Mining policy in BC

It is a nice change indeed to be responding to the recent PriceWaterhouseCoopers report that describes the British Columbia mining industry as having had a positive year.

Many of the key indicators are looking better and heading in the right direction: gross mining revenues were up in 2003; net mining revenues increased by $175 million; net income increased by $178 million; we shipped more product; we are spending more on mineral exploration; and the return on investment to shareholders was up significantly to 10% last year from just 4.1% in 2002.

From a purely financial perspective, the improvement in 2003 seems to be driven mostly by the increases in base and precious metals prices. From the industry’s perspective, though, other factors must be taken into account, in particular geology, government policy, and commodity prices.

British Columbia has the geology: the rocks in this province are both plentiful and promising.

But what of government policy? I define government policy as any action that government can take to encourage or discourage investment. This includes regulatory stability, competitive taxation, land use policies, and so on.

British Columbia missed out on attracting its full share of mineral exploration and development investment for 10 years. And we did so for the simple reason that the province, viewed through the eyes of investors, looked too uncertain, too unstable.

The policies and attitude of the government during that time discouraged mineral investment. As a result, British Columbia lost an estimated $750 million in exploration spending from 1992 to 2001. Statistically speaking, that lost exploration spending would have found eight new mines, resulted in more than $2 billion in additional capital spending, and provided more than 7,000 new jobs. Those opportunities may never be recovered.

Today, mineral investors view British Columbia as having a much more positive investment climate. Credit for that rests with the current provincial government, which has moved to restore investor confidence by endeavouring to enforce laws and regulations in a responsible manner and by re-establishing a climate that encourages business investment.

The provincial government has done a good job. But they have more to do. Ten years of “regulatory instability” cannot be easily erased from the memories of investors. It takes time and continued effort and action.

Looking ahead, we are hopeful that commodity prices will remain strong, and there are positive indications that they will. If current coal and base metal prices remain at their present levels, our industry will do well in 2004. We are encouraged by mineral exploration spending, which is on the rise. There is no doubt that mineral discoveries will result from increases in that spending.

In less than one year, the people of British Columbia will go to the polls and vote in a new government. Among those voters are mineral investors, who are looking for reassuring signs of continued regulatory stability.

It will be our job to ensure that the new government understands the economic value and social importance of mining, that it is sensitive to the delicate nature of investor confidence, and that it provides continuity and stability in terms of laws and regulations.

— The author is the former president and CEO of the Mining Association of British Columbia. He recently stepped down to assume a position at coal company based in the province.