Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK)
(“Teck”) today provided an update on Q1 2020 operations,
preventative measures taken with respect to COVID-19 and updated
its 2020 annual guidance.
“Notwithstanding the challenges in the month of March related to
COVID-19, all of our operations remain in production and our
steelmaking coal results significantly exceeded guidance,” said Don
Lindsay, President and CEO. “We remain focused on ensuring we have
the necessary measures in place to safeguard the health and safety
of our people and communities, while maintaining safe
operations.”
Q1 2020 Operations UpdateFollowing a difficult
start to the year, results in our Steelmaking Coal Business Unit
improved significantly in late February and March. First quarter
steelmaking coal sales are estimated at 5.6 million tonnes,
exceeding our guidance of 4.8 to 5.2 million tonnes. At the same
time, based on preliminary results we expect to report adjusted
site cost of sales of approximately $65 per tonne, well below
previous expectations.
Finished coal inventories at our mine sites were reduced during
the quarter, supporting sales and increasing operational
flexibility.
In spite of a difficult start to the year, our steelmaking coal
logistics supply chain performed well for the remainder of the
quarter, with both CP and CN recovering from early weather-related
disruptions and blockades. All three ports also performed well, in
particular Westshore Terminals, which had a strong March.
Our Neptune facility upgrade continues to advance and major
equipment deliveries are on track. We expect the new shiploader,
stacker/reclaimer, and single dumper replacement to be commissioned
around year-end. Completion of construction is still expected in Q1
2021, with the new double dumper expected to be commissioned in Q2
2021. The shutdown at our Elkview Operations to complete the plant
expansion is also progressing well and we expect completion in
mid-April. The Elkview plant is being expanded from a capacity of 7
million tonnes to 9 million tonnes, which will enable us to replace
higher cost production from our Cardinal River Mine, which produced
1.4 million tonnes in 2019, with lower cost production from Elkview
when Cardinal River closes later this year. Taking into
account both the cost savings and the higher average pricing for
Elkview coal, assuming US$150 benchmark coal pricing and current
exchange rates, this should translate to an annual $110 million
increase in EBITDA.
The ongoing impacts of the COVID-19 pandemic have the potential
to affect both cost and schedule for these projects, and although
impacts to date have not been material, we continue to monitor
progress closely given the level of uncertainty.
As previously announced, construction at our Quebrada Blanca
Phase 2 (QB2) project was temporarily suspended on March 18. All
non-essential employees have been safely demobilized. At this time,
construction remains suspended.
COVID-19 ResponseTeck has implemented extensive
preventative measures across all offices and operations in order to
safeguard the health of our employees and local communities, while
continuing to operate safely and responsibly maintain employment
and economic activity. These measures include enhanced cleaning and
disinfecting protocols, eliminating group meetings, reducing
occupancy on crew buses, screening contractors and visitors,
promoting preventative measures like hand washing, requiring
employees returning from international travel or showing symptoms
to self-isolate, and implementing remote work where possible.
As part of our focus on ensuring the health and safety of our
employees and communities, we have also implemented a temporary
slowdown of operations and reduction of crews by up to 50% of
regular levels at our steelmaking coal and Highland Valley Copper
operations. These measures commenced on March 25 and will be in
place for an initial two week period, after which we will
re-evaluate in light of the evolving situation. All employees
available for work will continue to be paid as normal during the
initial two-week period.
COVID-19 Production ImpactsImpacts from
COVID-19 will vary by operation, but production will continue at
sites on a reduced basis.While the reductions at our steelmaking
coal operations will vary by mine, total production is expected to
be reduced on average to approximately 80% to 85% of normal levels
during the initial two week period. During this period historically
high mine site clean coal inventories are expected to be drawn down
to support sales. At Highland Valley Copper, crew reductions are
expected to reduce production to 80% to 85% of normal levels for
the initial two week period.
At our Trail Operations we have temporarily reduced the number
of employees on site by one third while continuing to operate at
planned production levels. At Red Dog, production remains at
planned levels despite the significant travel restrictions and
modified schedules required to maintain safe operations due to the
fly-in fly-out nature of the operation. In Peru, our Antamina mine
continues to operate at full production levels with less than half
of the normal workforce. At Carmen de Andacollo in Chile, full
production has also been maintained to date with reduced workforce
levels.
