TNM Data Miner: A review of Canada’s top mining companies

In honour of Canada’s 150th anniversary, The Northern Miner has put together an in-depth snapshot of the country’s most prolific modern mining companies. Data was collected from the Intelligence Mine system to explore the state of the largest Canadian mining companies through a variety of financial metrics, including: market capitalization, cash position, year-on-year share performance, net income and geographic diversification.

Companies were required to maintain Canadian corporate headquarters in order to qualify for the report. Furthermore, data analysis did not include large-scale, diversified agricultural organizations (i.e. Potash Corporation of Saskatchewan (TSX: POT; NYSE: POT), Agrium (TSX: AGU; NYSE:AGU), or companies fully focused on the oil and gas sector (i.e. Canadian Natural Resources [TSX: CNQ; NYSE: CNQ], Cenovus Energy [TSX: CVE; NYSE: CVE], etc).

For in-depth data on the energy sector head over to sister company, JWN Energy.

Figure 1 illustrates Canadian companies with market capitalization in excess of $3 billion as of June 30, 2017. The valuations are presented alongside year-on-year percentage change in respective share prices:

Figure 1. Market capitalization (06/30/17) on the Y1 axis, and year-on-year share performance on the Y2 axis.

Barrick Gold (TSX: ABX; NYSE: ABX) reigns as Canada’s largest miner by market capitalization, though it is clear the past twelve months haven’t been particularly kind to gold producers. The scenario is linked to weaker metal prices during the data period. Spot gold hit a 52-week high of nearly US$1,375 per oz. in early July 2016 before trending towards roughly US$1,220 per oz. at the time of data collection.

The past few years have also seen the rise of streaming and royalty companies like Wheaton Precious Metals (TSX: WPM; NYSE: WPM) and Franco-Nevada (TSX: FNV; NYSE: FNV), which have become two of the most valuable mining equities in Canada.

Mining activity at Barrick Gold’s Veladero gold mine in Argentina. Credit: Barrick Gold.

Meanwhile, base metal companies were on the upswing following a period of debt and cost reduction. For example, Vancouver-based First Quantum Minerals (TSX: FM; NYSE: FQM) has rebounded from liquidity concerns last year that were underpinned by US$5 billion in net debt. In fact, First Quantum was able to raise US$2.2 billion in early 2017 following a period of “capital discipline.” The factors have combined to push the company’s stock up nearly 27% year-on-year.

Lukas Lundin’s eponymous Lundin Mining (TSX: LUN; US-OTC: LUNMF) is emerging as a Canadian base metal powerhouse following its US$1.8-billion purchase of an 80% stake in the Candelaria mine from Freeport-McMoRan (NYSE: FCX) in 2014, and the US$325-million acquisition of the Eagle project from Rio Tinto (NYSE: RIO; LON: RIO) in 2016. The data period does not include US$1.14 billion in capital proceeds from the sale of its stake in the Tenke Fungurume copper mine in the Democratic Republic of Congo (DRC) late last year.

Processing equipment at the Tenke Fungurume copper-cobalt mine in the Democratic Republic of the Congo. Credit: Lundin Mining.

Furthermore, industry staple Teck Resources (TSX: TCK.B; NYSE: TCK) has been riding momentum from more robust crude oil and metallurgical coal markets.

That fact becomes even more apparent in Figure 2, which charts net income and cash positions:

Figure 2. 2016 Net Income and Cash & Equivalents.

The data includes net income figures over the fiscal 2016 year, and cash and equivalent positions at year end. The chart includes a comparison of year-end cash and equivalents in 2015, alongside annual net income, for context. The twin graphs trace the top ten Canadian miners by net income and gross capital position.

Teck’s performance is underpinned by surging coking coal that saw it hit a six-year high of around US$310 per tonne in late last year. Furthermore, the company has also leveraged a 45% leap in West Texas Intermediate (WTI) benchmark oil prices due to its energy portfolio.

Despite a stabilization in copper prices over the past year, Turquoise Hill Resources (TSX: TRQ; NYSE: TRQ) is the only primary base-metal miner to make an appearance on the capital charts. The company has reaped rewards from ongoing operational improvements and expansions at the world-class Oyu Tolgoi operation in Mongolia, which is operated by partner Rio Tinto (NYSE: RIO; LON: RIO). Turquoise Hill should experience even further growth as Rio executes a US$5.3-billion expansion project.

A pit at Turquoise Hill Resources’ Oyu Tolgoi copper-gold project in Mongolia. Credit: Turquoise Hill Resources.

Barrick had an impressive year in which it produced approximately 5.5 million oz. gold and generated net income of US$655 million. The company has refocused itself on a core asset base in the Americas (predominantly in Nevada), and handily outperformed peers like Goldcorp (TSX: G; NYSE: GG), which saw its cash and equivalents virtually cut in half.

Agnico Eagle Mines (TSX: AEM; NYSE: AEM) has proven a notably consistent performer, and demonstrated strong fundamentals in both income generation and capital discipline. The company boosted its cash and equivalent position by over US$400 million last year.

Finally, Figure 3 will address the geographic diversity of Canadian miners. It should be noted that the streaming and royalty companies were not included due to the fact they functionally do not operate or carry related risks and responsibilities, in terms of mining operations.

Vancouver-based B2Gold (TSX: BTO; NYSE-MKT: BTG) slips into a spot vacated by Franco and Wheaton with its US$2.8-billion market capitalization. It has authored a significant story in the gold space due to its operational consistency and aggressive growth profile across Southeast Asia and West Africa:

Figure 3. Geographic operation and revenue distribution.

Canadian companies remain most active in North America, though the country’s miners now operate in over 120 nations. Teck remains the most active in Canada, with much of its operational capacity focused on five coking coal mines in British Columbia.

Goldcorp comes in second with six Canadian mines, including newly-commissioned operations at its Eleonore underground mine in Quebec. Meanwhile, Agnico Eagle has consolidated its production around Quebec, Nunavut, and the gold belts in Mexico. Canadian companies remain lacking in terms of base metal presence in-country, though First Quantum and Lundin have consolidated production regions abroad.

Barrick is the most geographically diverse operator, with mines in 25 countries.

A worker in the smelter at First Quantum Minerals’ majority-owned Kansanshi copper mine in Zambia. Credit: First Quantum Minerals.

In terms of in-country activity, the Mining Association of Canada reported that the value of Canadian mineral production declined by 4.4% in 2015, falling $1.8 billion from 2014 levels. The value of Canada-wide mining in 2015 totaled $42.8 billion. The top four provinces include: Ontario at $10.8 billion; Saskatchewan at $8.5 billion; Quebec at $7.7 billion; and British Columbia at $5.9 billion.

Companies invested $9.3 billion in Canadian mine complex development in 2015.