Reference: Greg Waller, VP Investor Relations & Strategic Analysis 604.699.4014 Marcia Smith, SVP Sustainability and External Affairs 604.699.4616
Teck Resources Limited +1 604 699 4000 Tel Suite 3300, 550 Burrard Street +1 604 699 4750 Fax Vancouver, BC Canada V6C 0B3 www.teck.com
For Immediate Release Date: July 25, 2012 12-31-TR
TECK REPORTS UNAUDITED SECOND QUARTER RESULTS FOR 2012
Vancouver, BC – Teck Resources Limited (TSX: TCK.A and TCK.B, NYSE: TCK) reported second quarter adjusted profit of $312 million, or $0.53 per share, compared with $663 million or $1.12 per share in 2011.
“We are pleased with our operating results for the second quarter, with record quarterly copper production, a significant increase in coal sales compared with the last quarter and settlement of labour agreements at our Trail and Cardinal River operations. Notwithstanding these increases, commodity prices were lower due in part to uncertainty over global economic conditions, resulting in lower profits compared with the second quarter of last year. However, our balance sheet remains strong with $3.6 billion of cash, which positions us to continue advancing our longer term growth plans,” said Don Lindsay, President and CEO.
Highlights and Significant Items
- Gross profit before depreciation and amortization was $1.0 billion in the second quarter compared with $1.4 billion the second quarter of 2011.
- Cash flow from operations, before working capital changes, was $725 million in the second quarter compared with $1.2 billion a year ago.
- Profit attributable to shareholders was $268 million and EBITDA was $790 million in the second quarter.
- To date we have reached agreements with our coal customers to sell 5.0 million tonnes of coal in the third quarter of 2012 and we expect to conclude additional sales over the course of the quarter. While prices for our premium coal have been agreed at US$225 per tonne, the average price for all products is approximately US$198 per tonne.
- Our cash balance was $3.6 billion at June 30, 2012, after capital expenditures, investments and debt payments totaling $891 million in the second quarter.
- New five-year labour agreements were ratified at our Trail Operations in the second quarter and at our Cardinal River Operations in early July.
All dollar amounts expressed in this news release are in Canadian dollars unless otherwise noted.
Reference: Greg Waller, VP Investor Relations & Strategic Analysis 604.699.4014 Marcia Smith, SVP Sustainability and External Affairs 604.699.4616 Additional corporate information is available at www.teck.com
- We achieved record quarterly copper production of 90,000 tonnes in the second quarter, which reflects our share of significantly higher production from Antamina’s major mill expansion.
- Subsequent to quarter end, the Social and Environmental Impact Assessment for the Quebrada Blanca Phase 2 project was voluntarily withdrawn in response to comments from Chilean regulators and requests for additional information. We are working with the regulators to define the time frame for resubmission of the application.
- We declared a $0.40 per share dividend on our Class A common shares and Class B subordinate voting shares, which was paid on July 3, 2012.
2 Teck Resources Limited 2012 Second Quarter News Release
This management’s discussion and analysis is dated as at July 24, 2012 and should be read in conjunction with the unaudited consolidated financial statements of Teck Resources Limited (Teck) and the notes thereto for the three months ended June 30, 2012 and with the audited consolidated financial statements of Teck and the notes thereto for the year ended December 31, 2011. In this news release, unless the context otherwise dictates, a reference to “the company” or “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, 2011, 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 INFORMATION” below.
Overview
We continue to make significant progress on our plan to increase copper and coal production. Copper production of 90,000 tonnes was a new quarterly record, with further increases expected in each of the next two quarters. Coal production was reduced by approximately 700,000 tonnes due to the nine-day Canadian Pacific Railway labour disruption which caused a complete shutdown of rail operations from our Elk Valley mines. However, material moved was maintained at our first quarter levels and this will benefit production in future periods.
Base metal prices weakened during the second quarter. Contract coal prices were weaker than those we experienced in the previous quarter, but coal sales volumes increased. Unit operating costs at our coal operations rose slightly as a result of the effect of lower production levels as we were forced to temporarily curtail production due to the rail strike.
