UPDATE 4-Teck Resources to cut 5 pct of its workforce, restart zinc mine

Tue Apr 22, 2014 11:41am EDT

* To restart Pend Oreille zinc mine at a cost of C$45 mln

* Quintette project put on care and maintenance

* Net profit falls 78.4 pct to C$69 mln (Adds quote from conference call, detail on unusual items)

April 22 (Reuters) - Teck Resources Ltd plans to cut about 600 jobs, or 5 percent of its global workforce, the diversified Canadian miner said on Tuesday, even as its first-quarter adjusted earnings came in ahead of expectations.

Teck also said it planned to resume production at its Pend Oreille underground zinc mine, which has been idle since 2009. The company said zinc has the best outlook of the base metals.

"Over a three-year period commencing last year, approximately 1.5 million tonnes of current zinc production will be closed due to mine depletion. This is a significant figure in a 13-million-tonne market," said Chief Executive Don Lindsay on a call with analysts and investors.

The capital cost of restarting Pend Oreille is pegged at about $41 million. Teck expects it will take seven months to prepare for restart and another five to reach full capacity.

The mine can produce 44,000 tonnes of zinc in concentrate per year, at average production costs of about 80 cents per pound of zinc. It has about five years of mine life left.

Net profit fell 78.4 percent to C$69 million, or 12 Canadian cents per share, in the three months to March 31, from C$319 million, or 55 Canadian cents per share, a year earlier, mainly due to weak coal and copper prices.

RBC Capital Markets analyst Fraser Phillips said the first quarter was solid: "Copper sales volumes were slightly above our expectations, while zinc sales and coal sales were a little light. Coal costs were better than expected."

Teck's shares were up 1 percent at $24.26 on the Toronto Stock Exchange.

MORE COST CUTS

Teck, which produces steelmaking coal, copper and zinc, said it is aiming to cut annual costs by another C$200 million ($182 million), and reduce 2014 capital spending by about C$105 million to C$1.8 billion as prices remain weak.

The company has set several annual cost savings targets in recent quarters, cutting annual expenses by C$345 million so far. It said it would cut jobs through attrition, a hiring freeze and reductions in the number of contractors and office and operational employees.

Teck said it would defer a planned restart of its Quintette coal mine in British Columbia, putting it on care and maintenance until market conditions for metallurgical coal improve.

Quintette, which was expected to produce 3-4 million tonnes of steelmaking coal annually, was shut down in March 2000 due to falling coal prices and high production costs.

Competition from natural gas has weighed on the market for lower-margin thermal coal, used to produce electricity.

Coal prices were 19 percent lower on average in the first quarter compared with the first quarter of 2013 in U.S. dollar terms, the lowest levels since 2007, Teck said. Copper prices dropped 11 percent, while zinc prices slipped about 2 percent.

Teck's coal revenue dropped 17 percent to C$880 million, while copper revenue fell about 5 percent to C$652 million and zinc revenue about 6 percent to C$551 million.

Coal production rose 8 percent to 6.7 million tonnes in the quarter. Copper output rose 2.4 percent to 85,000 tonnes and zinc-in-concentrate output about 11 percent to 163,000 tonnes.

On an adjusted basis, Teck earned 18 Canadian cents per share. RBC's Phillips said excluding provisional pricing adjustments and writedowns, adjusted earnings would have been 30 Canadian cents a share.

Analysts, on average, had expected a profit of 24 Canadian cents per share on revenue of C$2.1 billion, according to Thomson Reuters I/B/E/S.

Revenue fell about 11 percent to C$2.08 billion.

($1 = $1.10 Canadian) (Reporting by Shubhankar Chakravorty and Sneha Banerjee in Bangalore, Nicole Mordant in Vancouver and Allison Martell in Toronto; Editing by Ted Kerr, Alden Bentley and Meredith Mazzilli)

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article