Teck hit by plant outage at B.C. coal operation

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Teck Resources Ltd. (TECK.B-TSX, TECK.A-TSX, TECK-NYSE) has released details of a structural failure of the plant feed conveyor belt at its Elkview steelmaking coal operation at Elk Valley, British Columbia.

“Initial estimates are that production at Elkview Operations will be interrupted for 1-2 months as repairs are implemented,’’ the company said in a press release that came after the close of trading on September 20, 2022. “Assuming a two-month suspension of plant operations, Teck expects the impact on 2022 steelmaking coal production will be in the range of 1.5 million tonnes.

Teck shares fell on the news, easing 4.6% or $2.01 to $41.19 on volume of 446,220. The shares are currently trading in a 52-week range of $57.50 and $29.21.

Teck ranks as the world’s second-largest seaborne exporter of steelmaking coal, with six operations in Western Canada and significant steelmaking coal reserves. They include Elkview, Fording River, Greenhills and Line Creek in southeastern British Columbia.

Steelmaking coal – or metallurgical coal – is a higher-grade coal which is a necessary component in the chemical reactions that transform iron into steel.

Coal production is currently shipped via three B.C. west coast ports including Ridley, Neptune and Westshore Terminals. Located in Delta, British Columbia, Westshore Terminals is Canada’s premier coal export terminal and handles over 33 million tonnes of coal annually.

Ridley Terminals is a Federal Crown Corporation, which owns and operates a marine bulk handling terminal on the west coast of B.C. The terminal has the ability to load vessels at rates of up to 9,000 tonnes per hour, unload cars at rates of up to 6,000 tonnes per hour and has an overall shipping capacity of 16 million tonnes.

Teck recently completed an $800 million expansion of the Neptune terminal in Vancouver. The expansion was facilitated by agreements that provide for investments by Canadian National Railway Co. [CNR-TSX, NYSE] (CN) to enhance the rail infrastructure and support increased shipment volumes to Neptune.

“When also factoring in the impact of the recent labour action at Westshore Terminals, Teck’s third quarter steelmaking coal sales are now expected to be between 5.5-5.9 million tonnes, versus the previously announced guidance range of 5.8-6.2 million tonnes.

On September 16, 2022, Westshore Terminals Investment Corp said Local 502 of the International Longshore and Warehouse Union [ILWU] was expected to commence a work stoppage beginning at midnight on that day. It said the work stoppage would result in a complete suspension of operations at the terminal. No new talks were scheduled, Westshore said.

Meanwhile, Teck said Elkview will reschedule planned plant maintenance to take advantage of plant downtime and mine operations will focus on pre-stripping during the outage.

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