Mining, Oil & Gas Extraction

Mining played a pivotal role in the early development of BC's economy and has continued to do so since-from the 1840's, when coal was the main mineral product, through the gold rush years, and to the present.

The discovery of gold in the Interior was an important turning point in British Columbia's economic and political history. Miners hoping to strike it rich came to the province from San Francisco and points even further away. Most of them didn't become rich, but they did leave a legacy behind them.

Before the gold rush, Victoria was a Hudson's Bay Company trading post with a small population (only 450 people in 1853). The first ship full of miners and adventurers headed for the gold fields arrived in Victoria in 1858 and changed the town forever. It became a stopping point and outfitting centre for miners and other people headed for the gold fields, and many new businesses sprang up to supply their needs. The gold-seekers traveled on from Victoria to the mainland to begin the long trek up to the area around Barkerville, where they hoped to stake a claim and strike it rich. Barkerville is now a ghost town, visited by tourists with an interest in history, but in the 1860s it was the largest city west of Chicago and north of San Francisco.

The influx of miners, many of whom were from the US, alarmed the authorities and in order to affirm British sovereignty over the area, the Crown Colony of British Columbia was created on the mainland. The creation of the new colony, which was later merged with the Crown Colony of Vancouver Island to become the province of British Columbia, was largely due to the effects of the gold rush.

What's included in the mining, oil & gas extraction industry?

Mining establishments are primarily involved in extracting naturally occurring solid minerals, such as coal and ores. Oil and gas extraction involves removing liquids (crude petroleum) and gases (natural gas) from underground. The industry also includes establishments that explore for minerals or develop mineral properties and mining operations.

Mineral fuels accounted for nearly two-thirds of the value of BC's mineral production [1] in 2004

BC's mining, oil and gas extraction industry is diverse. A variety of metals and minerals, as well as coal, oil and gas resources are found throughout the province. Metal mining companies operating in BC are major world producers of these products.

Copper, molybdenum and gold are the major metals mined in BC

Only a handful of metals are mined in significant quantities in BC. Production of these metals was valued at $2.4 billion in 2005.

Copper is used in electrical wire and cable, (over two-thirds of the world's refined copper is used for this purpose) and to make tubes, pipes and other shapes. It's the most important metal mined in BC, accounting for $1.2 billion of the total value of metal production. About half of the copper produced in Canada comes from BC mines. This makes the province an important player in the global copper mining industry, since Canada is one of the world's top five copper-producing countries.

Molybdenum (28%), a metallic chemical that is used in alloys and to make high temperature steels, is now the second most important metal mined (based on value) in BC. The province is a leading world producer of this metal. BC is home to Canada's only primary molybdenum mine, although molybdenum is also extracted as a secondary product at other mines.

Gold (12%), silver (5%) and zinc (3%) account for most of the rest of the value of metal production in BC. Nearly 80% of the world's gold supply is used for jewelry, coins and other ornamentation. It's also used in electronics, dentistry and the aerospace industry.

Silver is used for many of the same purposes, as well as for photographic applications and as a catalyst for producing some of the substances needed to make plastics and polyester materials. Zinc, which is often found together with copper or lead, is used as a coating to make galvanized iron and steel, which is resistant to rust and corrosion.

The average car battery contains about 10 kilograms of lead, another metal mined in BC. Lead is also used as a protective sheathing for underground and underwater cables.

Non-metallic mineral products are primarily construction related

Non-metallic minerals produced in BC were valued at $604 million in 2005. The most important of these are cement ($289 million), sand and gravel ($171 million) and stone ($70 million), which are extracted from quarries and sandpits in the province. They are used intensively by the construction industry. Sulfur, peat and barite are other non-metallic minerals found in significant quantities in BC, but they account for only a small percentage of the total value.

Coal is exported for use in steelmaking, while natural gas fuels homes and businesses in the province

BC is the country's biggest coal-exporting province. The value of coal production was $1.8 billion in 2005, accounting for 79% of total Canadian production.

Coal mines are found in the Kootenays, Northeast and on Vancouver Island. Elk Valley in southeastern BC is the world's second-biggest producer of metallurgical coal, used in steel-making. Much of the coal mined in the province is sold to customers in Japan and South Korea.

The province's natural gas reserves are located in Northeastern BC. Gas extracted from these reserves is sold to customers in the province and other parts of Canada, but much of the energy is destined for export to the US, primarily to Northwest and Midwestern states, as well as California.

In 2004, the value of natural gas production in BC was $5.9 billion. Petroleum and crude oil production was valued at $809 million.

Exploration and development

Many establishments in the mining, oil and gas extraction industry are primarily engaged in extracting mineral resources. Others provide support services on a contract or fee basis. These companies do mineral exploration, including traditional prospecting methods such as taking core samples and making geological observations. They're also involved in drilling, surveying and cleaning out wells. They generated about 12% of the sector's total GDP in 2004.

What's happened since 1990?

Ups and downs: the price effect

The mining industry is very sensitive to changes in world markets because products such as coal and copper are usually exported, and prices for most mineral products are set internationally. This means that exchange rate fluctuations and economic conditions in countries like Japan and China affect the value of metals, fuels, and other minerals produced in BC. This can both help and hurt the industry.

World demand for metals and other mineral products is driving prices up

BC's mining industry faced some challenges during the 1990s, when prices for many products were depressed. Coal prices were flat or down during the 1990s and the early years of this decade. This was almost certainly a big factor in the decision to close down the Bullmoose and Quintette mines in Northeast BC. More recently, there has been an upturn in world demand for metallurgical coal, largely driven by China's need for steel, and two new coal mines-Willow Creek and Dillon-were opened in 2004.

