Teck more than doubles Q1 profits
Vancouver-based Teck Resources Limited (TSX: TCK.A and TCK.B, NYSE: TCK) reported earnings attributable to its shareholders of $461 million, or $0.78 per share. Adjusted quarterly profit was $450 million, or $0.76 per share, more than double the $198 million reported in the first quarter of 2010.
“Our adjusted earnings of $0.76 per share for the first quarter were more than double the $0.34 per share in the first quarter last year. The increase was due mainly to significant increases in the prices of coal and copper, notwithstanding lower sales volumes of coal. The quarter did present its challenges with an unusual number of operating issues affecting our production in both copper and coal and adverse weather conditions affecting our rail and port services,” said Don Lindsay, President and CEO.
“We are pleased that the strike at our Elkview coal mine was settled earlier this month and with the benchmark coal price expected to be about US$330 per tonne for our highest quality products and we anticipate improved earnings from coal in the second quarter. We are also reviewing initiatives to improve copper concentrate production at our Carmen de Andacollo mine in Chile and are advancing our copper, coal and oil sands expansion projects through various stages of development.”
- Gross profit, before depreciation and amortization, of $1.1 billion in the first quarter, was 30% higher than the $854 million in the first quarter of 2010 primarily due to substantially higher copper and coal prices.
- Cash flow from operations was $754 million in the first quarter of 2011, 47% higher than the $513 million a year ago.
- As previously disclosed, coal sales in the first quarter were negatively affected by unusually difficult winter weather conditions which hampered rail and port operations. First quarter sales were 5.0 million tonnes compared with an average of 5.3 million tonnes of sales in the first quarter of each of the last six years and Teck’s most recent guidance of 4.6 to 4.9 million tonnes.
- Coal production in the first quarter was affected by the strike at the Elkview mine that began on January 30, 2011, causing a loss of production of approximately one million tonnes. A new labour agreement was reached in April and production resumed on April 8th.
- A new four-year port services agreement was reached with Westshore Terminals in early March. The new agreement is for the period from April 1, 2012 to March 31, 2016. The agreement contemplates shipments of 16 million tonnes of coal in the initial contract year and larger amounts in subsequent years when Teck’s coal production is scheduled to increase, all at fixed rates.
- Teck obtained agreement on prices with the majority of our coal customers for the second quarter of 2011 with pricing at or above US$330 per tonne for our highest quality products. With a range of coal products of various qualities and carryover of approximately 1.2 million tonnes of undelivered volumes that will be sold using prices from the first quarter,Teck expects weighted average selling prices for coal in the second quarter of 2011 to be in the range of US$280 to US$290 per tonne. Teck expects to finish the second quarter with approximately 0.2 to 0.7 million tonnes of first and second quarter-priced volume that will be carried over into the third quarter, which is considered a normal level of carryover given the variability of vessel sizes and shipping schedules.
- On April 15, 2011, Teck announced it will undertake a new expansion study to examine the feasibility of adding an additional SAG mill, ball mill and other associated plant and equipment aimed at increasing annual production at Carmen de Andacollo copper mine to approximately 100,000 to 120,000 tonnes. The study will include drilling to confirm additional ore reserves and will address the key issues of availability of process water and permitting requirements. The study is expected to be complete by the end of the fourth quarter of 2011.
- Teck entered into an agreement to sell its interest in the Carrapateena project in southern Australia to an affiliate of OZ Minerals Ltd. The transaction is expected to close in the second quarter. Teck expects to receive cash proceeds of approximately US$134 million and record a pre-tax gain of approximately $105 million, excluding further contingent payments of up to US$25 million based on future production from the property.
- Teck’s cash balance stood at $1.0 billion at March 31, 2011 reflecting an increase of approximately $200 million in the quarter after dividend payments of $177 million, capital expenditures of $226 million and debt principal and interest payments of $101 million.
Image by Teck Resources Limited