Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK)
(“Teck”) reported unaudited(1) adjusted EBITDA(2) (3) of $4.3
billion in 2019 compared with $5.4 billion in 2018. Our 2019
unaudited adjusted profit attributable to shareholders(2) (3) was
$1.6 billion ($2.77 per share) compared with $2.4 billion ($4.13
per share) in 2018. In the fourth quarter, adjusted profit
attributable to shareholders was $122 million ($0.22 per share)
compared with $500 million ($0.87 per share) in the fourth quarter
of last year.
“Ongoing global economic uncertainty negatively impacted
commodity prices in the fourth quarter and that has continued into
2020, exacerbated by the effect on markets from
the Coronavirus and the impact of severe weather conditions in
British Columbia, followed by blockades on rail lines,” said Don
Lindsay, President and CEO. “Our focus remains on those aspects of
our business within our control including executing on our Quebrada
Blanca Phase 2 and Neptune Bulk Terminals expansion projects,
taking steps to improve our steelmaking coal logistics chain,
controlling costs and implementing our RACE21TM program, which has
exceeded initial expectations.”
Significant Items
- Adjusted profit attributable to shareholders in 2019 was $1.6
billion ($2.77 per share), compared with $2.4 billion ($4.13 per
share) in 2018. Profit attributable to shareholders in 2019 was
$339 million ($0.61 per share) compared with $3.1 billion ($5.41
per share) a year ago.
- Adjusted profit attributable to shareholders in the fourth
quarter was $122 million ($0.22 per share) compared with $500
million ($0.87 per share) in the fourth quarter of last year. In
the fourth quarter, we had a loss attributable to shareholders of
$891 million, or a $1.62 loss per share, compared with a profit of
$433 million ($0.75 per share) a year ago.
- Our adjusted EBITDA was $4.3 billion in 2019 compared to $5.4
billion in 2018 and our annual EBITDA(2) (3) was $2.5 billion
in 2019 compared with $6.2 billion in 2018. Adjusted EBITDA for the
fourth quarter was $649 million compared with $1.3 billion last
year. We had an EBITDA loss of $755 million in the fourth quarter,
compared with EBITDA of $1.2 billion a year ago.
- Our loss in the fourth quarter included non-cash, after-tax
impairments charges of $999 million, including $910 million
relating to our interest in Fort Hills (resulting from lower market
expectations for future oil prices), $75 million relating to our
Cardinal River Operations and $14 million relating to the remaining
assets of the cathode operations at Quebrada Blanca. For 2019,
total non-cash, after-tax impairment charges were $1.1
billion.
- Our RACE21TM innovation-driven business transformation program
has implemented initiatives aimed at achieving $160 million in
annualized EBITDA improvements as of the end of 2019 based on
commodity prices at December 31, 2019, exceeding our initial target
of $150 million. At prices in effect when the program was
implemented on May 31, 2019, the annualized EBITDA improvements
associated with these initiatives would have been $184
million.
- Under our cost reduction program, we achieved $210 million of
capital and operating cost reductions during the fourth quarter
against our target of $170 million.
- Construction at QB2 continues with over 7,500 people actively
working across the six major construction areas on the project.
Although the project continues to target first production in the
fourth quarter of 2021 with ramp-up to full production expected
during 2022, there have been delays in the schedule primarily
due to permitting and social unrest, which will also affect cost. A
new baseline schedule is being developed in conjunction with an
updated capital estimate planned for the first quarter of
2020.
- Our liquidity remains strong at $5.8 billion, including $532
million in cash at February 20, 2020, of which $270 million is on
deposit in Chile for the development of the QB2 project. We paid
our regular base dividend of $0.05 per share, which totaled $27
million in the quarter.
- The US$2.5 billion limited recourse project financing to fund
the development of QB2 closed in the fourth quarter. With funding
from the project financing and the partnering transaction with
Sumitomo Metal Mining Co. Ltd. and Sumitomo Corporation, our next
contributions to project capital are not expected until early
2021.
- We were recognized as one of the Global 100 Most Sustainable
Corporations by Corporate Knights in January 2020, and in February
2020, we announced an objective to be carbon neutral across all
operations and activities by 2050.
- Our first quarter 2020 steelmaking coal sales are being
negatively affected by severe weather in British Columbia causing
rail and port terminal performance issues and by blockades on rail
lines. The estimated impact on first quarter sales is expected to
be in excess of 1.0 million tonnes. We have included our first
quarter 2020 sales guidance along with our 2020 annual guidance for
production, unit costs and capital expenditures in our Guidance
tables on pages 38 to 41 in the full unaudited annual and fourth
quarter results at link below.
