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: October 24, 2013 13-32-TR
TECK REPORTS UNAUDITED THIRD QUARTER RESULTS FOR 2013
Vancouver, BC – Teck Resources Limited (TSX: TCK.A and TCK.B, NYSE: TCK) (“Teck”)
reported third quarter adjusted profit of $252 million, or $0.44 per share, compared with $425 million or $0.73 per share in 2012.
“We are pleased with our operating performance this quarter,” said Don Lindsay, President and CEO. “Our steelmaking coal sales of 7.6 million tonnes set a quarterly record and demand from customers is strong. However, the current price for steelmaking coal remains below what we believe is required to sustain adequate production in the industry in the long term. With the current market conditions, our near term efforts are focusing on our $330 million cost reduction program, reducing our sustaining capital spending and reviewing the timing of our various development projects.”
Highlights and Significant Items
- Coal sales in the third quarter were a record 7.6 million tonnes, up 36% from a year ago.
- Gross profit before depreciation and amortization was $919 million in the third quarter compared with $1.1 billion the third quarter of 2012.
- Cash flow from operations, before working capital changes, was $647 million in the third quarter compared with $885 million a year ago.
- Profit attributable to shareholders was $267 million and EBITDA was $815 million in the third quarter.
- Our cash balance was $2.3 billion at September 30, 2013.
- We continue to implement our cost reduction program and to date our existing operations have identified over $330 million of annual ongoing potential cost savings at constant production levels and have implemented $300 million of these initiatives.
- To date we have reached agreements with our coal customers to sell 5.6 million tonnes of coal in the fourth quarter of 2013 at an average price of US$145 per tonne and expect total sales in the fourth quarter, including spot sales, to be at or above 6.3 million tonnes.
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
- Coal cost of sales before transportation costs declined to $50 per tonne in the third quarter compared with $58 per tonne a year ago.
- We received the British Columbia Environmental Assessment Certificate for our Line Creek Phase 2 project which will maintain production and extend the mine life by 18 years.
- We reached an agreement to purchase approximately 7,150 hectares of private land in the Elk and Flathead valleys of British Columbia for $19 million, in order to protect key wildlife and fish habitat. These lands, in combination with ongoing reclamation work at our operations, will help us to achieve our sustainability goal of creating a net-positive impact on biodiversity.
- We were named to the Dow Jones Sustainability World Index (“DJSI”) for the fourth straight year, indicating that our sustainability practices rank in the top ten percent of the world’s 2,500 largest public companies.
2 Teck Resources Limited 2013 Third Quarter News Release
This management’s discussion and analysis is dated as at October 24, 2013 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 September 30, 2013 and with the audited consolidated financial statements of Teck and the notes thereto for the year ended December 31, 2012. 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, 2012, 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
Profits are lower than last year as a result of lower prices for all of our principal products. Coal and copper prices in the third quarter declined by 28% and 8%, respectively, compared with the same period a year ago. Based on sales volumes, these lower prices resulted in our revenues being approximately $410 million lower than in the third quarter of last year.
Production and sales volumes were at or above last year’s levels for our major products other than copper. Coal production was up 6% over last year and up 12% over last quarter and we set a new quarterly sales record of 7.6 million tonnes of coal. For copper, reduced throughput at Quebrada Blanca, in addition to lower grades at most of our mines, adversely affected production. We continued to focus on operating costs as unit costs were significantly lower in coal and total operating costs in copper were unchanged.
Our cost reduction program at all of our sites continues to make significant progress. We have identified over $330 million of potential ongoing, annual operating cost savings across the company, of which $300 million have been implemented. An additional $130 million of one-time cost savings and deferrals have also been identified and implemented. As a result, our site cash production costs this year are down by approximately $65 million per quarter since the beginning of the program in the fourth quarter of 2012, excluding the effect of labour settlement charges in 2012. We have also reduced our planned spending on exploration by approximately 15% while maintaining our commitments to partners and have reduced our corporate overhead.
