Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK)
(“Teck”) today provided select unaudited fourth quarter and 2021
sales and production results in light of the impacts of recent
logistics disruptions in British Columbia, Canada, as well as an
update on the ongoing impact of COVID-19 across the business, and
commentary regarding the outlook for 2022.
Strong steelmaking coal pricing and increased sales
should result in strong cash flow in H1 2022Demand for our
steelmaking coal remains strong and the FOB price has risen from
US$356 per tonne at the end of December to US$445 per tonne. At the
same time, record high clean coal inventories at our mines are
expected to result in sales exceeding production by 1.2 - 1.5
million tonnes in 2022. The strong pricing environment and
increased sales volumes should result in strong cash flow in the
first half of 2022.
Weather conditions have affected logisticsSince
our last guidance update on December 5, 2021, weather conditions
have continued to negatively affect infrastructure recovery efforts
in B.C. Interruptions and substantial reductions to rail service
and port activities persisted from mid-November into the first two
weeks of January as extreme cold-weather conditions followed heavy
rains and mudslides, which affected critical transportation
corridors. The provincial state of emergency declared on November
17, 2021 was lifted on January 18, 2022.
Steelmaking CoalAs a result, our realized
fourth quarter steelmaking coal sales were 5.1 million tonnes,
slightly below the low end of our previously revised guidance of
5.2 – 5.7 million tonnes. Our 2021 steelmaking coal production was
24.6 million tonnes, within our previously revised guidance of 24.5
– 25.0 million tonnes. Strong logistics chain performance leading
up to the heavy rain events, including at our expanded Neptune port
facility, resulted in historically low clean steelmaking coal
inventories at our operations, mitigating impacts on production
volumes. However, due to ongoing weather-related logistical
challenges which have continued through January, clean steelmaking
coal inventories at our mine sites are currently near record-high
levels. Further transportation disruptions have the potential to
require production cutbacks to manage inventory levels. CN and CP
reported meaningful progress on recovery in mid-January, with
demonstrable improvements to train fluidity last week. We expect to
substantially recover delayed fourth quarter sales in the first
half of 2022.
Despite the fourth quarter impacts of rail and port disruptions
on sales, 2021 unaudited adjusted site cash cost of sales1 and
transportation costs are $65 and $44 per tonne, within our previous
guidance ranges of $64 – $66 and $44 – $46 per tonne, respectively.
Logistics challenges and inflationary pressures drove higher fourth
quarter adjusted site cash cost of sales1 and transportation costs
of $72 and $49 per tonne, respectively, above the upper range of
our annual guidance.
Increased costs in the fourth quarter were more than offset by
continued strong prices. Realized steelmaking coal prices1 in the
fourth quarter averaged US$351 per tonne. The increase in
steelmaking coal prices from the third quarter further resulted in
positive pricing adjustments of approximately $70 million.
(1) This is a Non-GAAP Ratio. See Non-GAAP Ratio section of this
news release.
CopperThe logistics chain disruptions had
minimal impact to production at Highland Valley Copper, though the
disruptions did result in sales of copper in concentrate from the
operation being 5,600 tonnes lower than production in Q4 2021. The
shortfall in sales versus production volumes at Highland Valley
Copper was partially offset by strong sales at our other
operations, and total copper in concentrate sales were only 1,500
tonnes 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 costs1 of US$1.52/lb for the copper business unit.
(1) This is a Non-GAAP Ratio. See Non-GAAP Ratio section of this
news release.
COVID-19The recent surge in COVID-19 cases has
the potential to have a negative impact on our operations. An
increase in cases in southeastern British Columbia has resulted in
rising absenteeism at our steelmaking coal operations in the Elk
Valley. While the absenteeism has so far not had a major impact on
production, the situation poses a risk to Q1 2022 production.
However, in recent days we have seen some improvement, with the
number of employees returning from COVID-19 isolation exceeding the
number of new cases.
At our QB2 project in Chile we achieved our best quarter to date
in Q4 with some of our strongest rates of progress in December.
However, during January a significant rise in COVID-19 cases in
Chile has resulted in an increase in absenteeism.
OutlookLike others in the industry, and as
previously disclosed, we are seeing inflationary cost pressures,
notably in diesel prices, supplies and labour costs. Increases
experienced in fourth quarter operating results across our business
are expected to continue into 2022.
Sustaining capital spending is expected to increase in 2022 over
2021 levels due 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 our haulage truck rebuild program,
inflationary pressures, and the inclusion of sustaining capital for
QB2 for the first time. In total we expect these factors to
increase 2022 sustaining capital by approximately $500 million over
2021 levels.
