VANCOUVER (miningweekly.com) – Canadian diversified miner Teck Resources has reported fourth-quarter headline earnings slightly below analyst expectations, as lower metallurgical coal sales and prices offset metal price improvements in the three-month period to December 31.
Adjusted profit attributable to shareholders in the fourth quarter was C$700-million, or C$1.21 a share, compared with C$930-million, or C$1.61 a share, in the same period of 2016. Analysts had called for adjusted earnings of C$1.22 a share, according to Thomson Reuters data.
The most significant of these adjustments relates to a C$131-million after-tax impairment reversal related to the steelmaking coal assets, as a result of an improvement in the outlook for steelmaking coal prices. Teck also recorded one-time deferred income tax adjustments related to the reduction of US corporate tax rates as a consequence of tax reform, partly offset by British Columbia's provincial corporate tax increase.
The Vancouver-based miner said the decrease in its adjusted profit in the fourth quarter of 2017, in comparison with the prior year, was mainly owing to a decline in the contribution from its steelmaking coal business unit as a result of lower prices and sales volumes. The business unit's operating profit fell 45% year-on-year to C$638-million. The average realised price for met coal fell 18% to C$180/t.
Fourth-quarter sales of 6.4-million tonnes were 8% lower year-on-year and were negatively affected by two CP mainline derailments in November, coupled with underperformance at Westshore Terminals in the fourth quarter. Fourth-quarter sales volumes in 2016 represented record volumes for that period.
Teck expects demand for met coal will rise this year, in step with increased competition as Australian exports recover and ongoing logistics issues are gradually resolved. While it is unclear how coal trade rebalancing will affect pricing, Teck believes that it is well positioned to respond to changing markets.
Teck's steelmaking coal output is expected to range between 26-million and 27-million tonnes this year. Assuming that current market conditions persist, annual output from 2019 to 2021 is expected to be higher than in 2018, despite the closure of Coal Mountain operations in mid-2018, the company advised, declining to add numbers to the forecast.
Cash flow from operations of C$1.5-billion in the fourth quarter was the same as a year ago. Cash flow from operations for the year was a record C$5.1-billion, compared with C$3.1-billion in 2016. Revenue for the quarter slipped nearly 10% year-on-year to C$3.2-billion.
Copper output during the period remained relatively flat at 78 000 t, but prices jumped 29% year-on-year to $3.09/lb. The business unit reported an operating profit of C$296-million, up from C$52-million a year earlier.
Zinc concentrate output rose 12.5% in the three-month period to 171 000 t, while refined zinc output was flat at 80 000 t. The zinc price appreciated 29% year-over-year to $1.47/lb, helping to boost business unit operating profit to C$350-million.
Teck expects to produce between 270 000 t and 330 000 t of copper in 2018 and 270 000 t to 300 000 t for 2019 to 2022. Zinc output is forecast to hit 645 000 t to 670 000 t in 2018, dropping to between 575 000 t and 625 000 t in 2019 to 2022.
Meanwhile, the Fort Hills oil sands project, in which it holds a 20.89% stake with partners Suncor Energy and Total achieved first oil on January 27 and remains on track to reach 90% capacity by the end of this year. All three secondary extraction trains are mechanically complete. The first train is now producing and ramping up to capacity. The second and third trains are currently being insulated and are expected to begin producing on schedule in the first half of this year, Teck advised.
Teck expects its share of production from the Fort Hills oils sands mine to be between 7.5-million to 9-million barrels of bitumen for this year and 14-million barrels in 2019 to 2022.
Meanwhile, Teck said its decision to develop the second-phase Quebrada Blanca project, in Chile, depends on regulatory approvals, which are not expected before the second half of this year.
The company's TSX-listed equity rose 3.5% in the morning trading session on Wednesday to C$38.66 apiece.