Production and profit plunged at Teck Resources Ltd. in the first quarter as Canada’s biggest diversified mining company grappled with the damaging impact of the novel coronavirus that hammered commodity prices across its coal, copper and energy segments.
For the three months ending March 31, Vancouver-based Teck reported a loss of $312-million compared with a profit of $630-million in the same period last year.
On an adjusted basis, the miner reported a profit of 17 cents a share, two cents lighter than analysts surveyed by Refinitiv predicted. Revenue fell by 23 per cent to $2.4-billion.
The company also sounded an ominous tone in its near-term outlook for the core steel-making coal business, acknowledging that sales could test lows not seen in more than a decade.
In a conference call with analysts on Tuesday, chief executive Don Lindsay likened the current environment to the financial crisis of 2008-09, when the company experienced a dramatic slowdown, followed by a brisk snap-back. When asked whether it was realistic to expect quarterly coal sales to fall to 3.7 million tonnes – or about 35 per cent lower than current levels, Mr. Lindsay replied:
“Yes, I mean, it’s possible,” he said. “It doesn’t mean that those sales are lost forever. They tend to come back,” he added.
With COVID-19 spreading around the world during the quarter, Teck suspended construction of a new copper mine in Chile, temporarily idled its Antamina copper and zinc mine in Peru, and reduced production at its Fort Hills oil sands operation in Alberta.
The average price Teck received for coal, copper and zinc during the quarter declined by 30 per cent, 9 per cent and 21 per cent, respectively.
The company’s coal supply chain in British Columbia was also hurt by rail blockades and bad weather in January and February.
In late March, Teck reduced staffing by 50 per cent at its four coal mines in B.C. to decrease the risk of virus spread.
Earlier this month, the company faced blow-back after a B.C. resident penned a letter to the board of directors criticizing the company for keeping the coal mines in operation, citing COVID-19-related health risks to staff. A number of workers also told The Globe and Mail they didn’t feel safe. Teck, however, maintained the mines were safe and the local health authority said it was satisfied the company was taking the appropriate precautions. Those steps include staggering shift times at the mines, repeated disinfection of high-traffic touch points and enforcing stringent physical distancing rules. Teck has since bumped its staffing back up to 75-per-cent capacity at the B.C. coal mines and Mr. Lindsay said during the conference call that the company has the support of key stakeholders, including employees, their families and the union.
“We are continuing to monitor the situation with the goal of increasing on-site staffing levels when it is safe to do so,” the company said in a release.
Over the past few days, prices for Western Canadian Select oil futures dipped into negative territory inflicting extraordinary pressure on the Canadian oil patch and Teck is not immune.
The company took a $474-million impairment charge on its Fort Hills heavy oil site in Alberta. Mr. Lindsay did not rule out the possibility that Fort Hills, already running at reduced capacity, could be shut down entirely.
Suncor Energy Inc. is the majority owner and operator of the project with a 54.1-per-cent stake. Total SA of France owns 24.6 per cent and Teck has a 21.3-per-cent stake.
Shares in Teck fell by 5.2 per cent on Tuesday to close at $10.03 apiece on the Toronto Stock Exchange. Over the past year, the stock has declined by more than 70 per cent.
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