China is emerging as a major market for many mineral products and prices have been skyrocketing because world supply has not been able to keep up with the demand for these commodities. As the Chinese economy continues to develop its industrial base, the demand for raw materials to supply its emerging industrial machine is likely to remain elevated.

Molybdenum prices, in a slump during the 1990s, are now at record high levels, six times what they were in 1997 (that's why molybdenum, previously one of the smaller metals in terms of value, was ranked second in 2005). The cost of natural gas is nearly two-and-a-half times what it was in 1997. Copper prices are 41% higher, after slumping between 1997 and 2003. Producers of silver, gold, lead, sand, stone and gravel have also seen prices climb in recent years. Whether or not these will be permanent or only temporary shifts remains to be seen.

High, and rising, prices have helped restore the fortunes of some of the mining companies in the province, but the value added to the economy by metal and non-metallic mineral mining has increased only marginally (about 10%) since 1990. That's because mines are not necessarily extracting a lot more ore. In fact, the volume of production of every major BC metal product except gold has declined since 1990. In other words, higher prices mean higher profits for the industry (and more dividends for the individuals and other investors that are shareholders) but so far at least, the industry's output hasn't increased as rapidly.

The industry's share of GDP has been climbing, but employment growth has lagged behind the provincial average

Most of the industry's growth has come from the oil and gas extraction sector, and from exploration and development activities. Total GDP in mining, oil and gas extraction has doubled since 1990, but that hasn't translated into job growth. There were 27% fewer people working in the industry in 2005 than in 1990.

The mining, oil and gas extraction industry's share of total GDP is a lot higher than its share of employment, indicating that labour productivity is well above the provincial average. This is partly a reflection of higher wages paid to workers, but may also be due to the type of technology that's used by the industry.

The growing productivity gap between mining, oil and gas extraction and other industries may reflect a greater emphasis on oil and gas extraction, where the resource is taken out of the ground using pumps and other types of equipment, with less reliance on manual labour. In addition, robotics, global positioning systems and other types of high-tech equipment are now being used to locate and extract mineral resources.

What are the most common occupations?

Most of the workers in this industry are miners, drillers, or mining equipment operators

Four out of ten workers in this industry are in occupations unique to primary industries. Many of them are oil and gas well drillers, or miners who work underground. Another 25% are trades, transportation and equipment operators, such as truck drivers, heavy equipment operators, millwrights or welders.

Business, finance and administration and natural and applied sciences each employ 11% of the workforce. Geologists, technicians, engineers and computer scientists are employed in this industry.

How many people work in mining, oil & gas extraction, and how much do they earn?

Employment in mining, oil and gas extraction was 13,800 in 2005. Drilling, exploration and other support activities employed 4,400 people. Another 3,800 worked at metal mines, 3,100 were employed at other mines and 2,500 worked in the oil and gas industry.

13,800 British Columbians worked in mining, oil & gas extraction in 2005

Working conditions, especially for miners who go underground, are comparatively high risk. Wages in the industry include a risk premium, and may also be higher than average in order to compensate for the conditions in which employees must work.

The average hourly wage rate in mining, oil and gas extraction was $25.67 in 2005, more than six dollars higher than the average for all industries ($19.36). Workers in mining earned an average hourly wage of about $28 an hour, while those employed in oil and gas extraction ($23) and support activities ($22) received a lower hourly wage.

We don't have data on hours worked for this industry, but the average work week in forestry, fishing, mining, oil and gas was 44 hours.

What are the characteristics of the work force?

Virtually all (97%) of the people working in this industry have full-time jobs. Nine out of ten workers are male.

Thirty-one percent of the workers in forestry, fishing, mining, oil and gas extraction have union coverage, about the same rate as for the economy as a whole.

During the last fifteen years, the unemployment rate in mining, oil and gas extraction has averaged 8.1%, slightly less than the provincial average (8.4%) and a full percentage point lower than the average for the goods industries (9.1%).

Establishments tend to be somewhat larger than in other resource based industries

About 16% of the people who work in this industry are self-employed. Most of them work in exploration, development and similar activities. Self-employment is not common in mining or oil and gas extraction. Mining, except for panning for gold, is typically an activity that requires a huge investment in capital equipment.

Data on employment by establishment size isn't available for mining, oil and gas extraction separate from fishing and forestry. However, most mining operations tend to be relatively large and this is reflected in the information for the sector as a whole.

Where are the jobs located?

Most of the jobs in resource extracting industries are located outside the Lower Mainland

Mineral deposits are found in various locations around the province: copper is mined near Campbell River on Vancouver Island and in the Interior near Houston, Logan Lake, Mackenzie and Williams Lake. Most of these mines also produce silver, gold or molybdenum. Molybdenum is mined in the Interior. British Columbia's large deposits of coal are mainly found in the Crowsnest Pass area and the Northeastern regions of BC, while natural gas comes from the Peace River area.

What's the outlook to 2014?

Employment growth is expected to pick up, but the industry's share of total GDP is forecast to grow at below-average rates

GDP growth in the industry, which has outpaced the rest of the economy in recent years, is expected to slow. The mining, oil and gas extraction industry is forecast to generate about 2% of the province's GDP by 2014, down from its present level of 3%.

Employment is forecast to grow at about the same rate as in other industries, and retain its share of the total at about half a percent of the total. This is expected to be largely due to growth in the oil and gas extraction and service components of the industry, which are forecast to increase their output by about a third during the next few years, about three times the increase in metal and non-metal mining.

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[1] Although metal and non-metallic mineral production statistics were available to 2005, the value of oil and gas production was only available up to 2004 at the time this Guide was written