February 21, 2020 / 7:16 AM / a month ago

Miner Teck floats oil sands exit as Trudeau government weighs C$20.6 billion project

TORONTO (Reuters) - Canadian miner Teck Resources Ltd TCKb.TO (TECK.N) on Friday floated a potential exit from the oil sands and warned of a possible C$1.13 billion ($852.12 million) hit should Prime Minister Justin Trudeau’s government reject its Frontier bitumen mine.

FILE PHOTO: Teck Resources sign is on display during the company's annual general meeting in Vancouver, British Columbia, Canada, April 22, 2010. REUTERS/Lyle Stafford/File Photo

The fate of the C$20.6 billion mine is expected to be decided by next week in what has become a test of Canada’s commitment to reduce greenhouse gas emissions and repair relations with the country’s indigenous people.

At full capacity, the mine would produce 260,000 barrels of crude oil per day, making it one of the largest in Alberta’s carbon-intensive oil sands.

Teck Chief Executive Don Lindsay said the miner would consider a potential spin-off or sale of its stake in the Fort Hills oil sands complex once delayed pipeline expansions start up and operator Suncor Energy Inc (SU.TO) completes expansions.

Lindsay said if the value of the project was not reflected in Teck’s share price, “then we would look at doing something to release that value, whether it’s a spin out or some sort of transaction,” he told analysts.

“I think if we did that then probably Frontier ... would go with it.”

Teck said a negative decision on Frontier would result in an impairment in the quarter in which the decision is made.

The miner said it booked non-cash impairment charges of C$999 million in quarter ended Dec. 31, including C$910 million tied to the Fort Hills operation in which it has a 21.3% stake.

Teck said it had taken steps to improve the economics of the Frontier project but did not provide details.

It had previously told regulators it expected oil prices to exceed $95 per barrel during most of Frontier’s operations from 2026-2066.

Teck on Friday reported a 76% fall in fourth-quarter adjusted profit, hurt by lower prices for steelmaking coal, its biggest business, and warned the coronavirus outbreak would damage future earnings.

The stock fell to a 3-1/2-year low on Friday and was last down 14%.

A protracted U.S.-China trade war and concerns about slower global growth have weakened prices of copper and other base metals.

The integrated miner of copper, zinc and coking coal warned the coronavirus outbreak will have a material effect on the demand and price of its commodities as well as its suppliers.

Reporting by Jeff Lewis in Toronto; Additional reporting by Mekhla Raina and Arundhati Sarkar in Bengaluru; Editing by Arun Koyyur, Amy Caren Daniel, Barbara Lewis, Nick Macfie and Richard Chang

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