Tuesday, February 15, 2011

Some quick notes on the provincial budget in relation to natural resources

First off, revenues from natural resources is projected to be $3,100,000,000 while at the same time the natural resource ministries will see a fall of 25% to $880,000,000.

BC derives much of its well being from natural resources.   For us to manage the resources, we need ministries that are well funded and have enough staff and resources to know what is going on with the landbase of this province.

Would it not be reasonable to peg natural resource ministry budgets to the amount of revenues that come in?   Say 50% be available for the ministries, research or infrastructure improvements.

The current estimates the government is using for natural resources revenues are conservative.   The price of 2x4s is estimated for 2011 at 3.5% below current prices.  Copper is running at about $4.50 a pound but estimated to be at $3.65 for this year and $3.40 next year, other than the during the height of the global downturn, this is conservative.  Pulp prices are in the range of $960 a tonne versus $888 for this year in the budget.

The only commodity that seems to be well forecast is metallurgical coal at $220+ per tonne.

The budget does not seem to capture the potential of new mines opening in BC.   Copper Mountain could be open in a few months and bring 100,000,000 pounds of copper with gold and silver equivalents.   What is coming down the line soon - Schaft Creek could open soon, Mount Milligan will be operating in early 2013, EB coal mine slated to open by early 2013.  In the next five years there could be six to eight more mines open in BC.   Mining revenues could possibly more than double within five years to close to $20,000,000,000 assuming prices for metals and coal do not rise.   More than a 1% increase in GDP per year for each of the next five years.

I strongly suspect that BC will see some significant windfall resource revenues over the next few years and we could quite possibly be without a deficit for this year.  Being prudent and underestimating the current financial situation is a good thing, though I suspect they are being very conservative.
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