Noranda Tops 40 Largest Miners

Once again, and it is no surprise, Noranda is Canada’s largest mining company. Last year it posted revenues of almost $6.5 billion, up significantly from $6.0 billion in 1998 (all figures in Canadian dollars). Noranda’s asset base and earnings have also increased. The company’s return to its metal-producing roots continues to pay off handsomely (see Noranda profile in CMJ, June/July 2000).

Inco has regained its spot as this country’s second-largest mining company, moving ahead of both Potash Corp. of Saskatchewan and Agrium. Inco’s 1999 revenues grew to over $3.1 billion, compared with $2.6 billion the year before.

It is worth noting that these strong showings are by two base-metals producers. The largest precious metals miner, Barrick Gold, has made gains from the eighth spot in last year’s ranking to seventh spot this year. Barrick’s revenues totalled more than $2.1 billion in 1999, up from $1.92 billion the previous year. Placer Dome (CMJ, December 1999), which finished ahead of Barrick in last year’s survey, sits in the ninth spot with revenues of $1.95 billion, compared with $1.89 billion in 1998. (Some of the 1998 figures have been revised by companies since we published them last year.)

Two often-overlooked segments of the mining industry are represented in third to fifth place: industrial minerals and fuels. The third largest Canadian mining company is Potash Corp. of Saskatchewan (CMJ, June 1999). Revenues slipped to $3.05 billion from $3.4 billion a year earlier, but this year’s figure is still impressive. In fourth place is Agrium, primarily known for its agricultural chemicals. With the opening of its new phosphate producer in Ontario (CMJ, January 2000) and its 1999 revenue of $2.54 billion, Agrium has certainly earned its place among the Top 40.

Suncor Energy, the fifth-ranked company, is usually considered an oil and gas producer, but not entirely in the traditional sense. Suncor operates a large oil sands mine in northern Alberta (CMJ, August 1999). Revenues from that undertaking are included in last year’s revenues of $2.39 billion, a healthy increase from $2.07 billion in 1998. The other oil sands miner, Syncrude (CMJ, August 1999), is represented in the revenues of the Canadian Oil Sands Trust, in 20th place.

The success of Canada’s large and small mineral producers contributed $27.7 billion to this country’s economy last year, according to figures from The Mining Association of Canada. Mineral and metals exports totalled $40.0 billion, representing 13.3% of total exports from this country.

Canada remains a world leader in production of many minerals and metals: first in potash and uranium; second in nickel, zinc and cadmium; third in titanium, aluminum, asbestos and platinum group metals; fourth in salt, gold, molybdenum and copper; and fifth in gypsum, cobalt and lead.

In the Opinion of the Analysts…

If mining plays such a large part in the Canadian economy, and if the largest metals- and mineral-producing companies are selling billions and billions of dollars worth each year, why aren’t investors flocking to buy up their shares?

“Mining is an orphan in a dot.com world,” says analyst John Ing of Maison Placements. Metal prices are stalled as the cyclical nature of the industry stretches out into a long, low period. Mining stocks as a percentage of the Toronto Stock Exchange continue to decline. Some mining companies have even refashioned themselves as ‘dot.com’ enterprises to take advantage of the mania.

Ing points out the consolidation of mining companies. “It’s a game of musical chairs, and there are fewer and fewer chairs around,” he says. Investors have fewer choices, and are looking elsewhere for profits. This loss of investor support for mining makes it more difficult to finance big projects. And there are fewer world-class deposits remaining to be found. Although this trend has forced down mining stock prices, it has improved balance sheets because without the need to finance large developments, companies are retaining capital.

Consolidation in the mining industry will continue. Watch for the big companies to become even bigger, taking advantage of economies of scale for new developments. The middle-sized company may well disappear, leaving a large gap between a few majors and an abundance of juniors.

One analyst who is bullish on juniors is Alan Ferry at Dominic & Dominic Securities Inc. “The bottom line is that companies are doing better, except for gold producers,” he says, “and the junior sector is growing in strength.”

The juniors have had their bad years, Ferry admits, but many of them are now active in the hunt for diamonds. As the prices of platinum and palladium strengthen, many juniors are renewing interest in these metals. Juniors also succeed in industrial minerals by finding a niche and becoming preferred suppliers. And, for the first time, institutional investors are supporting junior companies.

Big is better in specialty areas. Companies such as Inco (nickel) and Cominco (zinc) will prosper. Ferry anticipates that integrated producers will continue to grow at the expense of diversified companies.

With these three things in mind–big is better; companies are consolidating; and juniors can grow–read the accompanying table to see if your favourite mining company is among Canada’s largest. Jot down the names of a few juniors to watch, and read CMJ’s list of top companies next year to see if any of them have made it.

The Criteria We Use

In selecting the companies for CMJ’s Top 40 list, we look first at Canadian companies that have at least one mine or advanced development in this country. This includes companies such as Rio Algom whose uranium mines are closed but which is active in the Highland Valley Copper joint venture (which had 1999 revenues of $213 million despite a 3 1/2-month showdown). On the other hand, joint ventures are not reported separately since their revenues are reflected in those of their owners.

The figures used in this article were taken from filings made by public companies to the System for Electronic Document Analysis and Retrieval (SEDAR), which those companies use to report to Canadian securities regulators. Some information from privately-owned companies was received directly from the owners, and a few figures came from other published sources. When companies reported in US dollars, a factor of 1.48 was used to convert those amounts into Canadian dollars.

Each year when we rate Canada’s mining companies, someone disagrees. Feel free to contact us, and we will share your reasoning with our readers. There were five more companies that almost made our list, and for that they receive an honourable mention: Campbell Resources, Denison Mines, Hillsborough Resources, Aber Resources, and St. Andrew Goldfields.