Numbers Confirm Mining Slowdown

The numbers are in, and they confirm that the boom of the previous few years was stopped in its tracks in 2012. But does it mark a brief pause or the crest of yet another cycle in the unpredictable industry?

PricewaterhouseCoopers LLP today released its annual report on the B.C. mining industry and the cumulative totals convey a mixed message. On the positive side, New Gold Inc.’s New Afton mine near Kamloops began production last year, only the second new mine to open in B.C. since 1998. And employment numbers were up: the industry employed 10,419 people in 2012, compared to 9,310 the previous year.

Industry-wide revenue, however, slid seven per cent, to $9.2 billion, compared to $9.9 billion the previous year. The more telling number was pre-tax income, with profits for B.C. miners tumbling 52 per cent, to $1.8 billion, compared to $3.7 billion in 2011.

PwC attributes the squeeze on profits to a free fall in two of B.C.’s chief mineral exports, coal and copper, as well as to increased operating costs. Metallurgical coal fell to an average of US$193 a tonne, compared to US$257 in 2011. The price of copper fell to an average of US$3.61 a pound compared to US$4 a pound the previous year.

Operating costs and other expenses, meanwhile, rose to $6.1 billion, up from $5.1 billion in 2011.

Exploration development expenditures were one bright spot, rising to a record $680 million, compared to $480 million in 2011. The bulk of that, however, went toward developing mature exploration projects, subsequently raising concerns about a continued pipeline of new projects.

“It was a challenging year, but there’s reason to be optimistic,” PwC mining leader Michael Cinnamond said at a press conference this morning. He pointed to significant infrastructure investments, including the northwest transmission power line, which is expected to extend the provincial power grid to the far northeast in 2014, and to expansion of the Lower Mainland’s coal-export terminals.

Although a slowdown in China’s economy and economic turmoil in Europe continue to exert downward pressure on commodity prices, Cinnamond remains optimistic: “While 2013 is already proving to be another tumultuous year for B.C.’s mineral exploration, development and operations, demand for resources is expected to remain steady for the foreseeable future.”