General News & Comment: B.C. Mining still in slump through coal

For yet another year, the news is not good for British Columbia’s mining industry — the second largest industry in the province. The annual Price Waterhouse report, a detailed statistical analysis of the mining sector’s performance, notes that “poor market conditions neutralized the industry’s ability to become profitable in 1985.”

For the first time since 1981 the industry recorded positive earnings of $6 million before taxes and royalties. But after those charges the loss was $35 million compared to $29 million in 1984.

However, cash generation from operations was much better because of a $47-million gain in depreciation charges. At $270 million, cash flow was the highest recorded since 1980, the report points out. Total net mining revenues increased by 1% over 1984 due mainly to an 11% increase in coal exports. But without that contribution, the mineral industry’s output was almost the same as 1984. With lower commodity prices factored in, the downturn in net revenue was about 8% or $92 million. Coal accounted for 49% of the total net revenues of the industry compared to 20% in 1980, largely the result of the Northeast Coal Project. Revenues from Quintette (Denison) and Teck Corp.’s Bullmoose operations will come under pressure in the current year because of demands from Japanese consumers for lower prices.

Capital expenditures by the industry were $210 million in 1985 which compares to $776 million in 1983 when work on the Northeast Coal Project was well under way. The bulk of 1985 expenditures related to the development of Westmin Resources’ H-W mine on Vancouver Island and work at Esso Resources’ Byron Creek coal operation in southeastern B.C.

About 640 jobs were created in 1985 with the opening of the H-W mine and the reopening of the Bell Copper and Brenda mines through the intervention of the Critical Industries Commission. But that was more than offset by the 1,900 jobs lost through cutbacks and temporary shutdowns in 1985 and the impact of closures occurring the previous year.

Breaking down the industry’s financial performance, the report showed that coal companies achieved a net profit of $10 million and all others recorded a net loss of $45 million. Of the 23 mining companies reporting results, 10 recorded profits totalling $81 million and the remainder losses aggregating $116 million. The industry has not received any return on investment since 1981 and that trend continued into the latest report year which had a negative return of 1.1%

The chairman of the mining association, Tony Petrina, says the report “emphasizes the need for a major overhaul of the financial and investment climate for the mineral industry in B.C.” Despite the continuing losses in the industry, he admits to being encouraged by Premier William Vander Zalm’s call for a task force to review the industry’s competitive position, adding it’s “an important first step in bringing British Columbia’s mineral policies in line with the international economic realities of the 1980s.”

Mining Association President Tom Waterland says the industry has the information to do that study, adding there appears to be a willingness on the part of the government to reduce industry costs. He argues that the industry needs a predictable cost structure so it can predict the economic life of a mining operation.