Notes:(1) All financial information in this
news release is unaudited.(2) Non-GAAP Financial
Measure. See “Use of Non-GAAP Financial Measures” section for
further information.(3) See “Use of Non-GAAP
Financial Measures” section for reconciliation.
This news release is dated as at February 20, 2020.
Unless the context otherwise dictates, a reference to “Teck,” “the
company,” “us,” “we,” or “our” refers to Teck and its subsidiaries.
Additional information, including our annual information form and
management’s discussion and analysis for the year ended December
31, 2018, is available on SEDAR at www.sedar.com.
This document contains forward-looking statements.
Please refer to the cautionary language under the heading
“CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS”
below.
Profit (Loss) and Adjusted
Profit
|
|
|
Three monthsended December 31, |
Year endedDecember 31, |
(CAD$ in millions) |
|
2019 |
|
|
2018 |
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
Profit (loss) attributable to shareholders |
$ |
(891 |
) |
$ |
433 |
$ |
339 |
|
$ |
3,107 |
|
Add (deduct): |
|
|
|
|
|
Asset impairments |
|
999 |
|
|
30 |
|
1,108 |
|
|
30 |
|
|
Debt prepayment option loss (gain) |
|
– |
|
|
24 |
|
(77 |
) |
|
31 |
|
|
Debt redemption or purchase loss |
|
– |
|
|
– |
|
166 |
|
|
19 |
|
|
Gain on sale of Waneta Dam |
|
– |
|
|
– |
|
– |
|
|
(812 |
) |
|
Taxes and other |
|
14 |
|
|
13 |
|
16 |
|
|
(3 |
) |
Adjusted profit attributable to shareholders1
2 |
$ |
122 |
|
$ |
500 |
$ |
1,552 |
|
$ |
2,372 |
|
Adjusted basic earnings per share1 2 |
$ |
0.22 |
|
$ |
0.87 |
$ |
2.77 |
|
$ |
4.13 |
|
Adjusted diluted earnings per share1 2 |
$ |
0.22 |
|
$ |
0.86 |
$ |
2.75 |
|
$ |
4.07 |
|
Notes:
- Non-GAAP Financial Measure. See “Use of Non-GAAP Financial
Measures” section for further information.
- See “Use of Non-GAAP Financial Measures” section for
reconciliation.
In addition to the items identified in the table above, our
results include gains and losses due to changes in market prices in
respect of pricing adjustments, commodity derivatives, inventory
write-downs and reversals, share-based compensation and changes in
the discounted value of decommissioning and restoration costs at
closed mines and other environmental expenses. Taken together,
these items resulted in $105 million of after-tax charges ($149
million before tax) in the fourth quarter, or $0.19 per share. We
do not adjust our reported profit for these items.
Click here to view Teck’s full unaudited annual and fourth
quarter results for 2019.
CAUTIONARY STATEMENT ON FORWARD-LOOKING
STATEMENTS
This news release contains certain forward-looking information
and forward-looking statements as defined in applicable securities
laws (collectively referred to as forward-looking statements).
These statements relate to future events or our future performance.
All statements other than statements of historical fact are
forward-looking statements. The use of any of the words
“anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”,
“will”, “project”, “predict”, “potential”, “should”, “believe” and
similar expressions is intended to identify forward-looking
statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking statements. These statements speak only as of the
date of this news release.
