Teck Reports Unaudited Annual and Fourth Quarter Results for 2020 Advancing Our Copper Growth Strategy and Improved Cost Structure
VANCOUVER, British Columbia, Feb. 17, 2021 (GLOBE NEWSWIRE) -- Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK) (“Teck”) today announced its unaudited annual and fourth quarter results for 2020 and guidance for 2021.
“Without question, 2020 was one of the most challenging years any of us have experienced, as we worked to manage through the global pandemic and its impacts on people, communities and the economy. The Teck team rose to meet that challenge, putting in place comprehensive measures to protect health and safety and ensure we could continue to operate responsibly and progress our strategy to grow copper production and optimize productivity and cost structures at our existing operations,” said Don Lindsay, President and CEO. “In the fourth quarter we delivered the strongest quarterly financial results of 2020, while also outperforming the same period in 2019. As of the end of the year we achieved our target of forty percent overall completion of our QB2 Project which, when operating at full capacity, will double our total consolidated copper production. This, in conjunction with our ongoing focus on reducing costs and deploying RACE21™ technology-driven improvements across our operations, will ensure we are well positioned as the rollout of vaccines and broad-based economic stimulus drive global economic recovery and associated commodity demand.”
Highlights
- Adjusted profit attributable to shareholders(1) (2) of $248 million or $0.47 per share in Q4 2020 and $561 million or $1.05 per share for the year.
- Adjusted EBITDA(1) (2) of $839 million in Q4 2020 and $2.6 billion for the year.
- The QB2 project met our target of 40% overall completion at the end of 2020, with our on-site workforce ramped back up to pre-COVID-19 construction levels.
- Our copper business unit had a strong Q4 2020, supported by an increase in copper prices. Copper production in the quarter was 78,100 tonnes with net cash unit costs(1)(2) of US$1.27 per pound sold.
- Adjusted site cash cost of sales(1) (2) in Q4 2020 in our steelmaking coal business of $58 per tonne down $9 per tonne compared to Q3 2020.
- Steelmaking coal sales near the top end of our Q4 2020 guidance range at 6.1 million tonnes with nearly 20% of sales to Chinese customers. Subsequent to the end of 2020, FOB Australia pricing levels increased significantly and are currently approximately US$40 per tonne higher than at the start of 2021, and CFR China prices have increased to above US$220 per tonne.
- Exceeded our cost reduction target, realizing more than $1.0 billion in savings as of the end of 2020.
Notes:
1) Non-GAAP Financial Measure. See “Use of Non-GAAP Financial Measures” section for further information.
2) See “Use of Non-GAAP Financial Measures” section for reconciliation.
Financial Summary Q4 and Annual 2020
Financial Metrics Q4 Q4
(CAD$ in millions, except per share data) 2020 2019 2020 2019 Revenues $ 2,560 $ 2,655 $ 8,948 $11,934 Gross profit before depreciation and amortization1 2 $ 911 $ 875 $ 2,843 $ 4,959 Gross profit $ 505 $ 460 $ 1,333 $ 3,340 Adjusted EBITDA1 2 $ 839 $ 785 $ 2,570 $ 4,473 Profit (loss) attributable to shareholders $ (464)$(1,835) $ (864)$ (605) Adjusted profit attributable to shareholders1 2 $ 248 $ 223 $ 561 $ 1,697 Basic earnings (loss) per share $ (0.87)$ (3.33) $ (1.62)$ (1.08) Diluted earnings (loss) per share $ (0.87)$ (3.33) $ (1.62)$ (1.08) Adjusted basic earnings per share1 2 $ 0.47 $ 0.40 $ 1.05 $ 3.03 Adjusted diluted earnings per share1 2 $ 0.46 $ 0.40 $ 1.04 $ 3.00
Notes:
1. Non-GAAP Financial Measure. See “Use of Non-GAAP Financial Measures” section for further information.
2. See “Use of Non-GAAP Financial Measures” section for reconciliation.
- In Q4 2020, we recorded a non-cash, pre-tax impairment of $597 million (after-tax $438 million) on our interest in Fort Hills.
