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Teck cuts coal outlook on British Columbia wildfire impact

Credit: Canadian Pacific Railway

Wildfires in Canada’s British Columbia province have caused rail disruptions expected to cost diversified miner Teck Resources (TSX: TECK-B) 300,000 to 500,000 tonnes of coking coal sales in the September quarter.

Teck does not expect second-quarter sales to be affected since the disruption started on the last day of the quarter. Teck’s 2021 guidance for coking coal production was set to increase to 25.5 to 26.5 million tonnes from the 2020 total of 21.1 million tonnes.

Teck’s 2021 guidance for coking coal production was set to increase to 25.5 to 26.5 million tonnes from the 2020 total of 21.1 million tonnes

Teck said it was taking steps to mitigate impacts of the rail disruption to transporting product from Highland Valley Copper operations, which is not expected to have a material effect on third-quarter sales at this time.

The announcement comes days after a wildfire devastated the Fraser Canyon village of Lytton, which earlier the same week smashed Canada’s heat record to a new 49.6 degrees celsius.

Traffic on both the Canadian National and Canadian Pacific Railway mainlines running parallel along the Fraser Canyon ground to a halt pending safety inspections of infrastructure. Canadian Pacific announced on Monday traffic had resumed, to the bewilderment of Lytton locals and the local First Nation, who argue conditions are not suitable to resume operations, CBC reported.

In the meantime, Teck said it had rerouted shipments to Ridley Terminals in Prince Rupert. Canadian Pacific was able to reinstitute limited traffic flow to the Lower Mainland terminals on Monday afternoon.

Canadian Pacific is reported to be increasing inspections of its tracks and equipment during this period of extreme weather.

The fire disrupted critical transportation services for the movement of goods across Western Canada and the rest of the continent.

Teck reports that all its British Columbia operations are operating, with steelmaking coal mines continuing to produce and taking advantage of low levels of clean coal inventory at the mines.

Teck said its steelmaking coal business is performing strongly, supported by strong long-term fundamentals underpinned by global economic recovery.

Teck cuts coal outlook on BC wildfire impact
Credit: Teck Resources

Local government data show 204 active wildfires in the province as of Wednesday, 71.6% were caused by lightning, 6.4% by humans, and 22.1% of incidents due to unknown causes.

“The ongoing wildfire risk is being closely monitored at all operations, and comprehensive emergency management plans are in place, with employee health and safety being the top priority,” the company said.

Teck’s Toronto-quoted equity has been trending higher over the past 12 months as, generally, strong commodity prices lift the balance sheet’s top and bottom lines. Despite shares achieving a mid-May 12-month high at C$32.27 per share, at C$28.09 on Wednesday, the equity was still up more than 93%, giving the company a market capitalization of C$15 billion ($12.01 billion).