In its third quarter earnings report, Teck Resources said profits were lower than last year as a result of lower prices for all of its principal products. Coal and copper prices in the third quarter declined by 28% and 8%, respectively, compared with the same period a year ago. Even though the company is reporting record sales volumes, lower prices resulted in revenues being approximately $410 million lower than in the third quarter of last year.
Production and sales volumes were at or above last year’s levels for most of the company’s major products other than copper. Coal production was up 6% over last year and up 12% over the last quarter and Teck set a new quarterly sales record of 7.6 million metric tons (mt) of coal. For copper, reduced throughput at Quebrada Blanca, in addition to lower grades at most of the mines, adversely affected production.
“We continued to focus on operating costs as unit costs were significantly lower in coal and total operating costs in copper were unchanged,” said Don Lindsay, president & CEO. “Our cost reduction program at all of our sites continues to make significant progress. We have identified more than $330 million of potential ongoing, annual operating cost savings across the company, of which $300 million have been implemented. An additional $130 million of one-time cost savings and deferrals have also been identified and implemented. As a result, our site cash production costs this year are down by approximately $65 million per quarter since the beginning of the program in the fourth quarter of 2012, excluding the effect of labor settlement charges in 2012. We have also reduced our planned spending on exploration by approximately 15% while maintaining our commitments to partners and have reduced our corporate overhead.”
The company continues to delay the development of some of its internal growth projects and have deferred capital spending. At Quintette, Teck delayed the final stage of development for the mine and will not start the development until it sees a sustained improvement in demand for coking coal. They have also slowed the development of Quebrada Blanca Phase 2 in part as a result of market conditions.
“We plan to update permits for our existing operations at Quebrada Blanca to reflect the longer mine life before resubmission of the social and environmental impact assessment (SEIA) for Phase 2,” Lindsay said. “We are also taking action to reduce sustaining capital expenditures.”