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E D IT OR'S C O MMENTS Ellswor th D ic kson Where have all the grassroots projects gone? PricewaterhouseCoopers recently released its 42nd study on the British Columbia mining industry. While 2012 could be considered a thriving year for BC mining in general, there has been a disturbing drop in grassroots, or greenfield, exploration. "BC's mining industry faced significant headwinds in 2012, including lower commodity prices as a result of global market jitters and a range of rising costs - labour, raw materials and energy,' said Michael Cinnamond, survey co-author and leader of PwC's Mining practice. "Lower capital expenditures, revenues and a drop in operating cash flows resulted." Gross mining revenues were $9.2 billion in 2012, down 7% from $9.9 billion in 2011, when the price of copper reached a new high and coal was near its peak. Commodity prices decreased as a result of slower global economic growth and a deepening debt crisis in Europe. The prices of BC's two largest revenue generating commodities, coal and copper, experienced slides as a result, causing a drop in aggregate BC mining revenues and profits for PwC survey participants in 2012. However, it is a long-term concern that only 1%–2% of the $680 million spent on exploration in BC was for grassroots projects, Gavin Dirom, President of the Association for Mineral Exploration British Columbia, said at a press conference. Almost all exploration funds were spent on advanced-stage projects owned by senior mining companies. This is a reflection of how difficult it has been for many junior miners to raise exploration funds. In the Canadian exploration industry, it is the juniors that have traditionally staked, bought or optioned early-stage mineral prospects. If a promising mineral deposit is discovered, the junior either sells the project or the entire company to a senior miner that would have the financial resources to build a mine. Occasionally, a junior will joint venture with another company or go it alone to build a mine. Dirom went on to explain that for the BC mining industry to be sustainable, maybe 8–10% or higher in exploration expenses are needed. After all, since an operating mine represents a non-renewable depleting asset, new mineral deposits have to be fed into the system. This development won't affect the overall supply of mineral commodities for the present time but the big question is: when will the bear market in junior miners end? Eventually, the seniors will need the promising mineral prospects that juniors can provide to sustain their operations. For the more senior companies, the PwC survey reported mixed results. Survey respondents indicated that the aggregate pre-tax net earnings fell 51% to $1.8 billion, down from $3.7 billion in 2011. Cash flow from operations decreased to $2.2 billion in 2012 as compared with $4 billion the previous year. "The decline in prices of coal and minerals produced in BC came along with investor fears of slower growth in China, a sluggish economic recovery in the US and Europe's credit crisis," said Marianne Carroll, survey co-author and Manager in PwC's mining practice. "In spite of slimmer profits in 2012, BC producers continued to move forward with plans to expand and build new mines." For a complete copy of PwC's 2012 BC Mining Industry Survey visit: www.pwc. com/ca/bcminingsurvey • On a more positive note, Mining for Miracles, the BC mining community's longstanding fundraising campaign in support of the BC Children's Hospital Foundation, raised over $1 million at its recent signature event – the 2013 Teck Celebrity Pie Throw, held in Vancouver. n Ellsworth Dickson, Editor-in-Chief Email: editor@resourceworld.com T: 604 484 3800 | 1 877 484 3800 JUNE 2013 www.resourceworld.com 7