Some industry insiders believe the worst may be over
VANCOUVER, May 14, 2014 /CNW/ - British Columbia's mining industry faced
significant headwinds in 2013 continuing the slide from a peak in 2011.
While total shipments were higher in 2013 than 2012, revenues and
earnings were down, according to the PwC BC Mining Industry Survey for 2013.
"In 2013 we saw investment in B.C.'s mining industry remain depressed as
prices for its key commodities such as coal, copper, zinc and moly
remained soft," said Mark Platt, survey co-author and leader of PwC's
BC mining practice. "Producers hunkered down to minimize costs as they
were hit with increased electricity rates, commodity market volatility,
a skilled labour shortage and the additional costs of B.C.'s return to
a PST and GST system last year."
The PwC survey found aggregate gross mining revenues were $8.5 billion
in 2013, down 7 % from 2012, largely due to continued global economic
uncertainty and a resulting drop in prices of B.C.'s two largest
revenue generating commodities, coal and copper. This slide impacted
the aggregate pre-tax net earnings as well, which fell 22 % to $1.4
billion from the prior year.
The drive for greater operating efficiencies and cost trimming paid some
benefits in 2013. Cash flow from operations increased to $2.6 billion
in 2013, up 15 % from 2012. Not surprisingly, companies cut back on
capital expenditures to conserve cash, with these falling 35 % to $1.8
billion in 2013.
There were 10,720 people directly employed in B.C.'s mining industry in
2013, an increase of 3% over the previous year. The survey respondents
reported a drop in average salaries paid, from $98,200 in 2012 down to
$91,900, before benefits.
B.C. is Canada's largest copper producer, the country's largest exporter
of metallurgical coal and the only producer of molybdenum. The province
is home to over 1,200 mining companies and the largest concentration of
mining exploration and geoscience professionals in the world.
"In spite of some financial challenges over the last couple of years,
B.C.'s mining sector continues to move forward," said Marianne Carroll,
survey co-author and a manager in PwC's B.C. mining practice. "Since
2011, the Copper Mountain, New Afton, and Mount Milligan mines in B.C.
have come into production. The province has a number of new mines under
construction and the new Red Chris and Roman mines should open in
Industry analysts are forecasting the prices of most precious and
non-precious metals produced in B.C. to see a moderate recovery over
the next 12 to 18 months. While the growth expectation for China, the
world's largest consumer of copper and other industrial minerals, is
trimmed from previous years it is still predicted to grow at a
respectable 7%. Other emerging nations such as India and Brazil are
expected to continue fuelling the demand for metals and put upward
pressure on prices. The U.S. economy continues to recover, and parts of
Europe are showing signs of strengthening. All of these factors should
help to increase the demand for products from B.C's mines.
B.C. and other Canadian mining companies should benefit from a sustained
lower Canadian dollar. PwC's Q1 2014 Capital Markets Flash identified mining as a longer-term winner from the tumbling loonie as
the commodities sold are priced in U.S. dollars, and many production
costs such as labour and energy are incurred in Canadian dollars.
Platt added: "B.C.'s mining sector did have a tough year in 2013 but
we've been through these cycles before. The real challenge for the
miners, government, and communities is to ensure that B.C. remains a
competitive region for a sustainable mining industry to weather these
About the survey
This year's survey had 37 participants: 21 operating metal and coal
mines (including 1 smelter); 14 in the developmental stage; and two
For a complete copy of PwC's 2013 BC Mining Industry Survey visit: www.pwc.com/ca/bcminingsurvey
Follow PwC on Twitter at @PwC_Canada_LLP and join the conversation by using #pwcmine.
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SOURCE: PwC (PricewaterhouseCoopers)
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