We continue to delay the development of some of our internal growth projects and have deferred capital spending. At Quintette, we delayed the final stage of development for the mine and will not start the development until we see a sustained improvement in demand for steelmaking coal. We have also slowed the development of Quebrada Blanca Phase 2 in part as a result of market conditions. We plan to update permits for our existing operations at Quebrada Blanca to reflect the longer mine life before resubmission of the social and environmental impact assessment (“SEIA”) for Phase 2. We are also taking action to reduce sustaining capital expenditures.
3 Teck Resources Limited 2013 Third Quarter News Release
Profit and Adjusted Profit*
Adjusted profit, which excludes the effect of certain transactions as described in the table below, was $252 million, or $0.44 per share, in the third quarter of 2013 compared with $425 million, or $0.73 per share, in the same period a year ago. The decline in adjusted profit was primarily due to significantly lower coal prices, partially offset by record sales volumes for coal in the quarter.
Profit attributable to shareholders was $267 million, or $0.46 per share, in the third quarter compared with $256 million, or $0.44 per share, in the same period last year. Profit last year was affected by a $196 million after-tax charge related to the refinancing of a portion of our debt.
Three months Nine months ended September 30, ended September 30,
| ($ in millions) | 2013 | 2012 | 2013 | 2012 |
| Profit attributable to shareholders as reported Add (deduct): Asset sales and provisions Foreign exchange (gains) losses Derivative (gains) losses Collective agreement charges Financing items Tax related items Adjusted profit Adjusted earnings per share | $ 256 (22) 2 (48) 9 196 32 | $ 868 (43) 21 (95) 59 525 32 | ||
| $ 267 | $ 729 | |||
| 5 | 27 | |||
| (9) | 13 | |||
| (1) | (2) | |||
| - | - | |||
| - | - | |||
| (10) | 10 | |||
| $ 252 | $ 425 | $ 777 | $ 1,367 | |
| $ 0.73 | $ 2.34 | |||
| $ 0.44 | $ 1.34 |
- 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 2013 Third Quarter News Release Our business unit results are presented in the tables below.
Three Months ended September 30 Gross profit before depreciation and
($ in millions) Revenues amortization Gross profit
| 2012 | 2012 | 2012 | ||||
| 2013 | 2013 | 2013 | ||||
| Copper Coal Zinc Energy | $ 763 1,077 664 1 | $ 392 548 135 1 | $ 299 421 107 - | |||
| $ 714 | $ 318 | $ 226 | ||||
| 1,088 | 417 | 217 | ||||
| 721 | 183 | 154 | ||||
| 1 | 1 | - | ||||
| Total | $ 2,505 | $ 1,076 | $ 827 | |||
| $ 2,524 | $ 919 | $ 597 |
Gross profit before depreciation and amortization from our copper business unit decreased by $74 million in the third quarter compared with a year ago primarily as a result of lower copper prices, reduced sales volumes and lower molybdenum revenues. Copper prices averaged US$3.21 per pound in the third quarter, a decline of 8% compared with a year ago. Copper production was 91,000 tonnes in the third quarter, up 7% from the second quarter, but lower than the record production levels we achieved in the third and fourth quarters of 2012 when significantly higher than normal grade sections were mined at Highland Valley. Total tonnes mined in the third quarter were the same as a year ago and the cost per tonne mined remained similar year-over-year. Total production costs in the third quarter, before changes in inventory and the effect of translating our costs denominated in U.S. dollars, remained the same as a year ago. Higher costs at Highland Valley due to partial plant shutdowns related to the mill optimization project and commissioning of the new pebble crushing facility, and increased costs at Antamina were offset by substantially lower costs at Quebrada Blanca. Cash unit costs in the third quarter of 2013, before and after by-product credits, were US$2.09 and US$1.71 per pound, respectively, similar to the second quarter of 2013 and 2012 annual unit costs. Cash unit costs, before and after by-product credits, were lower in the third quarter of 2012 at US$1.98 and US$1.53 per pound, respectively, due to the record production, which reduced unit costs and lower molybdenum by-product credits in the third quarter of 2013.
