BC mining industry robust in 2009: PwC report

VANCOUVER — The mining industry in British Columbia kept healthy last year despite a sharp drop in coal shipments and prices, according to the latest survey of the industry by PricewaterhouseCoopers (PwC).

The report, entitled Rock on: the mining industry in British Columbia 2009, finds net earnings before tax in 2009 were $2.3 billion, a drop of $984 million from the record high of 2008, but comparable to then-record-setting 2007.

“The results this year are down from last year, but last year was an absolute historic high,” said Michael Cinnamond of PwC, a lead author of the report at a launch event in Vancouver. “The results this year are still at historically high levels, up in the top three results we’ve ever recorded. That’s an excellent situation.”

Presented as part of B.C. Mining Week, the 42nd edition of the survey covers 17 operating mines, one smelter, 13 projects in the permitted or active permitting stage, three mines in reclamation and seven advanced-stage exploration properties.

The province was hardest hit by declines in the metallurgical coal industry, which accounted for 46% of net revenues in 2009. The average price of the resource plunged from US$260 per tonne in 2008 to US$157 in 2009; the price has further dropped in the first quarter of 2010 to US$140 per tonne.

Compounding the price drop was a 24% decrease in metallurgical coal shipments, from 22.3 million tonnes in 2008 to 16.9 million tonnes in 2009.

Total net revenues from metallurgical coal dropped from $3.2 billion in 2008 to $2.6 billion for 2009.

Copper, which made up 22% of revenues in 2009, fared better than coal despite also being hit by lower prices and demand. The copper price averaged US$2.35 per lb. in 2009, a 20% decline from US$3.16 per lb. in 2008.

The metal was boosted in the study by new reporting practices that record copper revenues on the final month of settlement. Copper prices made steady gains throughout 2009 and was selling at US$3.29 per lb. in the first quarter of 2010.

Total net revenues from copper increased from $1.19 billion in 2008 to $1.22 billion in 2009.

Gold also benefitted from higher prices, but in B.C. it is mostly a byproduct of copper production. The precious metal made up 5% of net revenue in 2009 with $309 million in sales.

The price of gold, however, continues to climb from the 2009 average of US$974.02 per oz., recently hitting a high of US$1,249.60 per oz.

Revenues from molybdenum declined 49%, from $472 million in 2008 to $241 million in 2009. The drop followed a decline in the average price of the resource from US$28.73 per lb. in 2008 to US$11.12 per lb. in 2009.

Cinnamond highlighted the fact that after 10 years of writing the report, this was the first time he could speak about a major metal mine coming online, in the form of Roca Mines’ Max molybdenum mine near Revelstoke.

“The mines that are coming in the next two or three years and beyond is excellent news, and a testament to the resiliency in the industry,” said Cinnamond.

Pierre Gratton, chief executive of the Mining Association of B.C., echoed the optimism for the future.

“Like everybody else we were extremely nervous about what the future had in store,” said Gratton. “But it turned out to be a very good future in ’09 and prospects in 2010 and beyond are even greater.”

While the active mining sector is still in fine shape, Cinnamond called for greater exploration in the province.

Last year spending in the sector totaled $154 million, down from $367 million in 2008. Claims were down to 36,800 sq. km covered, a 29% decrease from the 52,000 sq. km staked in 2008.

“The industry needs to find new deposits. It’s great that they’re going to develop those that are there, that’s great news, but we also need to encourage more greenfield exploration,” said Cinnamond.

He said the government could help by simplifying the permitting process, and helping to resolve land title issues, both of which were identified as major issues by the chief executives PwC interviewed for the report.

B.C. Minister of State for Mining Randy Hawes was also at the presentation. He said the government is working to streamline permitting, spoke of the benefits of the soon-to-be-insituted harmonized sales tax (HST) and reaffirmed the government’s commitment to electrify highway 37.

Hawes was put in the hot seat during the question period when asked about the provincial ban on uranium exploration and the abrupt ban on exploration in B.C.’s Flathead Valley.

Hawes replied that while uranium mining can be conducted safely, many people don’t believe that, and the government is spending all its political capital at the moment on the HST.

As for the Flathead Valley, he said he understood why it was unpopular, but it was an isolated decision and compensation was being worked out.

In response to a question about the Australian tax hike, Hawes said it is not something the government is considering. He did, however, hint at possible changes to the structure of land staking.

With the system now online and streamlined, Hawes said he wants to avoid “dead staking”, or staking land without the intention of exploring it.

As well, Hawes said the fee structure, which has not changed in 30 years, is likely to be adjusted.

Overall, Hawes was bullish on the future, ending his statement at the question period by saying “to paraphrase an old rock song — on the theme of ‘rock on’ — I think the future’s so bright we’re going to need shades.”