Mining a sunrise industry in BC

Richard Mills – Ahead of the Herd

Vancouver BC is undoubtedly one of the greatest mining centers in the world and British Columbia should be a mining powerhouse, consider:

• Excellent geology
• Good transportation system
• Competitive tax rates
• Strategic location with respect to Asian markets. Two modern ports, Vancouver – Canada’s largest and the Port of Prince Rupert which is the closest of any of North America’s West Coast ports to Asia – up to 58 hours of sailing time shorter
• High quality and easily accessible geological data
• Mining friendly provincial government
• Communities receptive to resource extraction as a livelihood
• Attractive exploration incentives
• BC is the third largest generator of hydro electricity in Canada – one of the lowest power costs in North America. Natural gas is plentiful, cheap and resources are growing
• Some of the most modern education and telecommunications infrastructure in the world

Many of the world’s largest mining companies use to have a strong presence in British Columbia – they left in the 1970’s after the political landscape changed. In the wake of the electoral collapse of the New Democratic Party (NDP) the Gordon Campbell led Liberals won an overwhelming majority in the 2001 provincial election. Since then the Liberal government has been trying to remake B.C. into an investable and attractive place for the mining industry to do business again. Are they succeeding?

Mining Facts from the Mining Association of B.C. (MABC)

• Gross mining revenues for the BC mining industry were $9.2 billion in 2012

• In 2012, the BC mining industry made total payments to the government and government agencies of $504 million

• British Columbia’s mining industry pre-tax net earnings for 2012 was $1.8 billion

• Hiring requirements for all mining sectors in BC, over the next 10 years, are projected to be 16,770 workers under a baseline scenario

• The number of people working in BC's mining industry in 2012 increased to 10,419 up from 9,310 in 2011

• Average employee earnings rose to $98,200 in 2012, up from $93,900 in 2011

• Capital expenditures fell to $2.7 billion in 2012 from $2.9 billion in 2011

• Vancouver is the world’s leading centre of expertise for mineral exploration.

• Some 1,200 exploration companies are located in British Columbia, most in the greater Vancouver area

• Exploration and development expenditures by survey participants, was $680 million in 2012 compared with $463 million in 2011

• Lead and lead concentrate revenue totalled $194 million in 2012

• Shipments of metallurgical coal rose to 24.2 million tonnes in 2012

• Coal accounts for 39% of the total volume handled at the Port of Vancouver, which moves shipments to China, Japan and other Asian markets

• Metallurgical coal continued to dominate BC's mining sector in 2012, representing 44% of revenues, followed by copper concentrates at 19%, silver at 10%, zinc and zinc concentrates at 9% and gold at 4%

• Copper concentrate revenue rose to $1.5 billion in 2012 and copper shipments rose to 787,000 tonnes

• Gold: net mining revenues rose significantly in 2012 to $275 million, up from $154 million in 2011

• Molybdenum: net mining revenues in 2012 were $248 million

• Total mining expenditures rose to $9.2 billion in 2012. Mining companies spent more on items such as production materials and supplies, energy and fuels, outward transportation, and machinery, equipment and construction materials

• Zinc and zinc concentrates revenue in 2012 fell slightly to $685 million from $693 million in 2011

• Silver: net mining revenue for 2012 was $760 million

• Cash flow from BC operations in 2012 was $2,230 million

In November 2010, after mounting public opposition to a new tax and the controversial ending of a political corruption trial (and a popularity rating as low as 9 percent) Premier Campbell announced his resignation. On February 26, 2011, Christy Clark was elected as the party's new leader and became the 35th Premier of British Columbia.

In September of 2011 Clark introduced her jobs plan, “Clark's $300-million jobs plan, which she introduced last week after a province wide tour, includes promises of eight new B.C. mines by 2015 and nine upgrades to existing mining operations.

She didn't name any of the new mines, but spoke glowingly of the economic rewards and family-supporting jobs mines bring to B.C. communities, citing the recently reopened Copper Mountain copper mine at Princeton in the B.C. Interior.

"We need more Princetons," said Clark about the mine that now employs 10 per cent of the community's workers.” CBC, Mining industry sees gold with Premier Clark's plan

Clark is on record promising her jobs plan will return $1.6-billion per year of additional revenue for the government and provide 1,800 new jobs.

The BC Jobs Plan targets eight new mines and nine upgrades and expansions to currently operating mines by 2015. Significant progress has been made toward this goal over the past two years.

Two new mines are operating:

• New Afton Mine, near Kamloops
• Mt Milligan Mine, near Prince George

Five more are under construction or permitted:

• Red Chris Mine, near Dease Lake
• Roman Mine, near Tumbler Ridge
• Quintette Mine, near Tumbler Ridge
• Bonanza Ledge Mine, near Barkerville
• Treasure Mountain Mine, near Hope

Major expansions have been approved for six existing mines:

• Highland Valley Mine, near Ashcroft
• Huckleberry Mine, near Houston
• Quinsam Mine, near Campbell River
• Elkview Mine, near Sparwood
• Endako Mine, near Fraser Lake
• Gibraltar Mine, near Williams Lake

The Notice of Work backlog has been reduced by 80 per cent and the Notice of Work application average turnaround time has been reduced from 110 days to 63 days.

