Teck reports on Q2 earning—remains “cash flow positive”

Teck Resources Limited CEO Don Lindsay explains highlights of their second quarter financial report. — Photo courtesy Teck

Teck Resources Limited (TSX: TCK.A and TCK.B, NYSE: TCK) (“Teck”) reported second quarter adjusted profit attributable to shareholders of $79 million, or $0.14 per share, compared with $72 million or $0.13 per share in 2014. Profit attributable to shareholders was $63 million ($0.11 per share) compared with $80 million ($0.14 per share) a year ago.

“Our operations have turned in a solid performance for the quarter," said Don Lindsay, President and CEO. "All of our operations have remained cash flow positive after sustaining capital investment and our balance sheet remains strong with over $6.5 billion of liquidity. This has been achieved notwithstanding a material drop in the U.S. dollar spot coal price since the beginning of 2015.”

• Profit attributable to shareholders was $63 million and EBITDA was $596 million in the second quarter.
• Gross profit before depreciation and amortization was $676 million in the second quarter compared with $636 million in the second quarter of 2014.
• Cash flow from operations, before working capital changes, was $531 million in the second quarter of 2015 compared with $520 million a year ago.
• We have reached agreements with the majority of our customers for the third quarter of 2015, based on a quarterly benchmark of US$93 per tonne for the highest quality product and we expect total sales in the third quarter, including spot sales, to be at least 6.0 million tonnes of steelmaking coal.
• All critical milestones are being achieved on the Fort Hills oil sands project. The partners are focused on opportunities to manage capital cost in the current economic environment.
• A falling Canadian dollar, lower oil prices and our cost reduction program have contributed to reduce our U.S. dollar unit costs for our products with copper and coal unit costs falling by US$0.15 per pound and US$17 per tonne, respectively, compared to last year.
• The Red Dog concentrate shipping season commenced on June 28, with the first vessel sailing. We expect sales of 170,000 tonnes of contained zinc metal in the third quarter and 200,000 tonnes in the fourth quarter reflecting the normal seasonal pattern of Red Dog sales.
• Our liquidity remains strong at over $6.5 billion inclusive of $1.5 billion cash at July 22, 2015 and US$4.2 billion of undrawn, committed credit facilities. Our cash balance is in line with expectations and consistent with our goal of finishing the year with at least $1.0 billion in cash.
• On May 28, in response to steelmaking coal market conditions we announced rotating shutdowns totaling three weeks in the third quarter at our steelmaking coal mines. These shutdowns have commenced and further steps to reduce production may be taken in the fourth quarter unless the supply-demand balance in the market improves.
• On June 25, unexpected ground movement was observed in the area of the SX-EW plant at our Quebrada Blanca Operations in Chile leading to a temporary suspension of cathode production. Partial production has since resumed. Production in the second half of 2015 is expected to be reduced by 5,000 to 10,000 tonnes of copper cathode.
• As planned, Duck Pond ceased operations on June 30 after exhausting all of its remaining ore resources.
• On July 9, we increased our cash position by US$162 million as a result of entering into a gold offtake agreement and terminating a separate royalty agreement with subsidiaries of Royal Gold, Inc. related to our Carmen de Andacollo Operation.
• We were the top-ranked mining company and fourth-ranked company overall named to the Best 50 Corporate Citizens in Canada ranking by media and investment research company Corporate Knights and were also named one of the Top 50 Socially Responsible Corporations in Canada by Sustainalytics, a global responsible investment research firm.

In the Q&A portion of the report, CEO Don Lindsay stated, when asked to discuss potential future cuts to coal production, he said this decision won’t be made until September.

In May, the company announced they would temporally idle their six coal operations. The mines, including five in the Elk Valley, are on a rotating shutdown over the summer which affects approximately 4,400 workers, mostly in B.C.