PricewaterhouseCoopers said the data reflected some of the greatest ups and downs the mining industry had ever seen.

The firm’s flagship mining publication Mine 2012 found the top 40 mining companies in the world by market capitalisation posted record profits of $US133 billion ($A133.8 billion) last year but market caps still fell by 25% to around $1.2 trillion.

"The global mining industry is facing a growing disconnect as despite record profits for the world’s 40 biggest miners in 2011 thanks to high commodity prices, investors proved fickle, demanding greater capital discipline and increased shareholder returns,” PwC global mining leader Tim Goldsmith said.

Of the top 40, only six companies, being China Shenhua, Yamana Gold, Goldcorp, Randgold, Ivanhoe Mines and Industrias Penoles, recorded increased market caps.

The top four companies – BHP Billiton, Rio Tinto, Vale and Shenhua – accounted for 38% of the total market caps of the top 40 last year, down from 44% in 2009.

Following its initial public offering last year, Glencore International joined the list for the first time, immediately jumping into the top 10.

Potash Corp of Saskatchewan and Freeport-McMoRan Copper & Gold fell out of the top 10 while Goldcorp re-entered the top 10 after a three-year hiatus.

Gold companies had increased standing, accounting for 21% of the top 40 last year, up from 16% the previous year but gold stocks still underperformed against an environment of record gold prices.

Revenues among the top companies last year increased by 26% to more than $700 billion and production volumes grew by 6%, particularly among copper and gold producers.

Iron ore accounted for 42% of total revenue, up from 20% in 2007.

Operating cash flows grew by 34% to $174 billion, while investing cash flows grew by 92%.

Total asset values remained above $1 trillion, growing a further 13% last year.

PwC said the market did not appear to support the long-term growth prospects of emerging economies, instead focusing on the damaging eurozone debt crisis.

The top 40 companies increased returns to shareholders by 156% to a record $32 billion but it clearly wasn’t enough for investors.

“Against a backdrop of shareholder demands for heightened capital discipline, the story for the future will be about the ability to bring on supply through developing the right projects,” Goldsmith said.

“We continue to observe a structural change of higher average commodity prices which are underwritten by higher production costs and lower grades.

“However, this does not guarantee increasing gross margins.”

Costs would be a major issue for miners in the future with costs increasing by 25% on 2010.

PwC said the report highlighted the need to focus on supply, with key issues facing supply including decreasing grades and higher input costs, labour costs, currency movements, changing fiscal regimes and resource nationalism, production disruptions, remoteness of locations and increasing capital expenditure requirements to take supply to the market.

The report found mining companies last year invested a record $98 billion in capital projects with plans for a further $140 billion this year.

“The market, however, doesn’t seem to be buying the industry’s long-term growth story, which has sent share prices lower − 2011 marks the start of the growing disconnect,” Goldsmith said.

PwC said the volatility was here to stay but the long-term fundamentals remained robust.

This article first appeared in ILN's sister publication MiningNews.net.