Monday, January 26, 2015

Trends in BC Mineral Exploration 1968 to 2014


In 2014 we saw mineral exploration expenditures drop in BC to $338 million, though in absolute terms it was still the 8th best year ever but this does not account for inflation.   Adjusted for inflation it drops to the 12th best year which is still generally good if you do not pay attention to the degree spending has fallen in the last couple of years.

When one looks at the graph there is the obvious trough from 1992 to 2003.   The timing coincides nicely with the NDP being in power but that is not really the cause for the low spending.    The mining industry in BC has a hatred of the NDP and this likely pushed spending even lower than it should have been.  However the main reason for low exploration expenditures from 1992 to 2003 was the low prices for metals from 1990 to 2004
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Some examples of how low prices went

  • Copper was often less than $1 a pound.  The price was low enough that Highland Valley Copper was close to shutting down
  • Gold was below $400 an ounce (chart of the gold price for last 25 years is below)
  • Molybdenum went below $3 a pound (chart of the molybdenum price for the last 19 years is below)
After the trough we got record levels of spending on exploration but that was not mainly because of a mining industry friendly Liberal government but because of a massive global rise in demand for all metals.   
  • Copper rose to $4,50 a pound, high enough that stealing copper wire was profitable
  • Molybdenum spiked to over $47 a pound
  • Gold manage to break $1800 an ounce.  
BC has a number of large undeveloped deposits that have metals such as copper, gold, silver, molybdenum and nickel.   The global demand for these metals made the rise in exploration expenditures inevitable in BC.

The rapid rise and now sudden decline are not good for anyone involved with services for mineral exploration.   Companies have had to ramp up very quickly for just a short period of extreme exploration activity.    The consistency from the late 60s to the end of the 80s provided companies supporting exploration work certainty

What is the future of mineral exploration in BC?   Two factors will play into how much mineral exploration there will be in the future in BC
  • Global prices - if they do not rise and in fact continue to fall exploration will dry up
  • Land Tenure Certainty - after New Prosperity being refused a federal environmental assessment and the Tsilqot'in decision, there is little or no certainty that an owner spending money on claim will be allowed to develop a mine

 I personally am pessimistic about both factors and I think we will see continued drops in exploration spending in BC.   The numbers for preceding year are always released towards the end of January which means if the 2016 exploration expenditures are very low, this is likely to become an election issue.

Sunday, January 25, 2015

On the Eve of the 2015 AME Exploration Roundup, How does the BC Mining Industry Look?

BC has been a long term significant producer of molybdenum -
this is the price trend over the last 15 years in Canadian dollars
Every year in during the last week of January Vancouver hosts the biggest gathering of mining industry people in the world at the Association of Mineral Exploration (AME) -  Exploration Roundup.    This is good time to take a look at where the mining industry in BC is at and the future might hold.

Over the last 15 years I have gone to the Exploration Roundup about seven or eight times.  In one year the work I had done with a client was featured on one of the panels.   It is one of the few really big global events that happens in Canada every year.   Companies with no presence in Canada send people to the conference or take booths.   With at times well over 5,000 people attending, it is interesting how little media attention the Roundup gets in BC which in many ways is reflective of how most of the public in BC sees the mining industry.

All that said, the event is a good time to take a look at who well the mining industry in BC is going because of the new data and information will come out.   As an example, each year the province releases the annual review of exploration and mining in BC at the Roundup.   It is not out tonight, but will be in the next couple of days and when it comes out I will comment on what is within it.   Right now I want to look at some trends for mining in BC.

Over the last nine years the world has gone through a period of one of the biggest rises in metal prices in decades.   Australia has experienced a stunning boom through the export of metals and coal to China but BC has not seen this happen.

In the last 15 years we have only a few new mines open in British Columbia.   Five coal mines opened, one of which closed, and only two major metal mines   Over the same time we had five metal mines and three coal mines close.   It is six metal mines if Mount Polley is considered closed.  This is a net loss of two to three mines which may not sound like a lot but the BC mining industry had been declining through the late 1980s and 90s already.

It is not as if there is a shortage of interesting deposits in BC, this is just a partial list of large scale mining projects in BC:

  • Galore Creek
  • KSM
  • Kitsault Moly
  • Ajax
  • Tuslequah Chief
  • Schaft Creek
  • New Prosperity
  • Chu Moly
  • Kutcho Creek
  • There numerous possible new coal mines in the East Kootenaies and in the Peace as well as the totally undeveloped Mount Klappan coal deposit near Iskut.
If the biggest boom in decades was not enough to make projects like Galore Creek worth developing, what will it take?   Are we realistically going to see many more mines open in BC?   Given the track record of the last 15 years it does not seem likely that new mines will open as fast as the existing ones come to an end of their life.
The values are not adjusted for inflation

The first stage of the development of any mine is exploration for deposits and then quantifying the scope and scale of the resources through advanced mineral exploration.   Without significant ongoing exploration new mines are not likely to open.   

