Canada’s Top 40 (August 01, 2006)
Naming Canada’s largest mining company in 2005 was easy. We thought of Noranda, which has topped the list for most of the last decade, and chose Falconbridge because it swallowed Noranda at the end of 2004. And we checked revenue figures, too. At $9.86 billion (a 20.5% increase over 2004), Falconbridge deserves the top spot. It is also the company with the most assets, at $15.03 billion.
Falconbridge may have run away with the No.1 ranking, but there are 20 other companies on the list that had revenues of more than a billion dollars (see table on page 12). Nickel producer Inco is in second place with revenues of $5.47 billion in 2005, a 5.6% rise from the previous year. Third place goes to oil sands miner Syncrude with revenues of $5.36 billion. Fourth place belongs to Potash Corp. of Saskatchewan with $4.66 billion in revenue, and rounding out the top five is another oil sands producer–the Athabasca Oil Sands Partnership at $4.55 billion.
The top four Canadian companies by earnings make an exclusive club of billion-dollar firms. Teck Cominco earned $1.34 billion, the oil sands operations of Suncor Energy earned $1.07 billion, Falconbridge earned $1.06 billion, and Inco earned $1.01 billion. Despite its industry-leading earnings, Teck Cominco’s revenues for 2005 were $4.42 billion, good enough for sixth place on our list.
For comparison, here are the numbers for two American companies. (We couldn’t really consider them “Canadian”, but their names are front and centre in Canadian business circles these days.) Phelps Dodge had revenues of $10.04 billion and earnings of $1.88 billion. Newmont Mining pulled in $5.33 billion of revenue and had earnings of $389.6 million.
Other members of Canada’s billion dollar revenue club are Agrium ($4.22 billion), Suncor Energy (oil sands only, $3.96 billion), Barrick Gold ($2.84 billion), Placer Dome (unaudited, $2.39 billion), Canadian Oil SandsTrust ($2.01 billion), Fording Canadian Coal Trust ($1.87 billion), Petro-Canada (oil sands only, $1.41 billion), Cameco ($1.31 billion), Sherritt International ($1.10 billion), and Goldcorp ($1.08 billion).
Even the 40th-ranked company, North American Palladium, is no slouch, with revenues of $92.6 million.
Base metals producers
The biggest of the base metal producers all have mines in Canada. Falconbridge is the largest, followed by Inco, Teck Cominco, Inmet Mining and HudBay Minerals. All benefited last year from continuing high metal prices.
A quick look at the year-over-year average prices for some base metals shows all were up. Nickel rose 6.7% during 2005, compared with 2004. Copper was up 28.4%, iron ore was up 71.2%, and zinc was up 31.8%. Even lowly lead was up 10.0%. The trend continues to be upward. Nickel, for instance, finished 2005 at US$6.70/lb but it had already risen above US$13.00/lb by the third week of July 2006.
With prices such as that, it is no wonder these base metal producers are among our Top 40.
The largest Canadian gold producer is Barrick Gold, which had revenues of $2.84 billion in 2005. By hunting through Barrick’s 2005 annual report, we have also found unaudited figures for Placer Dome, which Barrick bought out early in 2006. Placer Dome’s revenue was $2.39 billion. Next year, Barrick’s numbers will be bigger yet. Completing the top five gold producers are Goldcorp ($1.08 billion revenue), Kinross Gold ($877.8 million) and Cambior ($445.9 million).
Needless to say, the price of gold has experienced a tremendous upward movement. It finished 2004 at US$435/oz and finished 2005 at US$513/oz. Looking at the yearly averages, the yellow metal averaged US$409.72/oz in 2004 and US$444.74/oz in 2005. But the real excitement comes this year, with gold averaging US$650/oz in 2006 through July 17. That despite a downturn after the price hit a high of US$725.00/oz on May 12.
Upwards pressure on the price of oil is having an effect on all the energy producers–oil sands, coal and uranium. The four largest energy producers on our list are oil sands miners including Syncrude ($5.36 billion revenue), Athabasca Oil Sands Partnership ($4.55 billion), Suncor Energy ($3.96 billion) and Canadian Oil Sands Trust ($2.01 billion). The fifth largest energy producer is Fording Canadian Coal Trust with revenues of $1.87 billion. Cameco, Canada’s leading uranium producer (with a healthy dose of gold production as well), pulled in $1.31 billion, ranking it seventh among energy producers and fourteenth over all.
A look ahead
The mining industry has enjoyed steadily rising commodity prices for the past three years. With high commodity prices, geologists can declare lower-grade mineralization to be “ore”. Producers are adding economic reserves at existing mines. Explorationists are looking at new resource models for known mineralization, and in old camps for new deposits. Even the smallest of junior companies have been able to raise money to search for a wide variety of minerals.
But high commodity prices by themselves do not guarantee success for a producer. Even as high energy prices have boosted revenues in the oil sands, coal and uranium sectors, they have also helped to push up the operating costs of the producers. Mines are paying more for fuel, more for equipment and supplies, more for tires (if they are available at all), and more for labour.
Finding qualified employees will be a continuing problem for the mining industry. We baby boomers are aging, and within 10 years we will be retiring in large numbers. There are not enough trained personnel coming into the industry to replace us. The numbers of qualified miners is dwindling. Tradespeople are in short supply as not only mining but many industries are in a construction mode. Worse yet, the mining industry expects a severe shortage of qualified geologists. There are too few in schools now, and there will be too few capable of finding the next generation of mines.
People with skill sets in the most wanted disciplines will be demanding higher salaries and benefits. A higher-paid workforce will eat into the industry’s bottom line.
This summer’s hottest news story has been the takeover battle for Falconbridge and Inco. At press time, no one could accurately predict the winners. It looks certain that at least the Falconbridge name will disappear from our list, whether it is bought up by Inco or Swiss-based Xstrata. As well, the Inco name may vanish if Teck Cominco succeeds in its bid, or the name will be grafted onto that of an American company to become Phelps Dodge Inco. Either way it will be a sad day for the industry when two of the most recognizable corporate images change.
CMJ makes every effort to include all eligible companies. If you think your enterprise should be listed among the Top 40, please write to the author at [email protected].
How we make our selection
Now, a word about how we select companies for the Top 40 list. This year we have expanded eligibility to any company with a head office in Canada that has a producing mine or significant equity in a producer anywhere in the world. This is a departure from previous years wherein companies had to have a mine in Canada. We made the change to better reflect the global nature
of the industry.
Despite having interests in Canadian iron ore mines, Dofasco and Stelco are excluded because their primary business is steelmaking.
We perused annual reports and audited year-end financial statements for definitive numbers. We checked the Bank of Canada website for the average U.S.-to-Canadian dollar exchange during 2005 (that figure is 1-to-1.21) and made the necessary calculations to convert figures reported in U.S. dollars to Canadian dollars. Unless noted otherwise, figures in this article refer to Canadian dollars.
Click here to view the Top 40 list