The COVID-19 pandemic delivered a shock to a B.C. mining sector that was already under some strain, according to a new report from consultants PricewaterhouseCoopers (PwC).
Financial results from 2019 showed an industry already readjusting to lower prices for copper and coal, B.C.’s key commodities, due to a slowing global economy. Now, the pandemic has miners strategizing how to cope with more post-pandemic 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 2019 B.C. mining industry 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 of commodities, and ran straight into further uncertainty in the early months of 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 new COVID-19 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 18 operating mining operations and 12 mine-development projects.
Before the pandemic, Patterson said, a key industry focus was on improving its environmental, social and governance practices referred to by the shorthand acronym 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 companies seeking new financing in 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 bigger unknown around the impact that it’s going to have on bigger-picture market demand, particularly in commodity-consuming 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 motors for electric cars.
And O’Brien said focus on ESG measures will be important for companies trying to attract any new investment coming back into mining during the recovery from the initial round of the pandemic.
“Many investors are starting to measure ESG performance as a basis for where thy choose to invest their dollars,” O’Brien said.