Investment activity in Canadian coal has rebounded - PwC

A PwC/Coal Association of Canada report has found Canada's coal industry is a positive contributor to the country's trade balance, as almost 40% of Canadian coal is exported internationally.


Author: Dorothy Kosich
Posted: Friday , 09 Nov 2012


While Canadian coal production volumes are relatively constant at an average of 60 million tonnes of metallurgical and thermal coal annually, the value of coal production hit a historical record of C$7 billion in 2011, says a new PwC report sponsored by the Coal Association of Canada.

Bituminous and sub-bituminous coal contributes 50% and 35% of total production, respectively, with lignite accounting for the remainder, according to the PwC report, Economic impact analysis of the coal mining industry in Canada.

Most of the met coal mined in Canada is exported while the largest share of mined thermal coal is used domestically for energy generation purposes. Japan, South Korea and China are the main market destination for Canadian met coal, while the majority of exported thermal coal is shipped to Asian markets, said PwC.

Between 2001 and 2011, the coal mining sector contributed 19% of Canada's mineral exports, the PwC report noted. 2011 export sales for met coal were reported at C$8 billion, comprising almost 40% of coal produced in Canada. "Export sales of this magnitude make the coal industry a positive contributor to Canada's trade balance," said PwC. "Of the remaining coal production, the majority is used as a fuel source to generate electricity in Canada."

However, the global economic recession negatively affected Canada's mineral extraction sector, as financing for major projected dried up and coal prices fell sharply in late 2008 and early 2009. "However, investment activity in the sector has already resumed its growth path, with capital expenditures rebounding to levels higher than those observed before 2008," PwC observed. In 2011, coal capex was $1.023 billion, well above the $411 million 10-year capex average.

Expenditures made by the Canadian coal industry resulted in a total economic contribution of C$5.2 billion to the nation's GDP. The coal mining industry contributed direct impacts of $3.2 billion with $2 billion of indirect impacts to Canada's GDP. Last year coal mining contributions represented approximately 0.009% of the national GDP, said the report.

Total tax revenue from coal mining was $698 million, said PwC. In addition last year $344 million was reported as mineral royalties and mineral land taxes.

According to the coal mining companies surveyed by PwC, coal mining exploration and development expenditures amounted to $380 million in 2011.

Survey participants indicated a total of $2.2 billion or $721 million annually of future capital expenditures over the next three years (2012 to 2014).