St. LOUIS () -- Junior mining companies on the TSX Venture (TSX-V) Exchange showed they can be major players, according to an inaugural PricewaterhouseCoopers (PwC) report on Canada's junior mining sector.
In 2006, the total market capitalization for junior mining companies rose to C$27.6 billion, an 86% increase from C$14.8 billion in 2005.
PwC examined the financial position of the top 100 of the 967 junior mining companies on the TSX-V based on market capitalization as of September 30, 2006. The 40 mining companies included in mine represent over 80% of the total global industry by market capitalization.
According to the report, strong metal prices continued to lift the value of mining companies.
"Gold was a key reason for the growth on the TSX-V in 2006," said Paul Murphy, PwC partner and Canadian Mining Practice Leader, in a statement. "Four of the five largest mining companies on the exchange list gold as their commodity of focus."
In 2006, the average price of gold jumped to US$604.34 per ounce, up nearly 36% from the 2005 price of US$444.99 per ounce.
In 2006, all junior mining companies had $4 billion in total assets, $2.6 billion more than in 2005. The five companies in the junior sector with the highest market value are:
- UrAsia Energy [TSX-V:UUU] (C$1.23 billion)
- Aurelian Resources [TSX-V:ARU] (C$826.6 million)
- Northern Dynasty Minerals [TSX-V:NDM; AMEX:NAK] (C$657.4 million)
- ECU Silver Mining [TSX-V:ECU] (C$569.2 million)
- Seabridge Gold Inc. [TSX-V:SEA; AMEX:SA] (C$474.9 million)
The combined market capitalization of C$3.7 billion for these companies more than doubles the 2005 figure of $1.7 billion. The top five's share of the TSX-V's total value rose slightly from 11.4% to 13.4%.
According to Murphy, this demonstrates the overall growth of the TSX-V during the year, as most companies of all sizes saw value appreciation for their shareholders.
In , SXR Uranium One [TSX:SXR] placed a $3.1 billion stock offer for UrAsia Energy to make the world's second largest uranium producer. UrAsia has profited from the increased demand for nuclear facilities, forcing uranium prices to jump to $95 per pound today from $36 per pound at the start of last year.
As of April 2006, UrAsia's Akdala JV mine in Kazakhstan has been producing at an annualized rate of 2.6 million pounds at about $4.8/lb U308. The company's South Inkai and Kharassan projects are both expected to begin production later this year.
UrAsia holds a 70% interest in all properties while Kazakhstan's national atomic company Kazatomprom holds the remaining 30%.
In June 2006, Aurelian Resources revealed that the company had drilled an intercept of 204.8 metres of gold averaging 8.4 grams per tonne (g/t) as part of company's Condor project in Ecuador. This included 79.10 metres of 16.15 g/t gold.
Aurelian has traced the system over approximately 300 metres of strike length and it remains open to the north, south and west.
increased share price by 70% in a matter of hours, eventually pushing shares to highs of C$43. Shares have tapered off to about C$29 per share as of today, but are still drastically higher than the 52-week low of 61 cents per share.
Northern Dynasty Minerals
Northern Dynasty Minerals finished 2006 with a very promising return. Since Oct. 5, 2006, shares of the exploration company have risen to almost C$13 per share from C$6.46.
The company's flagship project is the giant Pebble gold deposit near Iliamna, Alaska. Although the company has been battling environmentalists and residents in regards to the effects on local fishing industry, the company maintains that its development is .
Pebble is the largest copper-gold deposit in North America at 49 billion pounds of copper and 64 million ounces of gold. It also contains an estimated 2.9 billion pounds of molybdenum.
ECU Silver Mining
ECU Silver Mining has reaped the benefits of higher silver prices. Last year, silver rose 43% to close at $12.90 after starting the year at $9.04/oz. So far in 2007, the price has risen modestly to $13.33.
The company's four mines, Santa Juana, San Mateo, San Juanes and San Diego, are located in mining district of Velardena in Durango State, central Mexico. The area historically produced about 500,000 ounces of gold and 250 million ounces of silver.
ECU boasts indicated resources of 17.4 million ounces of silver equivalent and inferred resources to 81 million ounces silver equivalent. In 2005, 61,000 tonnes of ore with average grades of 4.97 g/t gold and 196 g/t silver were processed from the Santa Juana Mine, double the 2004 output.
The company most recently announced assays from several new targets at the Santa Juana mine. The assays showed an average of 2 g/t gold, 90 g/t silver, 0.22% lead, 0.49% zinc and 0.21% copper over 19.8 metres of width and 250 metres of length.
At the beginning of 2006, shares for ECU were trading at 46 cents. Today, shares are priced at C$2.54.
Shares of Seabridge Gold Inc. have been steadily rising since May 2005. During 2006, shares of Seabridge increased 63% to C$16.60 per share, now trading at almost C$17.00.
The company has acquired a 100% interest in nine North American gold resource projects: Courageous Lake, Hog Ranch, Kerr-Sulpherets, Mitchell, Noche Buena, Quartz Mountain, Red Mountain and Castle/Black Rock.
In April 2006, the company purchased a 100% interest in the Kerr-Sulpherets project and confirmed a large gold/copper system located at the site.
Historical estimates show the Kerr deposit at 800,000 ounces of gold and 1.2 billion pounds of copper in the indicated category plus an additional 800,000 million ounces of gold and 1.1 billion pounds of copper in the inferred category.
The Sulphurets deposit contains an historic 1.3 million ounces of gold and 277 million pounds of copper in the indicated category plus an additional 500,000 ounces of gold and 113 million pounds of copper in the inferred category.
Minus the historically estimated resources, Seabridge boasts total measured and indicated resources of 7.12 million ounces of gold and indicated resources of 20.7 million gold ounces and 2.23 billion pounds of copper.
Investor confidence in the worldwide mining industry and its prospects have continued to strengthen - much like they have for junior mining companies on the TSX-V, according to PwC.
Murphy said that the survey found one of the most impressive numbers of 2006 was the $1.2 billion that exploration companies were able to raise through issuing shares, a 253% increase from 2005.
"The TSX-V is a good home for Canada's junior mining companies who can then graduate to the larger TSX when they become bigger scale producers," he said.
Juniors spent $409.4 million on exploration and development in 2006, 79% more than in 2005. Companies spent a total of $103.9 million, more than double from the year before, on plant and equipment in 2006.
"These are the kind of investments that are expected of junior mining companies and could pay high returns to shareholders if new properties are both discovered and developed to their potential," said Murphy.