- Liquidity of $6.5 billion as at February 17, 2021.
Key Updates
Executing on our copper growth strategy – QB2 a long-life, low-cost operation with major expansion potential
- Through Q4 2020, the project continued its staged ramp up of the construction workforce to pre-COVID-19 levels in line with our plans developed in Q2 2020.
- The project continues to enhance its protocols for, and management of, COVID-19;
- Work is progressing across the project in line with our current plan;
- Achieved our target of overall project progress of 40% at year end, and;
- First production is expected in the second half of 2022, but is dependent on our continued ability to successfully manage through the impacts of COVID- 19, among other things.
- We have updated our estimate of the overall COVID-19 related project costs based on our current assumptions arising from the suspension and impacts to construction productivity seen to date under our COVID-19 protocols.
- The estimated impact, including expensed costs and additional camp space, is expected to be approximately US$450 to US$500 million (excluding interest), an increase of approximately US$50 million over our previous guidance.
- Click here for photos of construction progress on QB2.
Operational resilience in the face of a global pandemic
- Despite ongoing challenges associated with COVID-19, in the second half of 2020 our operations performed in line with plan and without significant impacts carrying over to our 2021 operating plans.
- All of our business units achieved H2 2020 production and sales guidance.
- Our zinc, steelmaking coal and energy business units achieved H2 2020 unit cost guidance and our copper business unit achieved H2 2020 net unit cost guidance.
- In 2020, our safety performance metrics were at their lowest, representing our safest year on record.
Increasing margins – not volumes – in our steelmaking coal business
- Steelmaking coal adjusted site cash cost of sales decreased in the fourth quarter to $58 per tonne, ahead of plan due to:
- Elkview plant expansion;
- The closure of our higher cost Cardinal River Operations;
- Declining strip ratios, as planned;
- Benefits of our cost reduction program; and
- RACE21™ initiatives.
- We completed construction and pre-commissioning of the Elkview saturated rock fill in the fourth quarter, on schedule and below budget.
- The Neptune Bulk Terminals (Neptune) upgrade project to secure a lower cost, more reliable supply chain for our steelmaking coal is in the final phase of construction.
- All major equipment has been installed and work activity is focused on final mechanical installations and completion of electrical and control systems. Significant new facilities have already been placed into operation and are performing to plan.
- The surge in COVID-19 infections that started in Q4 has impacted both cost and schedule on the project, although first steelmaking coal is still expected to be handled through the new double dumper in early Q2 2021. The total cost of the project before the impact of COVID-19 is expected to be
approximately 10% above our previous estimate and costs associated with COVID-19 impacts since the onset of the pandemic are estimated to be an additional $80 to $100 million.
Strong financial position
- We have US$3.7 billion available on our US$4.0 billion revolving credit facility and our US$1.0 billion revolving credit facility is undrawn as at February 17, 2021. These facilities are committed to November 2024 and June 2022, respectively. Neither facility has an earnings or cash flow based financial covenant, a credit rating trigger or a general material adverse effect borrowing condition.
- Since the launch of our cost reduction program at the beginning of Q4 2019, we have realized approximately $355 million in operating cost and $710 million in capital cost reductions. These reductions are against our expected spending that was contemplated at the end of June 2019. Our cost reduction program is now complete and reductions are included in our operating plans and guidance.
Safety and sustainability leadership
- Health and Safety is a core value for Teck. We are deeply saddened by the fatality that took place in January 2021 at our Red Dog operations. Our investigation of the incident is ongoing.
- We were named to the S&P 2020 Dow Jones Sustainability World Index for the 11th consecutive year and recognized as the industry leader in Metals and Mining. We were also recognized in January as one of the 2021 Global 100 Most Sustainable Corporations by Corporate Knights.
- We were named to the Forbes World’s Best Employers 2020 list, Canada’s Top Employers for Young People 2021 and as one of Canada’s Top 100 Employers for the fourth consecutive year by Mediacorp Canada’s Top Employer’s program.
