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).
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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Visualizing the New Era of Gold Mining
This infographic highlights the need for new gold mining projects and shows the next generation of America’s gold deposits.
Visualizing the New Era of Gold Mining
Between 2011 and 2020, the number of major gold discoveries fell by 70% relative to 2001-2010.
The lack of discoveries, alongside stagnating gold production, has cast a shadow of doubt on the future of gold supply.
This infographic sponsored by NOVAGOLD highlights the need for new gold mining projects with a focus on the company’s Donlin Gold project in Alaska.
The Current State of Gold Production
Between 2010 and 2019, gold production increased steadily, though this growth has stagnated over the past few years.
|Year||Gold Production, tonnes||YoY % Change|
Along with a small decrease in gold production in 2020, there were no new major gold discoveries in 2021.
The fall in production and long-term lack of gold discoveries point towards a possible imbalance in gold supply and demand. This calls for the introduction of new gold development projects that can fill the supply-demand gap in the future.
Sustaining Supply: Gold for the Future
Jurisdictions play an important role when looking for projects that could sustain gold production well into the future.
From political stability to trustworthy legal systems, the characteristics of a jurisdiction can make or break mining projects. Amid ongoing market uncertainty, political turmoil, and resource nationalism, projects in safe jurisdictions offer a better investment opportunity for investors and mining companies.
Today, 10 of the top 15 mining jurisdictions for investment are located in North America, according to the Fraser Institute report published in 2023.
A Golden Opportunity
Located in Alaska, one of the world’s safest mining jurisdictions, NOVAGOLD’s 50% owned Donlin Gold project has the highest average grade of gold among major development projects in the Americas. For every tonne of ore, Donlin Gold offers 2.24 grams of gold, which is more than twice the global average grade of 1.04g/t.
Additionally, Donlin Gold is the second-largest gold-focused development project in the Americas, with over 39 million ounces of gold in M&I resources inclusive of reserves.
NOVAGOLD is focused on the Donlin Gold project in equal partnership with Barrick Gold.
Learn more about Donlin Gold .
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