Diversified mining group Teck Resources has increased Covid-19 capital guidance for the Quebrada Blanca Phase 2 (QB2) project, in Chile, by up to $500-million, citing cost pressures as a result of absenteeism and labour inefficiencies related to the pandemic.

The company now assumes that the impacts of Covid-19 will not end prior to the completion of construction and that it has to counter the adverse effects associated with construction in this environment.

As a result, Teck on Thursday announced a new Covid-19 capital cost guidance of $900-million to $1.1-billion, up from the previous estimate of $600-million. The miner had said it had put in place a variety of mitigation measures and incentives, many of which were aimed at attracting talent, employee retention and minimising absenteeism.

Non-Covid-19 cost pressures related to weather and subsurface conditions also required an additional contingency of up to 5% of the QB2 capital estimate of $5.26-billion.

Teck stated that it would spend between C$2.2-billion and C$2.5-billion of QB2 development capital on a consolidated basis in 2022, inclusive of Covid-19 capital.

QB2 would start up in the second half of this year, doubling Teck’s consolidated copper production by 2023.

Further, Teck reported that its sustaining capital spending would increase in 2022, over 2021 levels, owing to one-time projects, including the relocation of the maintenance and office facilities at the Elkview mine to allow access to the next phase of mining, a major smelter turnaround at Trail to replace the Kivcet furnace hearth at the end of its 20-year useful life, and its haulage truck rebuild programme, inflationary pressures, and the inclusion of sustaining capital for QB2 for the first time.

In total, Teck said these factors would increase 2022 sustaining capital by about $500-million over 2021 levels.

COAL/COPPER RESULTS
Meanwhile, Teck said that its fourth-quarter steelmaking coal sales were 5.1-million tonnes, which was below the low end of the already lowered guidance of 5.2-million to 5.7-million, owing to extreme coal weather conditions affecting critical transportation corridors.

Strong logistics chain performance leading up to the heavy rain events, including at the expanded Neptune port facility, resulted in historically low clean steelmaking coal inventories at Teck's operations, mitigating impacts on production volumes. However, owing to ongoing weather-related logistical challenges which have continued through January, clean steelmaking coal inventories at mine sites are currently near record-high levels.

Teck stated that further transportation disruptions had the potential to require production cutbacks to manage inventory levels.

Despite the fourth-quarter impacts of rail and port disruptions on sales, 2021 unaudited adjusted site cash cost of sales and transportation costs are $65/t and $44/t, within the previous guidance ranges of $64/t to $66/t and $44/t to $46/t, respectively.

Logistics challenges and inflationary pressures drove higher fourth-quarter adjusted site cash cost of sales and transportation costs of $72/t and $4/t, respectively, above the upper range of the annual guidance.

The logistics chain disruptions had minimal impact on production at Highland Valley Copper, though the disruptions did result in sales of copper in concentrate from the operation being 5 600 t lower than production in the fourth quarter of 2021. The shortfall in sales versus production volumes at Highland Valley Copper was partially offset by strong sales at other operations, and total copper in concentrate sales were only 1 500 t lower than production in the fourth quarter.

Overall, inflationary pressures and workers’ participation related to strong copper prices resulted in fourth-quarter net cash unit costs of $1.52/lb for the copper business unit.