by Greg Klein | November 16, 2015
Coal might be perceived as a dirty 19th century throwback but it’s hard to imagine life without steel. For British Columbians, it might be hard to imagine life without the province’s traditional industries. To underscore that point, Resource Works released a study on the economic benefits of five B.C. metallurgical coal mines operated by Teck Resources TSX:TCK.A and TCK.B.
Among the findings, the five mines supported 3,993 jobs in 2014 with a payroll totalling $457.6 million. Teck spent another $1.02 billion on goods and services for the quintet in 2014. Also attributed to the mines that year from a “small sample” of six suppliers were 345 jobs with a payroll totalling $34.5 million. With about 1,400 suppliers in B.C. and Alberta, “it is reasonable to deduce that the actual full benefits are much larger,” wrote author Marlyn Chisholm.
Her study didn’t consider taxes and royalties.
Although the five mines are concentrated in southeastern B.C.’s Elk Valley, the spinoffs spread widely. Nearly 60% of goods and services spending went to the Vancouver region, largely to shippers and suppliers.
Even during the downturn, B.C.’s “two largest revenue-generating commodities” are metallurgical coal and copper, according to a May report from PwC. Teck’s five B.C. coal operations soldier on but, to help cut Q3 production by 19%, each of them underwent three-week suspensions this year.
In last month’s Q3 results, Teck reported an average price of $88 per tonne, 20% lower than the same period in 2014, “reflecting oversupplied steelmaking coal market conditions and a decline in spot price assessments.” Prices reached as high as $300 a tonne in 2011. The company’s long-term assumptions foresee $130 per tonne.
Of $2.2 billion in impairments reported last quarter, Teck attributed an after-tax $1.45 billion to its steelmaking coal assets, which include the Cardinal River mine in Alberta. Another $300 million in after-tax impairments went to copper and $400 million to the company’s Fort Hills oilsands project.
Teck is Canada’s largest diversified miner and the world’s second-largest exporter of seaborne steelmaking coal, which accounted for 32% of the company’s business in 2014.
While Anglo American and Walter Energy have shut down their B.C. coal operations, HD Mining International won provincial environmental approval last month for its proposed Murray River metallurgical coal mine in northeastern B.C. The company, owned by Mandarin-speaking Chinese, intends to staff underground jobs with Mandarin-speaking Chinese.
Resource Works is a non-profit society that encourages “respectful, fact-based dialogue on responsible resource development” in B.C. A positive case for B.C.’s coal industry has also been presented by a coalition of B.C. miners, suppliers and unions.
Update: On November 18 Teck announced the Q4 2017 closure of Coal Mountain, one of the company’s five Elk Valley mines, and the suspension of Coal Mountain Phase 2, which had been intended to extend the operation. “Teck will identify options between now and the end of 2017 to potentially replace the 2.25 million tonnes of annual coal production that were planned from CMO Phase 2 by optimizing production from its five other steelmaking coal mines,” the company stated.
The Coal Mountain decision came amid plans for 2016 spending cuts of $650 million and the elimination of 1,000 jobs globally.