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MINING NEWS: Northern Dynasty tops most juniors on market cap Mining boom prompted accounting firm PricewaterhouseCoopers to analyze top 100 companies listed on Canada’s TSX Venture Exchange Sarah Hurst For Mining News
Vancouver-based Northern Dynasty, whose sole asset is the Pebble project in southwest Alaska, is the only junior mining company to remain in the top five on the TSX Venture Exchange or TSX-V by market capitalization for two years straight. The company’s market capitalization was C$326.5 million in 2005, making it the fourth-largest in its sector, and C$657.4 million in 2006, making it the third-largest. These and other achievements by Canadian companies are highlighted in a report called Junior Mine by PricewaterhouseCoopers.
Reflecting its success in expanding the resources at Pebble, Northern Dynasty’s share price has hit an all-time high in recent weeks, and is now trading at around $12.70, compared with $8 a year ago. The two mining companies on the TSX-V that are larger than Northern Dynasty are Aurelian Resources (exploring in Ecuador), with a market cap of C$826.6 million in 2006 and UrAsia Energy (producing uranium in Kazakhstan) at C$1.23 billion. ECU Silver Mining is fourth at C$569.2 million and Seabridge Gold is fifth at C$474.9 million.
This is the first report by PricewaterhouseCoopers on Canada’s junior mining sector, and it was motivated by “the recent success of junior mining companies in this prolonged boom cycle,” according to the accounting firm. The report examines the financial position of the top 100 of the 967 junior mining companies on the TSX-V as of Sept. 30, 2006. These 100 companies represent over half of the TSX-V mining industry by market capitalization, with total revenues of C$256.2 billion from production and C$9.6 billion from exploration in 2006. This represents an increase of 224 percent on production revenues over the 2005 figure, and a decrease of 8 percent on exploration revenues.
Other Alaska companies in top 100 In addition to Northern Dynasty, other companies active in Alaska in the top 100 include Bravo Venture Group, Century Mining, Full Metal Minerals, International Tower Hill Mines and Quaterra Resources. Companies active in Canada’s northern regions include Adanac Moly, Cash Minerals, North American Tungsten, Roca Mines, Seabridge Gold, Sherwood Copper, Starfield Resources and Yukon Zinc.
The total market capitalization of all the junior mining companies on the TSX-V rose to C$27.6 billion in 2006, up 86 percent from the total of C$14.8 billion in 2005. Gold was a key reason for the growth, according to the PricewaterhouseCoopers report. Companies that mine or explore for gold now account for approximately 60 percent of the market. Four of the five largest TSX-V mining companies list gold as their commodity of focus. The price of gold has risen from around $420 an ounce in April 2005 to around $660 today.
“Canada is the only country to offer flow-through shares for the juniors, which assist companies to get the external financing they need from investors to support their exploration activities in Canada,” the report says. “Flow-through shares allow companies to pass exploration expenditures to investors where the deductions can be immediately used to reduce taxable income.” Net financial losses for the top 100 companies rose from C$247 million in 2005 to C$395.7 million in 2006, which the report attributes to the dominance of exploration-stage companies in the sector.
Out of the top 100 companies, 86 are in the exploration stage. “This shows how the TSX-V can be a home to Canada’s junior companies who graduate to the larger TSX when they become large-scale producers,” the report says. “This often differs from exchanges such as London’s Alternative Investment Market (AIM), where not all mining companies move up to the FTSE when they mature into businesses with greater capitalization and resources.” Aurelian Resources, the second-largest company on the 2006 list, did move to the TSX in early 2007.
Many new players in 2006 list There were many new players in the TSX-V’s top 100 in 2006, with 51 companies appearing in the list that were not there the previous year. The difference in the market capitalization between the number one and number 100 companies on the list more than tripled from C$397 million in 2005 to C$1.2 billion in 2006. The 100th company is Vancouver-based Starfield Resources (exploring in Nunavut), with a market cap of C$54.4 million and a share price of around 24 cents.
Just over one-third, 34 percent, of the top 100 companies are operating in Canada, with 14 percent in the United States, 12 percent in Mexico, 5 percent in South Africa, 4 percent in Argentina, 4 percent in Peru, 4 percent in China, 3 percent in Brazil, 3 percent in Chile, 3 percent in Ecuador and 15 percent in other jurisdictions.
During 2006, four companies earned mining revenues that didn’t make any in 2005, including Vancouver-based North American Tungsten Corp. (mining in the Northwest Territories and exploring in the Yukon) with C$37 million. Century Mining led the way in revenues for production companies in 2006 — its mining revenues shot up from C$4.7 million in 2005 to C$42.6 million in 2006. Washington-based Century has operations in Quebec and Peru, as well as exploration properties in Alaska and British Columbia.
Stock compensation expenses for TSX-V mining companies went up noticeably in 2006 by C$79.6 million to C$135.2 million. Exploration companies bore most of this cost, spending C$59.7 million more than in 2005. “This is a reflection of the growing value of companies in this sustained boom and the need to attract and retain qualified people — and give them an incentive to stay with the company,” the report says. “Higher levels of stock compensation are not uncommon in the higher-risk junior mining sector. People in leadership roles often accept stock options in place of a higher base salary so that more cash can be used for mining efforts,” it adds.
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