Construction on QB2 continues to progress as we position for
start-up in the second half of the year. COVID-19 related capital
costs have experienced ongoing cost pressures as a result of
continued absenteeism and labour inefficiencies related to COVID-19
and contractual concessions have been required to manage these
impacts on contractors. Given our experience with the sudden onset
of Omicron, we have modified our prior assumptions and now assume
that the impacts of COVID-19 will not end prior to the completion
of construction. We are continuing to manage these costs and, to
counter the adverse effects associated with construction in this
environment, have put in place a variety of mitigation measures and
incentives, many of which are aimed at attracting talent, employee
retention and minimizing absenteeism. Based on our current
assumptions, including with respect to exchange rates, we are
updating our COVID-19 capital cost guidance to US$900-$1,100
million from our previous estimate of US$600 million. As noted
previously, certain non-COVID-19 cost pressures related to weather
and subsurface conditions, are currently estimated to require
additional contingency of up to 5% of our capital estimate of
US$5.26 billion, unchanged from our Q3 2021 guidance. We expect to
spend approximately C$2.2 - C$2.5 billion of QB2 development
capital on a consolidated basis in 2022, inclusive of COVID-19
capital.
Our fourth quarter and full year 2021 financial results are
scheduled for release on February 24, 2022. We will issue our usual
capital and operating guidance for 2022 at that time.
Forward-Looking StatementsThis 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 expectation to substantially recover
delayed fourth quarter steelmaking coal sales in the first half of
2022; expectations and projections regarding sustaining capital
expenditures in 2022; expectations and projections regarding QB2
start-up timing and 2022 development capital expenditures; QB2
COVID-19 capital cost guidance; QB2 capital estimate and additional
contingency expectations; expectation that steelmaking coal sales
will exceed production in 2022; expectation that a strong
steelmaking coal pricing environment and increased sales volumes
should result in strong cash flow in 2022; and the potential impact
of the COVID-19 on our business and operations, including our
ability to continue operations at our sites and progress our
projects and strategy.
These statements are based on a number of assumptions,
including, but not limited to, assumptions regarding: general
business and economic conditions; the supply and demand for,
deliveries of, and the level and volatility of prices of
steelmaking coal; availability of adequate transportation for our
steelmaking coal; the availability of qualified employees and
contractors for our operations and QB2 project; the outcome of our
coal price and volume negotiations with customers; and our ongoing
relations with our employees and with our business and joint
venture partners. Assumptions regarding QB2 capital include
assumptions regarding USD and CLP exchange rates and construction
progress in 2022. 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
prices; changes in market demand for our products; changes in
currency exchange rates; unanticipated operational and construction
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); impact of COVID-19 mitigation protocols; and failure of
customers or counterparties (including logistics suppliers) to
perform their contractual obligations.
The forward-looking statements in this news release and actual
results will also be impacted by the effects of COVID-19 and
related matters. The overall effects of COVID-19 related matters on
our business and operations and projects will depend on how the
ability of our sites to maintain normal operations, and on the
duration of impacts on our suppliers, contractors, employees,
customers and markets for our products, all of which are unknown at
this time.
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, 2020, 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.
Non-GAAP RatiosOur financial results are
prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board. This document refers to a number of non-GAAP
ratios, described below, which are not measures recognized under
IFRS, do not have a standardized meaning prescribed by IFRS and may
not be comparable to similar financial measures disclosed by other
issuers. For more information see the section titled “Non-GAAP
Financial Measures” in our most recent Management Discussion &
Analysis, which is incorporated by reference herein and is
available on SEDAR at www.sedar.com.
- Adjusted site cash cost of sales per tonne is a Non-GAAP ratio
comprised of adjusted site cash cost of sales/tonnes sold. There is
no similar financial measure in our financial statements with which
to compare. Adjusted site cash cost of sale is a Non-GAAP financial
measure.
- Realized steelmaking coal price per tonne is a Non-GAAP ratio
comprised of adjusted steelmaking coal revenue/tonnes sold. There
is no similar financial measure in our financial statements with
which to compare. Adjusted steelmaking coal revenue is a Non-GAAP
financial measure.
- Net cash unit costs per pound is a Non-GAAP ratio comprised of
adjusted cash cost of sales/payable pounds sold. There is no
similar financial measure in our financial statements with which to
compare. Adjusted cash cost of sales is a Non-GAAP financial
measure.
About Teck As one of Canada’s leading mining
companies, Teck is committed to responsible mining and mineral
development with major business units focused on copper, zinc, and
steelmaking coal, as well as investments in energy assets. Copper,
zinc and high-quality steelmaking coal are required for the
transition to a low-carbon world. Headquartered in Vancouver,
Canada, Teck’s 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.
Media Contact:Chris Stannell Public Relations
Manager604.699.4368chris.stannell@teck.com
Investor Contact:Fraser PhillipsSenior Vice
President, Investor Relations & Strategic
Analysis604.699.4621fraser.phillips@teck.com
Teck Resources (TSX:TECK.B)
Historical Stock Chart
From Mar 2024 to Apr 2024
Teck Resources (TSX:TECK.B)
Historical Stock Chart
From Apr 2023 to Apr 2024