BC’s mining industry results beat expectations in 2009, despite turbulent global economy: PwC report

VANCOUVER, May 12, 2010 — British Columbia’s mining industry reported pre-tax net earnings of $2.3 billion during 2009 in spite of the worldwide economic slowdown, according to a PricewaterhouseCoopers (PwC) report, The Mining Industry in British Columbia—2009. The earnings of $2.3 billion declined from the all-time record of $3.2 billion reported in 2008, but remain at historically high levels.

“The 2009 financial results for BC’s mining industry are very similar to those seen in 2007, which at the time was a record year itself,” says Michael Cinnamond, the leader of PwC’s BC Mining practice and co-author of the report. “The industry weathered the global economic downturn better than most.  Even so, the mines in BC were faced with lower shipments and weaker prices across the board last year due to a drop in overall economic activity just about everywhere. Coal, which dominates BC’s mining sector, experienced a 24% decline in volumes shipped and prices fell by almost half.”

Shipments of metallurgical coal were down to 16.9 million tonnes in 2009 from 22.3 million tonnes the prior year. Coal prices saw a dramatic decrease from an average of US$260/tonne in 2008 to US$157/tonne last year.

Copper concentrates remained the second most significant contributor to revenues, bringing in $1.2 billion in 2009, an increase of 3% over 2008. The average price of copper declined 26% to US$2.35/lb, and shipments were down 14% to 730,000 tonnes.

Zinc and zinc concentrate revenues were down by 20% over the previous year to $587 million. A drop in the average price of zinc to US$0.78/lb in 2009 from US$0.95/lb and a 12% decline in shipments to 289,000 tonnes drove the declines.

A 12% rise in the average gold price to US$974.02/oz in 2009 pushed gold revenues up by 34% to $309 million. In the first quarter of 2010 gold prices continued to rise, averaging US$1,110.16/oz. Revenues from silver were also up in 2009, rising 6% to $288 million in 2009, in the face of price declines from US$15.02/oz in 2008 to US$14.70/oz last year. Silver prices are up slightly to US$16.92/oz in the first quarter of 2010.

Average prices for molybdenum plummeted 61% to US$11.12/lb, pushing 2009 revenues from molybdenum down to $241 million, a drop of 49%. Molybdenum prices improved in the first quarter of 2010 to US$16.06/lb.      

“BC’s mining sector is an important component of the provincial economy, contributing $5.7 billion in 2009,” says Erfan Kazemi, a manager in PwC’s Mining industry practice and co-author of the report. “Overall employment fared well through the downturn, maintaining the 2008 level of employment and average salary. The mining industry paid out $851 million in salary and benefits last year, with the average salary at $110,800.”

PwC polled 34 CEOs of BC-based mining companies in late April of 2010 and found that 61% considered their businesses to have returned to normal, and 50% reported they are actively pursuing new properties, acquisitions or mergers. The overall results in the PwC CEO poll suggest that the BC mining industry weathered the storm during the last industry cycle downturn at the start of the decade. As a result it has emerged relatively unscathed from the recent global downturn. 

Cinnamond adds, “In early 2010, Roca Mines’ Max Moly Project received their mine permit and became BC’s first major metal mine in over a decade. Copper Mountain and New Afton are already under construction and very significant projects like Mt. Milligan, Red Chris and Prosperity are in the pipeline.”

 PwC’s report also revealed:

• Total metals and coal shipments from BC mines were down 21% to 21.3 million tonnes in 2009 from 26.8 million tonnes in 2008
• The survey respondents reported total payments to government of $413 million, down from $545 million in 2008. Direct tax payments fell to $243 million from $365 million in 2008—$96 million of this decrease is attributable to reductions in mineral taxes on coal
• Capital expenditures decreased by 33% from $853 million in 2008 to $568 million in 2009
• Mineral exploration and development expenditures by survey participants rose 83% to $157 million from $86 million in 2008, primarily due to the increased number of properties under development in BC

PwC’s 2009 survey summarizes the year-over-year financial information of 41 participants with operations in BC: 17 operating metal and coal mines; the Trail smelter; 13 operations in the permitted or active permitting stage; three mines in the reclamation stage; and seven advanced exploration stage properties. PwC has been compiling this annual survey of the BC mining industry for 42 years.