VANCOUVER, May 15, 2012 - According to a new report from PwC, revenues for British Columbia's mining companies reached a historic high in 2011, reflecting the ongoing resurgence of mining in the province. A $2 billion increase in revenues from the previous year pushed the aggregate gross mining revenues by survey respondents up to $9.9 billion.
"Following near-record financials in 2010, the BC mining sector delivered another outstanding performance in 2011," said Michael Cinnamond, leader of PwC's BC mining industry practice and co-author of the report. "Metallurgical coal was the main driver of the 2011 record numbers, with shipments up 10% and prices up by 42%. Higher prices and volumes for silver and lead also contributed to the record results."
The industry's overall net earnings before taxes were similar to 2010 at $3.7 billion1. Cash flow from operations increased by 40% to $4 billion in 2011. Pre-tax return on shareholder's investment was 46% in 2011, a drop from 63% the previous year, reflecting a significant increase in investments during the year.
Another encouraging sign is the 135% increase in capital expenditures during 2011 as companies spent almost $3 billion on machinery, equipment and construction projects. Exploration spending by survey respondents was also up-reaching $431 million, an increase of 113% over the previous year.
Coal remains the most significant commodity for the BC mining industry, representing 59% of total net revenues in 2011. Metallurgical coal shipments reached 24.5 million tonnes in 2011 at an average price of $US257/tonne. Total revenues from coal in 2011 totalled $5.1 billion.
"The record results posted by the BC mining sector were in spite of a strengthening Canadian dollar against the US dollar, which works against the industry," said Marianne Carroll, a Manager at PwC and co-author of the report. "The value of a US dollar in Canadian dollars averaged $0.989 in 2011 compared to $1.029 in 2010. PwC estimates this wiped $409 million from total revenues earned in 2011."
Cinnamond added a cautionary note that prices for coal and most metals had softened in Q1 of 2012.
Other key findings:
The BC Government has announced it plans to reinstate the PST on April 1, 2013. For the mining industry the return to a PST will result in additional costs associated with production and overhead. The BC Ministry of Finance has also announced that the permanent PST exemptions that were in effect as of June 30, 2010 will continue to be in effect after April 1, 2013. While the planned PST exemptions on items such as production equipment and machinery will help to reduce overall costs of production, there are still other various costs that are not expected to be PST exempt and overall operating and production costs are expected to increase after April 1, 2013.
"BC has a lot of reasons to be optimistic about mining," said Cinnamond. "In addition to record breaking revenues in 2011 there were four new metals mines under construction, including Copper Mountain which went into commercial production, and there are many more projects in the permitting process. However there is no room for complacency and the BC mining industry is working hard to address land access rights, build partnerships with First Nations communities, and plan for future infrastructure and workforce needs."
PwC interviewed some leaders of BC's mining industry as part of the survey. Without exception those interviewed saw 2011 as a turnaround year, primarily because of the new mines under construction and the pipeline of projects, on top of the industry's strong 2011 financial position. To view these video interviews visit: http://www.pwc.com/ca/en/mining/mining-industry-british-columbia.jhtml
PwC's 2011 survey summarizes the year-over-year financial information of 41 participants with operations in BC: 17 operating metal and coal mines; 1 smelter operation, 13 operations in the permitted or active permitting stage, eight advanced exploration stage properties and three mines in the reclamation stage. PwC has been compiling this annual survey of the BC mining industry since 1968.
For more information or to download a full copy of the 2011 report visit:
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