Top Forty Miners Earn Big Bucks

There was money to be made last year, at least before the financial meltdown in the fourth quarter, and Canada’s Top 40 miners amassed their share. Syncrude heads the list with 2008 revenues of almost $12.4 billion, and Suncor at $9.4 billion, is fourth. Remembering last summer’s sky-high crude oil price, it is no wonder the oil sands producers rank so highly.

Between Syncrude and Suncor are two fertilizer producers, Agrium ($10.9 billion) and Potash Corporation of Saskatchewan ($10.1 billion). Their rankings are to be expected, since the price of potash rose along with almost all other commodities over the previous five years, and people around the globe have to eat.

The world’s largest gold producer, Barrick Gold ($8.4 billion) sits comfortably in fifth spot.

Sixth spot goes to global base metal producer Teck Cominco (now Teck Resources). The company had revenues of $6.9 billion in 2008, but it spent a lot of money, too. It ran up considerable debts with the $14-billion takeover of Fording Coal.

Rounding out the top 10 companies with the largest revenues last year are in seventh spot Southern Copper ($5.2 billion), eighth Petro-Canada’s oil sands segment ($3.4 billion), ninth uranium producer Cameco ($2.9 billion) and tenth Goldcorp ($2.6 billion).

If you were to look at year-over-year change in revenue, Kirkland Lake Gold would top the list. The company’s excellent showing in this regard is attributable to increased gold production from the high-grade development ore of its South mine complex. A large jump in revenue means in this case a large jump in ounces.

Readers will note that there are several companies in the Top 40 that have no Canadian operations. That is acceptable under CMJ’s selection criteria. However, if we stick solely to Canadian companies with Canadian operations, 11 smaller miners would have made the grade. The runners-up include gold, base metals and coal producers.

Gold producers Wesdome Gold, Richmont Mines, Claude Resources, Louvem Mines, Century Mining, Alexis Minerals and San Gold would have made the Top 40. Base metal producers First Nickel, Roca Mines and Capstone Mining would have, too. The list would also have included coal producer Hillsborough Resources.

Kudos to the runners-up who make mining in Canada a priority.

Another way to look at the numbers is to rank our producers by net earnings. It is one thing to have huge revenues, and it is another to operate profitably and have money left over at the end of the year. Not surprisingly, Syncrude ($4.1 billion) and Suncor ($2.9 billion) top this list. In third spot is PotashCorp ($2.6 billion). Oil sands and potash producers are leaders again.

If you were to look at year-over-year changes for the top 10 earners, Agrium and Goldcorp had gains of almost 200%, or three times the earnings in 2008 compared to 2007. Not every company on this list had a positive change. For example, Teck’s earnings fell the most by about 59% as zinc and lead prices hit rock bottom.

To rank all the Top 40 companies by change in year-over-year growth in earnings, Eldorado Gold (360%) and Louvem (200%) beat out Agrium and Goldcorp. Right behind them are Yamana Gold (186%), Imperial Metals (161%), Syncrude, Suncor, Thompson Creek Metals (16%) and Cameco.

The assets of many miners have been inflated in recent years by high commodity prices. For example, as the price of molybdenum rises, so does the value of the pounds in the ground. By the yardstick of assets value, Teck is the leader ($31.5 billion), followed by Suncor’s oil sands business ($25.8 billion) and Barrick Gold ($25.8 billion).

If we choose year-over-year change, some of the results are spectacular. In terms of revenue growth, Capstone Mining leads the pack. Revenue there jumped from $1 million in 2007 to $131 million in 2008. To choose by year-over-year earnings can be more problematic, due to the fact that some companies are

faced with taking a net loss occasionally. Of those that had two profitable years in a row, Eldorado Gold had the largest increase in earnings, over 3.5 times more in 2008 than 2009. Using year-over-year assets value as a measure, the company whose assets increased most was San Gold. Its assets went from $5 million in 2007 to $214 million in 2008, thanks to continuing high-grade discoveries at its mines in Manitoba.

Once again, rounding up the Top 40 Canadian mining companies has been an interesting assignment, even if the results were somewhat predictable. With record prices for oil and fertilizers last year, it is to be expected the oil sands and potash miners would do well.

Next year will be even more interesting as fallout from the global finan cial crisis spreads across 2009. Almost without exception, commodity prices went into freefall in the fourth quarter of 2008. We have seen the effect of that in project postponements and nine months of difficulty parting investors from their money. The situation remains little changed in mid-2009. We have news that companies are beginning to raise money for worthwhile projects, and that is good. We are also hearing that the Chinese have put the recession behind them, and their economy is growing again. North Americans are beginning to see an economic rebound, but they are still wary. No one expects commodity prices to return to their recent highs in the next few months. We expect next year’s Top 40 list will show some new names near the top.