Teck Resources reports profit for third quarter

Operations have performed very well throughout the year, setting a number of quarterly and year-to-date production records.

Don Lindsay, President and CEO of Teck. — Photo: Teck

Teck Resources Limited reported profit attributable to shareholders of $234 million ($0.41 per share) and adjusted profit of $152 million ($0.26 per share) compared with $29 million ($0.05 per share) a year ago.

"Our operations have performed very well throughout the year, setting a number of quarterly and year-to-date production records while continuing to reduce costs," said Don Lindsay, President and CEO. "As a result of the recent increase in steelmaking coal prices, we are generating a significant amount of additional cash which we have used to reduce our debt by repurchasing $1.0 billion of our outstanding notes."

Highlights and Significant Items:

• Adjusted EBITDA was $830 million in the third quarter, more than double the $389 million recorded a year ago.
• Gross profit before depreciation and amortization was $817 million in the third quarter compared with $670 million in the third quarter of 2015.
• Cash flow from operations was $854 million in the third quarter of 2016 compared with $560 million a year ago.
• In September and early October, we repurchased US $759 million (CAD $1.0 billion) face value debt in market transactions, recording a gain of approximately CAD $75 million. At October 26, our outstanding notes totaled US $6.1 billion, down from US $7.2 billion at September 30, 2015.
• Our liquidity remains strong at CAD$4.7 billion inclusive of approximately CAD $690 million in cash at October 26, 2016 and US $3.0 billion of undrawn, committed credit facilities. We now expect that we will exceed our original target and end the year with a cash balance of approximately CAD $1.0 billion after having retired CAD $1.0 billion of debt, which was not contemplated in our original guidance.
• We set a number of quarterly and year-to-date sales and production records while reducing total costs in each of our business units.
• We expect total steelmaking coal sales, including spot sales, to be at or above 6.5 million tonnes in the fourth quarter of 2016.
• Our average realized fourth quarter price for steelmaking coal is expected to be in our typical range, in percentage terms, relative to the US$200 per tonne benchmark price which has been reported for the highest quality steelmaking coal.
• Construction of the Fort Hills oil sands project has surpassed 70% completion. Project execution is now effectively site-based, as the module program has been completed and substantially all the remaining construction components are now on-site.
• The Red Dog concentrate shipping season is expected to be completed the first week of November after a two week extension due to favourable ice conditions. We expect to ship approximately 1,075,000 tonnes of zinc concentrate and 220,000 tonnes of lead concentrate.
• For the seventh straight year, we have been named to the Dow Jones (DJ) Sustainability World Index (DJSI), indicating that our sustainability practices are in the top 10% of the 2,500 largest companies in the S&P Global Broad Market Index.

Operational Highlights:

Our Elkview and Line Creek Operations each set new all-time quarterly and year-to-date records. Unit cash production costs at the mines were 10% lower this quarter than in the third quarter of 2015 as a result of significantly increased production rates, the impacts of initiatives undertaken to improve productivity and lower energy prices.

Our West Line Creek active water treatment facility is operating consistent with design parameters and in compliance with permit limits.

Highland Valley Copper, we increased our interest in Highland Valley Copper in the quarter, acquiring the remaining 2.5% interest in the mine for $33 million. We now have a 100% interest in the mine. Copper production was 27,300 tonnes in the third quarter or 32% lower than a year ago, due to lower copper grades and lower recoveries. Mill throughput was higher than a year ago due to reduced volumes of harder Valley pit ore and an increasing volume of softer, but lower grade, Lornex pit ore as planned.

Red Dog: Zinc production in the third quarter was 14% higher than a year ago as a result of significantly higher mill throughput and slightly higher grades.

Pend Oreille: Mill throughput was 1,700 tonnes per day in the third quarter, similar to the second quarter. Zinc production during the quarter was 17% higher than the same period last year primarily due to increased mill throughput, higher ore grades and improved mill recoveries. Lead production was slightly higher at 1,600 tonnes.

Fort Hills Project: The Fort Hills project is currently in its peak construction period with site activity above levels seen before the Fort McMurray wild fire. Suncor, the operator of the project, expects to be in a position to provide a project cost and schedule update around year end.

Wintering Hills Wind Power Facility: During the third quarter, our share of the power generation from Wintering Hills was 25 GWhs, resulting in 16,000 tonnes of CO2 equivalent offsets. Our share of expected power generation in 2016 is 135 GWhs, resulting in approximately 85,000 tonnes of CO2 equivalent offsets, although actual generation will depend on weather conditions and other factors.

Source: Marketwire