By Judy McKinnon
Teck Resources Ltd. on Thursday reported a 21% drop in
second-quarter earnings as a continued slump in steelmaking coal
and copper prices weighed on the diversified miner's results.
Still, Vancouver-based Teck's results came in ahead of analyst
expectations, aided by a weaker Canadian dollar, sliding oil prices
and cost-cutting measures, which helped offset lower prices for its
key commodities.
Like its peers, Teck has been faced with slumping commodity
prices on indications of weakening demand from China and oversupply
issues. Teck cut its dividend earlier this year and is in the
process of idling its six Canadian coal operations.
Teck, the world's second-largest exporter of steelmaking coal
after Australia's BHP Billiton Ltd., earned 63 million Canadian
dollars ($48 million) in the second quarter, down from C$80 million
a year earlier. Its adjusted profit, which excluded certain items,
was 14 Canadian cents a share, better than the 11 Canadian cents
analysts polled by Thomson Reuters expected.
Revenue was flat at about C$2 billion.
"We're very, very proud of this quarter," Chief Executive Don
Lindsay said on a conference call, noting that all operations
remained cash-flow positive. He cautioned, however, that the
industry continues to face difficult conditions.
Teck said its average realized coal price fell 14% in the
quarter, to $95 per metric ton. That followed a 19% drop in the
first quarter. Unit costs in Teck's coal operations declined to $68
a ton in the latest quarter from $85 a year earlier, it said.
Teck has cut spending and in May said it would temporarily idle
its Canadian coal operations in the third quarter. The shutdowns
will cut quarterly output by 22%.
Teck may consider additional shutdowns depending on market
conditions. Fourth-quarter production levels will be reviewed at
the end of September, Mr. Lindsay said on the call.
Coal production in the latest quarter rose to 6.6 million tons
from 6.4 million tons a year earlier, Teck said. The planned
shutdowns led the company to slightly scale back its coal output
view for the year, which it now puts in the range of 25 million to
26 million tons.
Copper production rose 7% from a year earlier, though its
realized copper price fell 10%. Teck also shaved its full-year
production guidance for copper to a range of 340,000 to 350,000
tons, which is at the low end of previous guidance, after a ground
movement in late June at its Quebrada Blanca mine in Chile caused
it to temporarily suspend some mining operations there.
The company said its cash position fell to C$1.3 billion from
C$1.6 billion in the quarter, largely due to spending on the Fort
Hills oil-sands project in northern Alberta. Teck has a 20% stake
in the project, which is under construction. Its Fort Hills
partners include the Canadian unit of Total SA and Suncor Energy
Inc.
Mr. Lindsay said he considers this "a great environment" to be
building Fort Hills, citing easing pressure on labor and
contractors due to the pullback of other operators in the energy
patch as a result of the drop in crude-oil prices. He said all
milestones are being achieved as planned at Fort Hills, where first
oil is expected as early as he fourth quarter of 2017.
Write to Judy McKinnon at judy.mckinnon@wsj.com
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