The mining industry in BC has a hatred of the NDP that borders on the irrational and through the 1990s exploration dried up in BC.  There was a huge expectation that with the election of the BC Liberals life for miners would improve dramatically.   We did see  exploration spending rise in but this has not turned into new mines opening.   One big metal mine to open in the last 15 years, Mount Milligan, initially had been given approval in 1995 during the first NDP term of  government.   The mine did not built for almost another 20 years.

Most exploration spending is done by existing operating mines or projects in advanced stages development,   As the number of projects in either category declines the amount of mineral exploration in BC will fall.   This will lead to a loss in BC both of human expertise and of the infrastructure to support exploration.   

Notwithstanding the hard work AME and the Mining Association of BC have, the mining industry still has a lot of executives in it that are hostile to aboriginal people.   The Tsihqot'in decision made it very clear there is Aboriginal Title in BC and not just in small areas.   The response by some people in the mining industry to the decision was not productive.

Taseko Mines, owner of the New Propensity project, issued a response  to the decision that said the court did not find there was Aboriginal Title at the mine site.   Technically this was true but that is only because the courts were not asked if there was or was not Aboriginal Title underlying the New Prosperity project.  Given the evidence that was sufficient to prove Aboriginal Title by the Tsilhqot'in it seems very obvious that the mine site has underlying Aboriginal Title.   Boneheaded is the politest term one could use for the Taseko statement on the decision.

BC's mining industry for generations has been based around zinc. lead, silver, gold, copper, molybdenum, and coal.   Only coal production levels have been holding steady.  Since we have had few new deposits come online in BC, the province is seeing the lowest levels of production for lead, silver and gold since the 1890s - 120 years ago.
BC zinc production levels are at historic low levels since the 1920s.
For lead we have not had production levels as low as the last couple of yeas since the 1980s

 Global prices for most metals have been trending downward and in US dollars values are lower now than have been seen in most of the last decade.   The best times for new mines seem to over.
Since the early 1970s copper has been a major BC metal, but the lifespan of the existing mines is coming to an end   The price has held moderately well Canadian dollar terms, but in US dollar terms the current price is the lowest since the boom started other than during the financial crisis.  There is no global crisis to drive the price down now.
BC silver production has fallen to levels not seen since the 1890s, the same is true of gold.   
Given current trends in metal prices and the uncertainty on the last base, the province is going to see at least another decade or two of decline in mining.    It will be interesting to see what comes out this week at the Exploration Roundup but it is hard to see what possible news could be come out.


Thursday, January 22, 2015

Looking at the tenure of Women as first ministers in Canada.

I first looked at this June 14th 2011 just after Christy Clark became premier of BC.   At that time only eight women had been first minister and only two women had won elections.  Since then five more have won elections and three more have become premiers.

Here is how they all stack up by time in office - bold means currently in office.

  1. Eva Aariak         Nunavut 1827 days
  2. Nellie Cournoyea   NWT     1469 days
  3. Christy Clark      BC      1411 days
  4. Catherine Callbeck PEI     1353 days
  5. Kathy Dunderdale   NF      1148 days
  6. Alison Redford     Alberta  898 days
  7. Pat Duncan         Yukon    884 days
  8. Kathleen Wynne     Ontario  710 days
  9. Pauline Marois     Quebec   581 days
  10. Rita Johnson       BC       217 days
  11. Kim Campbell       Federal  132 days

Each time I have looked at this I have considered how many person days each first minister has governed for - this is time in office multiplied by population governed.    I think that in many ways it is a better measure of the relative impact of women in politics.    As you can see Kathleen Wynne tops the list when you calculated it this way.

The number is person days governed

  1. Kathleen Wynne     Ont 9,125,000,000 Lib
  2. Christy Clark      BC  5,650,000,000 Lib
  3. Pauline Marois     Que 4,582,000,000 PQ
  4. Kim Campbell       Fed 3,786,000,000 PC
  5. Alison Redford     Ab  3,273,000,000 PC
  6. Rita Johnson       BC    715,500,000 Socred
  7. Kathy Dunderdale   Nf    590,700,000 PC
  8. Catherine Callbeck PEI   149,000,000 Lib
  9. Nellie Cournoyea   NWT    92,000,000 na
  10. Eva Aariak         Nu     58,300,000 na
  11. Pat Duncan         Yk     24,800,000 Lib
Since the selecton of Eva Aariak to be premier of Nunavut on November 14th 2008 we have always had at least one woman premier in Canada.   This is 2261 consecutive days.

What is also interesting is that three of the women did significantly better than expected in their elections - that being Alison Redford, Christy Clark and Kathleen Wynne.