Our strong cash flow, debt capacity and cash position of $3.6 billion, together with access to capital markets, should provide the financial capacity necessary to fund our attractive portfolio of growth projects.
3 Teck Resources Limited 2012 Second Quarter News Release
Profit and Adjusted Profit*
Adjusted profit, which excludes the effect of certain transactions as described in the table below, was $312 million, or $0.53 per share, in the second quarter of 2012 compared with $663 million, or $1.12 per share, in the same period a year ago. The decline in adjusted profit was primarily due to significantly lower coal and metal prices. Also contributing to the lower adjusted profit were negative after-tax pricing adjustments of $53 million as a result of declining metal prices in the quarter compared with minimal adjustments in the second quarter of 2011. Partly offsetting these items was a 21% and 10% rise in coal and copper sales volumes, respectively.
Profit attributable to shareholders was $268 million, or $0.46 per share, in the second quarter compared with $756 million or $1.28 per share in the same period last year.
Three months Six months ended June 30, ended June 30,
| ($ in millions) | 2012 | 2011 | 2012 | 2011 |
| Profit attributable to shareholders as reported Add (deduct): Asset sale gains Foreign exchange (gains) losses Derivative (gains) losses Collective agreement charges Financing items Adjusted profit Adjusted earnings per share | $ 756 (113) 2 (8) 26 - | $ 1,217 (121) (5) (4) 26 - | ||
| $ 268 | $ 486 | |||
| (19) | (21) | |||
| 13 | 19 | |||
| 12 | (47) | |||
| 38 | 50 | |||
| - | 329 | |||
| $ 312 | $ 663 | $ 816 | $ 1,113 | |
| $1.12 | $ 1.88 | |||
| $ 0.53 | $ 1.39 |
- Our financial results are prepared in accordance with International Financial Reporting Standards (“IFRS”). This news release refers to adjusted profit, adjusted earnings per share, EBITDA and gross profit before depreciation and amortization, which are not measures recognized under IFRS in Canada and do not have a standardized meaning prescribed by IFRS or Generally Accepted Accounting Principles (“GAAP”) in the United States. For adjusted profit we adjust profit attributable to shareholders as reported to remove the effect of certain kinds of transactions in these measures. EBITDA is profit attributable to shareholders before net finance expense, income taxes, depreciation and amortization. Gross profit before depreciation and amortization is gross profit with depreciation and amortization added back. These measures may differ from those used by, and may not be comparable to such measures as reported by, other issuers. We disclose these measures, which have been derived from our financial statements and applied on a consistent basis, because we believe they are of assistance in understanding the results of our operations and financial position and are meant to provide further information about our financial results to investors.
4 Teck Resources Limited 2012 Second Quarter News Release Our business unit results are presented in the tables below.
Three Months ended June 30 Gross profit before depreciation and
($ in millions) Revenues amortization Gross profit
| 2011 | 2011 | 2011 | ||||
| 2012 | 2012 | 2012 | ||||
| Copper Coal Zinc Energy | $ 749 1,471 576 - | $ 427 844 156 - | $ 355 709 133 - | |||
| $ 731 | $ 342 | $ 255 | ||||
| 1,362 | 596 | 450 | ||||
| 467 | 54 | 30 | ||||
| 1 | - | - | ||||
| Total | $ 2,796 | $ 1,427 | $ 1,197 | |||
| $ 2,561 | $ 992 | $ 735 |
We achieved record copper production of 90,000 tonnes in the second quarter, an increase of 13% from the same period a year ago, reflecting our share of additional production from Antamina’s mine expansion program and increased throughput at Highland Valley. Despite the record production and resulting 10% rise in copper sales volumes, gross profit before depreciation and amortization decreased by $85 million in the second quarter compared with a year ago as a result of a 14% decline in copper prices and increased unit costs. Operating costs rose in the quarter, reflecting higher costs for labour, energy and various consumables. Our average total cash unit costs of product sold, after by-product credits, in the second quarter of 2012 was US$1.74 per pound compared with US$1.56 per pound in the second quarter of 2011.
