CANADIAN MINING PERSPECTIVE: Canada’s Top 100 miners prospered in 2009

Canada's Top 100 mining companies are back with a vengeance, says Ernst & Young in its latest report. All ...




Canada's Top 100 mining companies are back with a vengeance, says Ernst & Young in its latest report. All - from Barrick Gold to International Minerals Corp. - successfully reduced their debt levels and increased their cash reserves.

That is welcome news to an industry that survived the crashing commodity prices of late 2008. Last year, 2009, management got back to basics and the effort is paying off.

"The mining sector has been buoyed by a renewed optimism that's being driven by increasing demand and renewed interest in the commodities market - particularly with respect to gold and the general economic recovery," says Tom Whelan, leader of Ernst & Young's national mining practice.

The Ernst & Young report along with a list of the Top 100 companies may be read at$FILE/MiningReport_Mar2010.pdf. It ranks Canada's leading 100 TSX-traded mining companies based on market capitalization. Among its findings:

  • The aggregate market capitalization of the TSX 100 increased 74% to $325 billion (December 2009) from $187 billion (January 2009).
  • More than two-thirds of the companies saw their stock price rise as much as 300%. And for 13 of them, their stocks appreciated in excess of 500%.
  • The capitalization requirement to be included in the 2009 Top 100 was over $430 million, up 230% from $130 million a year earlier.
  • While Top 100 companies were active in only 129 or 6% of the total Canadian mining transactions, they were responsible for 65% of the overall transaction value.

The report highlights that perhaps the most profound effect of the global financial crisis on the metals and mining industry is that the world has lost as much as two years of growth in the supply of scarce resources. If demand rebounds back to its long-term growth rate as anticipated, there will have to be higher product prices, for longer, before the sector responds with new capacity, leading to metal prices increasing sharply - with the potential for deal prices to follow.

I believe the worst is behind us and welcome the renewed interest investors are showing in the mineral industry.


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