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Jobs, revenues, share prices benefit as higher commodity prices boost B.C. mining

by Greg Klein | May 11, 2018

Jobs, revenues, share prices benefit as higher commodity prices boost B.C. mining

A 75%/25% partnership of Copper Mountain Mining TSX:CMMC and Mitsubishi
Materials brought a former mine back into production, employing 430 workers.

 

The bull’s still not back but higher commodity prices continue to sustain a mood of cautious optimism among British Columbia miners, PricewaterhouseCoopers assures us. Its 50th annual report on B.C. mining sketched a broad picture of the province’s industry by surveying 13 companies, focusing on 15 operating mines, a smelter and seven projects in the exploration, permitting or environmental review stage.

Among survey participants, gross revenue hit $11.7 billion in 2017, a 35% jump from the previous year and reflecting an upward trend in the mining cycle. (Except for commodity prices, all figures are given in Canadian dollars.) Governments scooped up $859 million in total mining revenues from those companies last year, compared with $650 million in 2016.

Shareholders fared especially well, reaping 31.1% pre-tax gains from the companies involved, compared with 13.5% in 2016 and 6.3% in 2015. “This is the highest return we’ve seen in recent years and it has surpassed the historic high levels of 2012,” PwC stated.

Direct employment among the companies climbed to 10,196 jobs, compared with 9,329 in 2016 and 9,221 in 2015. PwC attributed most of the increase to Conuma Coal Resources’ two operating mines in the northeast.

Indeed, the participants’ metallurgical coal revenue rose to $5.2 billion from $3 billion in 2016 and $2 billion in 2015. Prices averaged $173 a tonne last year, up from $115 in 2016 and $101 in 2015. At a 50% increase over 2016, the steelmaking stuff struck the highest price increase of any commodity included in the report.

Revenue from copper concentrate came to nearly $1.9 billion, after $1.8 billion in 2016 and $2 billion in 2015. Average red metal prices rose 27% to $2.80 a pound, compared with $2.21 in 2016 and $2.50 in 2015.

Despite a slight decrease in shipments, a 38% price increase lifted participants’ zinc revenue to $1.2 billion, compared with $877 million in 2016 and $818 million the previous year. Prices swelled to an average $1.31 a pound, compared with $0.95 in 2016 and $0.87 in 2015.

Participants’ gold revenues rose to $829 million from $651 million in 2016 and $519 million in 2015. Although B.C. produces the yellow metal largely as a copper byproduct, the 2017 increase largely came from Pretium Resources’ (TSX:PVG) Brucejack mine, which began commercial production that year. Average prices underwhelmed, however, at $1,259 an ounce, although slightly less depressed than the $1,248 in 2016 and $1,160 in 2015.

Silver revenues slipped to $509 million from $589 million the previous year and $535 million in 2015. Average prices wallowed around $17.08 an ounce, compared with $17.11 in 2016, up from $15.71 in 2015. B.C. mines generally garner silver as a byproduct of metals like copper, gold, lead and zinc.

As for lead, it dropped to $224 million in revenues from $255 million the previous year, despite prices rising to $1.05 a pound from $0.85 in 2016.

Molybdenum more than doubled to $104 million from $45 million in 2016 and $51 million in 2015, thanks to higher volumes and prices, which reached $7.07 a pound from $6.37 in 2016.

[The return on shares for participating companies] is the highest return we’ve seen in recent years and it has surpassed the historic high levels of 2012.

Saying “the worst may be over,” PwC stated: “Many in the industry haven’t felt this positive since it was recovering from the fallout of the 2008-09 global financial crisis. There’s cautious optimism the industry will continue to recover.”

But a warning came from an otherwise upbeat Bryan Cox, president of the Mining Association of B.C.: “Mining projects are capital-intensive, multi-year commitments, from exploration to mine development and operation, necessitating clarity, consistency and co-ordination from governments for investors to deploy capital. If any one of those three Cs is missing, then capital investment is at risk.”

This marks PwC’s 50th such report since 1967, when “Lester B. Pearson was Canada’s prime minister, W.A.C. Bennett was the premier of British Columbia and [get this!] the Toronto Maple Leafs won the Stanley Cup. As for mining, in 1967 the price of gold was about $35 per ounce, copper was trading around $0.50 per pound and the Britannia mine, now a museum, was still producing copper, gold, silver and other metals and minerals.”

Download 50 years on… The mining industry in British Columbia 2017.

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