Gross profit before depreciation and amortization from our coal business unit decreased by $248 million in the second quarter compared to the same period a year ago as a result of significantly lower coal prices, despite increased sales volumes. Coal production was 5.7 million tonnes in the second quarter, similar to the same period a year ago. Approximately 700,000 tonnes of coal production was lost due to the Canadian Pacific Railway strike, which caused a complete shutdown of rail operations from the Elk Valley mines for a nine-day period. The reduction in production volume increased unit costs of production and costs of sales in the quarter. Sales volumes were 6.7 million tonnes compared with 5.6 million tonnes in the second quarter of 2011. The average coal price of US$202 per tonne in the second quarter decreased by 26% from the second quarter of last year. Coal prices last year had reached record high levels due to the combination of strong demand for seaborne, high-quality steelmaking coal and weather-related restrictions on the supply of coal from Australia. Total unit cost of sales in the second quarter, including depreciation and transportation charges, were similar to the same period last year.
Gross profit before depreciation and amortization from our zinc business unit decreased by $102 million in the second quarter compared with a year ago. This was primarily due to a onetime charge of $51 million ($38 million after-tax) related to the new labour agreement at Trail, lower metal prices and reduced sales volumes from Red Dog. Red Dog zinc production declined by 9% in the second quarter compared with the same period a year ago due to unplanned maintenance shutdowns. Refined zinc and lead production from Trail were similar to the same period a year ago. Zinc sales volumes in the second quarter from Red Dog decreased by 22% as a result of the timing of shipments, as customers had advanced shipments into the first
5 Teck Resources Limited 2012 Second Quarter News Release quarter of 2012. Zinc and lead prices decreased 15% and 22%, respectively, in the second quarter of 2012 compared with the same period a year ago.
Revenues
Revenues from operations were $2.6 billion in the second quarter compared with $2.8 billion a year ago. Revenues from our copper business unit declined slightly from a year ago as lower copper prices were partially offset by higher sales volumes. Coal revenues decreased by $109 million compared with the second quarter of 2011 as a result of significantly lower coal prices despite a 21% increase in sales volumes. Revenues from our zinc business unit declined by $109 million from a year ago as a result of lower metal prices and a 22% decline in sales volumes from Red Dog.
Average Prices and Exchange Rates*
Three months Six months ended June 30, ended June 30,
| 2012 | 2011 % Change | 2012 | 2011 % Change | |
| Copper (LME Cash - US$/pound) Coal (realized - US$/tonne) Zinc (LME Cash - US$/pound) Silver (LME PM fix – US$/ounce) Molybdenum (published price - US$/pound) Lead (LME Cash - US$/pound) Cdn/U.S. exchange rate (Bank of Canada) | 4.14 -14% 272 -26% 1.02 -15% 38 -24% 17 -18% 1.16 -22% 0.97 +4% | 4.26 -14% 242 -12% 1.05 -14% 35 -11% 17 -18% 1.17 -21% 0.98 +3% | ||
| 3.57 | 3.67 | |||
| 202 | 212 | |||
| 0.87 | 0.90 | |||
| 29 | 31 | |||
| 14 | 14 | |||
| 0.90 | 0.92 | |||
| 1.01 | 1.01 |
- Except for coal prices, the average commodity prices disclosed above are based on published benchmark prices and are provided for information only. Our actual revenues are determined using commodity prices and other terms and conditions specified in our various sales contracts with our customers. The molybdenum price is the price published in Platts Metals Week.
