BC mines more profitable

In 2002, British Columbia’s mining industry saw a continuation in its 4-year trend of year-over-year increases in profitability. However, total revenues for the year declined as the residual impact of mine closures in 2001 and sales of excess electricity fell significantly from 2001 levels.

In a survey titled The Mining Industry in British Columbia — 2002, PricewaterhouseCoopers (PwC) reports that the industry showed a net profit of $107 million, compared with $61 million in 2001, and that gross mining revenue dropped 5% between 2001 and 2002, from $3.7 billion to $3.53 billion. Sales of excess electricity contributed $24 million to net revenue and net income in 2002, down from $300 million in 2001. Cash flow from operations was $567 million in 2002, a decrease of $42 million, or 7%, from the $609 million reported in in 2001.

“Although 2002 has generally been a positive year for the B.C. mining industry, there are still significant areas that cause concern,” says John Bowles, PwC’s expert on mining practice in the province. “We’ve had six mine closures since 1999 and expect more to come over the next 10 years. Also, exploration expenditures by participants totalled just $11 million in 2002. In 2001, the amount reported, $10 million, was the lowest level of exploration expenditures in the province ever recorded by this survey.”

The uncertainty of the availability of land for mining activities remains a significant constraint to developing new mines in the province. On the bright side, government tax incentives and an improvement in gold prices have set the groundwork for increased levels of exploration and development activities.

“New government measures aimed at stimulating mineral exploration in the province are encouraging,” says Bowles. “The B.C. government has implemented a 20% mining flow-through share tax credit program for individuals investing in qualifying flow-through shares. And effective July 31, 2001, the purchases and leases of qualifying production machinery and equipment were exempted from provincial sales tax.”

Copper prices remained consistent with those of 2001, while zinc prices continued to slide. Precious metals and molybdenum prices increased in 2002, as did prices for metallurgical coal, though the average price for thermal coal was lower than in 2001. The total number of tonnes shipped fell by 8% to 24.1 million tonnes last year from 26.2 million tonnes in 2001. Still, the coal sector continued to be the largest segment of the mining industry, accounting for 38% (37% in 2001) of net revenues and 42% of employees (36% in 2001).

The survey found that mining continued to be a significant, albeit declining, employer in British Columbia. In 2002, there were 6,729 direct employees earning an average salary and benefits of $89,900, compared with 7,630 employees earning $81,100 in 2001.

PwC’s survey on mining in British Columbia is now in its 35th year of publication. The 2002 edition is based on data from 13 operating metal and coal mines and one smelting operation.

Copies of the report are available on the Internet at pwc.com/ca/mining.