Gross profit before depreciation and amortization from our coal business unit declined by $131 million in the third quarter compared with the same period a year ago due to significantly lower coal prices. This was partially offset by record sales of 7.6 million tonnes and reduced cash operating costs. Coal prices were 28% lower than a year ago and averaged US$139 per tonne in the third quarter of 2013. Sales of 7.6 million tonnes in the third quarter set a new quarterly record, reflecting improving market sentiment through the quarter. Strong demand from contract customers, sales to new customers, good spot sales, and consistently strong performance of our logistics chain, including the expanded capacity at our Neptune Terminals, contributed to maximizing sales in the quarter. The cost of product sold in the third quarter, before transportation and depreciation charges, significantly improved and was reduced to $50 per tonne compared with $58 per tonne in the same period a year ago. Cost reduction initiatives at the mines continue to drive down unit costs across the business unit and many of them have been implemented and delivering savings for over a year.
5 Teck Resources Limited 2013 Third Quarter News Release Gross profit from our zinc business unit, before depreciation and amortization, rose by $48 million compared with a year ago, with both Red Dog and Trail contributing higher gross profits. The increase was primarily due to higher sales volumes, especially from Red Dog, and higher lead prices. Red Dog’s sales volumes of zinc and lead were approximately 25% higher than a year ago when poor weather delayed shipments. Red Dog’s zinc production was 11% higher than a year ago at 142,500 tonnes, as third quarter 2012 production was impacted by fine grained/high silica ore, which required a reduction in mill throughput to achieve acceptable recoveries. Trail’s refined zinc and lead production in the third quarter of 2013 rose 4% and 10%, respectively, as a result of higher throughput and improved operating efficiencies.
Revenues
Revenues from operations of $2.5 billion in the third quarter were the same as a year ago. Revenues from our copper business unit declined by $49 million from a year ago primarily due to lower copper prices and a reduction in molybdenum revenues. Coal revenues in the third quarter remained similar to a year ago as significantly lower coal prices were primarily offset by a 36%, or 2.0 million tonne, increase in sales volumes. Revenues from our zinc business unit increased by $57 million from a year ago primarily due to significantly higher zinc and lead sales volumes from Red Dog. Partly offsetting the coal and metal price declines was the effect of the stronger U.S. dollar in the third quarter compared with a year ago.
Average Prices and Exchange Rates*
Three months Nine months ended September 30, ended September 30,
| 2013 | 2012 % Change | 2013 | 2012 % Change | |
| Copper (LME Cash - US$/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$/pound) Cdn/U.S. exchange rate (Bank of Canada) | 3.50 -8% 193 -28% 0.86 -2% 30 -30% 12 -25% 0.90 6% 1.00 4% | 3.61 -7% 206 -27% 0.88 -1% 31 -19% 13 -23% 0.91 8% 1.00 2% | ||
| 3.21 | 3.35 | |||
| 139 | 151 | |||
| 0.84 | 0.87 | |||
| 21 | 25 | |||
| 9 | 10 | |||
| 0.95 | 0.98 | |||
| 1.04 | 1.02 |
- Except for coal prices, the average commodity prices disclosed above are based on published benchmark prices and are provided for information only. Our actual revenues are determined using commodity prices and other terms and conditions specified in our various sales contracts with our customers. The molybdenum price is the price published in Platts Metals Week.
6 Teck Resources Limited 2013 Third Quarter News Release Our year-to-date business unit results are presented in the table below:
Nine Months ended September 30 Gross profit before depreciation and
($ in millions) Revenues amortization Gross profit
| 2012 | 2012 | |||
| 2013 | 2013 | 2013 | ||
| $ 2,247 3,637 1,726 3 | $ 1,138 1,970 303 2 | |||
| $ 2,091 | $ 1,007 | $ 719 | ||
| 3,150 | 1,377 | 840 | ||
| 1,761 | 396 | 319 | ||
| 4 | 4 | 2 | ||
| $ 7,613 | $ 3,413 | |||
| $ 7,006 | $ 2,784 | $ 1,880 |
2012 Copper $ 885 Coal 1,588 Zinc 226 Energy - Total $ 2,699
7 Teck Resources Limited 2013 Third Quarter News Release The table below shows our production and sales of our major products.
