Increased coal prices primary source of financial strength
VANCOUVER, May 5 /CNW/ - The British Columbia mining industry posted
record financial results in 2008, according to a PricewaterhouseCoopers (PwC)
report, The Mining Industry in British Columbia - 2008, released today.
Aggregate pre-tax net earnings for the industry were up by 88% to $3.2
billion, the highest amount in the 41 year history of PwC's annual survey.
Returns on shareholders investments in BC's operating mines, based on pre-tax
earnings, reached an unprecedented 98% in 2008, up from 46% the prior year.
"The performance of the BC mining industry amidst a crashing economy in
the later part of 2008 was nothing short of outstanding", said Michael
Cinnamond, a partner in PwC's mining practice and co-author of the report.
"The impressive results were primarily driven by increased coal prices that
were up 225% to US$261/tonne over the prior year, with coal representing 86%
of total product shipments in 2008. However, if you fast-forward to April
2009, the one year prices announced were in the US$125/tonne range, a
significant reduction from prices realized in 2008, but still high compared to
Copper concentrates were the second largest contributor of mining
revenues during 2008, but down by 29% in 2008 to $1.19 billion from $1.66
billion the previous year. The 2008 copper price averaged US$3.16/lb, but
dropped to an average of US$1.56/lb in the first quarter of 2009, reflecting
weak global demand.
Zinc and zinc concentrates contributed net mining revenues of $736
million in 2008, down 40% from $1.2 billion in 2007. Rising gold prices led to
a 13% increase in gold revenues to $231 million in 2008, up from $205 million
in 2007. Gold prices continued to strengthen in the first quarter of 2009,
averaging $908.71/oz. Silver prices also rose in 2008, pushing revenues from
silver up by 10% to $272 million over the previous year.
Total net mining revenue from molybdenum increased 9% to $472 million
from $433 million in 2007, while the price dropped 5% to an average of
US$28.42/lb. Molybdenum, primarily used as a strengthening material in the
steel industry, saw a significant price decrease in the last quarter of 2008
and prices remain low in the first quarter of 2009, down 69% to US$8.75/lb.
"Cash flow from operations increased by 78% to $3.4 billion over 2007 - a
direct result of earnings growth", said Erfan Kazemi, a Manager in PwC's BC
Mining practice, and co-author of the report. "BC's mining industry
contributed $6.1 billion in expenditures to the economy, including payroll and
benefits of $858 million. The average salary and benefits package increased by
11% in 2008 to $112,800, and employment rose 2% to 7,607 over the prior year."
Cinnamond added: "While we saw records set in 2008, there is currently a
mix of uncertainty and cautious optimism within the BC mining industry. PwC
polled 33 CEOs of BC based mining companies in April 2009 and learned that 27%
of the respondents are conserving cash, 39% have implemented either moderate
or major spending cuts, and 12% are just hanging on. As a contrast, about 15%
of the respondents reported they are actively seeking acquisitions and looking
PwC's 2008 survey summarizes the 2008 year-over-year financial
information of 18 operating metal and coal mines (including the Trail
Smelter), nine operations in the permitted or active permitting stage, six
mines in the reclamation stage and seven advanced exploration stage
properties, all in BC. There were a total of 40 participants for 2008, the
same number as 2007.
Other key findings from the PwC report include:
- Total metals and coal shipments from BC mines increased by 8% to
26,840,000 tonnes in 2008 from 24,854,000 tonnes in 2007.
- Capital expenditures were $853 million in 2008, a decrease from
$964 million in the prior year. Machinery, equipment and construction
materials purchases dropped by $31 million to $448 million in 2008.
- Production materials and supplies spending decreased by $59 million
to $639 million in 2008.
- Total exploration expenditure in British Columbia, estimated at
$416 million in 2007, decreased by 12% to $367 million in 2008,
according to the Mining and Mineral Exploration in British Columbia,
- BC's mining industry made total payments to the government of
$545 million, an increase of $82 million from $463 million in 2007.
Direct tax payments increased by $75 million to $365 million from
$290 million in 2007, corresponding to increased net earnings for
Note: All figures are in $CAD unless noted otherwise.
A copy of PwC's survey report is available from the PwC Canada Web site
For more information on PwC's The Mining Industry in British Columbia -
2008, or to arrange an interview to discuss the findings with the report's
authors, please contact Jim Nelson, PricewaterhouseCoopers, at 604 806 7047,
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For further information: Jim Nelson, PricewaterhouseCoopers LLP, (604)