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Teck Resources cuts guidance for steelmaking coal; outage continues at Elkview mine

The Canadian Press
Teck Resources cuts guidance for steelmaking coal; outage continues at Elkview mine

One day after announcing it will exit the oilsands business by selling its stake in the Fort Hills oilsands project, Teck Resources Ltd. said it continues to face inflationary pressures and production challenges at other sites around the globe.

The Vancouver-based miner reported a loss of $195 million in its latest quarter as it took a $952-million one-time asset impairment charge related to the sale of its 21.3 per cent stake in the Fort Hills oilsands project to Suncor Energy Inc.

The loss worked out to 37 cents per diluted share for the quarter ended Sept. 30, compared with a profit of $816 million or $1.51 per diluted share in the same quarter a year ago.

The approximately $1 billion oilsands deal with Suncor, which the two companies announced Wednesday evening, is part of Teck’s strategy to improve its environmental performance by reducing its exposure to assets with a high carbon footprint and concentrate more on metals like copper and zinc.

In a conference call to discuss the company’s third-quarter earnings Thursday, Teck CEO Jonathan Price said copper in particular is the heart of the company’s strategy. Teck’s massive new QB2 copper mine in Chile, which is expected to reach full production next year, will double the company’s copper production. Price added Teck’s asset portfolio contains other options to introduce copper output in years to come as well.

“We are rebalancing our portfolio of high-quality assets towards low-carbon metals, in particular, copper, where demand is expected to double by 2050, driven in large part by electrification and the low carbon transition,” Price said on the call. “We intend to capitalize on this market opportunity while at the same time, reducing the proportion of carbon in our overall portfolio.”

But while Teck is bullish on its new strategy and the role it believes it can play in meeting rising global demand for critical minerals and metals, the company acknowledged it’s facing some short-term headwinds.

On Wednesday, Teck revised its construction capital cost guidance for the QB2 mine project to between US$7.4 billion and US$7.75 billion, up from its prior guidance of US$6.9 to 7 billion, due to the impact of foreign exchange rates and cost pressures related to weather and subsurface conditions and other factors.

The company said while it’s still hoping to achieve first copper production from QB2 late this year, production issues could delay that milestone until January 2023.

Also on Wednesday, Teck reduced its three-year production guidance for steelmaking coal to 25 million to 26 million tonnes, down from 26 million to 27 million tonnes previously. Price said the lowered guidance reflects the impact of an equipment failure at its Elkview operation in B.C., as well as a number of other external challenges experienced by the company over the past three years.

“These challenges include severe weather-related events including rain, flooding, extreme cold and wildfire events in 2021, as well as the COVID pandemic and the associated ongoing disruption to supply chains and labour availability,” he said.

While Teck won’t release its capital expenditure guidance for 2023 until February, on Wednesday the company said it no longer expects to achieve a $2 billion reduction in capital expenses from 2022 levels, like it once did.

Economy-wide inflationary pressures have increased the company’s operating costs by 14 per cent compared to the same period last year, said Teck’s president and chief operating officer Harry Conger, adding half of that increase is related to higher diesel and transportation costs.

“Like others in the industry, we continue to operate in a period of uncertainty,” Conger said. “While the rate of inflation appears to be slowing, we continue to experience significant inflation in the price of many of our key supplies when compared to the same period last year.”

Revenue in Teck’s third quarter totalled $4.67 billion, up from $3.97 billion in the same quarter last year.

On an adjusted basis, Teck says it earned $923 million or $1.74 per diluted share for the quarter compared with an adjusted profit of nearly $1.02 billion or $1.88 per diluted share in the same quarter last year.

©2022 THE CANADIAN PRESS

 

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