B.C. mining industry revenues reach record high

According to figures released in an annual survey report prepared for the Mining Association of British Columbia (MABC), gross revenues were $3.9 billion last year, an increase of $714 million over 1987 and a record high for the industry.

Industry earnings after tax were $449 million, the highest level of net earnings since 1979.

The coal sector continued to be the largest contributor to the industry last year, with coal revenues representing 41% of total British Columbia mining revenues. The base metal sector enjoyed an improved year as a result of stronger metal prices, particularly for copper, zinc and lead.

Copper revenues increased 24% or $150 million over 1987, although production rose only slightly. Zinc and lead revenues increased 84% ($189 million) and 59% ($34 million) respectively over 1987.

Silver and gold did not fare as well as the prices realized were 19% and 11% lower than 1987 respectively. Despite this, gold revenues were up 24% and silver revenue climbed 10% last year because of an increase in basic production.

An encouraging note for investors was the revelation that an after- tax return of 14.3% was achieved on shareholders investment. But Tom Waterland, president of the MABC still sees plenty of room for improvement.

“Although this 1988 figure is higher than the 10-year average return of 5.3%, it is definitely not yet at levels sufficient to attract investment to a high risk business,” he said.

Waterland’s views are borne out by the fact that the industry’s primary source of finance for 1988 was internally generated funds.

Internally generated capital in 1988 was $777 million, the highest level recorded in recent years. In comparison new capital raised was only $186 million, the lowest level since 1979.

Waterland said both market factors and internal factors contributed to the improved profit picture for mining in the province in 1988, with the market factors including stronger demand for metals, persistently low metal inventories and higher prices for most metals. The internal factors relate to the continued enhancement of operating efficiencies.

“The cost of production as a percentage of net mining revenues was 60% in 1988, down from 64% in 1987 and the lowest percentage experienced in nine years,” he said.

Waterland also noted that payments to governments amounted to $418 million — almost as much as industry’s net after tax earnings.

The climate of improved profitability also led to substantially increased capital spending in 1988. Total capital expenditures were $386 million in 1988, an increase of 44% over the previous year.

While exploration and development expenditures reached a healthy $213 million last year, Waterland warned that the outlook is for declining expenditures in 1990 due partly to the decreased attractiveness of flow-through share funding. Waterland stressed the need for more money to be spent on exploration in British Columbia in order to replace the province’s diminishing mineral reserves and thus sustain industry production.

The survey also showed that British Columbia mining directly or indirectly supports some 58,000 jobs across Canada, with direct employment estimated to be about 20,000 people in the province.

The data for the study is collected independently by Price Waterhouse from 42 separate mining companies, representing most of the province’s mining industry and including all major mining operations.

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