These forward-looking statements include, but are not limited
to, statements concerning: our focus and strategy; anticipated
global and regional supply, demand and market outlook for our
commodities; the potential impact of the Coronavirus; assumptions
relating to future market prices of our commodities and future
exchange rates; production, sales, unit costs and other cost
guidance, expectations and forecasts for our products, business
units and individual operations and our expectation that we will
meet that guidance; capital expenditure guidance and expectations;
capitalized stripping guidance; mine lives and duration of
operations at our various mines and operations; our ability to
extend the lives of certain mines and to increase production to
offset the closure of other operations; the timing of first and
full production at our QB2 project; the timing for an updated
capital estimate in respect of QB2; timing of next project capital
contributions to QB2; targeted cost reduction amounts and timing;
expected annualized EBITDA improvements and other benefits that
will be generated from our RACE21TM innovation-driven business
transformation program and the associated implementation costs and
timing; our intention to implement certain RACE21TM programs more
broadly across other operations and to identify and implement
additional RACE21TM projects; expectations relating to the closure
of Cardinal River and the timing thereof; expectations regarding
the plant expansion project at our Elkview Operations and the
timing thereof; anticipated reductions in strip ratios; estimated
effects of rail and port performance and the impact on our sales
thereof; expectations regarding the Neptune Bulk Terminals facility
upgrade including costs, benefits and timing thereof and the
frequency and length of our planned outages at Neptune Bulk
Terminals and the impact thereof; planned plant outages at their
effects on our production; anticipated benefits of our new
long-term rail agreement with CN; Elk Valley Water Quality Plan
spending guidance, including projected 2020 capital spending and
other capital spending guidance; timing of construction and
completion of our proposed AWTFs and SRFs and expected treatment
capacity thereof; our expectations regarding our water treatment
capacity in the future; expectations regarding operating costs
associated with water treatment; our expectation that Fording River
AWTF will be the last full-scale AWTF and that future treatment
facilities will be SRFs; timing of discussions in respect of
potential charges under the Fisheries Act; the potential to
debottleneck at Fort Hills and expand production capacity and
potential to increase Fort Hills production generally; the effect
and duration of production curtailment measures imposed by the
Government of Alberta; the timing of a federal decision statement
on Frontier; our belief regarding the impact of project technology
and operational improvements on Frontier’s technical feasibility
and commercial viability; plans relating to tailings and
water-related projects at Red Dog and their expected benefits, our
intention to make additional returns to shareholders in certain
situations; the sensitivity of our profit and EBITDA to changes in
currency exchange rates and commodity price changes; all guidance
appearing in this news release including but not limited to the
production, sales, unit cost, capital expenditure, cost reduction
and other guidance under the heading “Guidance”; the expectations
regarding the amount of Class B subordinate voting shares that
might be purchased under the normal course issuer bid and the
mechanics thereof; the impact of certain accounting initiatives and
estimates and our expectations, projections and sensitivities under
the heading “Commodity Prices and Sensitivities”.
These statements are based on a number of assumptions,
including, but not limited to, assumptions regarding general
business and economic conditions, interest rates, commodity and
power prices, acts of foreign or domestic governments and the
outcome of legal proceedings, the supply and demand for,
deliveries of, and the level and volatility of prices of copper,
coal, zinc and blended bitumen and our other metals and minerals,
as well as oil, natural gas and other petroleum products, the
timing of the receipt of regulatory and governmental approvals for
our development projects and other operations, including mine
extensions; positive results from the studies on our expansion and
development projects; our ability to secure adequate
transportation, including rail, pipeline and port service, for our
products our costs of production and our production and
productivity levels, as well as those of our competitors,
continuing availability of water and power resources for our
operations, our ability to secure adequate transportation, pipeline
and port services for our products; changes in credit market
conditions and conditions in financial markets generally, the
availability of funding to refinance our borrowings as they become
due or to finance our development projects on reasonable terms; our
ability to procure equipment and operating supplies in sufficient
quantities and on a timely basis; the availability of qualified
employees and contractors for our operations, including our new
developments and our ability to attract and retain skilled
employees; the satisfactory negotiation of collective agreements
with unionized employees; the impact of changes in Canadian-U.S.
dollar and other foreign exchange rates on our costs and results;
engineering and construction timetables and capital costs for our
development and expansion projects; the benefits of technology for
our operations and development projects, including the impact of
our RACE21™ program; costs of closure, and environmental compliance
costs generally, of operations; market competition; the accuracy of
our mineral reserve and resource estimates (including with respect
to size, grade and recoverability) and the geological, operational
and price assumptions on which these are based; tax benefits and
tax rates; the outcome of our coal price and volume negotiations
with customers; the outcome of our copper, zinc and lead
concentrate treatment and refining charge negotiations with
customers; curtailment measures on oil production taken by the
Government of Alberta; the resolution of environmental and other
proceedings or disputes; the future supply of low-cost power to the
Trail smelting and refining complex; our ability to obtain, comply
with and renew permits in a timely manner; and our ongoing
relations with our employees and with our business and joint
venture partners.
In addition, assumptions regarding the Elk Valley Water Quality
Plan include assumptions that additional treatment will be
effective at scale, and that the technology and facilities operate
as expected, as well as additional assumptions discussed under the
heading “Elk Valley Water Management Update”. Assumptions regarding
QB2 include current project assumptions and assumptions regarding
the final feasibility study. Assumptions regarding the costs
and benefits of the Neptune Bulk Terminals expansion and other
projects include assumptions that the relevant project is
constructed and operated in accordance with current expectations.
