A day after announcing it would exit the oilsands business by selling its stake in the Fort Hills oilsands project, Teck Resources Ltd. said. that it continues to face inflationary pressures and production challenges at other sites around the world.
The Vancouver-based miner reported a loss of $195 million in its most recent quarter as it took a $952-million one-time asset impairment charge related to the sale of its 21.3 percent stake in the Fort Hills oilsands project to Suncor Energy Inc.
The loss came to 37 cents per diluted share for the quarter ended Sept. 30, compared with a profit of $816 million or $1.51 per diluted share in the same quarter last year.
The roughly $1 billion oilsands deal with Suncor, which the two companies announced late Wednesday, is part of Teck’s strategy to improve its environmental performance by reducing its exposure to high-risk assets. carbon footprint and focus more on metals such as copper and zinc.
In a conference call to discuss the company’s third-quarter earnings Thursday, Teck CEO Jonathan Price said copper in particular is at the heart of the company’s strategy. Teck’s massive new QB2 copper mine in Chile, which is expected to reach full production next year, will double the company’s copper production. Price added Teck’s asset portfolio contains other options to introduce copper output in the coming years.
“We are rebalancing our portfolio of high-quality assets towards low-carbon metals, in particular, copper, where demand is expected to double by 2050, driven in large part by electrification and the low carbon transition,” Price said on the call. “We want to take advantage of this market opportunity while at the same time, reducing the proportion of carbon in our overall portfolio.”
But while Teck is bullish on its new strategy and the role it believes it can play in meeting rising global demand for critical minerals and metals, the company acknowledged it faces some short-term headwinds.
On Wednesday, Teck revised its construction capital cost guidance for the QB2 mine project to between US$7.4 billion and US$7.75 billion, from its previous guidance of US$6.9 to 7 billion, due to the impact of foreign exchanges rates and pressure pressure related to weather and subsurface and other factors.
The company said that while it still hopes to achieve first copper production from QB2 later this year, production issues could delay that milestone until January 2023.
Also on Wednesday, Teck cut its three-year production guidance for coal steelmaking to 25 million to 26 million tonnes, from 26 million to 27 million tonnes previously. Price said the reduced guidance reflects the impact of the equipment failure at its Elkview operation in BC, as well as several other external challenges the company has experienced over the past three years.
“These challenges include severe weather-related events including rain, flooding, extreme cold and fires in 2021, as well as the COVID pandemic and the associated ongoing disruption to supply chains and labor availability, ” he said.
Although Teck won’t release capital spending guidance for 2023 until February, on Wednesday the company said it no longer expects to achieve a $2 billion reduction in capital costs from 2022 levels, as before.
Inflationary pressures across the economy have increased the company’s operating costs by 14 percent compared to the same period last year, said Teck’s president and chief operating officer Harry Conger, who attributed half of the increase to that is associated with higher diesel and transportation costs.
“Like everyone else in the industry, we continue to operate in an era of uncertainty,” Conger said. “While the rate of inflation appears to be slowing, we continue to experience significant price inflation for many of our key supplies compared to the same period last year.”
Teck’s third-quarter revenue totaled $4.67 billion, up from $3.97 billion in the same quarter last year.
On an adjusted basis, Teck said it earned $923 million or $1.74 per diluted share for the quarter compared to an adjusted profit of nearly $1.02 billion or $1.88 per diluted share in the same quarter last year.
This report by The Canadian Press was first published on Oct. 27, 2022.
Companies in this story: (TSX:TECK.B)
Amanda Stephenson, The Canadian Press