In its first quarter earnings report, Teck Resources said gross profit for its coal segment $168 million over last year due primarily to higher selling prices, increased sales volumes, and lower unit cost of product sold. Production for the first quarter increased by 43% compared with the same quarter of 2011. “This significant increase is due partly to our expanded production capacity and partly to unusual weather-related events and the strike at our Elkview mine in the first quarter of 2011,” said Don Lindsay, president and CEO, Teck Resources.
“We continue to execute our growth strategy, with approximately $65 million of investments in expansion capital made during the quarter, including investments in the Quintette re-opening project, expansion of the maintenance shop at the Fording River mine to accommodate new larger capacity haul trucks, and the expansion of the processing plant at the Elkview mine, which has now been commissioned,” Lindsay said. “The volume of material moved in the first quarter exceeded our previous best first quarter by more than 15%. Unless we are required to restrict production because of customer demand, we expect to produce 24.5 to 25.5 million [metric] tons in 2012.”
The average coal price of $223/mt in the first quarter was up 8% over last year. Quarterly contract prices for the first quarter of 2011 were finalized in late 2010 before the severe flooding in Australia caused significant supply disruptions in the seaborne steelmaking coal market, which resulted in a spike in prices in early 2011. Market conditions subsequently turned downward in the latter part of 2011 as supply gradually returned to normal and uncertainty over the global economic conditions grew. “We have agreed on prices with the vast majority of our quarterly contract customers for the second quarter of 2012 based on pricing of approximately $206/mt for our highest quality product,” Lindsay said. “We have sold approximately 6.3 million mt of coal for delivery in the second quarter at an average price of $202/mt, which is roughly balanced with our expected production for the quarter.
The company said the feasibility study for the re-opening of the Quintette mine in northeast British Columbia is progressing. Additional work is ongoing to ensure water management plans are complete for inclusion in the permit application and to update the mine plan based on additional drilling. This information will be included in the study, which is due for completion in the second quarter. Long-lead equipment items, including trucks, shovels and drills, have been ordered, preliminary on-site work has commenced and stakeholder consultation processes are ongoing.
“Assuming permits are approved on a timely basis and development proceeds as currently planned, the mine could be in production in the second half of 2013 with production ramping up through 2014 to approximately 3 million mt/y,” Lindsay said.