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Sector looks to recover after hitting bottom, according to survey
While B.C. miners face an uncertain future, it pales in comparison with the challenges of the global industry, which saw its profits crushed in 2013, according to a new report from accounting and consulting firm PwC.
The world’s top 40 mining companies lost $280 billion in capital value on stock markets last year and profits, at $20 billion, down 72 per cent, representing the lowest level in a decade, the report states.
Canadian companies account for eight of the top 40 companies in the global survey, including Vancouver-based heavyweights Goldcorp. Inc., Teck Resources Ltd. and First Quantum Minerals Ltd.
“I think we’ve hit the bottom, and we’re starting to crawl out,” said James Gravelle, leader of PwC’s global mining practice.
Looking at first-quarter financial results for the companies that have reported, mining firms are starting to see firmer profits and improved stock values, he added. This is the result of cost cutting and rationalizing within the industry in recent months, according to Gravelle.
“But it is a crawl. We’re not blasting off the bottom here, and I hope we’ve seen the worst of it,” he said.
All three Vancouver-based companies in the survey have suffered the ravages of lower prices for their commodities, although each reported to having shored up operations with higher output and improved productivity.
Copper producer First Quantum has shown the biggest recovery of its market value. Its share price of $21.90, as of its Thursday close on the Toronto Stock Exchange, is up 15 per cent from a year ago. In its first quarter, the company reported a $127-million profit, compared with $154 million a year ago.
Goldcorp, however, in its first quarter, reported a $94-million profit, compared with $299 million a year ago, although it achieved higher gold production and sales levels. Its stock price, which closed at $25.45 Thursday on the Toronto Stock Exchange, is 17 per cent lower than it was a year ago.
Teck, a diversified miner that produces mainly coal and copper in B.C., as well as zinc, copper and other metals at mines around the world, reported a first-quarter profit of $69 million, compared with $329 million a year ago, while churning out more of its key commodities.
The industry within B.C. has fared better, comparatively speaking, with profits down 22 per cent in 2013 to $1.39 billion and revenues down seven per cent, according to the PwC report on provincial mining released in May.
However, it might still take more time before the sector’s recovery is helped by higher commodity prices, particularly gold, according to analyst Patricia Mohr, vice-president of industry and commodities at Scotiabank Economics.
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