Teck gets Q3 earnings boost from coal operations
Teck Resources Ltd. (TECK.B-TSX, TECK.A-TSX, TECK-NYSE) said earnings more than tripled in the third quarter of 2021, thanks to an “extremely favourable commodity price environment – particularly for steelmaking coal.”
“Heading into the fourth quarter, we are focused on continuing to optimize sales and production to capitalize on high commodity prices and advancing our priority QB2 project,” said Teck President and CEO Don Lindsay.
The company said adjusted EBITDA (earnings before interest, tax and depreciation) was a record $2.1 billion in the third quarter, more than triple the same period last year. Profit attributable to shareholders was $816 million or $1.53 per share and adjusted profit attributable to shareholders was $1.0 billion or $1.91 per share in the third quarter, more than seven times higher than the same period last year.
Realized copper, zinc and steelmaking coal prices were US$4.25 per pound, US$1.38 per pound and US$277 per tonne respectively in the months of September (2021). As a result, Teck said its EBITDA for the month of September contributed approximately half of its adjusted EBITDA in the third quarter.
Sales of steelmaking coal were 5.9 million tonnes in the third quarter, with approximately 1.9 million tonnes or 32% sold to China significantly above FOB Australia prices. The FOB Australia price increased sharply in the latter half of the second quarter and continued to increase to unprecedented levels through the third quarter.
It is worth noting that these developments follow recent speculation that Teck was planning to unload its coal operations and increase the emphasis on copper production.
They also follow recent revisions to the company’s 2021 coal and zinc production forecasts. The revisions were driven by the impact of British Columbia wildfires and increased absenteeism associated with COVID-19 protocols.
Annual coal production is expected to be at the lower end of the annual guidance range of 25.0-26.0 million tonnes.
Due to the impact of wildfires, Teck trimmed its 2021 refined zinc production at the Trail, B.C. smelting operation by 3.0% and warned that copper sales at the Highland Valley operation, also in B.C., are unlikely to catch up to output due to logistical disruptions.
Meanwhile, the company has said it continues to makes solid progress at the Quebrada Blanca Phase 2 (QB2) copper project in Chile.
“Overall progress on our QB2 project is now past the two-thirds mark and we continue to expect first production in the second half of 2022,” Teck said.
QB2 is essentially as continuation of the existing Quebrada Blanca open pit operation, which is located in the Tarapaca Region of northern Chile, and is expected to produce up to 8,000 tonnes of cathode copper this year.
The copper growth from QB2 will, over time, help to balance Teck’s portfolio so that the contribution from the company’s copper business could be similar to its steelmaking coal business.
On October 26, 2021, Teck’s Class B common shares closed at $34.95. The shares are currently trading in a 52-week range of $37.00 and $15.81.