Lower profits for B.C. mining industry

British Columbia’s mining industry recorded an all-time high of nearly $4 billion in gross sales in 1989, but an independent survey by Price Waterhouse also shows that the industry suffered a dramatic 56% decrease in earnings from 1988 results. “Profit margins were severely eroded during 1989,” said Tom Waterland, president of the Mining Association of British Columbia. He cited increased operating costs, general inflation, and the strong Canadian dollars as factors that had a negative impact on earnings last year.

“The increased operating costs are largely due to the aging of many of our larger mines in this province,” Waterland explained. “Older operations typically experience lower grades of ore, higher mining costs, and higher repair and maintenance costs.”

Earnings for British Columbia’s mining industry in 1989 totalled $196 million, compared with $449 million in 1988. The results for 1989 were jointly released by the Mining Association and Price Waterhouse using data collected independently by Price Waterhouse from 45 separate companies.

Coal accounted for 34% of net mining revenues in 1989, down from 41% of net revenues in the previous year. It was still the most important commodity produced last year, followed by copper which accounted for 26% of net revenues. Zinc net revenues increased $134 million in 1989 over 1998. Gold and silver net revenues declined 6% and 8% respectively from 1988, with price decreases partially offset by production increases.

“A 23% decrease in net capital inflow to $553 million in 1989 for B.C. mining and the decline in flow-through financing due to reduction in Revenue Canada tax incentives resulted in less capital available for new mine development to replace the province’s dwindling mineral reserves,” Waterland added.

Capital expenditures for mine expansion and the development of new mines decreased 28% to $278 million in 1989. Exploration and development expenditures were $177 million in 1989, a decrease of 17% from the total for 1988.

“The 1989 calendar year has seen the after-tax return on shareholders’ investment drop to just 6.7%, after peaking in 1988 at 14.3%. These levels are certainly not sufficient to attract strong investment to the high risk business of mining,” Waterland said.

Waterland also noted British Columbia’s mining industry spent $35 million on environmental control measures, including both capital and operating outlays. He pointed out that over half of all research dollars spent by the industry in British Columbia go to the control and treatment of acid rock drainage and to the study of potential preventative measures.