- We were named to the 2021 Bloomberg Gender-Equality Index for the fourth straight year.
Guidance
- Summary guidance for 2021 is outlined below and our usual guidance tables, including three-year production guidance, can be found on pages 36 — 39 of Teck’s full fourth quarter results for 2020 at the link below.
2021 Guidance – Summary Production Guidance
Copper (000’s tonnes) 275 –
Zinc (000’s tonnes) 585 –
Refined zinc (000’s tonnes) 300 –
Steelmaking coal (million tonnes) 25.5 – 26.5 Bitumen (million barrels) 8.6 – 12.1
Sales Guidance – Q1 2021
Red Dog zinc in concentrate sales (000’s tonnes) 90 – 100 Steelmaking coal sales (million tonnes) 5.9 – 6.3
Unit Cost Guidance
Copper net cash unit costs (US$/lb.) 1.30 – $ 1.40 Zinc net cash unit costs (US$/lb.) 0.40 – $ 0.45 Steelmaking coal adjusted site cash cost of sales (CAD$/tonne) $ 59 – 64 Steelmaking coal transportation costs (CAD$/tonne) $ 36 – 39 Bitumen adjusted operating costs (CAD$/barrel) $ 28 – 32
Click here to view Teck’s full fourth quarter results for 2020.
WEBCAST
Teck will host an Investor Conference Call to discuss its Q4/2020 financial results at 11:00 AM Eastern time, 8:00 AM Pacific time, on Thursday, February 18, 2021. A live audio webcast of the conference call, together with supporting presentation slides, will be available at our website at www.teck.com. The webcast will be archived at www.teck.com
Reference:
Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analysis:
604.699.4621
Marcia Smith, Senior Vice President, Sustainability and External Affairs: 604.699.4616
Use of Non-GAAP Financial Measures
Our 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 Financial Measures which are not measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS or Generally Accepted Accounting Principles (GAAP) in the United States. These Non-GAAP Financial Measures are discussed below, as well as defined and reconciled, as applicable, to the relevant IFRS measure.
Adjusted profit attributable to shareholders – For adjusted profit, we adjust profit attributable to shareholders as reported to remove the after-tax effect of certain types of transactions that reflect measurement changes on our balance sheet or are not indicative of our normal operating activities. We believe adjusted profit helps us and readers better understand the results of our normal operating activities and the ongoing cash generating potential of our business.
Adjusted basic earnings per share – Adjusted basic earnings per share is adjusted profit divided by average number of shares outstanding in the period.
Adjusted diluted earnings per share – Adjusted diluted earnings per share is adjusted profit divided by average number of fully diluted shares in a period.
EBITDA – EBITDA is profit before net finance expense, provision for income taxes, and depreciation and amortization.
Adjusted EBITDA – Adjusted EBITDA is EBITDA before the pre-tax effect of the adjustments that we make to adjusted profit attributable to shareholders as described above.
The adjustments described above to profit attributable to shareholders and EBITDA highlight items and allow us and readers to analyze the rest of our results more clearly. We believe that disclosing these measures assists readers in understanding the ongoing cash generating potential of our business in order to provide liquidity to fund working capital needs, service outstanding debt, fund future capital expenditures and investment opportunities, and pay dividends.
Gross profit before depreciation and amortization – Gross profit before depreciation and amortization is gross profit with the depreciation and amortization expense added back. We believe this measure assists us and readers to assess our ability to generate cash flow from our business units or operations.
Net cash unit costs – Net cash unit costs of principal product, after deducting co-product and by-product margins, are also a common industry measure. By deducting the co- and by-product margin per unit of the principal product, the margin for the mine on a per unit basis may be presented in a single metric for comparison to other operations. Readers should be aware that this metric, by excluding certain items and reclassifying cost and revenue items, distorts our actual production costs as determined under IFRS.
