Mining in B.C. generated record revenue: PwC

B.C.’s mining sector generated $12.3 billion in gross revenue in 2018 – a nearly $4 billion increase over 2016 – according to a new PwC report.

Higher prices for metallurgical coal and copper helped boost net income for B.C. miners to $3.5 billion in 2018, according to a PwC mining survey released Thursday, May 16.

Of the $12.3 billion generated in gross revenue in 2018 – a record, according to PwC – metallurgical coal mining alone represented more than half ($7 billion). Payments to government in 2018 through taxes was $900 million, compared to $650 million in 2016.

“This again is a record year for payments to government,” Kelsey Binns, assurance manager at PwC Canada, said Thursday, May 16, in a presentation to the Vancouver business community.

While Teck Resources (TSX.B:TECK) is the biggest player in the steelmaking coal space in B.C., Conuma Coal Resources also contributed to the increase in gross revenue with the reopening of a third coal mine in B.C. in 2018 – Willow Creek – which had been shut down. The new Brucejack mine, which was in full operation in 2018, also helped boost the overall revenue numbers, said PwC mining partner Mark Platt.

“That added probably $300 million to top-line revenues,” Platt said.

B.C.’s mining sector directly employed 11,281 workers in 2018, up from 9,329 in 2016. That’s not including all the jobs that mining in B.C. generates indirectly through Vancouver’s service sector – accounting, engineering, financing, environmental services, etc.

Exploration spending was also up in 2018 – $102 million, compared with $95 million in 2016.

Those numbers are just for companies surveyed by PwC, and does not reflect the total exploration spend in B.C. The spending on exploration in B.C. in 2018 was actually about three times the number reported by PwC, according to the B.C. government – $331 million.

PwC surveyed 24 companies, with 17 operating mines, and six exploration and development stage companies.

A lot of the exploration spending in 2018 was in the Golden Triangle in northwest B.C. by companies like Ascot Resources Ltd. (TSX-V:AOT) and the Seabridge Gold (TSX:SEA) KSM copper-gold project.

The growth in mining and exploration in B.C. in the last couple of years are largely the result of higher commodity prices. The two most important ones for B.C. is metallurgical coal and copper, which account for 73% of the revenue generated, Binns said.

PwC also noted the increased M&A activity that has taken place over the last year as an indicator of a mining cycle upturn in the past couple of years.

Michael Goehring, the Mining Association of BC’s new CEO, said the PwC report confirms that the sector has seen increased stability in 2017 and 2018.

But he warned of “headwinds” posed primarily by global economic trends and “uneasiness with regulatory developments in Canada and British Columbia. They are tempering growth and they’re tempering investment in British Columbia.”

He said the biggest problem in B.C. is that developing a new mine in B.C. simply takes too long.

“This situation needs to be addressed,” he said. “We have to sharpen our competitive edge.”

He said B.C. is already a high-cost jurisdiction to operate in, due partly to geography, and additional regulations and taxes add to those costs.

Citing the B.C. government's own Mining Jobs Task Force, Goehring said there is a real risk of a contraction of mining in B.C.

He said the three biggest concerns for the mining sector, if it is to remain competitive, is "a fair application of carbon taxes," more transparent and predictable regulatory processes, and reforms to the way PST is applied to machinery and equipment.

"The problem is the current (carbon) tax structure is not revenue neutral, and it effectively promotes higher emission production elsewhere in the world, because our low emission mines are becoming less competitive," Goehring said. "So it effectively promotes carbon leakage."

He added a more timely and transparent regulatory framework is needed.

[email protected]

@nbennett_biv