Trent Ernst, Editor
People anxiously waiting for Teck to restart Quintette will have to wait at least a little longer, despite strengthening coal prices.
That’s the word from President and CEO Don Lindsay during the Q2 conference call last week.
Teck reported their second quarter results on July 28. The company is in surprisingly good shape, due to cost cutting measures and slightly stronger prices.
“While the commodity cycle continues to be challenging, we are starting to see some positive changes in the direction of zinc and steelmaking coal prices,” said Don Lindsay, President and CEO. “We are pleased with the performance of our operations, which have continued to reduce costs while maintaining production volumes. In addition, through recent transactions, we now have no substantial bond maturities for five years.”
The company has reached agreements with the majority of its steelmaking coal customers for the third quarter of 2016, based on a quarterly benchmark of US$92.50 per tonne for the highest quality product.
That’s still below last year’s Q3 benchmark of US $93, but up significantly from US$84 last quarter.
The price of coal bottomed out earlier this year, with the quarterly benchmark hitting US$81 per tonne in Q1.
While prices are up over US $10 per tonne in the last few months, the prices are still almost $30 per tonne lower than the US $120 prices were at when Teck decided to defer restarting Quintette in April of 2014.
“Typically mines want to see a sustained increase in price before they consider restarting a closed operation,” says Lindsay. “Quintette is actually one of the easier ones to get back on, it would be about a year of construction activity and capital. And we clearly are not looking at bringing it back at these price levels.
Quintette closed in 2000 amid depressed coal prices. Teck spent about $200-million of the $860-million it had budgeted to restart the mine before pulling the plug on their plans in 2014 as coal prices plummeted.
Teck is winding down operations at its Coal Mountain Operations, near Sparwood. Phase 1 is expected to be shut down by the end of next year. The company had started working on phase 2, but stopped working on the permitting process late last year.
The mine produces between 2.7 million and 3.5 million tonnes of coal annually. Teck expects to increase production at its other operations to compensate.