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Inside BC's Mining Boom

Why billions are pouring in for copper, coal, uranium.

By Monte Paulsen 17 May 2007 | TheTyee.ca

Monte Paulsen is a contributing editor at The Tyee. He welcomes your feedback via e-mail (monte@thetyee.ca), and invites you to participate in the online discussion happening below.

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Highland Valley copper mine: Green driven?

British Columbia's mining industry unearthed an unprecedented $8.1 billion in revenue in 2006, and posted net income of $2.3 billion. B.C. miners reaped these record-smashing profits not by digging up more ore -- total shipments decreased by 4 per cent to 25 million tons -- but by cashing in on a soaring global market for commodity prices.

"Results for the '06 industry are truly nothing short of spectacular," said Michael Cinnamond, an author of the annual PricewaterhouseCoopers report, from which these results are drawn. "It was by far the highest net revenue and earnings that we've ever reported."

Shareholders yielded an after-tax return on investment of 64.8 per cent last year. Payments to federal, provincial and local governments totalled $799 million, or about 10 per cent of gross revenue.

"I can't imagine a happier industry," said MLA Kevin Krueger, the BC Liberals' minister of state for mining. "There's really great cooperation between this government and industry."

Mining employment rose to 7,345 direct employees in 2006, earning an average salary and benefits package worth $99,900. Mining remains the largest private sector employer of Aboriginal people in Canada.

"I'm never supposed to be at a loss for words," Krueger told mining executives gathered in Vancouver this week. "I really like your words. Words like 'spectacular' and 'nothing short of unprecedented' and 'eclipsed' and 'by far the highest.' Those are excellent words."

Green copper tops coal

Copper prices rose 83 per cent last year, pushing copper ahead of coal as the largest contributor to mining revenue. B.C. miners sold about $2 billion worth of copper in 2006.

"Even more impressive is the growth of prices in the first quarter of this year," Cinnamond said. "I think we can expect copper to continue to be one of the largest contributors in 2007."

"Copper is the most important commodity we produce in this province," said Michael McPhie, president of the Mining Association of British Columbia. He noted that the worldwide shift toward electric transportation, widely perceived as green technology, is helping to drive up copper demand.

"A Toyota Prius contains 30 more pounds of copper than a regular car," McPhie said. "There are 9,000 pounds of copper in an electric bus."

Mineral prices have risen and fallen in relatively predictable cycles for generations. But as resource demand rises simultaneously across the so-called "BRIC" nations -- Brazil, Russia, India and China -- some economists are calling this a prolonged "super-cycle."

"There are many who suggest that we are in the midst of a super cycle for commodities, and that we should expect strong prices to continue for many years to come," McPhie told a luncheon at the Vancouver Board of Trade. "The overwhelming evidence is that we are in for a fairly prolonged bull run."

Others warn that the expectation of green demand has whipped copper prices into a speculative bubble. "There's a lot of copper around the world," said Joan Kuyek of MiningWatch Canada. "Also, copper is one of the most easily recycled materials; it could be profitably mined from U.S. and Canadian landfills."

Coal remains a burning issue

Coal was the second largest contributor of 2006 mining revenue, contributing $1.98 billion in BC. Coal is a relatively dirty fuel that faces mounting environmental criticism, both because its combustion generates excessive greenhouse gas emissions, and also because coal burning releases toxic metals such as mercury.

"Industry must change and adapt, there is no doubt," McPhie acknowledged. But he questioned some of the solutions being proposed by environmentalists.

"Take carbon offsets for example," McPhie said. "Not unlike the penance paid to the church in medieval times for untoward indulgences, this is not what is going to save our planet from the vagaries of increasing population, deforestation and over consumption."

Through McPhie praised Premier Gordon Campbell's generous treatment of the mining industry, he criticized the premier's new plan aimed at slowly reducing greenhouse gas emissions. McPhie said these policies, "essentially shut down any opportunity to utilize our abundant coal reserves for future energy production."

"Wouldn't it have made sense, rather than sterilizing a huge resource, for the government to work with industry, the [environmental] community and others to ... investigate the possibility of creating a clean coal energy sector within the province?" McPhie asked.

Kuyek agreed that it would make more sense for B.C. to sell electricity than to export raw coal. "It's better economically. And it's better that we live with the consequences of what we do -- both the economic benefit, as well as the less beneficial environmental and cultural consequences," she said. "Nowhere in this detailed PriceWaterhouseCoopers report is there any accounting of the damage to air, water, and wilderness inflicted by the mining industry."

Exploration booming

McPhie warned that the good times won't last if BC doesn't open new mines. "When times are good, it's time to make investments," he said. "These are revenues [from] mines that were built more than 10 years ago. Only one new mine opened in the last year and a half."

The provincial government figures $265 million was spent on exploration last year, an increase of 20 per cent. "That makes 2006 the seventh consecutive year of increases in explorations spending," said Cinnamond.

"We have 25 of the 52 major projects across Canada that are coming down the pike here in British Columbia," boasted MLA Krueger, "and eight more in the pre-approval process."

Krueger is particularly eager to see a mine developed in the Interior, where the mountain pine beetle has cut short the forestry industry's future. The province put $25 million into Geoscience BC, which is studying the complex geology beneath BC's volcanic interior. "They are focusing on the mountain pine beetle kill area," Krueger said. "Those communities really need new economic activity. Because of the complexities of the geology under the land where the pines have been growing, we needed some modern techniques. And we're going to be rolling out some programs shortly."

"There are myriad undiscovered deposits out there in the mountains," said Pierre Lebel, who chairs both Imperial Metals Corporation and the mining association. "But so far our endowment has not been the kind ... where a mine just builds itself."

Infrastructure: Who pays?

In order to build new mines, the industry is calling for massive public spending. Among the investments called for by McPhie are the Gateway Project of freeways around Vancouver, the twinning of the Canadian Pacific rail lines to Vancouver's ports, and a $300-million power line that would extend the electrical grid to the province's remote northwest corner.

"The full electrification of Highway 37 should be pursued vigorously." McPhie said. If such a project were to include a connection to Alaska, he added, "the power line would open up a green power and industrial development corridor that would connect the entire west coast of North America."

Kuyek said the mines themselves should pay for their fair share of the infrastructure they require: "The richest vein of gold the Canadian mining industry has ever tapped was the one they discovered in the taxpayer's arm."

The B.C. mining industry made payments to governments totalling $799 million in 2005. That figure includes federal and provincial income tax, mineral taxes (royalties), provincial sales taxes, gasoline and fuel taxes, property taxes, and even income taxes paid by mining employees. And yet that number is still only 10 per cent of revenue.

Kuyek speculated that B.C. miners probably already receive more than that amount in subsidies such as roads, ports, and cheap electricity. "Not to mention their subsidy from the environment. They get their water for free, and they don't return it clean."

"There's another number here," Lebel said, noting that direct payments to governments is only part of the picture. "Our industry spends $6.7 billion in the province in 2006," he said. "The money reverberates through the economy, benefiting everyone."

McPhie encouraged Premier Campbell to invest in the future, in the style of BC's longest-serving premier, W.A.C. Bennett. "These are investments," McPhie said, "like the Bennett dams of the '60s that would make a big difference to the future prosperity of the province."

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