By Julie Gordon and Allison Martell
TORONTO, July 25 Teck Resources Ltd on
Thursday reported a sharp drop in second-quarter earnings on
lower copper and coal prices, and cut its capital spending plan
through 2014, delaying new mining projects.
The company, Canada's largest diversified miner, is slowing
the restarting of its Quintette coal mine in British Columbia
until the steelmaking coal market recovers, and it delayed
development of its Quebrada Blanca Phase 2 copper expansion in
"I think it is the right move," said Garrett Nelson, mining
analyst at BB&T Capital Markets, on the Quebrada Blanca delay.
"That was going to be a significant drain on free cash flow over
the next few years."
Shares rose 4 percent to C$24.64 on the Toronto Stock
A feasibility study last year pegged the project's capital
cost at $5.6 billion, with Teck's share at $4.8 billion. It had
planned to complete a study on its social and environmental
impact by the end of the second quarter, but now does not expect
to finish before the fourth quarter of 2014.
Teck also warned that economic uncertainty in the United
States and Europe, along with less robust growth in emerging
markets, would probably continue to affect prices and demand for
"While we believe that the longer term fundamentals for
steelmaking coal, copper and zinc are favorable, the recent
weakness in these markets may well persist for some time," the
company said in a statement.
Teck said it does not plan to approve any new mine
development projects this year.
Teck said it was slowing the Quebrada Blanca expansion due
to market conditions, but also because of permitting concerns as
it moves to the second stage of the project.
"As previously announced, we have identified issues linked
to permitting for existing facilities which need to be
reviewed," it said.
It plans separate regulatory filings on the matter before
submitting its impact assessment for Phase 2.
The mine's original environmental approvals ran from 1993 to
2007, Teck said on last quarter's conference call, and it has
been operating since then on extensions. In the meantime Chile's
regulatory regime has changed.
Teck would not be the first miner to run into difficulties
in Chile. Goldcorp Inc and Barrick Gold Corp
have both faced regulatory headaches there in recent years.
Teck's coal sales fell 6 percent to 6.3 million tonnes in
the quarter, while expense-cutting reduced the cost of sales by
15 percent to $50 a tonne. Coal revenue fell 26 percent, mainly
on a 23 percent drop in the realized price to $156 a tonne.
The Vancouver-based company said it had commitments in place
to sell 6.4 million tonnes of coal in the third quarter at an
average price of $143 per tonne.
Copper sales rose, but unit revenue fell 5 percent as the
realized copper price declined 9 percent to $3.24 a pound.
Copper cash costs fell to $2.97 a pound from $2.14 a year
BB&T Capital's Nelson said the sales figures were slightly
better than he expected, and thus operating results were
Teck said it expected about C$1.85 billion ($1.80 billion)
in capital spending in 2013, down from a previous estimate of
C$2 billion, and about C$500 million for 2014. It may make
The company posted a second-quarter net profit of C$143
million ($139 million), or 25 Canadian cents a share, compared
with C$354 million, or 60 Canadian cents a share, a year
Excluding one-time items, earnings were 34 Canadian cents a
share. On that basis, analysts expected 31 Canadian cents,
according to Thomson Reuters I/B/E/S. Revenue from operations
fell 15 percent to C$2.15 billion.