Higher commodity prices, coupled with a more relaxed provincial tax regime and regulatory attitude, is helping the moribund British Columbia mining industry to start turning a financial corner.

The province is turning on the afterburners to take advantage of recent price increases in base and precious metals to rebuild the mining industry – a key factor in making B.C. a ‘have’ province again.

“We’ve created the regulatory and taxation environment, and increasing prices in the mining sector have presented us with a unique opportunity to grow,” says Pat Bell, minister of state for mining. “We expect to have 17 or 18 mines operating by the end of the year.”

There are 13 mines currently in operation.

Photo courtesy Province of British Columbia
Pat Bell, minister of state for mining, right, has been given the task of helping revitalize the province’s industry and to meet the needs of each sector.

Increases in metal prices and coal markets sent mining indicators up in 2003: Industry net income was up 166 per cent, mines shipped five per cent more product, exploration increased for the fourth year in a row, and shareholder return on investment jumped to double digits from 4.1 per cent in 2002.

“Historically, mining exploration spending tracks political changes,” says Brian Battison, interim president of the Mining Association of B.C.

“It’s a mirror relationship. It can take 10 years to develop a mine through exploration and permitting to development. What we need is a constant application of laws and regulations, and we don’t need wide swings in policy changes,” he adds.

Wide swings in policy were just what happened in the 1990s.

Bell notes that in 1991, there were 30 operating mines employing 16,000 workers directly and providing up to 60,000 spinoff jobs. But by 2001, there were only a dozen mines employing 7,800.

In its heyday, mining was the second most important industry in B.C. Exploration companies were investing $200 million annually, and an average of two new mines came onstream each year.

The B.C. Mining Association blames the former NDP government’s attitude for a downward spiral that it claims cost the province $750 million in exploration – enough, it says, to have generated eight new mines, 7,000 new jobs and $2 billion in capital spending.

Investors shied away from B.C.’s unstable political climate, its capricious access and restrictive land-use policies, unsettled land claims, environmental restrictions and taxation load.

But they are now being lured back – and not only by higher commodity prices.

“Copper prices hit a high in the mid-’90s,” says Gary Livingstone, president and CEO of Western Canadian Coal. “But investors still shunned B.C.”

This time, higher prices coincide with a positive government attitude toward mining development.

The Liberal government sent positive signs to industry after the election in 2001, says Battison. “It immediately took action to change the tax regime,” including a sales-tax exemption on exploration equipment, tax credit for exploration and a flow-through tax credit for investors.

It introduced a two-zone land-use system that opened the whole province to mining outside zones for parks, ecological reserves and lands protected under the Environment and Land Use Act.

Investors spent about $55 million on exploration in 2003, up 38 per cent from last year, and the province estimates they’ll spend twice as much this year. “We’ve done some good work on taxation and regulatory regimes, but hadn’t seen the significant increases we were expecting,” says Bell. So last summer, a mining task force travelled the province speaking to local communities, engineers, geologists and First Nations about outstanding issues.

In February, Bell was appointed minister of state for mining and charged with developing a mining plan to rev up the industry. The industry is grouped into five different sectors – aggregate, industrial minerals, the placer industry, coal, and hard-rock extraction and exploration – and plans are to meet the individual needs of each sector.

But the industry won’t have to wait until the plan is fully developed. “We intend to implement changes as we go,” Bell says.

Two examples put in place since February include a monthly online mining update where investors and mining companies can find the latest on government activities in support of the industry, and an online map of more than 150 mining properties for sale or option throughout the province.

“It’s an incredibly useful tool,” adds Bell, a sort of one-stop shop that gives investors a shortcut to setting up business in the province.

While mining is important to improving the provincial economy generally, as MLA for Prince George, a central B.C. staging centre for mining and prospecting, Bell understands particularly what it means to rural areas.

Mining directly employs about 6,000 workers in B.C. If all goes well, by year’s end it will employ thousands more as mines in Williams Lake, Quesnell and Bralorne reopen. And in rural areas where job creation is increasingly in the lower-paying service sector, these jobs pay well: Miners earned an average salary of $77,200 ($94,500 including benefits) in 2003.

A mine’s economic benefits last for years, says Battison. The Sullivan mine in Kimberley operated for more than 100 years, he notes, and during its life, produced an estimated $20 billion in ore. When it recently closed, the town was able to reinvent itself as a recreational tourism and retirement centre. “The mine didn’t ruin that potential – in fact, it made it all possible,” he says.