Adjusted site cash cost of sales – Adjusted site cash cost of sales for our steelmaking coal operations is defined as the cost of the product as it leaves the mine excluding depreciation and amortization charges, out-bound transportation costs and any one-time collective agreement charges and inventory write-down provisions.
Profit (Loss) and Adjusted Profit
Three months Year ended ended December 31, December 31, (CAD$ in millions) 2020 2019 2020 2019 Profit (loss) attributable to shareholders $ (464) $ (1,835) $ (864) $ (605) Add (deduct) on an after-tax basis:
| Asset impairments | 438 | 1,943 | 912 | 2,052 |
| COVID-19 costs | – | – | 233 | – |
| Environmental costs | 201 | 62 | 210 | 142 |
| Inventory write-downs | 15 | 34 | 91 | 41 |
| Share-based compensation | 21 | 4 | 34 | 3 |
| Commodity derivative losses (gains) | (15) | 1 | (46) | (13) |
| Debt prepayment option gain | – | – | – | (77) |
| Loss on debt redemption or purchase | – | – | 8 | 166 |
| Taxes and other | 52 | 14 | (17) | (12) |
| Adjusted profit attributable to shareholders | $ 248 $ | 223 $ | 561 $ 1,697 | |
| Adjusted basic earnings per share | $ 0.47 $ | 0.40 $ | 1.05 $ | 3.03 |
| Adjusted diluted earnings per share | $ 0.46 $ | 0.40 $ | 1.04 $ | 3.00 |
Reconciliation of Basic Earnings per share to Adjusted Basic Earnings per share
Three months Year ended ended December 31, December 31, (Per share amounts) 2020 2019 2020 2019
Basic earnings (loss) per share $ (0.87) $ (3.33) $ (1.62) $ (1.08) Add (deduct):
| Asset impairments | 0.82 | 3.52 | 1.71 | 3.67 | ||
| COVID-19 costs | – | – | 0.44 | – | ||
| Environmental costs | 0.37 | 0.11 | 0.39 | 0.25 | ||
| Inventory write-downs | 0.03 | 0.06 | 0.17 | 0.07 | ||
| Share-based compensation | 0.04 | 0.01 | 0.06 | 0.01 | ||
| Commodity derivative losses (gains) | (0.03) | – (0.09) | (0.02) | |||
| Debt prepayment option gain | – | – | – | (0.13) | ||
| Loss on debt redemption or purchase | – | – | 0.01 | 0.29 | ||
| Taxes and other | 0.11 | 0.03 (0.02) | (0.03) | |||
| Adjusted basic earnings per share | $ 0.47 $ | 0.40 $ | 1.05 $ | 3.03 |
Reconciliation of Diluted Earnings per share to Adjusted Diluted Earnings per share
Three months Year ended ended December 31, December 31, (Per share amounts) 2020 2019 2020 2019
Diluted earnings (loss) per share $ (0.87) $ (3.33) $ (1.62) $ (1.08) Add (deduct):
| Asset impairments | 0.82 | 3.49 | 1.70 | 3.63 | ||
| COVID-19 costs | – | – | 0.43 | – | ||
| Environmental costs | 0.37 | 0.11 | 0.39 | 0.25 | ||
| Inventory write-downs | 0.03 | 0.06 | 0.17 | 0.07 | ||
| Share-based compensation | 0.04 | 0.01 | 0.07 | 0.01 | ||
| Commodity derivative losses (gains) | (0.03) | – (0.09) | (0.02) | |||
| Debt prepayment option gain | – | – | – | (0.13) | ||
| Debt redemption loss | – | – | 0.01 | 0.29 | ||
| Taxes and other | 0.10 | 0.06 (0.02) | (0.02) | |||
| Adjusted diluted earnings per share | $ 0.46 $ | 0.40 $ | 1.04 $ | 3.00 |
Reconciliation of EBITDA and Adjusted EBITDA
Three months Year ended ended December 31 December 31,
| (CAD$ in millions) | 2020 | 2019 2020 | 2019 | |
| Profit (loss) | $ (473) $ (1,855) $ | (944) $ | (588) | |
| Finance expense net of finance income | 44 | 46 | 268 | 218 |