Our year-to-date business unit results are presented in the table below:
Six Months ended June 30 Gross profit before depreciation and
($ in millions) Revenues amortization Gross profit
| 2011 | 2011 | 2011 | ||||
| 2012 | 2012 | 2012 | ||||
| Copper Coal Zinc Energy | $ 1,522 2,490 1,150 - | $ 896 1,321 323 - | $ 753 1,065 276 - | |||
| $ 1,484 | $ 708 | $ 540 | ||||
| 2,560 | 1,241 | 990 | ||||
| 1,062 | 173 | 123 | ||||
| 2 | 1 | - | ||||
| Total | $ 5,162 | $ 2,540 | $ 2,094 | |||
| $ 5,108 | $ 2,123 | $ 1,653 |
6 Teck Resources Limited 2012 Second Quarter News Release The table below shows our production and sales of our major products.
| Units (000's) Production | Sales | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Second Quarter Year-to-date (note 1) 2012 2011 2012 2011 Principal products Copper Contained in concentrate tonnes 72 62 135 119 Cathode tonnes 18 18 36 36 90 80 171 155 Coal tonnes 5,707 5,756 11,972 10,135 Zinc Contained in concentrate tonnes 149 166 296 332 Refined tonnes 69 71 143 143 Other products Lead Contained in concentrate tonnes 24 22 47 43 Refined tonnes 22 21 43 44 Molybdenum Contained in concentrate pounds 3,234 2,342 6,204 4,221 | Second Quarter Year-to-date 2012 2011 2012 2011 67 60 132 116 18 17 36 34 | ||||||||||
| 2011 | 2011 | ||||||||||
| 2012 | 2012 | 2012 | 2012 | ||||||||
| Principal products Copper Contained in concentrate tonnes Cathode tonnes Coal tonnes Zinc Contained in concentrate tonnes Refined tonnes Other products Lead Contained in concentrate tonnes Refined tonnes Molybdenum Contained in concentrate pounds | 119 36 | 116 34 | |||||||||
| 72 | 135 | 67 | 132 | ||||||||
| 18 | 36 | 18 | 36 | ||||||||
| 80 | 155 | 77 | 150 | ||||||||
| 90 | 171 | 85 | 168 | ||||||||
| 5,756 166 71 22 21 2,342 | 10,135 332 143 43 44 4,221 | 5,566 99 72 - 22 2,223 | 10,517 228 145 - 42 4,578 | ||||||||
| 5,707 | 1 | 1,972 | 6,716 | 1 | 2,021 | ||||||
| 149 | 296 | 79 | 214 | ||||||||
| 69 | 143 | 69 | 145 | ||||||||
| 24 | 47 | - | - | ||||||||
| 22 | 43 | 21 | 43 | ||||||||
| 3,234 | 6,204 | 3,280 | 6,390 |
(1) We include 100% of production and sales from our Highland Valley Copper, Quebrada Blanca and Carmen de Andacollo mines in our production and sales volumes, even though we own 97.5%, 76.5% and 90%, respectively, of these operations, because we fully consolidate their results in our financial statements. We include 22.5% of production and sales from Antamina, representing our proportionate equity interest in Antamina.
7 Teck Resources Limited 2012 Second Quarter News Release
QUARTER ENDED JUNE, 30
| 2011 | 2011 | 2011 | ||||
| 2012 | 2012 | 2012 | ||||
| Copper Highland Valley Copper Antamina Quebrada Blanca Carmen de Andacollo Duck Pond Other | $ 250 184 140 153 22 - | $ 136 134 69 75 13 - | $ 114 129 49 56 7 - | |||
| $ 227 | $ 107 | $ 75 | ||||
| 207 | 148 | 141 | ||||
| 137 | 42 | 18 | ||||
| 126 | 37 | 18 | ||||
| 34 | 11 | 6 | ||||
| - | (3) | (3) | ||||
| Coal (note 1) Zinc Trail Red Dog Other Inter-segment sales | 749 1,471 521 110 5 (60) | 427 844 79 75 2 - | 355 709 66 65 2 - | |||
| 731 | 342 | 255 | ||||
| 1,362 | 596 | 450 | ||||
| 434 | (7) | (20) | ||||
| 75 | 57 | 46 | ||||
| 2 | 4 | 4 | ||||
| (44) | - | - | ||||
| Energy | 576 - | 156 - | 133 - | |||
| 467 | 54 | 30 | ||||
| 1 | - | - | ||||
| TOTAL | $ 2,796 | $ 1,427 | $ 1,197 | |||
| $ 2,561 | $ 992 | $ 735 |
(1) Our coal business unit represents our interest in six operating mines. We wholly own the Fording River, Coal Mountain, Line Creek and Cardinal River mines, and have a 95% partnership interest in the Elkview mine and an 80% interest in the Greenhills mine.
