In its quarterly earning statement, Teck Resources reported an annual adjusted profit attributable to shareholders of $452 million compared with $1 billion in 2013.
“Although 2014 was a challenging year with significantly lower prices for some of our key products, our operations performed well, setting various production records and generating positive cash flows at all sites,” said Don Lindsay, president and CEO, Teck Resources. “We continued to focus on conserving cash and maintaining a strong financial position.”
The company’s cost reduction program continues to exceed its initial goals with approximately $640 million of annualized reductions realized to date, which contributed to reduced unit costs at 10 of its 13 operations.
In 2014, Tech produced a record 26.7 million metric tons (mt) of coal. The Red Dog mine achieved a record annual zinc output of 596,000 mt. Antamina achieved a record ore throughput of approximately 138,000 mt/d. The Trail Operations exceeded the company’s initial business unit production guidance for the year.
The company remains committed to advancing the Fort Hills oil sands project. All critical milestones set for 2014 were achieved on that project. Detailed engineering activities were approximately 65% complete by the end of the fourth quarter.
Teck restarted the Pend Oreille zinc mine in the fourth quarter on time and under budget. The first shipment of zinc and lead in concentrate to the Trail Operations was made during mid-December, and the company expects to reach full production of 44,000 mt/y in the second quarter of 2015.
Lindsay explained that the recent drop in oil prices and the strengthening of the U.S. dollar are expected to have a significant positive effect on the company’s operating costs over the near term if they persist. “Each C$0.01 change in the exchange rate affects our EBITDA by approximately $52 million, which is lower than our previous estimates due mainly to the effect of lower commodity prices, and each $1 per barrel reduction in the oil price reduces operating costs by approximately $5 million, in each case on an annualized basis,” Lindsay said.
“While demand from our customers remains robust, our profits and cash flows continue to be negatively affected by lower copper and steelmaking coal prices,” Lindsay said. “In U.S. dollar terms, annual coal and copper prices in 2014 were down 23% and 6%, respectively, compared to 2013. Gross profit from our zinc business unit increased by approximately 50% compared with 2013, due mainly to a 13% increase in zinc price and record production from the Red Dog mine as a result of increased mill throughput from softer ore.”