Teck Resources Limited (TSX: TECK.A, NYSE: TECK) (“Teck”) reported adjusted profit attributable to shareholders of $621 million ($1.08 per share) in the third quarter compared with $152 million ($0.26 per share) a year ago.
“We are very pleased with our performance in the third quarter,” said Don Lindsay, President and CEO. “We achieved strong operating results with our second highest quarterly sales for steelmaking coal and record zinc production at Antamina for the second consecutive quarter. With these strong operating results and favourable prices, our adjusted EBITDA was $1.4 billion, just over $700 million higher than in the third quarter of last year.”
Highlights and Significant Items
- Adjusted profit was $621 million ($1.08 per share) in the third quarter compared with $152 million ($0.26 per share) in the third quarter of last year. Profit attributable to shareholders was $600 million ($1.04 per share) in the third quarter compared with $234 million ($0.41 per share) a year ago.
- Adjusted EBITDA for the 12 months ended September 30, 2017 was $6.1 billion, which was $153 million higher than our previous twelve-month record of approximately $5.9 billion set in 2011.
- EBITDA was $1.4 billion in the third quarter compared with $804 million in the third quarter of 2016. Our adjusted EBITDA in the third quarter totaled $1.4 billion compared with $696 million last year.
- Gross profit was $1.1 billion in the third quarter compared with $452 million a year ago. Gross profit before depreciation and amortization was $1.5 billion in the third quarter compared with $817 million in the third quarter of 2016.
- We achieved record total material movement at our steelmaking coal business unit, moving over 79 million bank cubic meters (BCM’s) in the quarter. Third quarter steelmaking coal sales reached 7.54 million tonnes, our second highest quarterly sales on record. We expect our steelmaking coal sales to be approximately 6.5 million tonnes in the fourth quarter.
- Antamina achieved record zinc production for the second consecutive quarter of 102,300 tonnes.
- Construction progress on the Fort Hills oil sands project has surpassed 96%. In order to accelerate commissioning, the Fort Hills plant initiated froth production in the quarter, which required operating the mine, ore preparation, primary extraction tailings and utilities areas.
- In September, we announced an increase in our zinc production guidance for our Red Dog operation. Red Dog’s zinc production for 2017 is now expected to be in the range of 525,000 to 550,000 tonnes, up from the prior guidance range of 475,000 to 500,000 tonnes.
- The Red Dog concentrate shipping season is expected to be completed in the first week of November. We expect to ship approximately 1.0 million tonnes of zinc concentrate and 210,000 tonnes of lead concentrate representing all of the concentrate available to be shipped from the operation.
- In early October, we received approval to make a normal course issuer bid to purchase our Class B subordinate voting shares (Class B shares). We may purchase up to 20 million Class B shares during the period starting October 10, 2017 and ending October 9, 2018.
- For the eighth straight year, we have been named to the Dow Jones Sustainability World Index (DJSI), indicating that our sustainability practices are in the top 10% of the 2,500 largest companies in the S&P Global Broad Market Index (BMI).
- Our liquidity remains strong at approximately $4.9 billion, including US$3.0 billion of undrawn, committed credit facilities and over $1.0 billion of cash at October 25, 2017.
This management’s discussion and analysis is dated as at October 25, 2017 and should be read in conjunction with the unaudited consolidated financial statements of Teck Resources Limited (“Teck”) and the notes thereto for the three and nine months ended September 30, 2017 and with the audited consolidated financial statements of Teck and the notes thereto for the year ended December 31, 2016. In this news release, unless the context otherwise dictates, a reference to “the company” or “us,” “we” or “our” refers to Teck and its subsidiaries. Additional information, including our Annual Information Form and Management’s Discussion and Analysis for the year ended December 31, 2016, is available on SEDAR at www.sedar.com.
This document contains forward-looking statements. Please refer to the cautionary language under the heading “CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION.”
Our financial results continue to benefit from strong operating performance, which has enabled us to capitalize on favourable commodity prices. For the 12 months ending September 30, 2017, we achieved adjusted EBITDA of $6.1 billion – a record for any 12-month period in Teck’s history. This was generated at average realized steelmaking coal prices of US$185 per tonne and copper prices of US$2.62 per pound, and was the result of an ongoing focus on controlling costs and optimizing production from our core assets. We note that the realized steelmaking coal price for the past ten years has averaged US$164 per tonne, or US$180 on an inflation-adjusted basis.
Third quarter prices for steelmaking coal, copper and zinc rose by 73%, 33% and 31%, respectively, compared with the same period a year ago. Steelmaking coal prices remained well supported in the quarter reflecting record high steel production in China during the third quarter following the previous record high crude steel production set in the second quarter and strong demand in the rest of the world. Copper prices reached a three-year high early in the quarter at US$3.13 per pound, while zinc prices reached a ten-year high in September at just under US$1.50 per pound. Partly offsetting the stronger commodity prices was the negative effect of a strengthening Canadian dollar during the quarter, as most of our products are denominated in U.S. dollars. Subsequent to quarter end, copper and zinc prices have risen further, reaching new multi-year highs of US$3.21 and US$1.53 per pound, respectively.
Construction progress on the Fort Hills oil sands project has now surpassed 96%. Five of the six major project areas have been turned over to operations with site construction now focused on secondary extraction. During the quarter the Fort Hills plant initiated froth production in order to accelerate commissioning. The project remains on track to produce first oil in late 2017.
Taken together, operational performance, strong markets for our key products and the approaching completion of Fort Hills have resulted in a successful quarter for the company and positions us well for ongoing profitability.
Profit and Adjusted Profit
Profit attributable to shareholders was $600 million, or $1.04 per share, in the third quarter compared with $234 million, or $0.41 per share in the same period a year ago.
Adjusted profit attributable to shareholders in the third quarter, after adjusting for the items identified in the table below was $621 million, or $1.08 per share, compared with $152 million, or $0.26 per share, in the same period last year. The most significant of these adjustments relates to the after-tax charges that totaled $28 million on the collective agreements settled at the Highland Valley Copper and Trail Operations during the third quarter. In addition, we recorded a $24 million after-tax charge for a break fee paid in respect to the sale of our interest in the Waneta Dam.