On the other hand two women were forced out of the office of premier in an atypical manner early on in their first term as elected premier.   

I also looked at this on:

Tuesday, January 13, 2015

The fall of the price of oil is not as bad in Canada, sort of

We always hear the price of oil in US dollars but the reality is that in Canada we work in Canadian dollars and that difference at times matters significantly.

First is a graph of the fall of the West Texas Intermediate price for a barrel of oil at Cushing Okalahoma.in US dollars over the last year.  It has gone from a peak of just over to $105 below $50, a drop of more than 53% in little more than six months.

Now we have the same chart but in Canadian dollars.   The peak was $115 dollars and it has just gone below $60.  This is a drop of only about 48%     It may not seem like a big difference, but it could be enough to keep the oil industry in Alberta doing much better than that of North Dakota.

The difference between $48 per barrel US and $58 per barrel Canadian is very important because it means Canadian oil remains profitable longer than US oil.   The Canadian dollar has declined about 11% against the American dollar since the start of the fall of oil prices.   This fall is the reason the drop in oil prices in Canada has been slower than in the US>  

The best estimate I can find is that it costs around $38 per barrel to produce synthetic crude in Alberta.   As the Canadian dollar has fallen the cost of producing Canadian synthetic crude has fallen in US dollar terms.   It means the tar sands oil will remain worth producing much longer than many US sources.      What I am not accounting for is the long term discount synthetic crude has been selling at.   Tar sands oil tends to sell for close to $4 US a barrel less than the WTI price, but factoring in that, tar sands oil is likely to still be selling for more than the operating costs at a price of $37 US per WTI barrel.

What does disappear are the big fat royalties for the government. and any expansion plans or new tar sands projects.

Monday, January 12, 2015

One Local Government Reform Needed in BC

There are many different local government reforms that are needed but this morning I thought I would just raise this one - we need more direct local control and responsibility in unorganized areas.

Local government in BC is responsible for the needs of private property within their own boundaries.  In general Crown Lands do not come under the jurisdiction of local government.  In an urban setting like Victoria, Vancouver or Kelowna, private property makes up the bulk of the land and so it seems as if the local government is responsible for the whole land base.   In many rural areas the majority o the land base within a municipality is Crown Land and not subject to many bylaws.  This makes for a fairly nice division in powers in the province.   The division becomes much less clear when we look at private lands within unorganized areas in BC.  

Unorganized areas in BC are governed by a regional district but many of the functions of local government are looked after by the province.   The regional district governance structure means that in many cases local government decisions for unorganized areas are made by representatives of municipalities within the regional district and not by the person elected from the area the decision impacts.   As an example, the Capital Regional District board has a lot of control over the future of the southern Gulf Islands and the Port Renfrew area but almost all of the directors come from the urban areas of Victoria.

A solution to this would be for unorganized areas to become municipalities but in BC there is a serious financial disincentive to taking this action or even to or to joining existing municipalities.    At the moment the cost of provision of policing and roads falls 100% on the provincial government and not on the local population.

Places like Saltspring Island and Gabriola Island should be municipalities already but are not.   Saltspring has a large enough population that if it were a municipality it would have to pay for all the policing costs.   Gabriola's population is low enough that they would only be responsible for a portion of the cost of policing.   In neither case do local people have to pay for their roads to be maintained.    Why would anyone agree to incorporate when it means taking on these new costs?  

Meanwhile unorganized areas only get to elect a director to their regional district.   The areas are then governed by the whole board which means in a number of cases around BC that the interests of a community in an unorganized area are completely overshadowed by the interests of much larger neighbouring organized communities.  This comes about because the role of regional districts is to sort of be the local government for unorganized areas.   It leads to a democratic imbalance.   People in organized areas get a lot more influence over unorganized areas than the other way around.

What change would I propose?    I would first of all remove the financial disincentive to incorporating by levying taxes for roads and police on properties in unorganized areas comparable to the provincial average based on assessed value.   Second I would create a new model for large rural municipal governments that allows them to operate in a way that makes the most sense for them.   Third, I would offer significant financial incentives for unorganized areas to join existing municipalities.   Finally I would have a provincial fund available to offer even more assistance to a community wanting to incorporate than is currently available

Monday, January 5, 2015

Top two pairings in Ridings for the 2015 Federal Election

Here is the list of the top two party pairings from the results of the 2011 election and those numbers transposed to the new riding boundaries.

Winner Second  2011 2011 transposed
Cons    NDP     107  117
Cons    Liberal  56   69
NDP     Bloc     42   44
NDP     Cons     40   41
Liberal Cons     23   25
NDP     Liberal  19   22
Liberal NDP      11   11

In 158 of the 338 ridings the race is between the the NDP and the Conservatives.

For the Conservatives and Liberals it is only 94 races.