In 2012, more than 30,000 people were working in B.C.’s mining, mineral exploration, and related sectors, more than double the number working in 2001.

The production value of mining in 2001 was $2.8 billion. In 2012, it was $8.3 billion.

Mining is big business

Teck Resources Ltd. (Canada's largest diversified miner) and Teck Highland Valley Copper Corp. (in which Tech Resources holds a 97.5 percent interest) gave $222,400 to the Liberals – just $62,500 to the NDP.
Teck Resources operates the first six largest (out of the ten largest) mines in B.C.:
• Fording River in Elkford – coal, 2012 revenue $1.45b
• Elkview in Sparwood – coal, 2012 revenue $1.05b
• Highland Valley Copper – copper & moly, 2012 revenue $1.01b
• Greenhills in Elkford – coal, 2012 revenue $845mm
• Line Creek in Soarwood – coal, revenue in 2012 $566mm
• Coal Mtn. – coal, revenue in 2012 was $436mm
Tech was number two on the BCBusiness 100 Biggest Companies in 2013 by Revenue. Out of the top ten revenue producing mines in B.C. eight are coal mines.
Business Vancouver has published a list of the biggest mining companies in B.C. in 2012, the list may be accessed here.
“The mining industry is a cornerstone of our provincial economy.” former BC Premier Gordon Campbell

The importance of exploration

BC mining

As you can see from the above graphs exploration spending under a Liberal government has exploded from a not so awe inspiring $29.1mm in 2001 under the NDP to an estimated plus $650mm in 2013. Well over two billion dollars worth of exploration (expenditures include exploration and deposit appraisal) have been spent in the province of British Columbia just over the last three years!

Sixty per cent of Canadian exploration companies are based in BC, and 69 per cent of TSX and TSX-V stock exchange listed companies based in BC are involved in the mineral exploration and mining sector.

Junior v Senior

It’s a fact in the mining world that most discoveries are made by junior mining companies and old time individual prospectors. Juniors, not majors, own the worlds future mines and juniors are the ones most adept at finding these future mines. They already own, and find more of, what the world’s larger mining companies need to replace reserves and grow their asset base.

Why are the juniors so successful at making discoveries and finding mines? Well, the good ones are lean mean boots on the ground exploration and development companies run by people who have been out there and know what it takes. They know how to raise money from the suits and they know how to get the story out to the retail investor.

They are not tied up in bureaucratic red tape and can make the important decisions without commissioning a six month study or running it up through 12 layers of pencil pushers and then sitting on their butts waiting for an answer while somebody else scoops the prize. They can and do make up their minds very quickly and can execute immediately on plans.

Old time prospectors are independent minded, bush savvy and, geologically speaking, very knowledgeable. Unfortunately for them they lack the wherewithal to advance their discovery and most often option their property, or project if you will, to a junior they hope will raise money and develop it to the point where a more senior company wants to get involved, or perhaps take it over outright.

It’s hard to invest in a prospector, fortunately if you want to invest in a potential discovery or the building of something of value – be in on the discovery of a mineral deposit and be there as the company moves it down the development path towards a mine there are quality junior companies, both private and public, to choose from. There are enormous opportunities to back excellent management teams with your investment money.

Conclusion

A junior resource companies place in the food chain is to explore for, find and develop, to a certain point, the world’s future mines and nowhere are juniors more important to mining then right here in British Columbia, a vast and under explored treasure trove of minerals.

B.C.’s Liberals say they are committed to opening up the province to free enterprise and that they realize that the exploration for and development of natural resources is a cornerstone of the provincial economy. The terrific rise in exploration dollars being spent in the province says to me many believe what they are saying and trust them to keep their word.

There’s no doubt mining brings a great deal of revenue to the province, but let’s remember one important point – juniors find the deposits and prove them up to the point where a major would step in and buy them. Consider another point – when was the last time you heard of a major mining company making a discovery?

Today the relationship between juniors and majors is so inextricably linked that it’s doubtful a major mining company could replace its mined reserves, let alone grow them, without keeping a close eye on junior’s activities and a check book handy.

Perhaps the importance of junior resource companies in the exploration and mine development food chain should be on all our radar screens but especially so for our dear liberal leaders. Are they on yours?

If not, they should be.

Richard is the owner of Aheadoftheherd.com and invests in the junior resource/bio-tech sectors. His articles have been published on over 400 websites, including:
WallStreetJournal, USAToday, NationalPost, Lewrockwell, MontrealGazette, VancouverSun, CBSnews, HuffingtonPost, Londonthenews, Wealthwire, CalgaryHerald, Forbes, Dallasnews, SGTreport, Vantagewire, Indiatimes, Ninemsn, Ibtimes, Businessweek, HongKongHerald, Moneytalks and the Association of Mining Analysts.
If you're interested in learning more about the junior resource and bio-med sectors, and quality individual company’s within these sectors, please come and visit us at www.aheadoftheherd.com
If you are interested in advertising on Richard’s site please contact him for more information, [email protected]
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Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.
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