Mining industry weathering the storm: consultant
The COVID -19 pandemic delivered a shock to a B.C. mining sector already under some strain, according to a new report from consultant PricewaterhouseCoopers (PwC).
Financial results from 2019 showed an industry adjusting to lower prices for copper and coal, B.C.’s key commodities, due to a slowing global economy. Now, the pandemic has miners strategizing to cope with more uncertainty.
Pre-tax profits from mining in 2019, at $1.8 billion, were about half the 2018 net income of $3.6 billion from B.C.’s 18 operating mines, according to the report, and direct employment had fallen to 11,784 in 2019 from a decade-high 12,404 jobs in 2018.
Revenues for the 18 operating mines canvassed in PwC’s report were down seven per cent to $11.4 billion in 2019 compared with $12.4 billion in 2018, due to lower prices and lower shipments, and ran straight into further uncertainty in the pandemic.
“No question, 2020 is going to be a challenging year from a results perspective, in terms of revenue and profits,” said Mark Patterson, the leader of PwC’s mining group in B.C. and co-author of the report.
However, Patterson said B.C.’s industry was fortunate that it, along with forestry, was declared essential and never fully shut down except for some initial closures while companies came up with infection prevention measures.
“I think there’s a solid foundation, particularly from an employment and community economic contribution perspective, that the mining industry is going to stay the course whereas a lot of other industries in the province have obviously been pretty severely impacted by the effects of the pandemic,” Patterson said.
PwC surveyed executives from 30 participants, including the 18 operating mines and 12 mine-development projects.
Before the pandemic, Patterson said, a key industry focus was on improving environmental, social and governance practices, or ESG.
The social in ESG means community engagement and building relationships with Indigenous communities, and Patterson said it will be “even more relevant” to mining firms seeking new financing while recovering from the pandemic.
In that respect, being allowed to continue operating during the pandemic meant not only developing strong COVID-19 prevention measures within their workforces, but demonstrating that to the communities they operate in, said David O’Brien, PwC’s leader of sustainable business solutions in Western Canada.
“Often mines are located in rural areas and there is concern about communities, about workers coming into the community and potentially spreading infection,” O’Brien said. “I think that’s been one of the reasons why in B.C., mining companies have been able to get back up and running.”
However, the pandemic has delivered a greater unknown around the impact that it’s going to have on bigger-picture market demand, particularly in countries such as China, Japan and South Korea, Patterson said.
“Some of them have started to open back up over the last few months, cautiously obviously,” Patterson said, but how long recovery will take is “the big question that everyone would love to have the precise answer to.”
“But probably longer than anyone would have anticipated (at the start),” Patterson said.
Overall, over the last several years, mining has been trying to strengthen its appeal as a supplier of key minerals for the transition to renewable energy and a low-carbon economy such as copper for use in electric cars.
And O’Brien said a focus on ESG measures will be important for firms to attract new investment. “Many investors are starting to measure ESG performance as a basis for where they choose to invest their dollars,” O’Brien said.