Teck swings to loss as COVID-19 snarls production and dents demand

Teck swings to loss as COVID-19 snarls production and dents demand

Teck swings to loss as COVID-19 snarls production and dents demand

Teck Resources Ltd. saw profits fall by 165 per cent last quarter as the COVID-19 pandemic dented demand for its commodities and slashed prices.

The second quarter yielded a loss of $149 million for the Vancouver-based miner, which was forced to shut down operations and halt construction at some sites.

All mines are now producing, and the company has issued an updated guidance after suspending it in April.

The forecast states that coal, copper, zinc and crude oil production in the second half of 2020 will reach volumes at or close to pre-pandemic predictions as industry ramps back up following lockdown closures.

“The COVID-19 pandemic obviously had a significant negative impact on business in the quarter. While all of our operations are currently producing with comprehensive virus-prevention measures in place, the economic impacts of the pandemic have reduced demand and prices for our products,” CEO Don Lindsay said on a conference call.

Year-over-year prices for steelmaking coal, zinc and bitumen dropped 37 per cent, 29 per cent and 73 per cent, respectively, in the quarter ended June 30, Teck said. Copper output took a 12 per cent hit.

Construction of the US$5.2-billion Quebrada Blanca Phase 2 copper mine expansion in Chile dragged to a near standstill in the spring. Teck cut the workforce to 400, but the site now boasts 3,400 employees with the goal of reaching “full strength by October,” or 8,000 workers, Lindsay said.

The project — key to the company’s shift toward copper, which is used increasingly in electric vehicles, clean power plants and transmission lines — will see a half-year delay due to the COVID-19 interruption, with first production now slated for the end of 2022, he said.

Teck has also suspended its upgrade of the Neptune bulk terminal in North Vancouver for five months starting in May, with construction expected to resume this fall and wind down in early 2021. Projected costs have ballooned to up to $800 million from $400 million amid delays.

The company incurred $260 million costs tied to the pandemic, more than half of which related to suspending construction at the Quebrada Blanca facility, said chief financial officer Ron Millos. Some $18 million more stemmed from a temporary shutdown at the Antamina copper and zinc mine in Peru as well as coronavirus fund donations.

Impala Asset Management, a New York-based investment firm and Teck shareholder, commended the company’s response to the pandemic but criticized past decisions to delve into the Alberta oilsands and indulge heavy coal expenditures.

“The oilsands has been a disaster. It would have never happened had Don as the CEO not fully supported it,” said Impala founder Bob Bishop, citing hundreds of millions of dollars in losses.

Teck’s energy business includes a 21.3 per cent interest in the Fort Hills oilsands mine, which is majority owned by Suncor Energy Inc. The operation posted a $10-million profit last year with losses of $165 million in 2018 and $218 million in the first half of 2020.

In February Teck opted to withdraw from its Frontier oilsands project, which it owned entirely, posting a non-cash impairment of $1.13 billion.

Coal is more promising, but still a problem for the mining outfit, Bishop said.

“Your coking coal is kind of your flagship and you don’t let your flagship costs go the wrong way. And they have. And that’s on this management and that’s on this board,” he said.

Teck’s coal costs have risen to $105 per tonne from $67 per tonne in 2005, when Lindsay took over as CEO.

The company said it is carrying out a cost-cutting strategy for steelmaking coal and expects “the adjusted site cash cost of sales to drop below $60 per tonne” by the end of the year.

On Fort Hills, Teck reiterated that selling off its stake in the oilsands venture remains a real possibility.

“We have been very clear that if we can’t see the value reflected in our share price, we will not hesitate to pursue other options for realizing value, including divestment at the appropriate time,” the company said in an email.

The company said it cut about $250 million in operating costs and $430 million in capital costs to date from expected spending contemplated at the end of last June.

On Thursday, Teck reported revenues of $1.72 billion, down 45 per cent from $3.1 billion in the second quarter of 2019.

Its quarterly loss amounted to 28 cents per share, compared with a 41 cents per share or $231-million profit a year earlier.

Excluding one-time items, Teck’s adjusted profit fell to $89 million or 17 cents per share, down from $498 million or 88 cents per share in the prior year quarter.

The company was expected to report a three cents per share loss and 10 cents per share adjusted loss on $1.7 billion of revenues, according to financial markets data firm Refinitiv.

