Photo by: Flathead Wild
TORONTO (miningweekly.com) – Regardless of lifting the province’s total mining output in 2013, British Columbia’s mining industry continued to deal with significant headwinds in the year, resulting in sliding revenues and earnings when compared with the record year of 2011, professional services firm PwC has found in its latest ‘BC Mining Industry Survey’.
PwC presented the findings of its forty-sixth yearly BC Mining Industry Survey as part of the province’s Mining Week, saying that low commodity prices and soft demand were mainly to blame for the industry’s sluggish performance.
“In 2013 we saw investment in British Columbia's mining industry remain depressed as prices for its key commodities such as coal, copper, zinc and molybdenum remained soft. Producers hunkered down to minimise costs as they were hit with increased electricity rates, commodity market volatility, a skilled labour shortage and the additional costs of British Columbia’s return to a provincial sales tax and goods and services tax system last year,” survey co-author and leader of PwC’s British Columbia mining practice, Mark Platt, said.
The PwC survey found total gross mining revenues amounted to $8.5-billion in 2013, down 7% from 2012, mainly owing to continued global economic uncertainty and a resulting drop in prices of British Columbia’s two largest revenue-generating commodities, coal and copper.
This slide impacted the total pre-tax net earnings as well, which fell 22% to $1.4-billion from 2012.
The drive for greater operating efficiencies and cost trimming paid some benefits in 2013. Cash flow from operations increased to $2.6-billion in 2013, up 15% from 2012.
Not surprisingly, companies cut back on capital expenditures to conserve cash, with these falling 35% to $1.8-billion in 2013.
There were 10 720 people directly employed in the province’s mining industry last year, an increase of 3% over the previous year. The survey respondents reported a drop in average salaries paid, from $98 200 in 2012, down to $91 900, before benefits.
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British Columbia is Canada’s largest copper producer, the country’s largest exporter of metallurgical, or steelmaking coal, and the only producer of molybdenum. The province is home to more than 1 200 mining companies and home to the largest concentration of mining exploration and geoscience professionals in the world.
“In spite of some financial challenges over the last couple of years, British Columbia’s mining sector continues to move forward. Since 2011, the Copper Mountain, New Afton, and Mount Milligan mines in British Columbia have come into production. The province has a number of new mines under construction and the new Red Chris and Roman mines should open in 2014,” survey co-author and a manager in PwC’s British Columbia mining practise, Marianne Carroll, said.
Industry analysts were forecasting the prices of most precious and non-precious metals produced in the province to see a moderate recovery over the next 12 to 18 months.
While the growth expectation for China, the world's largest consumer of copper and other industrial minerals, was trimmed from previous years, it is still predicted to grow at a respectable 7%.
Other emerging nations such as India and Brazil are expected to continue fuelling the demand for metals and to put upward pressure on prices. The US economy continues to recover, and parts of Europe were showing signs of strengthening. All of these factors should help to increase the demand for products from British Columbia’s mines.
British Columbia, and other Canadian mining companies should benefit from a sustained lower Canadian dollar. PwC's first-quarter ‘Capital Markets Flash’ identified mining as a longer-term winner from the tumbling loonie as the commodities sold were priced in US dollars, and many production costs such as labour and energy were incurred in Canadian dollars.
“British Columbia mining sector did have a tough year in 2013, but we've been through these cycles before. The real challenge for the miners, government and communities is to ensure that British Columbia remains a competitive region for a sustainable mining industry to weather these cycles,” Platt said.