| Provision for (recovery of) income taxes | (76) | (510) | (192) | 120 |
| Depreciation and amortization | 406 | 415 1,510 1,619 | ||
| EBITDA | (99) (1,904) | 642 1,369 |
Add (deduct):
Asset impairments 597 2,519 1,244 2,690
| COVID-19 costs | – | – | 336 | – |
| Environmental costs | 258 | 85 | 270 | 197 |
| Inventory write-downs | 23 | 51 | 134 | 60 |
| Share-based compensation | 29 | 6 | 47 | 4 |
| Commodity derivative losses (gains) | (20) | 2 | (62) | (17) |
| Debt prepayment option gain | – | – | – | (105) |
| Loss on debt redemption or purchase | – | – | 11 | 224 |
| Taxes and other | 51 | 26 | (52) | 51 |
| Adjusted EBITDA | $ 839 $ | 785 $ 2,570 $ 4,473 |
Reconciliation of Gross Profit Before Depreciation and Amortization
Three months Year ended ended December 31, December 31, (CAD$ in millions) 2020 2019 2020 2019
Gross profit $ 505 $ 460 $ 1,333 $ 3,340 Depreciation and amortization 406 415 1,510 1,619
Gross profit before depreciation and amortization $ 911 $ 875 $ 2,843 $ 4,959
Reported as:
Copper
| Highland Valley Copper | $ 185 $ | 117 $ | 476 $ | 395 |
| Antamina | 210 | 164 | 566 | 614 |
| Carmen de Andacollo | 63 | (14) | 170 | 89 |
| Quebrada Blanca | 12 | (28) | 30 | (18) |
470 239 1,242 1,080
Zinc
| Trail Operations | 27 | (10) | 65 | – |
| Red Dog | 188 | 210 | 717 | 837 |
| Pend Oreille | – | – | – | (4) |
| Other | 2 | (15) | 33 | (2) |
| 217 | 185 | 815 | 831 | |
| Steelmaking coal | 248 | 448 1,009 2,904 | ||
| Energy | (24) | 3 | (223) | 144 |
Gross profit before depreciation and amortization $ 911 $ 875 $ 2,843 $ 4,959
Copper Unit Cost Reconciliation
Three months ended Year ended December 31, December 31, (CAD$ in millions, except where noted) 2020 2019 2020 2019
| Revenue as reported | $ | 820 $ | 592 $ 2,419 $ 2,469 | ||
|---|---|---|---|---|---|
| By-product revenue (A) | (104) | (68 ) | (300) | (311) | |
| Smelter processing charges (B) | 40 | 38 | 140 | 164 | |
| Adjusted revenue | $ | 756 $ | 562 $ 2,259 $ 2,322 | ||
| Cost of sales as reported | $ | 452 $ | 462 $ 1,560 $ 1,852 |
Less:
| Depreciation and amortization | (102) | (109 ) | (383) | (463) |
| Inventory (write-downs) provision reversal | – | (20 ) | – | (24) |
| Labour settlement and strike costs | – | (22 ) | – | (35) |
| By-product cost of sales (C) | (29) | (19 ) | (71) | (58) |
| Adjusted cash cost of sales (D) | $ 321 $ | 292 $ 1,106 $ 1,272 |
Payable pounds sold (millions) (E) 172.7 158.5 591.7 641.7
Per unit amounts – CAD$/pound
| Adjusted cash cost of sales (D/E) | $ | 1.86 $ | 1.84 $ | 1.87 $ | 1.98 |
| Smelter processing charges (B/E) | 0.23 | 0.24 | 0.23 | 0.26 | |
| Total cash unit costs – CAD$/pound | $ | 2.09 $ | 2.08 $ | 2.10 $ | 2.24 |
Cash margin for by-products – ((A – C)/E) (0.43) (0.31 ) (0.39) (0.39)
Net cash unit costs – CAD$/pound $ 1.66 $ 1.77 $ 1.71 $ 1.85
US$ amounts1 Average exchange rate (CAD$ per US$1.00) $ 1.30 $ 1.32 $ 1.34 $ 1.33
Per unit amounts – US$/pound
| Adjusted cash cost of sales | $ | 1.42 $ | 1.40 $ | 1.39 $ | 1.49 |
| Smelter processing charges | 0.18 | 0.18 | 0.18 | 0.19 | |
| Total cash unit costs – US$/pound | $ | 1.60 $ | 1.58 $ | 1.57 $ | 1.68 |
Cash margin for by-products (0.33) (0.24 ) (0.29) (0.29)
Net cash unit costs – US$/pound $ 1.27 $ 1.34 $ 1.28 $ 1.39
Note:
