Asian Demand for Commodities Drives Hefty Investment in British Columbia's Mining and LNG Projects

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--British Columbia is going through an industrial investment boom, as continued high prices and strong global demand for a variety of commodities have led to tens of billions of dollars in planned project spending in the province. Increased project spending is particularly pronounced in the Metals & Minerals and liquefied natural gas (LNG) industries. Industrial Info is tracking approximately $4.5 billion of planned project spending for LNG facilities in British Columbia and about $40.7 billion in Metals & Minerals projects in the province.

Since last October, Canada's National Energy Board (Calgary, Alberta) has granted export licenses to two LNG facilities scheduled to be built in British Columbia. The agency is scheduled to make a decision on a third license in the coming weeks. Most of the LNG exported from British Columbia will go to Asia, where prices will range from $11 to $18 per million British thermal units (MMBtu) over the next decade, according to a study conducted by Wood Mackenzie for one of the LNG developers.

According to a report in Toronto's Globe and Mail newspaper, Wood Mackenzie projected hefty profits for British Columbia LNG projects at current low gas prices. An LNG firm could obtain gas for about $2.50 per MMBtu, spend about $5.25 to $5.75 per MMBtu to liquefy and transport it to Asia, creating a healthy profit margin of between $2.75 and $9.75 per MMBtu.

The Globe and Mail noted that LNG projects come amidst a broad push in recent months by the federal government to send Canadian energy products to Asia. In its reasons for its decision on the BC LNG project, the NEB said such exports make sense, when it comes to natural gas." It quoted the NEB as saying, "The board recognizes that the forecast annual LNG demand growth in Asia provides a new opportunity for Canadian producers to diversify their natural gas export markets." The NEB said the size of Canada's natural gas resource, proximity to Asian markets and a stable political and regulatory environment in Canada were ingredients that could lead to potentially attractive profits from LNG projects.

One of the LNG facilities to win an export license is a $3 billion, grassroot export plant located at the Port of Kitimat, British Columbia. Apache Canada, a unit of Apache Corporation (NYSE:APA) (Houston, Texas), is developing this project, which is scheduled to break ground during the fourth quarter of 2012 and be online in the fourth quarter of 2015.

Reflecting on the Asian export opportunities for LNG, British Columbia Premier Christy Clark recently said, "It is an opportunity to establish an entirely new industry in British Columbia. This isn't something that happens every day and it's not something that even happens every decade."

What the NEB said about LNG terminals in British Columbia could also apply to a variety of mining projects in the province that are either under construction or scheduled to kick off in the near future. Some of the larger British Columbia mining projects include:

• A $4.6 billion above-ground and underground gold and copper mine and mill in Stewart, being developed by Seabridge Gold Incorporated (NYSE:SA) (Toronto, Ontario). This project is scheduled to break ground in late 2013 and begin producing in late 2015.


• A $3 billion modernization and expansion of the Kitimat Aluminum Smelter, which is scheduled to kick off late this year and begin operating in March 2014. This project is being developed by Rio Tinto Alcan, a unit of Rio Tinto plc (NYSE:RIO) (London, England).


• The $1.3 billion grassroot Prince George Mount Milligan above-ground copper and gold mine and mill, located in Fort Saint James. Construction of this project kicked off last year, and is scheduled to be completed in late 2014. The project is owned by Terrane Metals Corporation (Fort Saint James, British Columbia), a unit of Thompson Creek Metals Company Incorporated (NYSE:TC) (Littleton, Colorado).


• The restart and expansion of the Tumbler Ridge Quintette above-ground metallurgical coal mine, a $400 million project scheduled to kick off at the end of this year and begin operations in late 2013. Teck Resources Limited (NYSE:TCK) (Vancouver, British Columbia) is developing this project.
  
  These projects are moving forward because strong global demand for mined commodities has kept prices for gold and copper at high levels. And strong demand for steel in China, Asia and other rapidly industrializing nations is leading to high prices for metallurgical coal, which is used to make steel. But economic growth in China and India is slowing from the previous white-hot pace, which could affect the price of and demand for mined commodities--and the profitability and feasibility of some British Columbia mining projects.
  
  View Project Report - 57000945 57000871 57000155 57000756 300011050
  
  Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.