| Units (000's) Production | Sales | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Third Quarter Year-to-date (note 1) 2013 2012 2013 2012 Principal products Copper Contained in concentrate tonnes 77 84 216 219 Cathode tonnes 14 15 43 51 91 99 259 270 Coal tonnes 6,707 6,322 18,955 18,294 Zinc Contained in concentrate tonnes 156 145 464 441 Refined tonnes 77 74 221 217 Other products Lead Contained in concentrate tonnes 23 22 71 69 Refined tonnes 24 21 66 64 Molybdenum Contained in concentrate pounds 1,668 3,448 6,086 9,652 | Third Quarter Year-to-date 2013 2012 2013 2012 80 83 220 215 15 15 44 51 | ||||||||||
| 2012 | 2012 | ||||||||||
| 2013 | 2013 | 2013 | 2013 | ||||||||
| 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 | 219 51 | 215 51 | |||||||||
| 77 | 216 | 80 | 220 | ||||||||
| 14 | 43 | 15 | 44 | ||||||||
| 99 | 270 | 98 | 266 | ||||||||
| 91 | 259 | 95 | 264 | ||||||||
| 6,322 145 74 22 21 3,448 | 18,294 441 217 69 64 9,652 | 5,546 157 75 46 22 3,006 | 17,567 371 220 46 65 9,396 | ||||||||
| 6,707 | 1 | 8,955 | 7,568 | 2 | 0,431 | ||||||
| 156 | 464 | 191 | 412 | ||||||||
| 77 | 221 | 78 | 221 | ||||||||
| 23 | 71 | 60 | 60 | ||||||||
| 24 | 66 | 23 | 64 | ||||||||
| 1,668 | 6,086 | 1,876 | 6,167 |
(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.
8 Teck Resources Limited 2013 Third Quarter News Release
QUARTER ENDED SEPTEMBER, 30
($ in millions) Revenues amortization Gross profit (loss)
| 2012 | 2012 | 2012 | ||||
| 2013 | 2013 | 2013 | ||||
| Copper Highland Valley Copper Antamina Quebrada Blanca Carmen de Andacollo Duck Pond Other | $ 251 227 107 142 31 5 | $ 135 179 10 60 5 3 | $ 102 170 (14) 39 (1) 3 | |||
| $ 206 | $ 75 | $ 48 | ||||
| 226 | 163 | 156 | ||||
| 102 | 25 | - | ||||
| 153 | 54 | 30 | ||||
| 27 | 3 | (6) | ||||
| - | (2) | (2) | ||||
| Coal (note 1) Zinc Trail Red Dog Other Inter-segment sales | 763 1,077 437 288 2 (63) | 392 548 5 136 (6) - | 299 421 (8) 121 (6) - | |||
| 714 | 318 | 226 | ||||
| 1,088 | 417 | 217 | ||||
| 415 | 22 | 8 | ||||
| 354 | 158 | 143 | ||||
| 8 | 3 | 3 | ||||
| (56) | - | - | ||||
| Energy | 664 1 | 135 1 | 107 - | |||
| 721 | 183 | 154 | ||||
| 1 | 1 | - | ||||
| TOTAL | $ 2,505 | $ 1,076 | $ 827 | |||
| $ 2,524 | $ 919 | $ 597 |
(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.