1. Average period exchange rates are used to convert to US$ per pound equivalent.
Steelmaking Coal Unit Cost Reconciliation
Three months ended Year ended December 31, December 31, (CAD$ in millions, except where noted) 2020 2019 2020 2019
Cost of sales as reported $ 825 $ 864 $ 3,098 $ 3,410 Less:
| Transportation costs | (245) (249) | (905) | (976) | ||
| Depreciation and amortization | (212) (207) | (732) | (792) | ||
| Inventory (write-down) reversal | (14) | (28) | (59) | (32) | |
| Labour settlement | – | – | (4) | – | |
| Adjusted site cash cost of sales | $ 354 $ | 380 $ 1,398 $ 1,610 | |||
| Tonnes sold (millions) | 6.1 | 6.3 | 21.9 | 25.0 |
Per unit amounts – CAD$/tonne
| Adjusted site cash cost of sales | $ | 58 $ | 60 $ | 64 $ | 65 |
| Transportation costs | 40 | 40 | 41 | 39 | |
| Inventory write-downs | 2 | 4 | 3 | 1 | |
| Unit costs – CAD$/tonne | $ | 100 $ | 104 $ | 108 $ | 105 |
US$ amounts1 Average exchange rate (CAD$ per US$1.00) $ 1.30 $ 1.32 $ 1.34 $ 1.33 Per unit amounts – US$/tonne
| Adjusted site cash cost of sales | $ | 44 $ | 46 $ | 47 $ | 49 |
| Transportation costs | 31 | 30 | 31 | 29 | |
| Inventory write-downs | 2 | 3 | 2 | 1 | |
| Unit costs – US$/tonne | $ | 77 $ | 79 $ | 80 $ | 79 |
Note:
1. Average period exchange rates are used to convert to US$/tonne equivalent.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This news release contains certain forward-looking information and forward-looking statements as defined in applicable securities laws (collectively referred to as forwardlooking 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 focus and strategy; anticipated global and regional supply, demand and market outlook for our commodities; 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; our ability to manage challenges presented by COVID-19, including the effectiveness of our management protocols implemented to protect the health and safety of our employees; expected impacts of COVID-19 on our 2021 operating plans; expectation that we will be well positioned as the rollout of vaccines and stimulus in the event of global economic recovery and associated commodity demand; QB2 ramp-up plans and expectations and timing of Teck’s contributions to project capital; estimated COVID-19 related costs on our QB2 project; impact of the construction suspension period at our QB2 project; estimated timing of first production from QB2; expectation that QB2 will be a longlife, low-cost operation with major expansion potential; effectiveness of our tailings and water-related projects to manage increased water volumes at Red Dog, including expectation that they will minimize potential constraints on production in the future; expectations regarding the Neptune Bulk Terminals facility upgrade including costs, benefits and timing of completion of the upgrade, our expectations regarding the continued impact of costs associated with COVID-19 response measures on unit costs; expectations regarding the benefits of CP and CN Rail infrastructure improvements to support increased volumes through Neptune Bulk Terminals; expectation regarding mining in new areas at Fording River, Elkview and Greenhills Operation and anticipated long term production from these operations; coal sales to China targets; benefits of the agreements with Westshore and