TORONTO (miningweekly.com) – Diversified Canadian miner Teck Resources on Tuesday announced that it would reduce its global workforce by 5%, or 600 workers, as it sought to cut costs amid sagging profit and low commodity prices.

For the three months ended March 31, the net profit attributable to shareholders was C$69-million, or C$0.12 a share, down 78.36% when compared with C$319-million, or C$0.55 a share, in the same period of 2013.

“We are targeting a 5% or approximately 600 position reduction in our global workforce through attrition, hiring freezes and reductions in contractors and employees at our operations and corporate offices. We are also targeting a 5% reduction in our other costs for total savings of approximately C$200-million,” Teck said.

North American coal miners are dealing with weak prices amid low demand for thermal electricity-making coal and metallurgical steelmaking coal as competition from the emerging shale gas industry impacts on markets.

Last week coal miner Walter Energy said that it planned to idle its Canadian coal mines in the face of weak metallurgical coal prices, placing more than 695 jobs on the line. Earlier this month US coal miner James River Coal filed for Chapter 11 bankruptcy protection after it too had been grappling with weak coal prices for months.

Vancouver-based Teck reported that since the second half of 2012, when it started its cost reduction programme, it had exceeded its initial goals, having identified C$380-million in ongoing yearly operating cost savings across the company and to date have implemented C$366-million, and realised C$345-million.

The company also slashed its capital development budget by C$150-million, mainly through deferring equipment purchases and a reduction in spending on its development projects, except for the Fort Hills oil sands project, in Alberta, which was progressing at the planned pace.

Despite the cuts, Teck affirmed that it remained committed to spending about C$2.94-billion over the next four years to develop the Fort Hills oil sands project.

First-quarter profits were lower than last year as a result of lower prices for most of its main products, especially coal, which was impacted on by increased supply from Australian mines.

Teck said that it is uncertain how long the current low coal prices would prevail. Coal prices were down 19% year-on-year, with coal prices currently being at their lowest level since 2007 and margins at their lowest level in a decade.

Copper prices also fell 11% year-over-year, despite these US-dollar denominated commodities being helped by a weaker Canadian dollar.

Teck also said that it would defer restarting the Quintette coal mine, in north-east British Columbia, which has the potential to produce between three-million and four-million tonnes of steelmaking coal a year, until market conditions had improved. The company would, however, continue to work on obtaining the two remaining permits that would enable it to restart the mine within 14 months of a construction decision.

RISING ZINC

Meanwhile, Tech reported that its outlook for zinc is the most favourable of the base metals.

“With recent and expected closures of a number of zinc mines, we believe that approximately 1.5-million tonnes of current zinc mine production will be closed by the end of 2016 in a 13-million-tonne-per-year market,” Teck said.

It revealed plans to restart the Pend Oreille mine, in Washington State, which had been on care and maintenance since early 2009.

The Pend Oreille mine is an underground operation and has the capacity to produce about 44 000 t/y of zinc in concentrate. It is expected to take about seven months to ready the mine for operations and a further five months to ramp up to full capacity.

Teck expects the mine to cost $41-million to restart and the expected average cost of production is about $0.80/lb of zinc produced over the expected five-year remaining life of the operation.

All output from Pend Oreille would be processed at Teck’s Trail metallurgical operations, as the concentrate characteristics in the ore and lower transportation costs could provide it with about C$15-million in yearly savings that cannot be obtained from other sources of concentrate.

DISAPPOINTING QUARTER

The adjusted profit, excluding the effect of tax adjustments and asset provisions was C$105-million, or C$0.18 per share, 68% lower when compared with C$328-million, or C$0.56 a share, a year earlier. The decline in adjusted profit was mainly owing to lower commodity prices, especially for coal.

TSX analysts had, however, expected earnings of C$0.24 a share on revenue of C$2.1-billion.

The company’s revenue fell about 11% year-over-year to C$2.08-billion.

Coal revenue dropped 17% to C$880-million, while copper revenue fell about 5% to C$652-million. Zinc revenue also fell 6% to C$551-million.

Coal output rose 8% to 6.7-million tonnes in the quarter. Copper output rose 2.4% to 85 000 t and zinc-concentrate output rose by 11% to 163 000 t, boosted by a 19% increase in zinc output from Teck’s Red Dog mine, in Alaska.

Teck said that it expected to produce between 26-million and 27-million tonnes of coal at a cost of $85/t to $93/t in 2014.