40 of Canada’s finest miners: Little change among top performers – by Marilyn Scales (Canadian Mining Journal – August 8, 2013)

Marilyn Scales is a field editor for the Canadian Mining Journal, Canada’s first mining publication. She is one of Canada’s most senior mining commentators.

Last year, 2012, almost all commodity prices softened, and that fact is reflected in the fortunes of Canada’s Top 40 mining companies. Gross revenues, the number on which we base our ranking, grew little if at all.

However, the most successful companies will weather the industry’s cyclical downturns. Note the 10 companies that lead our list. Nine of them remain among the top 10. The exception is Cameco that fell from 10th to 11th, trading places with Yamana Gold.

The other nine miners among this year’s top 10 were among the top 10 last year. With one exception they held the same positions as last year – Teck jumped up one to 3rd, pushing Suncor down to 4th.

The list is again headed by Agrium ($16.69 billion) that mines potash at Vanscoy, Sask., and phosphate at Kapuskasing, Ont. Mining is not the company’s only business; it is a retail supplier of agricultural products and services throughout the Americas and Australia. The world needs to eat, and its appetite for fertilizer appears to be strong.

Again in second place is Barrick Gold ($14.55 billion). Long the largest gold miner in the world in terms of market capitalization, Barrick has been under pressure from both the lackluster gold price and skyrocketing development costs. Nonetheless, the company increased its 2012 revenues by 2% over 2011. But the company had a net loss of $677.0 million in 2012, compared to a net profit of $4.54 million the year before.

Next year may be a different story. Barrick (as were other gold miners) was hit in the first half of 2013 by the lowest gold price in three years. The yellow metal slid to US$1,192 on June 28, 2013. The company was hurt at the same time by news that the Chilean government ordered a halt to construction of the showpiece Pascua-Lama gold project, at least the portion that lies within its jurisdiction. Barrick’s share price was hobbled by the decision despite continuing work on the Argentine portion. The resulting loss of market capitalization was enough to allow Goldcorp to become the world’s largest gold miner.

Teck Resources ($10.34 billion) rose one position in this year’s survey, filling the 3rd slot despite a roughly billion-dollar-drop in revenues. Part of its success must be attributed to its variety of business segments. The company produces zinc, copper, metallurgical coal and energy. Price downturns of one commodity are not felt equally across all segments of the business.

Suncor Energy’s oil sands revenues ($8.39 billion) put it in 4th place. Although the oil prices have been in the mid-US$85 range reached record daily production of 359,300 bbl/d, revenues fell in 2013 from $8.58 billion.

Again in 5th spot is Potash Corporation of Saskatchewan ($7.93 billion), a solid performance but off 9% from 2011. The company operates six potash mines in Saskatchewan and one in New Brunswick. From this solid Canadian base, PotashCorp has grown into a global leader in fertilizer and agricultural products.

Goldcorp ($5.44 billion) rings at 6th this year, having overtaken Barrick as the world’s largest gold miner by market capitalization. Goldcorp counts 67.1 million oz of gold contained in its proven and probable reserves at Dec. 31, 2012. By comparison, Barrick had 140.7 million oz and produced 7.4 million oz last year. Goldcorp’s 2012 production was 2.5 million oz. Arguments may be made, depending on your criteria, for either Goldcorp or Barrick being the world’s leading gold miner.

In 7th place is Kinross Gold ($4.31 billion). The company had a banner year as revenues grew 12% over 2011. Too bad earnings did not reflect the improvement. Kinross had a net loss of $2.51 billion, compared to a loss of only $2.01 billion in 2011. Like Barrick and Goldcorp, Kinross has a portfolio of projects that hopscotch around the world. Kinross produced 2.6 million attributable oz of gold in 2012.

Canadian Oil Sands Trust ($3.91 billion) is holding down 8th spot. Included in the company’s revenue is its 36.74% share of Syncrude production. If you extrapolate from the COS number, Syncrude sales would appear to be $10.63 billion in 2012. Syncrude is a private joint venture and not under the same reporting rules as public companies, including COS. As tempting as it might be to put Syncrude into the Top 40 (in 3rd position), the number is merely an estimate since Syncrude has not published a figure of its own.

Another base metal producer, First Quantum Metals, sits in 9th place, but watch for this company to rise in next year’s rankings. Earlier this year First Quantum acquired Inmet Mining and its huge Cobre Panama project. Inmet is 17th on this year’s Top 40 list, and the combined revenues of the two companies top $4 billion. If 2013 revenues are anything like last year’s, First Quantum will rise a couple slots a year from now.

Rounding out the 10 top mining companies is Yamana Gold with interests in nine producing mines in South America and the Pilar gold development project in Brazil. Don’t be mislead by the company’s name. It is also a producer of copper, molybdenum, silver and zinc.

If a look at the largest Canadian miners is satisfying, a peek at the runners-up is intriguing. The 10 companies that rank 41st to 50th is usually where the most movement in rank occurs. Taseko Mines, Aurizon Mines and AuRico Gold fell out of the Top 40. Perhaps they will bounce up the list next year?

New to the list of runners-up this year are Silver Standard Resources, Endeavour Silver, Primero Mining, Gran Colombia Gold, and Fortuna Silver. Interesting that these are for the most part precious metals producers. They made good use of gold and silver prices in 2012, but dipping prices this year may force them down in the rankings next year.

While it is well and good for a company to reap billions of dollars in revenue, another measure of success might be to look at how much of the revenue translates into earnings. PotashCorp heads the list of top earners ($3.08 billion), followed by First Quantum ($1.87 billion), Goldcorp ($1.75 billion) and Agrium ($1.50 billion). This is money that can be used to grow the business, explore and develop new mines, or reward shareholders.

Out of curiosity, we looked at the companies with the largest asset base and calculated what percentage of the asset base had been translated into earnings. The company with the biggest asset base was Barrick ($47.28 billion), but it recorded a net loss of $677 million. Kinross also had a loss ($2.5 billion) on assets of $14.88 billion.

Before thinking that gold producers all lost money last year, look to Goldcorp that had net earnings of $1.75 billion and assets of $31.21 billion. That works out to about a factor of 5.6%, firmly in the middle.

The companies that had the greatest earnings to assets rating were Agrium (9.4%) and Canadian Oil Sands Trust (9.6%).

There are other ways to gauge the size or success of Canadian miners. It is always interesting to look at how much a company’s revenues or earnings grew year over year. The fact that only six of the Top 40 companies had earnings gains can be seen as a measure of how the industry is rushing toward a cyclical low.

Asset growth is interesting in that it is often a reflection of rising commodity prices. Since commodity prices have been contracting, perhaps the greatest asset growth is a consequence of turning a development project in to a producing mine.

Congratulations to all of the companies included in the Top 40.