Once companies have addressed their balance sheet issues and re-earned the right to grow (or have maintained resiliency despite the down cycle), they should think about how to create new value in the future.
To be both a great company and a great stock, miners need a highly explicit and cohesive value-creation strategy. Formulating such a strategy starts with defining sensible TSR targets that take into account the profitability of a miner’s assets through the commodity cycle and the expected range of commodity prices. Moreover, the value creation strategy should connect the TSR target with three other strategies: business strategy, financial strategy, and investor strategy.
TSR is the ultimate measure of how the market evaluates a company’s performance. By putting the potential impact on TSR at the center of its evaluation of potential strategic moves, a company incorporates the viewpoint of investors into its strategic thinking.
Miners that use this approach stand a better chance of building up healthy supplies of capital and cash, as well as enhancing their strategic and financial flexibility. As a result, they can position themselves to act countercyclically by taking advantage of depressed prices for assets, equipment, and talent at a time when buyers are scarce.