Teck’s shares gained 91 cents or 6.3 per cent at $15.41 in afternoon trading on the Toronto Stock Exchange.

This report by The Canadian Press was first published July 23, 2020.

Companies in this story: (TSX:TECK.B, TSX:SU)

Christopher Reynolds, The Canadian Press

Just Posted

The Government of Alberta identified 115 new COVID-19 cases Sunday, bringing the provincial total to 3,089.
(Black Press file photo)
Red Deer drops to 71 active cases of COVID-19

Province adds 127 new cases of the virus

Police officers and their dogs undergo training at the RCMP Police Dog Services training centre in Innisfail, Alta., on Wednesday, July 15, 2015. Mounties say they are searching for an armed and dangerous man near a provincial park in northern Alberta who is believed to have shot and killed a service dog during a police chase. THE CANADIAN PRESS/Jeff McIntosh
RCMP search for armed man in northern Alberta after police dog shot and killed

Cpl. Deanna Fontaine says a police service dog named Jago was shot during the pursuit

Alberta now has 2,336 active cases of COVID-19, with 237 people in hospital, including 58 in intensive care. (Black Press file photo)
Red Deer down to 73 active cases of COVID-19, lowest since early November

The Central zone has 253 active cases of the virus

Marco Mendicino, Minister of Immigration, Refugees and Citizenship during a press conference in Ottawa on Thursday, May 13, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Canada to welcome 45,000 refugees this year, says immigration minister

Canada plans to increase persons admitted from 23,500 to 45,000 and expedite permanent residency applications

This undated file photo provided by Ernie Carswell & Partners shows the home featured in the opening and closing scenes of The Brady Bunch in Los Angeles. Do you know the occupation of Mike Brady, the father in this show about a blended family? (Anthony Barcelo/Ernie Carswell & Partners via AP, File)
QUIZ: A celebration of dad on Father’s Day

How much do you know about famous fathers?

A dose of the Pfizer-BioNTech COVID-19 vaccine is pictured at a vaccination site in Vancouver Thursday, March 11, 2021. THE CANADIAN PRESS/Jonathan Hayward
NACI advice to mix vaccines gets varied reaction from AstraZeneca double-dosers

NACI recommends an mRNA vaccine for all Canadians receiving a second dose of a COVID-19 vaccine

Bruce Springsteen performs at the 13th annual Stand Up For Heroes benefit concert in support of the Bob Woodruff Foundation in New York on Nov. 4, 2019. (Greg Allen/Invision/AP)
Canadians who got AstraZeneca shot can now see ‘Springsteen on Broadway’

B.C. mayor David Screech who received his second AstraZeneca dose last week can now attend the show

A lotto Max ticket is shown in Toronto on Monday Feb. 26, 2018.THE CANADIAN PRESS
No winning ticket sold for Friday’s $70 million Lotto Max jackpot

The huge jackpot has remained unclaimed for several weeks now

Canadian Prime Minister Justin Trudeau is seen during a joint news conference following the EU-Canada Summit, in Brussels, Belgium, Tuesday June 15, 2021. Trudeau says Canada is on track now to have 68 million doses delivered by the end of July, which is more than enough to fully vaccinate all 33.2 million Canadians over the age of 12. THE CANADIAN PRESS/Adrian Wyld
Vaccine deliveries enough to fully vaccinate all eligible Canadians by end of July

Three in four eligible Canadians now have their first dose, nearly one in five fully vaccinated.

Chief Public Health Officer Theresa Tam listens to a question during a news conference, in Ottawa, Tuesday, Jan. 12, 2021. The number of confirmed COVID-19 cases attributed to the highly contagious Delta variant grew in Canada this week. THE CANADIAN PRESS/Adrian Wyld
Canada’s public health agency reports spike in confirmed cases of Delta variant

More than 2,000 cases of the variant confirmed across all 10 provinces and in one territory

The federal government says it wants to ban most flavoured vaping products in a bid to reduce their appeal to youth. THE CANADIAN PRESS/AP-Craig Mitchelldyer
Health Canada proposes ban on most vaping flavours it says appeal to youth

If implemented, the regulations would restrict all e-cigarette flavours except tobacco, mint and menthol

Most Read