Chart: The March of the Zombie Miners Continues
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The March of the Zombie Miners Continues [Chart]

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The March of the Zombie Miners Continues [Chart]

The March of the Zombie Miners Continues [Chart]

New report shows that over half (52%) of all Canadian-listed mining companies are zombies

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

Canada has a reputation worldwide as the epicenter for mining exploration, and over the years the country’s junior-listed companies have created billions of dollars in wealth through new mineral discoveries.

However, these days, Canada is home to a horror story that seems to haunt investors more each year: 52% of all Canadian mining stocks are now “zombies”, and together the walking dead combine for a total of -$2.8 billion in negative working capital.

The “Zombie” Backstory

It was just over a year ago that Tony Simon, President of Seguro Consulting, brought to our attention the initial problem of the zombie miners.

In this case, his “zombie” definition referred to mining exploration companies that had negative working capital and therefore did not meet the Continuous Listing Requirements (CLR) for the TSX and TSX-V stock exchanges.

Our chart from last year called “A Miner Problem” detailed these requirements, while also showing the ugly state of the 589 listed companies’ balance sheets. Many of these companies have negative working capital because they have no real assets that can be monetized, while being saddled with mounting costs or unsustainable debt.

Zombie Survival Tactics

Break out your Zombie Survival Kit, because we now have another year’s worth of information from Mr. Simon, who is a CPA by designation.

Here are the stats that caught our eye, most of which are also included in this week’s chart:

  • The number of zombie miners increased from 589 to 669.
  • Zombies now make up 52% (up from 40%) of all mining companies in Canada listed on TSX and TSX-V exchanges.
  • The average zombie has had negative working capital for 44 months.
  • Negative working capital of all zombie companies increased by 31.6% from -$2.15 billion (2015) to -$2.83 billion (2016).

Zombie Survival Tactics

Of the original 589 zombies, 398 (68%) stayed as zombies the following year, and were counted towards 2016’s total. Mr. Simon provided us with some additional stats on the companies carried forward:

  • 51% of the zombies have share prices of $0.025 or less.
  • Only 13 zombies had $1,000,000 or more of liquidity in the last quarter.
  • Meanwhile, an astonishing 68% of zombies traded with less than $50,000 of liquidity last quarter.
  • 55% of zombies have market capitalizations of less than $1 million.

In other words, these zombies don’t eat brains for breakfast. Instead, they munch on capital from private placements until no one is willing to feed them.

So why do they continue to exist?

More Zombies, More Problems

From the perspective of the zombie management teams, it makes sense why they still roam the streets in search of capital or a stroke of luck. Just read this post by an anonymous CEO of a zombie company. To sum up: they continue to exist because of fiduciary duty to their shareholders.

However, it gets tougher to explain their existence from other angles.

How does the exchange justify keeping them around? Mr. Simon has been poking at this with a stick to try and get an answer. After all, retail investors have a tough enough time as it is, even without 52% of the total selection of companies being extreme long shots.

Here’s hoping that normalizing commodity prices in gold, silver, zinc, and other metals will help spur mergers and acquisitions in the sector. Perhaps today’s zombies can have their assets “brought to life” on the balance sheets of healthier companies.

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Energy

Visualizing U.S. Consumption of Fuel and Materials per Capita

Wealthy countries consume large amounts of natural resources per capita, and the U.S. is no exception. See how much is used per person.

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Visualizing U.S. Consumption of Fuel and Materials per Capita

This was originally posted on Elements. Sign up to the free mailing list to get beautiful visualizations on natural resource megatrends in your email every week.

Wealthy countries consume massive amounts of natural resources per capita, and the United States is no exception.

According to data from the National Mining Association, each American needs more than 39,000 pounds (17,700 kg) of minerals and fossil fuels annually to maintain their standard of living.

Materials We Need to Build

Every building around us and every sidewalk we walk on is made of sand, steel, and cement.

As a result, these materials lead consumption per capita in the United States. On average, each person in America drives the demand of over 10,000 lbs of stone and around 7,000 lbs of sand and gravel per year.

Material/Fossil FuelPounds Per Person
Stone10,643
Natural Gas9,456
Sand, Gravel7,088
Petroleum Products 6,527
Coal 3,290
Cement724
Other Nonmetals569
Salt359
Iron Ore239
Phosphate Rock 166
Sulfur66
Potash49
Soda Ash36
Bauxite (Aluminum)24
Other Metals 21
Copper13
Lead11
Zinc6
Manganese4
Total 39,291

The construction industry is a major contributor to the U.S. economy.

Crushed stone, sand, gravel, and other construction aggregates represent half of the industrial minerals produced in the country, resulting in $29 billion in revenue per year.

Also on the list are crucial hard metals such as copper, aluminum, iron ore, and of course many rarer metals used in smaller quantities each year. These rarer metals can make a big economic difference even when their uses are more concentrated and isolated—for example, palladium (primarily used in catalytic converters) costs $54 million per tonne.

Fuels Powering our Lives

Despite ongoing efforts to fight climate change and reduce carbon emissions, each person in the U.S. uses over 19,000 lbs of fossil fuels per year.

U.S. primary energy consumption by energy source, 2021

Gasoline is the most consumed petroleum product in the United States.

In 2021, finished motor gasoline consumption averaged about 369 million gallons per day, equal to about 44% of total U.S. petroleum use. Distillate fuel oil (20%), hydrocarbon gas liquids (17%), and jet fuel (7%) were the next most important uses.

Reliance on Other Countries

Over the past three decades, the United States has become reliant on foreign sources to meet domestic demand for minerals and fossil fuels. Today, the country is 100% import-reliant for 17 mineral commodities and at least 50% for 30 others.

In order to reduce the dependency on other countries, namely China, the Biden administration has been working to diversify supply chains in critical minerals. This includes strengthening alliances with other countries such as Australia, India, and Japan.

However, questions still remain about how soon these policies can make an impact, and the degree to which they can ultimately help localize and diversify supply chains.

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