Canadian Mining Journal

Feature

Top 40: Not Much has Changed

This is the time of year we at CMJ pause to examine how Canada’s mining companies performed during the previous year. We start by poring through year-end 2013 results from twice as many companies as will make the list in an effort not to...


This is the time of year we at CMJ pause to examine how Canada’s mining companies performed during the previous year. We start by poring through year-end 2013 results from twice as many companies as will make the list in an effort not to miss a likely company. Their revenues, earnings or losses, and their assets are examined, then we use their gross revenues for the Top 40 ranking because it is obtainable from public records.

That’s easy enough. By gross revenues, once again Agrium made the most money ($16.2 billion). Not surprisingly, Barrick Gold ($12.9 billion), Suncor’s oil sands operations ($12.3 billion), and Syncrude’s estimated oil sands revenue ($11.4 billion) were not far behind. What’s a billion or two among friends?

Sad to say some familiar names disappeared from the Top 40. Inmet Mining was taken over by First Quantum ($3.7 billion) and Aurizon Mines was acquired by Hecla Mining Co., an American company. High River Gold was absorbed by a Russian gold miner, Nord Gold. Harry Winston became Dominion Diamond Corp. ($356 million) and consolidated the performance of the Ekati and Diavik mines.

Dominion Diamond was only one of the new names welcomed to the Top 40 list. Silver Wheaton ($728 million) and Franco-Nevada Corp. ($413 million) are included even though they are metals streaming businesses. Their incomes and interests lie solidly in the mining sector. Also new to the Top 40 this year are B2Gold ($561 million) whose output jumped 132% last year. Two other companies with large increases in gold production are also first-timers: Crocodile Gold ($310 million) and Rio Alto Mining ($294 million). We also welcome Aura Minerals ($341 million) and Golden Star Resources ($496 million).

A look at the PwC publication, Mine: Realigning Expectations, reveals that Canadian companies are well represented on its list of top 40 global miners. Barrick is No.4, Cameco is No.6, First Quantum is No.11, Goldcorp is No.15, PotashCorp is No.28, Silver Wheaton is No.32, Teck is No.34, and Yamana Gold is No.38. We are proud that Canada is so well represented.

As a point of interest, Glencore Xstrata was No.14 and Vale SA was 37. Russian enterprise and largest diamond producer in the world, Alrosa, topped PwC’s list.

The list of the 10 largest gold producers compiled by Gold Investing News puts Barrick at the top (no surprise there). But it also includes Goldcorp at No.4 and Kinross at No.5. This ranking was made by the number of ounces produced.

A review of the gold producers on our Top 40 list shows that 2013 has been a terrible year for all of them. The 29% drop in the price of gold hit almost all of them squarely in the revenues, typically for a drop of 20%. There were two exceptions, Centerra and Crocodile Gold. Centerra doubled its output to 600,000 oz and registered a 42% gain in revenues. Crocodile Gold boosted output by 26% and revenues by 17.5%.

As bad as the hit on the revenues of gold miners was, their earnings turned mostly to losses. Of the 25 gold focused companies on our list, less than half recorded positive numbers in the earnings column. Barrick, despite revenues of $12.9 billion recorded a net loss of $10.9 billion. Other large gold producers – Kinross, Goldcorp, Yamana, IamGold, Eldorado Gold, New Gold and Osisko – all posted negative results.

The brightest light among gold miners is Agnico Eagle. That company posted net earnings of $418 million on revenues of $1.7 billion. Looked at differently, the company retained 24.8% of its revenues as earnings.

Centerra, with its doubling production, also bucked the loosing trend. It had revenues of $973 million and net earnings of $162 million. That is a respectable 16.7% of gross sales turned into earnings.

The revenue-turned-into-earnings picture has not been much better for base metals producers. Prices fell slightly or stagnated, leading to loses for half of the base metal miners in the Top 40. There were exceptions – First Quantum (earnings of $545.6 million on revenues of $3.66 billion), Lundin Mining ($140.8 million on revenues of $749.6 million), and Polish owner of three mines in the Sudbury Basin KGHM International. The latter earned $9.7 million on revenues of $1.09 billion.

The best earnings in the base metal sector were generated by Teck Resources. This enterprise turned revenues of $9.38 billion into net earnings of $1.01 billion. But coal also plays a big part in Teck’s income. Its coal business earned revenues of $4.11 billion, or 43.8% of the total, generating profit before tax that totaled $927.0 million.

The impact of commodity prices can also be felt when looking at the change in assets of our Top 40 companies. Suncor, whose oil sands assets stood at $42.75 billion in 2013, registered only a 7.8% increase despite rising oil prices.

Companies that had significant gains in assets made major changes to their businesses. B2Gold started production at the Masbate mine, advanced the Otjikoto development project, and expanded resources at two other properties. The closer the new projects get to production, the more valuable they are, allowing B2Gold to increase the value of its asset base 241% to $2.38 billion.

A popular way to grow an asset base is the takeover as practiced by First Quantum with the acquisition of Inmet Mining and its Cobre Panama development project. The deal gave the combined company a 105.4% boost in assets to $15.94 billion. Capstone Mining acquired the Pinto Valley copper mine in Arizona. That move played a part in its 26.4% asset growth to $1.96 billion.

A slightly different business focus can also enlarge assets. Silver Wheaton, whose assets grew 37.6% to $4.51 billion, is no longer purely a silver streaming company. It has added gold to its portfolio, notably purchasing half the gold stream from Hudbay’s Costancia mine.

And Hudbay Minerals added to its asset base by starting both the Lalor goldzinc and Reed copper mines. It reported an asset base of $3.84 billion, up 10.6% from 2012.

There are many ways to look at the Top 40 Canadian mining companies – by revenue, assets, earnings, gains and losses. Readers are invited to examine the tables accompanying this article and note what stands out for them.

By any measure, we at CMJ salute all Canadian miners, especially those that have prospered despite adversity last year