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.

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