British Columbia producing faster than ever

The mining industry in British Columbia surpassed itself in 2006, with revenues at an all-time high, according to the annual survey by PricewaterhouseCoopers. Net income for companies active in the province totaled C$2.3 billion, by far the highest amount since the survey was first published in 1968, and an increase of C$507 million on the previous year's figure. The average number of people employed in British Columbia's mining sector increased from 7,071 in 2005 to 7,345 in 2006.

The latest survey covered 17 operating metal and coal mines, one smelting operation, six operations in the permitted or active permitting stage, eight mines in the reclamation stage and 10 advanced exploration-stage properties, a total of 42 participants compared to 43 in 2005. Four operating and exploration-stage companies that contributed C$19.1 million to exploration and development in 2005 did not participate in the survey in 2006.

"The recent resurgence in the global mining industry exceeded the expectations of even the most optimistic analysts and continues to do so. The mining industry in British Columbia has mirrored the global resurgence," the survey says. "The province should celebrate the successful development or advances towards development of a significant number of projects. But in almost all cases, these are previously known deposits, which are now economic as a result of significant improvements in commodity prices. The province needs new discoveries, and it needs them now."

At the end of 2005 the survey reported that 18 projects were in the permitting stage. Of these projects, only three progressed to operational status during 2006. At the end of 2006 there were 25 mines awaiting permitting, with only six of these expected to go into operation in 2007.

Shipments of metallurgical coal down

Shipments of metallurgical coal from British Columbia decreased by 5 percent from 24 million metric tons in 2005 to 22.9 million tons in 2006. Net mining revenues for metallurgical coal remained virtually unchanged at C$1.94 billion (compared to C$1.95 billion in 2005), due to coal price increases. Net mining revenues from copper concentrate increased by 76 percent from C$1.13 billion in 2005 to C$2 billion in 2006. Copper saw a rise in its average price during the period from US$1.67 per pound to US$3.05 per pound, and shipments of copper concentrate from British Columbia were up 5 percent in 2006.

Molybdenum was the only mineral covered in the survey that saw a decrease in its average price from 2005 to 2006, dropping 21 percent from US$31.05 per pound to US$24.38 per pound. This contributed to a 30 percent decrease in net molybdenum mining revenues from C$592 million in 2005 to C$412 million in 2006. The price of molybdenum remains strong compared to historical prices, the survey noted.

Net revenues from zinc and zinc concentrate increased from C$528 million in 2005 to C1.29 billion in 2006, due to a 137 percent rise in the average price of zinc from US63 cents per pound to US$1.49 per pound, accompanied by an increase of 19 percent in shipments from British Columbia in 2006. There was also a 32 percent rise in the average price of lead during the period, from US44 cents per pound to US58 cents per pound, and a 28 percent increase in shipments of lead from British Columbia. As a result, net mining revenues went up from C$87 million in 2005 to C$137 million in 2006.

Shipments of gold from British Columbia were down 4 percent in 2006, while the average price of gold increased from US$444.88 per ounce to US$604.34 per ounce, resulting in an increase of 35 percent in gold net revenues from C$255 million in 2005 to C$343 million in 2006. Net silver revenue increased by 74 percent from C$213 million in 2005 to C$371 million in 2006, mainly due to a rise in the average price of silver from US$7.31 per ounce to US$11.57 per ounce, as well as a 12 percent increase in silver shipments, from 28.8 million ounces in 2005 to 32.2 million ounces in 2006.

Cost increases somewhat offset revenues

Revenue increases were somewhat offset by parallel increases in the cost of essential supplies such as steel, fuel and tires, and other production costs, according to the survey. These costs were up from C$1.6 billion in 2005 to C$2.3 billion in 2006, and included increases in the costs associated with hiring and retaining experienced mining personnel. Capital expenditures increased by C$168 million during the year to C$513 million. The largest contributors to the increase were expenditures on machinery, other equipment and surface construction.

Outward transportation - comprised of rail costs, shipping costs and wharfage fees - is the largest individual component of industry costs, the survey says. Nevertheless, total transportation costs decreased by 1 percent to C$1.01 billion in 2006 compared to C$1.02 billion in 2005. The decrease was mainly due to reduced coal tonnages shipped during the year.

Direct tax payments made by British Columbia's mining industry increased from C$445 million in 2005 to C$648 million in 2006, reflecting improved profitability. Expenditures at the eight participating mines that are in the reclamation stage amounted to C$63 million in 2006, down 10 percent on the C$70 million spent in 2005.