Net income tops $2.35 billion, smashing 2005 record of $1.84 billion
VANCOUVER, May 15, 2007 — British Columbia’s mining industry posted another year of record financial results in 2006, driven primarily by increased global demand and higher coal and metals prices. Net income reached $2.35 billion in 2006, up 27.6% from $1.84 billion in 2005 — the highest level in the 39 year history of PricewaterhouseCoopers’ (PwC) annual survey of the B.C. mining industry. These and other findings were revealed today by PwC in its report titled The Mining Industry in British Columbia — 2006.
“The 2006 B.C. mining industry earnings were absolutely spectacular, exceeding the expectations of the industry and analysts,” said Michael Cinnamond, a partner in PwC’s B.C. mining practice, and author of the survey report. “The B.C. industry performance mirrored the global resurgence in the mining sector. Last year we saw copper prices up by 83% and zinc prices by 137%, which helped to push the gross revenue numbers up.”
Gross mining revenues for 2006 increased by 29% to $8.1 billion, up from $6.3 billion in 2005. The increase was fuelled by a significant growth in mining commodity prices. These price levels are expected to continue for the balance of 2007.
Cinnamond added that the Canadian dollar strengthened by about 6.8% in value against the US dollar during 2006, which offset some of the increase in gross revenues as coal and metals are priced in US dollars. “Based on the 2006 revenues reported in PwC’s survey, a one-cent change in the value of the Canadian dollar would cause a gross revenue shift of $71 million.”
While gross revenues were up in 2006, the cost of supplies and labour increased by 35% to $2.98 billion from $2.21 billion in 2005. The increase was in part due to global price increases in steel, fuel, and tires, plus the costs of hiring and retaining experienced mining personnel. Cash flow from operations increased by 39% to $2.9 billion from $2.1 billion over the same period. Capital expenditures, including machinery, equipment and construction costs, increased by 49% during 2006 to $513 million.
Copper surpassed coal as the largest contributor to the B.C. industry’s net mining revenue, responsible for $2.0 billion, about 30% of the total. Coal, which was the largest contributor of net mining revenue in 2005 at 40%, came second in 2006, contributing $1.98 billion. Increases in the prices of base metals, including copper, are primarily responsible for this shift.
“Overall the industry appears to be in good financial health, and if current demand levels hold, higher price levels should continue in the short term,” noted Cinnamond. “Identifying and developing new deposits to continue to supply the huge demand remains the biggest challenge. Only successful sustainable development will allow preservation of capital and resources between generations.”
Other key findings of PwC’s survey:
- Total shipments from B.C. mines were down slightly in 2006 to 25.4 million tonnes from 26.6 million tonnes in 2005.
- The B.C. Government estimates an increase in exploration expenditure in the province of 20% in 2006 to $265 million from $220 million in the previous year.
- After-tax return on shareholder’s investment increased to 64.8% in 2006 from 54.1% in 2005.
- The average number of people employed by the B.C. mining industry increased to 7,345 from 7,071 the previous year.
- In 2006 the B.C. mining industry made payments to governments totalling $799 million, an increase of 29% over 2005. Total direct tax payments during 2006 were $648 million, and increase of 46% over the previous year.
PwC’s survey summarizes the 2006 year-over-year financial information of B.C.’s 17 operating metal and coal mines, one smelter, six operations in the permitted or active permitting stages, eight mines in the reclamation stage and 10 advanced exploration stage properties. The 2006 survey had 42 participants, compared to 43 in 2005.
Over the years many mines have opened and closed in B.C., and companies surveyed are not always consistent in their participation and responses. Consequently, the historical comparative figures are not fully comparable from year to year, but are representative of the overall mining industry in B.C.
Note: All figures are in $CAD unless noted otherwise.
For more information on PwC’s The Mining Industry in British Columbia — 2006, or to arrange an interview to discuss the findings with the report’s author, please contact
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