Expectations regarding our operations are based on numerous
assumptions regarding the operations. Our Guidance tables include
footnotes with further assumptions relating to our guidance. Our
anticipated RACE21TM related EBITDA improvements and associated
costs assume that the relevant projects are implemented in
accordance with our plans and budget and that the relevant projects
will achieve the expected production and operating results, and are
based on current commodity price assumptions and forecast sale
volumes. Statements regarding the availability of our credit
facilities are based on assumptions that we will be able to satisfy
the conditions for borrowing at the time of a borrowing request and
that the credit facilities are not otherwise terminated or
accelerated due to an event of default. Statements concerning
future production costs or volumes are based on numerous
assumptions of management regarding operating matters and on
assumptions that demand for products develops as anticipated, that
customers and other counterparties perform their contractual
obligations, that operating and capital plans will not be disrupted
by issues such as mechanical failure, unavailability of parts and
supplies, labour disturbances, interruption in transportation or
utilities, adverse weather conditions, and that there are no
material unanticipated variations in the cost of energy or
supplies. Statements regarding anticipated steelmaking coal sales
volumes and average steelmaking coal prices depend on timely
arrival of vessels and performance of our steelmaking coal-loading
facilities, as well as the level of spot pricing sales. The
foregoing list of assumptions is not exhaustive. Events or
circumstances could cause actual results to vary materially.
Factors that may cause actual results to vary materially
include, but are not limited to, changes in commodity and power
prices, changes in market demand for our products, changes in
interest and currency exchange rates, acts of governments and the
outcome of legal proceedings, inaccurate geological and
metallurgical assumptions (including with respect to the size,
grade and recoverability of mineral reserves and resources),
unanticipated operational difficulties (including failure of plant,
equipment or processes to operate in accordance with specifications
or expectations, cost escalation, unavailability of materials and
equipment, government action or delays in the receipt of government
approvals, industrial disturbances or other job action, adverse
weather conditions and unanticipated events related to health,
safety and environmental matters), union labour disputes, political
risk, social unrest, failure of customers or counterparties
(including logistics suppliers) to perform their contractual
obligations, changes in our credit ratings, unanticipated increases
in costs to construct our development projects, difficulty in
obtaining permits, inability to address concerns regarding permits
of environmental impact assessments, and changes or further
deterioration in general economic conditions. Certain operations
and projects are not controlled by us; schedules and costs may be
adjusted by our partners, and timing of spending and operation of
the operation or project is not in our control. Current and new
technologies relating to our Elk Valley water treatment efforts may
not perform as anticipated, and ongoing monitoring may reveal
unexpected environmental conditions requiring additional remedial
measures. Purchases of Class B subordinate voting shares under the
normal course issuer bid may be affected by, among other things,
availability of Class B subordinate voting shares, share price
volatility and availability of funds to purchase shares. EBITDA
improvements may be impacted by the effectiveness of our projects,
actual commodity prices and sales volumes, among other matters.
We assume no obligation to update forward-looking statements
except as required under securities laws. Further information
concerning risks and uncertainties associated with these
forward-looking statements and our business can be found in our
Annual Information Form for the year ended December 31, 2018, filed
under our profile on SEDAR (www.sedar.com) and on EDGAR
(www.sec.gov) under cover of Form 40-F, as well as subsequent
filings that can also be found under our profile.
Scientific and technical information in this quarterly report
regarding our coal properties was reviewed, approved and verified
by Messrs. Don Mills P.Geo. and Robin Gold P.Eng., each employees
of Teck Coal Limited and each a Qualified Person as defined under
National Instrument 43-101. Scientific and technical information in
this quarterly report regarding our other properties was reviewed,
approved and verified by Rodrigo Alves Marinho, P.Geo., an employee
of Teck and a Qualified Person as defined under National Instrument
43-101.
WEBCAST
Teck will host an Investor Conference Call to discuss its
Q4/2019 financial results at 11:00 AM Eastern time, 8:00 AM Pacific
time, on Friday, February 21, 2020. A live audio
webcast of the conference call, together with supporting
presentation slides, will be available at our website at
www.teck.com. The webcast will be archived at www.teck.com
Reference:
Fraser Phillips, Senior Vice President, Investor Relations and
Strategic Analysis: 604.699.4621
Marcia Smith, Senior Vice President, Sustainability and External
Affairs: 604.699.4616
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