9 Teck Resources Limited 2013 Third Quarter News Release
NINE MONTHS ENDED SEPTEMBER 30
($ in millions) Revenues amortization Gross profit
| 2012 | 2012 | 2012 | ||||||
| 2013 | 2013 | 2013 | ||||||
| Copper Highland Valley Copper Antamina Quebrada Blanca Carmen de Andacollo Duck Pond Other | $ 698 640 380 423 99 7 | $ 359 491 106 155 27 - | $ 279 470 33 94 9 - | |||||
| $ 662 | $ 298 | $ 211 | ||||||
| 572 | 416 | 381 | ||||||
| 311 | 85 | 11 | ||||||
| 466 | 185 | 117 | ||||||
| 73 | 21 | (3 | ) | |||||
| 7 | 2 | 2 | ||||||
| Coal (note 1) Zinc Trail Red Dog Other Inter-segment sales | 2,247 3,637 1,366 516 6 (162) | 1,138 1,970 34 270 (1) - | 885 1,588 (4) 231 (1) - | |||||
| 2,091 | 1,007 | 719 | ||||||
| 3,150 | 1,377 | 840 | ||||||
| 1,323 | 79 | 41 | ||||||
| 594 | 309 | 270 | ||||||
| 11 | 8 | 8 | ||||||
| (167 | ) | - | - | |||||
| Energy | 1,726 3 | 303 2 | 226 - | |||||
| 1,761 | 396 | 319 | ||||||
| 4 | 4 | 2 | ||||||
| TOTAL | $ 7,613 | $ 3,413 | $ 2,699 | |||||
| $ 7,006 | $ 2,784 | $ 1,880 |
(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% interest in the Greenhills mine.
10 Teck Resources Limited 2013 Third Quarter News Release
COPPER Highland Valley Copper (97.5%)
Operating results at the 100% level are summarized in the following table:
Three months ended Nine months ended September 30, September 30,
| 2012 | 2012 | |||
| 2013 | 2013 | |||
| 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 | 10,955 0.32 89.3 31.5 31.5 2.7 2.2 $ 107 $ 9 $ 33 $ 135 (33) | 33,723 0.27 85.9 78.9 80.2 7.5 6.9 $ 314 $ 25 $ 80 $ 359 (80) | ||
| 10,295 | 33,111 | |||
| 0.28 | 0.28 | |||
| 88.5 | 85.5 | |||
| 25.5 | 79.5 | |||
| 27.1 | 83.2 | |||
| 1.0 | 4.4 | |||
| 1.3 | 4.6 | |||
| $ 122 | $ 339 | |||
| $ 9 | $ 25 | |||
| $ 27 | $ 87 | |||
| $ 75 | $ 298 | |||
| (27) | (87) | |||
| After depreciation and amortization | $ 102 | $ 279 | ||
| $ 48 | $ 211 |
(1) Results do not include a provision for the 2.5% non-controlling interest in Highland Valley Copper.
Highland Valley Copper's third quarter gross profit declined by $60 million before depreciation and amortization, primarily due to lower copper prices and lower production levels of both copper and molybdenum.
Copper ore grades mined in the quarter were close to reserve grades, whereas higher than normal grades were mined in the comparable quarter last year. Grades similar to this quarter are expected for the remainder of the year and into 2014. Mill throughput was also lower during the quarter as a result of shutdowns to tie in the new flotation and pebble crushing facilities and other maintenance activities. Molybdenum production declined to 1.0 million pounds from 2.7 million pounds a year ago primarily due to lower ore grades.
Operating costs in the third quarter, before changes in inventory, were $113 million compared with $105 million a year ago. The increase was due to higher labour costs related to the shutdown work and an increase in routine tailings dam costs as the facility expands. As sales exceeded production in the quarter, cost of sales included a change in inventory charge of $9
11 Teck Resources Limited 2013 Third Quarter News Release million in the third quarter compared with $2 million last year. Capitalized stripping costs in third quarter of 2013 were $29 million compared with $26 million a year ago.
The mill optimization project is on schedule for substantial mechanical completion by year end with commissioning of the new flotation facility in the first quarter of 2014. The new pebble crushing facility and grinding line upgrades were commissioned in the third quarter and are operating as designed, but with some minor modifications required. As a result, higher mill throughput rates are anticipated to start in the fourth quarter, with the full throughput benefit in 2014.
Drilling activities are continuing in the Bethlehem area and engineering studies have commenced on the Bethlehem Phase 1 project targeting an initial 100 million tonnes of additional ore reserves.
12 Teck Resources Limited 2013 Third Quarter News Release