BC’s mining industry posted record performance in 2008: PricewaterhouseCoopers report

Increased coal prices primary source of financial strength

TORONTO, May 5, 2009 — The British Columbia mining industry posted record financial results in 2008, according to a PricewaterhouseCoopers (PwC) report, The Mining Industry in British Columbia — 2008, released today. Aggregate pre-tax net earnings for the industry were up by 88% to $3.2 billion, the highest amount in the 41- year history of PwC's annual survey. Returns on shareholders investments in BC's operating mines, based on pre-tax earnings, reached an unprecedented 98% in 2008, up from 46% the prior year.

"The performance of the BC mining industry amidst a crashing economy in the later part of 2008 was nothing short of outstanding", said Michael Cinnamond, a partner in PwC's mining practice and co-author of the report. "The impressive results were primarily driven by increased coal prices that were up 225% to US$261/tonne over the prior year, with coal representing 86% of total product shipments in 2008. However, if you fast -forward to April 2009, the one- year prices announced were in the US$125/tonne range, a significant reduction from prices realized in 2008, but still high compared to historical averages."

Copper concentrates were the second largest contributor of mining revenues during 2008, but down by 29% in 2008 to $1.19 billion from $1.66 billion the previous year. The 2008 copper price averaged US$3.16/lb, but dropped to an average of US$1.56/lb in the first quarter of 2009, reflecting weak global demand.

Zinc and zinc concentrates contributed net mining revenues of $736 million in 2008, down 40% from $1.2 billion in 2007. Rising gold prices led to a 13% increase in gold revenues to $231 million in 2008, up from $205 million in 2007. Gold prices continued to strengthen in the first quarter of 2009, averaging $908.71/oz. Silver prices also rose in 2008, pushing revenues from silver up by 10% to $272 million over the previous year.

Total net mining revenue from molybdenum increased 9% to $472 million from $433 million in 2007, while the price dropped 5% to an average of US$28.42/lb. Molybdenum, primarily used as a strengthening material in the steel industry, saw a significant price decrease in the last quarter of 2008 and prices remain low in the first quarter of 2009, down 69% to US$8.75/lb.

"Cash flow from operations increased by 78% to $3.4 billion over 2007-a direct result of earnings growth", said Erfan Kazemi, a mManager in PwC's BC mMining practice, and co-author of the report. "BC's mining industry contributed $6.1 billion in expenditures to the economy, including payroll and benefits of $858 million. The average salary and benefits package increased by 11% in 2008 to $112,800, and employment rose 2% to 7,607 over the prior year."

Cinnamond added: "While we saw records set in 2008, there is currently a mix of uncertainty and cautious optimism within the BC mining industry. PwC polled 33 CEOs of BC- based mining companies in April 2009 and learned that 27% of the respondents are conserving cash, 39% have implemented either moderate or major spending cuts, and 12% are just hanging on. As a contrast, about 15% of the respondents reported they are actively seeking acquisitions and looking to grow."PwC's 2008 survey summarizes the 2008 year-over-year financial information of 18 operating metal and coal mines (including the Trail Smelter), nine operations in the permitted or active permitting stage, six mines in the reclamation stage and seven advanced exploration stage properties, all in BC. There were a total of 40 participants for 2008, the same number as 2007.

Other key findings from the PwC report include:

• Total metals and coal shipments from BC mines increased by 8% to 26,840,000 tonnes in 2008 from 24,854,000 tonnes in 2007.
• Capital expenditures were $853 million in 2008, a decrease from $964 million in the prior year. Machinery, equipment and construction materials purchases dropped by $31 million to $448 million in 2008.
• Production materials and supplies spending decreased by $59 million to $639 million in 2008.
• Total exploration expenditure in British Columbia, estimated at $416 million in 2007, decreased by 12% to $367 million in 2008, according to the Mining and Mineral Exploration in British Columbia, Overview 2008.
• BC's mining industry made total payments to the government of $545 million, an increase of $82 million from $463 million in 2007. Direct tax payments increased by $75 million to $365 million from $290 million in 2007, corresponding to increased net earnings for 2008.

Note: All figures are in $CAD unless noted otherwise.

For more information on PwC's The Mining Industry in British Columbia — 2008, or to arrange an interview to discuss the findings with the report's authors, please contact Jim Nelson, PricewaterhouseCoopers, at +1 604 806 7047.

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