Despite record commodities prices, a recently released Pricewaterhouse Coopers survey revealed a significant decline in net earnings from mining as coal prices took their toll in British Columbia's mining sector last year.
The PwC survey, The Mining Industry in British Columbia 2007, found that the Province's mining industry reported a 16% decrease or $1.04 billion in net mining revenues from $6.59 billion in 2006 to $5.6 billion in 2007. BC's gross mining revenues decreased $6.9 billion in 2007, a 15% decline, mainly driven by lower coal prices and decreased overall coal and metals shipments. Cash flow from operations declined 31% to $1.9 billion in 2007, according to the survey.
Despite metals price increases copper net revenues declined 17% to $1.66 billion last year as silver net revenues dropped 33% to $248 million. PwC noted that zinc net mining revenues decreased from $1.29 billion in 2006 to $1.23 billion in 2007.
Although gold prices soared, the lack of gold mining projects in the province impacted gold net revenues which decreased 40% to $205 million in 2007.
Nevertheless, strong lead prices helped BC realize a 47% increase in net revenue to $202 million in 2007.
Coal experienced the most significant reductions, as metallurgical coal dropped $568 million to $1.4 billion in 2007. However, we are pleased to note that the price of coal recovered subsequent to 2007 and soared to US$138.54 in the first quarter of 2008, which bodes well for the 2008 industry results, PwC said.
Total expenditure in the BC mining industry decreased 5% to $6.4 billion in 1008.
Gerrie van der Westhuizen, a manager in PwC's mining practice said foreign exchange rates had a notable impact on BC's gross mining revenues because all coal and metals are priced in U.S. dollars.
New capital raised in the sector increased by a hefty 157% to $1.05 billion in 2007. Capex increased 87% to $960 million in 2007. Nevertheless, shareholders were rewarded with dividends of $635 million.
PwC Partner Michael Cinnamond estimated that 20 mining projects were in the pipeline for environmental assessment and review, which would generate 15,000 operating jobs. Direct employment increased in the sector during 2007 from 7,345 jobs in 2006 to 7,415 jobs last year. Salary and benefits totaled $755 million in 2007, up from $734 million in the previous year.
Exploration and development spending increased $29 million to $158 million in 2007. Of that $103 million was spent on properties under development or in production, rather than greenfield exploration areas.
The survey covered 19 operating metal and coal mines, one smelting operation, six mines undergoing reclamation, six advanced exploration stage properties, and eight projects in the permitted or active permitting stages. The total number of survey participants declined to 40 in 2007 from 42 the prior year. PwC believes that the survey covered all but two operating metal and coal mines in the province.
BC's mining sector saw over $1 billion of new capital raised in 2007, Cinnamond noted. 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.