Teck makes #328-million in first three months of 2013

Trent Ernst, Editor

In the first three months, Teck made enough profit to fund two mid-range summer Hollywood blockbusters, though that is down by nearly one and a half blockbuster’s from the same time last year.

In the first quarter, Teck reported an adjusted profit of $328 million, or $0.56 per share, compared with $544 million in 2012.

Despite failing to make as much as last year, (missing the mark by about the equivalent of The Dark Knight Rises), Teck is still doing well. “I’m pleased with our performance so far this year,” said Don Lindsay, President and CEO. “Sales of steelmaking coal were up 24 percent over the first quarter of 2012, a new record for first quarter sales, while sales volumes for copper and zinc were similar to last year despite various operational challenges. However, with continuing uncertain global economic conditions, prices for all of our major products were down compared to the first quarter of last year resulting in lower profits and cash flows.”

Teck’s gross profit before depreciation and amortization was $994 million in the first quarter compared with $1.2 billion in the first quarter of 2012.

Profitability was down from the same period last year as prices for copper and steelmaking coal have declined, says Teck’s Q1 report. Coal prices were down 28 percent from a year ago while copper was down 5 percent from the same period. “Substantially higher coal sales volumes in the quarter partly offset the weaker prices,” says the report. “These declines have reduced our revenue by approximately $440 million based on 2013 sales volumes.”

Cash flow from operations, before working capital changes, was $776 million in the first quarter of 2013 compared with $1.1 billion a year ago.

Profit attributable to shareholders was $319 million and EBITDA was $902 million in the first quarter.

Teck achieved all-time record first quarter coal sales of 6.6 million tonnes despite relatively weak market conditions and shipping constraints due to repairs at Westshore terminals, which continued into early February.

Teck says they have sales to the tune of 5.4 million tonnes of coal lined up already for the next three months, at an average price of US$154 per tonne. At that rate, total sales in the second quarter, including spot sales, should weigh in at 6.0 million tonnes or more.

Teck had $2.95 billion in the bank as of March 31, 2013, after dividend payments, share repurchases, capital expenditures and investments totaling approximately $1.0 billion in the first quarter.

In an effort to maximize profits, Teck has been working at reducing costs, a program that is going very well for the Vancouver based company. “Our finance expense was down 40 percent from a year ago,” reports Teck, “primarily as a result of the full benefit of our debt refinancing transactions undertaken last year.”

The Quintette re-start project continues to progress, with an estimated capital cost of approximately $860 million, of which $188 million has been spent to date. The Mines Act Permit Amendment (“MAPA”) application process is proceeding and Teck expects to receive the permit approval in the second quarter with first coal production expected in the first half of 2014. Early works activities, procurement of long-lead equipment and engineering, are progressing.

During the first quarter, a five-year labour agreement was ratified with the union. By the fourth quarter of 2014, Quintette is expected to be producing at an annualized rate of three million tonnes.

On April 15, Teck received an Area Based Management Plan Order from the British Columbia Ministry of the Environment, providing clarity around watershed protection and mining activities in the Elk Valley. “We consider this a positive step that will provide a regulatory basis to deal with effects of mining on water quality in the Elk Valley and will establish a regulatory context for permitting of future mining activity,” says Teck.