Mining revenue in British Columbia dropped 14% last year
For the second consecutive year weak commodity prices hurt the mining industry in Canada’s British Columbia, with net income before taxes for miners operating in the province tumbling from $1.4 billion in 2013 to only $288 million last year.
According to a new report released today by PwC, the continued drop in the price of key metals and minerals for B.C., particularly metallurgical coal and copper, led to reduced revenues and margins.
Mining revenues fell to $8.2 billion in 2014, compared to $8.5 billion the previous year, while spending sank as companies continued to hunker down and weather the ongoing market volatility. Capital expenditures, for example, dropped to $1.5 billion, compared to $1.8 billion in 2013, the report shows.
"In 2014 we saw investment in BC's mining industry remain depressed as prices for its key commodities, metallurgical coal and copper, remained soft," said Mark Platt, Partner and Leader of PwC's BC mining practice. "Producers and developers continue to take measures to contain costs but at least producers felt some relief from the impact of the significant weakening of the Canadian dollar compared to the US dollar."
Prices were also influenced by the strengthening US dollar and concerns about an economic slowdown in China, one of the world's top consumers of copper, coal, and zinc.
Coal the most hurtful
According to PwC analysts, the sharp drop in metallurgical coal prices had the biggest impact on mining activity in the province last year, causing a handful of coal mines to be place on care and maintenance.
Metallurgical coal has fallen below US$100 per tonne as of the spring of 2015, down from record US$330 per tonne in 2011, due to oversupply of this steelmaking ingredient in the global market and a slowdown in China's economic growth.
Copper was performing well for most of 2014, but then fell below $3.00 per pound towards the end of the year, amid concerns of oversupply. That compares to early 2011, when copper traded at a record of just over $4.60 a pound.
Asked about what to expect for 2015, Platt said this year is proving to be another challenging one for metal and coal prices.
He added that while some metals will do better than others, miners will continue to manage their costs to reflect the ongoing downturn in the cycle, and are expected to treat any price recovery with great caution.
The expert concludes that while BC's mining sector is not showing any early signs of improvement so far, investment in the mining industry must continue; “Miners need to keep exploring if they are to find the discoveries today that will be developed into the mines of tomorrow. This is the only way to ensure the industry remains competitive in the long term."
The full report is available here.