AGRIUM HEADS TOP 40 LIST

Two years ago the world entered what was called the “greatest recession since 1929.” Whether it was or not is still open to debate. Among the first casualties of the downturn were commodity prices. Many of them rebounded in 2009, thanks to strong demand from India and particularly China.

The rebound can be seen in the fertilizer sector, particularly Agrium which leads the revenue generators of 2009 with $10.6 billion. Potash Corp. of Saskatchewan is again among the leaders being in fifth places with revenues of $4.5 billion.

The price of gold dipped early in 2009 but rebounded and finished the year over US$1,000 an ounce as investors abandoned a weak U.S. dollar. The world’s largest gold producer, Barrick Gold which is in third place on our Top 40 list, had record revenues of $9.3 billion, up 7% from 2008. Despite its healthy revenue stream, Barrick had a $4.9 billion loss in 2009 which may be due in large part to the development costs of the Pascua Lama gold mine on the Chile-Argentina border.

The third greatest revenue stream, $7.7 billion, was that of Teck Resources. Despite the expensive purchase of Elk Valley Coal in 2008, Teck has prudently reduced its debt and recorded net earnings of $1.8 billion in 2009. Teck is one of the world’s largest zinc producers as well as mining 19 million tonnes of coal in 2009.

The first oil sands producer on our list is Syncrude in fourth place with revenues of $7.6 billion. Suncor’s oil sands revenue, $4.1 billion placed it in sixth place, and with $2.8 billion Canadian Oil Sands was seventh.

If Suncor’s revenues from all sources were counted, it would have headed the list with $18.7 billion, but since we have figures for its oil sands segment, it seems only fair to use the lesser number. The same problem occurs with Canadian Natural Resources that produced the first synthetic crude from its Horizon mine in 2009. Revenue from its oil sands mine is not segmented in its 2009 annual report, and since it amounts to so little of Canadian Natural’s $11.1 billion revenues, we have omitted the company. Perhaps next year we can discover a separate figure for the Horizon project.

Rounding out the top ten of our Top 40 are two more gold producers, Kinross Gold ($2.7 billion) and Goldcorp ($2.5 billion) as well as uranium producer Cameco ($2.3 billion). Thus all of Canada’s major mineral production is represented at the head of the list. The cutoff for inclusion in the Top 40 was $188 million for 2009, up 44% higher than the figure of $131 million a year earlier. There are a goodly number of companies with assets in the billions, from Sherritt International ($9.9 billion) to Taseko Mines in 40th position.

Taking a quick look at the runners-up by revenue, none of the companies on last year’s list moved up to the Top 40 this year. Only one, Wesdome Mines, was a runner up two years in a row.

The ability to retain cash is another measure of success. If we were to judge

the Top 40 by their earnings to revenue ratios, we would have a much different list. First we have to remove the companies that had net losses from consideration. Next to go are companies that reported more earnings that revenue.

The Canadian mining companies that retained 10% to 25% of earnings number about 25, but the leader with an earnings-to-revenue ratio of 69.9% was Scorpio Mining, which operates a silver mine in Mexico. Next on the list is uranium giant Cameco, that retained 47.5% of revenue.

Canada’s top revenue gainers, those companies that saw their earnings jump from 2008 to 2009 are led by South Gobi Energy (up almost 12-fold) and TVI Pacific (up over 11-fold). Close on their heels is Aura Minerals (up over 9-fold) and Taseko Mines (with a 6.7 times increase).

Looking at the companies with the largest asset bases in 2009, Suncor’s oil sands business leads the way with $37.6 billion, an increase of 69% over a year earlier despite crude oil prices that fell dramatically from their 2008 levels. There are a goodly number of companies that have notable assets, from Sherritt International ($9.9 billion) to Lake Shore Gold ($1.0 billion), and on down the list to the small juniors, those companies that have more optimism than assets.

There are many ways to measure what makes a company the “top”. It can be revenue, assets, net earnings or market capitalization. Looking at the year-over- year changes to these figures generates a number of equally interesting rankings. But we at CMJ are sticking basically to revenues because the number is easily available and its definition varies little, company to company, thanks to uniform international accounting policy.

Congratulations to all of Canada’s Top 40 (by revenue) mining companies!

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Who is eligible for the Top 40?

Picking only 40 of the Canadian mining companies with producing mines involves a bid of research. We use the following criteria in making our choices.

A company must be registered in Canada, and preferably domiciled in this country.

A company must own or have a significant equity interest in a mineral producer. Companies with a project in the advanced development stage may also be considered.

The numbers are taken from annual reports, year-end financial statements and other public information.

Numbers that are reported in U.S. dollars have been converted to millions of Canadian dollars at a rate of US$1.00 equals Cdn$1.14, the average exchange rate calculated by the Bank of Canada for the 2009 calendar year.

We make every effort to include all eligible companies. If you believe your enterprise should listed among the Top 40, please write to the author at MScales@CanadianMiningJournal.com.

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