“Mineral extraction is an important part of our lives,” agrees Terry Lyons, chairman of the board of Northgate Exploration Ltd., which owns the Kemess copper and gold mine 400 kilometres northwest of Prince George. “You can’t just say, ‘Don’t do it here, do it somewhere else.’ ” The Kemess mine is the only one of six operating base and precious mineral mines in the province with reserves – and therefore, jobs – expected to last more than a decade. Mining not only provides jobs, says Lyons, but minerals and products that are vital to the modern lifestyle.

But there are many other attractive places in the world to explore and develop, as the B.C. mining industry discovered when investors began giving the province the cold shoulder in the 1990s. “The reason for our dismal performance is we were unable to provide security and tenure in a fashion that minimizes risk,” says Bell.

Land claims and environmental interventions scared off potential investors, say mining company representatives.

But the province has now signed agreements in principle with four of six First Nations with outstanding claims. The agreements provide certainty to mining investors and a means for First Nations to participate in the economic benefits of mining. The province recently tagged $282,250 for Yekooche First Nation to develop skills to enter joint-venture negotiations with a mining company.

Employment, job training and education for First Nations are high priorities, too, says Lyons.

Both the province and industry say they take environmental concerns very seriously. Taking good care of the environment can mean fewer objections at public hearings and faster and more certain project approvals.

The industry’s environmental spending rose by 20 per cent in 2003, but one of the challenges, says Bell, “is doing a better job of communicating that to the public.”

The coal sector is already onboard. “We have the highest environmental standards in Canada,” says Cindy Brunel of the Elk Valley Coal Group, the country’s second-largest producer of metallurgical coal.

“We have excellent laws for environmental protection,” adds Lyons. “And this government has told us over and over again it is not going to compromise on environment. It has simplified and improved the rules and regulations without compromising (environmental regulations).”

Environmental activists have been quiescent for several years because the industry has been slow. But groups across the province will be watching and evaluating projects as they are proposed, says Gil Arnold, board member of the Environmental Mining Council of B.C.

“So far, we see a lot of these companies working closely with First Nations and communities,” says Arnold, who works in northern B.C. as a conservation activist. “Most of the signs are (that) these guys want to do the right thing.”

Mining company attitudes, too, have changed since the 1990s, when companies “essentially walked away from the table. They refused to discuss the effects of the business with communities and First Nations,” Arnold says.

Now, he adds, “The laws are on the books for clean mining. Whether the industry operates that way remains to be seen.”

One concern is reopening of old mines with patchy environmental records. “From my own review of reclaimed mines, we’ve been less than successful” in preventing waterway acidification, Arnold says.

A recent Fraser Institute mining survey shows the enthusiasm of investors lags behind that of government and industry. Although ranked near the top of the mineral potential index, B.C. is near the bottom when respondents are asked about potential, given current regulatory conditions.

A provincial election is about a year away, and a second term in office for the current government, further entrenching its policies, would go far to assuaging those concerns, says Fred McMahon, director of the Centre for Globalization Studies at the Fraser Institute.

Survey respondents “may not be up to date,” on political changes in B.C., says McMahon, who adds that may be good for the industry in the long run. ‘It’s going to take a while before we know whether the changes are stable. The mining industry is long-term. You sink a shaft today and you may not realize a return on your investment for a decade.”

But others believe the industry has turned the corner.

“All indications are the demand is going to be here a while,” says Livingstone.

BC Mining Statistics 2003:
* Gross revenue increased 3.5 per cent to $3.65 billion from $3.53 billion in 2002.
* Net income after-tax of $285 million, up $178 million from 2002.
* Post-tax return on shareholders’ investment increased to 10.9 per cent from 4.1 per cent in 2002.
* There were no writedowns of mining assets compared with $22 million in 2002.
* Total tax expenses decreased 53 per cent from 2002.
* Cashflow increased to $598 million from $567 million in 2002.
* Prices were up in 2003 over 2002 across the board: Zinc by nine per cent, copper by 14 per cent, gold by 17 per cent, silver by six per cent and coal up marginally.
* The trend in increased prices continues in 2004, with zinc up 29 per cent over 2003 averages, copper up 53 per cent and molybdenum up 54 per cent. Gold and silver prices are also continuing to rise.
* Expenditures on environmental control increased to $73 million in 2003 from $61 million in 2002.

Source: PricewaterhouseCoopers survey of 2003 financial results from B.C.’s 13 mines