Lower coal prices and reduced shipment volumes impacted revenues
VANCOUVER, May 13, 2008 — The British Columbia mining industry posted strong financial results for 2007, driven by base metals prices and continuing strong global demand. According to the latest PricewaterhouseCoopers (PwC) report, The Mining Industry in British Columbia — 2007, while net earnings of $1.2 billion in 2007 were down 48% from an unprecedented high of $2.3 billion in 2006, results were still very positive, and shareholders were rewarded with dividends of $635 million.
The survey found that the lower 2007 average coal price of US$80 per tonne, down 26% from the previous year, and a 10% reduction in total coal shipments were major factors in lower revenues and earnings.
"The BC mining industry continued to be a key contributor to the provincial economy in 2007 with strong financial results and it provided direct employment for over 7,400 people," said Michael Cinnamond, a partner in PwC's BC mining practice, and author of the report. "BC's mining sector saw over $1 billion of new capital raised in 2007, a 157% increase over 2006. These results bode well for the future as continued exploration and development of new mineral deposits and renewal of existing plants and machinery are necessary to preserve the longevity of the industry."
BC's gross mining revenues decreased to $6.9 billion in 2007 from $8.1 billion in 2006, a drop of 15% — mainly driven by decreased coal prices and decreased overall coal and metals shipments. Cash flow from operations dropped by 31% in 2007 to $1.9 billion from the previous year.
Copper continues to be the largest contributor to the BC industry's net mining revenues at $1.66 billion in 2007. Metallurgical coal is the second largest contributor to net mining revenues at $1.37 billion, followed by zinc at $1.23 billion and molybdenum in fourth place at $433 million. While gold prices challenged the previously unthinkable price of US$1,000 per ounce, there are very few operations in BC that are focused on gold production, and gold shipments were valued at a relatively small $205 million in 2007. One of BC's largest gold producers in prior years ceased production in 2007 and did not participate in this year's survey.
Total expenditure in BC's mining industry in 2007 was $6.4 billion, a decrease of 5% from 2006. Unit operating costs continued to climb and capital investment on new development projects increased. Outbound transportation costs are one of the largest components of total industry expense, although it dropped 5% to $957 million in 2007, mostly due to fewer shipments.
"Foreign exchange rates have a notable impact on BC's gross mining revenues, as all coal and metals are priced in US dollars," said Gerrie van der Westhuizen, a manager in PwC's BC mining practice, and contributor to the survey. "For the companies in the PwC survey, a one cent change in the value of the Canadian dollar against the US dollar would cause a gross revenue shift of $64 million Canadian dollars."
The average salary and benefits package in BC's mining sector was valued at $101,900 per employee, up from $99,900 in 2006, reflecting a global shortage of experienced mining personnel.
Cinnamond noted: "According to figures from the BC Environmental Assessment Office, there are about 20 mining projects in the pipeline for environmental assessment and review, which could potentially create around 16,000 construction jobs and eventually 15,000 operating jobs."
Other key findings of PwC's survey:
- Exploration and development expenditures (based on 2007 survey participants) increased by 22% to $158 million in 2007 from 2006.
- The BC Government estimates an increase in total exploration expenditure of 57% to $416 million from $265 million in 2006.
- Total coal and metal shipments from BC mines decreased 2% to 24,854,000 tonnes in 2007 from 25,449,000 tonnes in 2006.
- After-tax return on shareholder's investment was a strong 41.6%, but down from 64.8% in 2006.
- BC mining operations made total payments of $463 million to governments in 2007, a decrease 42% over 2006. Direct tax payments were also down to $290 million in 2007 from $648 million.
PwC's survey summarizes the 2007 year-over-year financial information of 19 operating metal and coal mines, one smelter, eight operations in the permitted or active permitting stages, six mines in the reclamation stage and six advanced exploration stage properties. The 2007 survey had 40 participants, compared to 42 in 2006.
Over the years many mines have opened and closed in BC, 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 BC.
Note: All figures are in $CAD unless noted otherwise.
For more information on PwC's The Mining Industry in British Columbia — 2007, or to arrange an interview to discuss the findings with the report's author, please contact
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