PwC survey says BC in good shape

In contrast to the findings in an annual survey of mining companies published by the Fraser Institute, a report by PricewaterhouseCoopers says financing for mining projects in British Columbia improved in 2003.

Increases in commodity prices last year helped push industry net income to $285 million, an increase of 166% over the $107 million reported for 2002. The improvement would have been greater were it not for the stronger Canadian dollar, which offset some of the gains. (Mineral prices are reported in U.S. dollars, and a 1 change in the value of the Canadian dollar translates as a $26-million shift in gross revenues for British Columbia producers.)

The Pricewaterhouse report, titled The Mining Industry in British Columbia — 2003: An Annual Survey and Assessment of Overall Performance, summarizes financial information on the province’s 13 mines and one smelter.

The Fraser Institute study, conducted earlier this year, paints the province in a different light. In a series of indices based on a poll of 1,012 junior mining companies worldwide, British Colmbia ranked as seventh among the best territories in Canada in which to do business. Worse, the province ranked last in the country in the Policy Potential Index, which measures the effects of government policies such as regulation and land use.

Said Survey Co-ordinator Liv Fredricksen: “B.C. continues to score low despite recent changes in policy, demonstrating that the perception of a jurisdiction’s business climate is as important as its actual policies.”

Gary Livingstone, former president and CEO of the British Columbia Mining Association, echoes those words: “The provincial government has done a good job. But they have more to do. Ten years of ‘regulatory instability’ cannot be easily erased from the memories of investors. It takes time and continued effort and action.”

Gross mining revenues in British Columbia were up 3.5% to $3.65 billion in 2003, compared with $3.53 billion a year earlier. Cash flow from operations in 2003 was $598 million, an increase of $31 million, or 5%, from the $567 million reported for 2002. Last year’s return on shareholder investment was 10.9%, a considerable increase over the previous year’s 4.1%.

“The province’s mining industry seems to be finding its feet after some tough years,” says John Bowles, a spokesman for PwC in British Columbia. “Higher metals prices are helping, and may lead to the reopening of some existing mines.”

Exploration expenditures were higher last year — $55 million province-wide — and will likely approach $100 million in 2004. Expenditures by PwC survey participants totalled $15 million in 2003, up 36% in 2002. In 2001, the amount of exploration spending in the province, as reported by survey participants, was $10 million — a record-low in the 36-year history of the PwC survey.

Higher metals prices contributed largely to the province’s wealth. The price of copper increased 14% in 2003 to an average of US81 per lb. and has since jumped a further 53% to an average of US$1.24 per lb. for the first quarter. The average price of zinc leapt 8% in 2003, to US35 per lb. and has risen a further 29% in the first quarter to US49 per lb.

Gold prices vaulted by 17% to an average of US$364 per oz. in 2003, whereas silver prices increased 6% to US$4.60 per lb.

Average metallurgical coal prices were relatively stable, compared with the previous year. Total tonnage shipped from all British Columbia mines in 2003 increased to 25.3 million tonnes, up 5% from 2002. The increase in shipments is largely attributable to coal, which accounted for $964 million, or 36%, of the mining industry’s $2.7 billion in net revenues — down slightly from 38% in 2002.

Mining remains a significant employer in the province: in 2003, 6,128 direct employees earned an average of $94,500 in salary and benefits, compared with 6,729 earning $89,900 in 2002.

Copies of the report are available by visiting pwc.com/ca-mining.