8 Teck Resources Limited 2012 Second Quarter News Release
SIX MONTHS ENDED JUNE 30
| 2011 | 2011 | 2011 | |||||||
| 2012 | 2012 | 2012 | |||||||
| Copper Highland Valley Copper Antamina Quebrada Blanca Carmen de Andacollo Duck Pond Other | $ 460 402 283 310 67 - | $ 252 294 151 168 31 - | $ 213 283 108 129 20 - | ||||||
| $ 447 | $ 213 | $ 159 | |||||||
| 413 | 296 | 283 | |||||||
| 273 | 86 | 37 | |||||||
| 281 | 95 | 54 | |||||||
| 68 | 21 | 10 | |||||||
| 2 | (3 | ) | (3 | ) | |||||
| Coal (note 1) Zinc Trail Red Dog Other Inter-segment sales | 1,522 2,490 1,006 253 11 (120) | 896 1,321 156 161 6 - | 753 1,065 131 139 6 - | ||||||
| 1,484 | 708 | 540 | |||||||
| 2,560 | 1,241 | 990 | |||||||
| 929 | 33 | 8 | |||||||
| 228 | 134 | 110 | |||||||
| 4 | 6 | 5 | |||||||
| (99 | ) | - | - | ||||||
| Energy | 1,150 - | 323 - | 276 - | ||||||
| 1,062 | 173 | 123 | |||||||
| 2 | 1 | - | |||||||
| TOTAL | $ 5,162 | $ 2,540 | $ 2,094 | ||||||
| $ 5,108 | $ 2,123 | $ 1,653 |
(1) Our coal business unit represents our interest in six operating mines. We wholly own the Fording River, Coal Mountain, Line Creek and Cardinal River mines, have a 95% partnership interest in the Elkview mine and an 80% joint venture interest in the Greenhills mine.
9 Teck Resources Limited 2012 Second Quarter News Release
COPPER Highland Valley Copper (97.5%)
Operating results at the 100% level are summarized in the following table:
Three months ended Six months ended June 30, June 30,
| 2011 | 2011 | |||
| 2012 | 2012 | |||
| Tonnes milled (000's) Copper Grade (%) Recovery (%) Production (000's tonnes) Sales (000's tonnes) Molybdenum Production (million pounds) Sales (million pounds) Cost of sales ($ millions) Operating costs Distribution costs Depreciation and amortization Gross profit summary ($ millions) (note 1) Before depreciation and amortization Depreciation and amortization | 10,286 0.28 88.4 25.8 26.6 1.7 1.7 $ 106 $ 8 $ 22 $ 136 (22) | 19,868 0.27 87.9 47.2 46.8 3.1 3.5 $ 192 $ 16 $ 39 $ 252 (39) | ||
| 11,894 | 22,768 | |||
| 0.28 | 0.25 | |||
| 82.9 | 83.9 | |||
| 27.3 | 47.4 | |||
| 25.6 | 48.7 | |||
| 2.6 | 4.8 | |||
| 2.4 | 4.7 | |||
| $ 112 | $ 218 | |||
| $ 8 | $ 16 | |||
| $ 32 | $ 54 | |||
| $ 107 | $ 213 | |||
| (32) | (54) | |||
| After depreciation and amortization | $ 114 | $ 213 | ||
| $ 75 | $ 159 |
(1) Results do not include a provision for the 2.5% non-controlling interest in Highland Valley Copper.
The decline in Highland Valley Copper's second quarter gross profit before depreciation and amortization was primarily due to lower copper prices. Copper sales volumes in the second quarter were slightly lower than the same period a year ago due to timing of shipments.
Copper production of 27,300 tonnes was 6% higher primarily as a result of higher throughput in the mill, partially offset by lower recovery. Throughput improvement projects are continuing to demonstrate strong results as the mill processed 16% more material than the same quarter last year. Molybdenum production was also strong in the quarter as a result of the additional throughput and higher feed grades.
