Teck’s profit rises on higher sales volumes
Teck Resources Ltd , the world’s second-biggest exporter of steelmaking coal, reported on Tuesday a 15 percent increase in first-quarter adjusted profit on increased sales volumes.
Teck, which also mines copper, zinc and gold, said adjusted profit attributable to shareholders rose to C$753 million ($586.4 million) or C$1.31 per share in the quarter ended March 31, compared with C$655 million or C$1.13 per share in the year-earlier period.
“Prices for our key commodities remained strong resulting in another good quarter for us, with adjusted earnings of $753 million and adjusted EBITDA of $1.6 billion,” said Don Lindsay, President and CEO. “Our operations performed well during the quarter and we’re pleased that Fort Hills achieved first oil and is ramping up to full capacity as expected.”
We recorded strong results in the first quarter with gross profit of $1.4 billion, gross profit before depreciation of $1.7 billion, and EBITDA of $1.6 billion compared to our average of $1.5 billion over the last six quarters. Profit attributable to shareholders was $759 million, or $1.32 per share. Sales volumes for all our principal products in the first quarter were strong and increased from a year ago. In particular, copper sales volumes rose by 20% compared with a year ago in large part because of increased production at Highland Valley Copper due to higher grade ore compared to the first quarter of 2017.
Steelmaking coal prices averaged US$207 per tonne in the first quarter, slightly lower than a year ago and the fourth quarter of 2017. Copper and zinc prices increased from average prices in the fourth quarter of 2017, and were 19% and 23% higher, respectively, than in the first quarter of 2017. Copper prices reached a four-year high in January at US$3.27 per pound and zinc prices reached a ten-year high in February at US$1.64 per pound. A stronger Canadian dollar during the quarter partially offset the higher commodity prices as our products are sold in U.S. dollars and the majority of our operating costs are incurred in Canadian dollars.
Production and sales volumes at our steelmaking coal operations were negatively affected in the first quarter by logistical issues at Westshore Terminals. Orders from customers were in place to exceed our original sales guidance of 6.3 to 6.5 million tonnes. Clean coal stockpiles at mines reached high levels, forcing some plants to idle, consequently affecting production.
Oil production from the first of three secondary extraction trains at Fort Hills commenced on January 27, 2018 and the second train started producing oil on March 23, 2018. The third secondary extraction train is scheduled to be completed and commissioned in the second quarter of 2018 and production is expected to reach full capacity by the end of 2018. All systems relating to the first two trains are currently running well and plant start-up has exceeded expectations with respect to both production volumes and product quality.
In early April, we acquired an additional 13.5% indirect interest in the company that owns the Quebrada Blanca property, bringing our interest to 90%. Quebrada Blanca’s principal asset is the Quebrada Blanca Phase 2 (QB2) copper project. This acquisition simplifies the ownership and capital structure of QB2 and gives us flexibility with respect to financing options for the project.
With the completion of our Fort Hills project, our strong financial position, favourable markets for our key products and an improved oil price market, we are well positioned for ongoing profitability and strong cash flows.