B.C. mining industry pumped up

British Columbia’s mining sector enjoyed another year of improved financial results and industry growth in 2004, continuing a six-year trend. Higher metals and coal prices, driven by strong demand, and an increase in the number of mines in production helped to push the aggregate industry net mining revenues up $790 million (29%) to $3.5 billion. This contributed to total net earnings of $871 million in 2004–the highest levels since PricewaterhouseCoopers (PwC) began conducting this survey in 1968. These and other findings were revealed by PwC in a report titled The Mining Industry in British Columbia — 2004,an annual survey and assessment of the British Columbian mining industry’s overall performance.

PwC’s survey summarizes the 2004 year-over-year financial information of the province’s 18 mines that were either operating or about to commence operations, one smelter, eight mines in the active permitting stage, eight mines in the reclamation stage, and six exploration properties. The total number of participants was 41, up from 31 in 2003.

Gross mining revenues increased by 25% to $4.58 billion in 2004 from $3.65 billion the previous year. The PwC survey also found that cash flow from operations showed a healthy increase of 91% from $598 million in 2003 to $1.14 billion in 2004. The after-tax return on shareholder investment increased significantly from 10.9% in 2003 to 29.4% in 2004.

“B.C.’s mining industry had a great year in 2004 due to strong metal and coal prices driven by demand in China and elsewhere,” said John Bowles, PwC’s B.C. mining practice leader. “Coal, the largest segment of B.C.’s mining industry at about 30% of total revenues, also saw strong worldwide demand and prices, and the 2005 outlook for coal is staggering. The 2004 average price of metallurgical coal was US$50/tonne, and as of April 1, 2005, the average market price was US$125/tonne.”

Total exploration and development expenditures reported by the survey participants were $73 million, up from $15 million in 2003; $57 million of this was spent by the eight mines now at the permitting stage, of which seven are included in the survey for the first time. The B.C. government estimates that the total exploration expenditures by all companies in 2004 was $130 million, up by 136% from $55 million in 2003.

Total mining claims staked in 2004 were 47,600, an increase of 11,100 or 30% over 2003.

“The increases in base metal and coal prices were so significant in 2004 they have more than offset any negative impact of the strengthening Canadian dollar,” said Michael Cinnamond, co-author of PwC’s survey. “The global mining industry prices its products in U.S. dollars, and a 1-cent increase in the value of the Canadian dollar equals a loss of $35 million in gross revenues for B.C. producers.”

Shipments of metallurgical coal increased by 10% in 2004 to 22.8 million tonnes over the previous year. An average price increase from US$46/tonne in 2003 to US$50/tonne in 2004 translated into a 6% increase in net mining revenues from metallurgical coal, rising from $937 million in 2003 to $990 million in 2004.

Molybdenum net revenues reflected the most significant growth of any commodity included in the 2004 survey, increasing by 209% to $398 million from $129 million in 2003. Average molybdenum prices rose 206% during this period from US$5.21/lb to US$15.92/lb, and total shipments were up by 23% in 2004. Molybdenum’s most significant use is in the steel-making industry, and demand for steel is at an unprecedented level.

The price of copper strengthened by 60%, to an average of US$1.30/lb in 2004 from US$0.81 the previous year. The average price of zinc increased 26% in 2004, to US$0.48/lb, from US$0.38 in 2003. Gold averaged US$409/oz in 2004, up 13% from US$363/oz in 2003. The average price of silver rose by 36% from US$4.88/oz in 2003 over the same period to US$6.65/oz.

PwC’s The Mining Industry in British Columbia—2004 is prepared annually by the PwC’s B.C. mining industry practice, based on data gathered from operating mines through a comprehensive survey.* Copies of the full survey report are available at www.pwc.com/ca/mining.

PricewaterhouseCoopers provides industry-focused assurance, advisory and tax services for public, private and government clients in all markets, with more than 120,000 employees in 139 countries. In Canada, PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 4,200 partners and staff, and offices in 25 locations.

*Over the years, many mines have opened and closed in the province, and companies are not always consistent in their participation and presentation. Consequently, the historical figures are not fully comparable from year-to-year, but they are representative of the overall industry in British Columbia. The survey does not include exploration and mining operations that are domiciled outside the province, nor does it include any of the junior exploration companies operating in the province, except for certain exploration data provided by the B.C. government, or head office results, except where those results are directly related to B.C. mining activities. No attempt has been made to bring all companies to a common basis of accounting.