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Caution steadies the hand for Canada’s top miners: PwC

by Greg Klein | March 1, 2018

Last year saw “few eye-popping deals and only limited financing activity” as TSX-listed mining companies responded cautiously to improved markets, according to a new PricewaterhouseCoopers report. Like many of their peers internationally, the big board’s top 25 miners focused on “paying down debt, improving balance sheets and judiciously investing in capital projects as commodity prices largely stabilized.”

The findings come from Preparing for Growth: Capitalizing on a Period of Progress and Stability, released March 1.

Gold, the raison d’être for most of the miners, fell 3% during the year ending September 30. During that period the 225 TSX-listed miners (down from 230 the previous year) lost 4% of their aggregate value, compared with a 10% combined improvement for other sectors. Miners slipped to a 9% share of the entire TSX market, compared with 11% the previous year, holding ninth place among industries on the exchange. (Financial services came in first.)

Barrick Gold TSX:ABX, still the world’s top gold producer despite Newmont Mining’s (NYSE:NEM) challenge, held top place among TSX mining market caps as of September 30. The top stock was Kirkland Lake Gold TSX:KL, with a 175% price increase over the full year, following its billion-dollar takeout of Newmarket Gold. The acquisition represented part of a trend of “mid-market, intermediate gold companies looking to build scale and gain efficiencies through consolidation,” said John Matheson of PwC Canada.

Two since-merged companies, Potash Corp of Saskatchewan and Agrium, followed Barrick with second and third place among TSX mining valuations. Currently at about $41 billion, the potash combination Nutrien Ltd TSX:NTR has far surpassed Barrick’s $16.8-billion market cap.

Nearly half of the 225 companies had valuations of $150 million or less. But the category between $150 million and $1 billion boasted 74 companies, compared with 59 the previous year.

Nineteen of the top 25 had exposure to gold, 10 to copper, seven to zinc, six to silver and four to nickel, PwC stated. The report noted increasingly bullish sentiment for copper, zinc, cobalt and lithium. The latter mineral did especially well for five companies, with an approximately 39% total increase in valuations over nine months to September 30 for Orocobre TSX:ORL, Lithium Americas TSX:LAC, Nemaska Lithium TSX:NMX, Avalon Advanced Materials TSX:AVL and Globex Mining Enterprises TSX:GMX.

But overall, TSX miners “raised only half the equity capital in 2017 that they did the previous year. And for the second consecutive year, there were no mining initial public offerings on the TSX.”

That contrasts with a more buoyant, although still cautious mood among Venture-listed junior miners reported in November by PwC, which found a substantial increase in market caps, financings, M&A and IPOs for TSXV explorers.

Download Preparing for Growth: Capitalizing on a Period of Progress and Stability.

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