Teck Resources posts first quarter 2020 financials
Teck Resources Limited [TECK.A-TSX; TECK.B-TSX, NYSE] reported adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $608 million for the first quarter of 2020 compared with $1.4 billion a year ago. Adjusted profit attributable to shareholders was $94 million ($0.17 per share) compared with $587 million ($1.03 per share) a year ago.
“Our current focus is on managing the risks around COVID-19 and ensuring we have the necessary measures in place to safeguard our people and our local communities,” said Don Lindsay, President and CEO. “The pandemic has had a significant negative impact on the global economy and commodity markets and the outlook is uncertain. However, almost all of our sites are currently operating, with some at reduced production, and our steelmaking coal operations had a strong finish to the quarter, exceeding our sales guidance with site costs well below expectations.”
COVID-19 has had a significant effect on our business and contributed to significant reductions in the prices we receive for the commodities we produce. Teck has undertaken significant measures in response to COVID-19, including:
Implementing comprehensive preventative measures at all sites;
Reducing crew sizes at some of our sites, resulting in lower production;
Temporarily suspending construction activities on the QB2 project;
Temporarily suspending operations at Antamina;
Reducing Fort Hills to a single-train facility resulting in lower production of bitumen and contributing to an after-tax asset impairment of $474 million in the first quarter;
Incurring $44 million in incremental costs responding to COVID-19 including temporary suspension and demobilization of the QB2 project;
Suspending all previously issued 2020 guidance.
In April, we announced the creation of a $20 million fund to support COVID-19 response and future recovery efforts. Funding will support a range of critical initiatives, including procuring one million KN95 masks to be donated for healthcare in British Columbia, donations to healthcare facilities in Chile, a community investment fund for local organizations in the areas where Teck operates and donations to international relief efforts.
We have increased the target under our cost reduction program to $1 billion and have achieved $375 million to date since starting the program in the fourth quarter of 2019.
In April, we completed the major expansion of our Elkview Operations plant, increasing the annual capacity to 9 million tonnes. This will allow us to replace higher cost production from Cardinal River Operations with lower cost production from Elkview and maintain our overall steelmaking coal production capacity. Taking into account the cost savings and higher average price for Elkview products and assuming a US$150 per tonne coal price and current exchange rates, shifting 2 million tonnes of production to Elkview Operations translates to an increase of approximately $160 million in annualized EBITDA.
Our liquidity remains strong at $5.8 billion, including $525 million in cash at April 20, 2020. Our US$4.0 billion revolving credit facility is committed through the fourth quarter of 2024, does not have a cash-flow based financial covenant, a credit rating trigger or a general material adverse effect borrowing condition. We have no significant debt maturities prior to 2035 and we have investment grade credit ratings from all four credit rating agencies.
In the first quarter, we had a loss attributable to shareholders of $312 million, or a $0.57 loss per share, compared with a profit of $630 million ($1.11 per share) a year ago. Adjusted profit attributable to shareholders was $94 million ($0.17 per share) compared with $587 million ($1.03 per share) in the first quarter of 2019.
EBITDA was $45 million compared with $1.4 billion in the first quarter of 2019. Our adjusted EBITDA in the first quarter totaled $608 million compared with $1.4 billion last year.
Gross profit was $398 million in the first quarter compared with $1.0 billion a year ago. Gross profit before depreciation and amortization was $776 million compared with $1.4 billion in the first quarter of 2019.
Our steelmaking coal operations had a strong finish to the first quarter with sales of 5.7 million tonnes exceeding our previously issued 2020 first quarter guidance range of 4.8 to 5.2 million tonnes and adjusted site cash cost of sale of $63 per tonne, which was also significantly lower than previously issued guidance.
On March 31, 2020, we issued an updated capital cost estimate for our QB2 project of US$5.2 billion, including escalation, with US$3.9 billion remaining to be spent from April 1, 2020, subject to the impact of COVID-19 on the project schedule and timing of capital spending. With funding from Sumitomo Metal Mining Co., Ltd and Sumitomo Corporation (SMM/SC) and the US$2.5 billion limited recourse project financing, no significant funding is expected to be required from Teck until the first quarter of 2021.