Cost of sales in the second quarter were similar to the same quarter a year ago, with the benefits realized from improvement projects largely offsetting higher costs associated with the increased throughput. The mill modernization project is progressing, with detailed engineering now over 50% complete. Concrete work has started and steel erection will commence in the third quarter.
10 Teck Resources Limited 2012 Second Quarter News Release
Antamina (22.5%)
Operating results at the 100% level are summarized in the following table:
Three months ended Six months ended June 30, June 30,
| 2011 | 2011 | |||||
| 2012 | 2012 | |||||
| Tonnes milled (000's) Copper-only ore Copper-zinc ore Copper (note 1) Grade (%) Recovery (%) Production (000's tonnes) Sales (000's tonnes) Zinc (note 1) Grade (%) Recovery (%) Production (000's tonnes) Sales (000's tonnes) Molybdenum Production (million pounds) Sales (million pounds) Cost of sales (US$ millions) Operating costs Distribution costs Royalties and other costs (note 2) Depreciation and amortization Gross profit summary (our 22.5% share) ($ millions) Before depreciation and amortization Depreciation and amortization | 5,811 3,442 | 10,783 7,759 | ||||
| 7,796 | 14,182 | |||||
| 4,499 | 8,275 | |||||
| 9,253 0.90 84.8 69.1 72.4 2.38 85.9 71.6 64.8 2.7 2.3 $ 133 $ 19 $ 49 $ 27 $ 134 (5) | 18,542 0.95 84.1 145.5 152.7 2.27 85.3 156.4 154.8 4.9 4.9 $ 273 $ 44 $ 115 $ 53 $ 294 (11) | |||||
| 12,295 | 22,457 | |||||
| 1.01 | 1.03 | |||||
| 86.4 | 86.5 | |||||
| 106.9 | 201.7 | |||||
| 100.6 | 194.9 | |||||
| 1.84 | 1.85 | |||||
| 79.9 | 79.7 | |||||
| 64.2 | 123.5 | |||||
| 64.1 | 111.6 | |||||
| 3.0 | 6.4 | |||||
| 3.2 | 7.6 | |||||
| $ 191 | $ 366 | |||||
| $ 27 | $ 51 | |||||
| $ 47 | $ 103 | |||||
| $ 35 | $ 64 | |||||
| $ 148 | $ 296 | |||||
| (7 | ) | (13 | ) | |||
| After depreciation and amortization | $ 129 | $ 283 | ||||
| $ 141 | $ 283 |
(1) Copper ore grades and recoveries apply to all of the processed ores. Zinc ore grades and recoveries apply to copper-zinc ores only.
(2) In addition to royalties paid by Antamina, we also pay a royalty in connection with the acquisition of our interest in Antamina equivalent to 7.4% of our share of cash flow distributed by the mine.
The increase in our 22.5% share of Antamina’s gross profit before depreciation and amortization in the second quarter was primarily due to higher copper production and sales volumes as the benefits from the expansion project began to be realized. Higher sales volumes were partially offset by the significantly lower copper and zinc prices.
11 Teck Resources Limited 2012 Second Quarter News Release Tonnes milled in the second quarter were 33% higher than a year ago and averaged approximately 135,100 tonnes per day, which reflects Antamina’s expanded mill capacity.
The mix of mill feed in the second quarter was 63% copper-only ore and 37% copper-zinc ore, similar to the same period a year ago. Copper production increased by 55% to 106,900 tonnes compared with 69,100 tonnes in the second quarter of 2011. The higher production was the result of the mill expansion, as well as higher head grades and improved recovery. Zinc production decreased to 64,200 tonnes from 71,600 tonnes in the same period a year ago due to lower zinc grades and recoveries. Molybdenum production rose slightly in the second quarter compared with a year ago as a result of higher throughput of copper-only ores with higher molybdenum grades.
Negotiations for a new collective labour agreement have commenced as the current agreement expired on July 23, 2012.
12 Teck Resources Limited 2012 Second Quarter News Release