British Columbia's booming $4.58-billion mining sector faces some serious challenges, says a top mining industry official.

While the industry is showing strong growth and expects to do even better in the years ahead, the process for assessing the environmental impact of potential mines could be a significant stumbling block, says Michael McPhie, president and CEO of the Mining Association of British Columbia.

In a recent speech to the Vancouver Board of Trade, McPhie said the process needs to become more efficient and effective. Mining companies have to be granted greater land- use certainty, he added.

"The time it takes to permit any major mining project in B.C. is a significant issue for our industry," said McPhie.

Michael McPhie

"In particular, the role of certain agencies of the Government of Canada, the prolonged decision-making process, the bureaucratic overlap, a serious lack of accountability and the notable inefficiencies associated with the current environmental assessment process are (all) major concerns."

McPhie laid the blame on the federal government, saying the lack of attention and support by Ottawa on matters of concern to B.C. are key factors. This contrasts with the provincial government, which has done a great job for the mining industry in B.C., he added.

McPhie's remarks on land use drew support from Graeme Currie, a mining analyst with Vancouver-based Canaccord Capital Corp.

"I'm not prepared to get into a debate as to which level of government is the problem, but the whole issue of land tenure is a challenge, although relations with the native communities are getting better," said Currie. "What you really want is to know what land areas in B.C. are available for mining and what land areas aren't, and that is extremely difficult to negotiate."

McPhie's remarks were delivered in the wake of an annual report by consulting firm PricewaterhouseCoopers on B.C.'s mining industry for 2004.

The report noted that gross mining revenues increased 25 per cent to $4.58 billion, compared with $3.65 billion in 2003.

Net income for the industry rose by $586 million to $871 million, equal to the net income for all the previous eight years in total. After-tax return on shareholders' investment rose to 29.4 per cent, compared with 10.9 per cent in 2003 and 4.1 per cent in 2002.

Quoting provincial government figures, the report said exploration expenditures rose to $130 million from $55 million in 2003, a gain of 136 per cent.

"Exploration is the key," Currie noted. "It is the equivalent to what research and development is to a lot of other companies. The industry is in very good shape for two reasons: Commodity prices are high and the provincial government has made the industry very competitive through a number of initiatives. B.C. is highly ranked worldwide for having a competitive mining industry."

McPhie told the board of trade audience that mining is now experiencing a true renaissance. Total mineral exploration investment is at its highest level since 1991, he added, and "indications are that we will come close to the $200- million mark in exploration spending this year. If we did, we would be back to the level of spending we were making in the 1980s, a strong decade for mining in B.C."

At the end of last year, there were 14 new potential mine projects in various permit review and development stages, compared with one mine in 2001.

But there have to be changes if the industry can realize its full potential, McPhie added, noting the sector needs to develop a more productive relationship with the province's First Nations communities. "This issue is, without exception, a top priority for our industry."

McPhie said more than 40 per cent of the workforce at Barrick's Eskay Creek Mine in northwestern B.C. is Aboriginal. "Right from the beginning, the company ... and the local community have worked together."

Mining provides an extraordinary opportunity for Aboriginal communities to achieve economic self'-sufficiency, he added, "and, in particular, it represents an extraordinary opportunity for the large number of Aboriginal youth in B.C. to work close in their communities in jobs that pay on average over $90,000 per year."

McPhie admitted that the industry has not attracted enough young people in the last 10 years and today is feeling the results, a significant labour shortage that will last for years as existing miners begin to retire.

Meanwhile, he said political and community leaders need to counter "misinformation campaigns" from well-funded and vocal environmental groups who claim that B.C. is cutting regulations at the expense of the environment.

"We need to get the accurate message out and be willing to engage in important debates about the future of our province," McPhie said.

The areas in which mines operate constitute less than 0.03 per cent of the province's land base, and yet the wealth and prosperity generated by mining is extraordinary, he noted.

"Yes, we are on the verge of a golden decade ... but for mining it may be a decade that stretches into a 20- or 30-year period of growth and prosperity for the communities and regions in which we operate," he added.

(George Froehlich can be reached at george@businessedge.ca)