At our QB2 project, after the initial two-week suspension,
project construction activities remain on hold. It is not currently
possible to predict when construction activities will be
re-started. For more information on the current status of QB2
please refer to our press release titled “Teck Announces
Updated QB2 Capital Estimate” issued March 31, 2020.
We are continuing to work with our unions and affected
communities and are following the guidance of government and public
health authorities, and will adapt our response as necessary as
this situation continues to evolve.
2020 GuidanceWe have outlined above the
immediate impact of these measures on expected production levels at
our operations. We are still assessing longer term response
actions, and our ability to maintain operations at current levels,
or potentially to increase staffing levels and production. COVID-19
has the potential to affect both our customers and certain of our
suppliers, and we are closely monitoring potential impacts on
demand for our products, as well as our supply chain. Our operating
plans will depend in part on regulatory restrictions that may
affect our business, as well as the progress of the pandemic
generally, and the extent of additional measures, if any, required
to protect the health and safety of employees. The actual degree
and duration of production slowdowns and/or staff reductions and
related costs is unknown at this time. Given the high degree of
uncertainty associated with the current COVID-19 situation we are
suspending our 2020 guidance. We will provide a further update when
we report our Q1 2020 financial results.
Forward looking statements This press release
contains certain forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995
and forward-looking information as defined in the Securities Act
(Ontario) (together referred to a “forward-looking statements”).
Forward-looking statements can be identified by the use of words
such as “estimate”, “expects”, “intends”, “is expected”,
“potential” or variations of such words and phrases or statements
that certain actions, events or results “may”, “could”, “should”,
“would”, “might” or “will” be taken, occur, or be achieved. The
forward-looking statements in this news release include statements
regarding: complete of construction and commissioning of the
Neptune facility upgrade, the completion of the Elkview plant
expansion and the operation of the Elkview plant following the
closure of the Cardinal River Mine; the potential impacts of COVID
-19 on the cost and schedule for those projects; operating
restrictions at our steelmaking coal and Highland Valley operations
and the associated impacts on production. These statements are
based on a number of assumptions, including, but not limited to,
assumptions regarding: there being no material and negative impact
to the various contractors, suppliers and subcontractors for the
sites and projects relating to COVID-19 or otherwise; there being
no new regulatory or other restriction affecting our ability to
continue operations or construction, whether associated with
COVID-19 or otherwise; timely receipt of permits and other
regulatory approvals; construction progress and timing of restart
of full construction activities; availability of labour; and
performance by contractors, subcontractors and suppliers.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors, which may cause the actual results
and performance to be materially different from those expressed or
implied by the forward-looking statements. Factors that may cause
actual results to vary include, but are not limited to: changes in
general economic conditions; labour disruptions; unanticipated
permitting or construction issues, or suspension, withdrawal or
lack of availability of permits and authorizations; unanticipated
factors affecting construction plans and budget including supplier,
transportation or logistics issues; adverse weather or natural
disaster; community or social unrest; disruption of financial
markets; additional measures imposed by regulatory authorities to
restrict operating activities; measures imposed or undertaken by
suppliers, contractors or subcontractors in response to COVID-19
that might otherwise directly or indirectly affect our operations
or projects; and additional measures that we may be required to
take to protect the health and safety of our employees.
Certain of these risks are described in more detail in the
annual information form of Teck and in its public filings with
Canadian securities administrators and the U.S. Securities and
Exchange Commission. Teck does not assume the obligation to revise
or update these forward-looking statements after the date of this
document or to revise them to reflect the occurrence of future
unanticipated events, except as may be required under applicable
securities laws.
About Teck Teck is a diversified resource
company committed to responsible mining and mineral development
with major business units focused on copper, steelmaking coal, zinc
and energy. Headquartered in Vancouver, Canada, its shares are
listed on the Toronto Stock Exchange under the symbols TECK.A and
TECK.B and the New York Stock Exchange under the symbol TECK. Learn
more about Teck at www.teck.com or
follow @TeckResources.
Teck Media Contact: Chris Stannell Public
Relations Manager 604.699.4368chris.stannell@teck.com
Teck Investor Contact: Fraser Phillips Senior
Vice President, Investor Relations and Strategic Analysis
604.699.4621 fraser.phillips@teck.com
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