Vancouver, BC – Teck Resources Limited (TSX: TCK.A and TCK.B, NYSE: TCK) (“Teck”) reported profit attributable to shareholders of $234 million ($0.41 per share) and adjusted profit of $152 million ($0.26 per share) compared with $29 million ($0.05 per share) a year ago.
“Our operations have performed very well throughout the year, setting a number of quarterly and year-to-date production records while continuing to reduce costs,” said Don Lindsay, President and CEO. “As a result of the recent increase in steelmaking coal prices, we are generating a significant amount of additional cash which we have used to reduce our debt by repurchasing $1.0 billion of our outstanding notes.”
Highlights and Significant Items
- Adjusted EBITDA was $830 million in the third quarter, more than double the $389 million recorded a year ago.
- Gross profit before depreciation and amortization was $817 million in the third quarter compared with $670 million in the third quarter of 2015.
- Cash flow from operations was $854 million in the third quarter of 2016 compared with $560 million a year ago.
- In September and early October, we repurchased US$759 million (CAD$1.0 billion) face value debt in market transactions, recording a gain of approximately CAD$75 million. At October 26, our outstanding notes totaled US$6.1 billion, down from US$7.2 billion at September 30, 2015.
- Our liquidity remains strong at CAD$4.7 billion inclusive of approximately CAD$690 million in cash at October 26, 2016 and US$3.0 billion of undrawn, committed credit facilities. We now expect that we will exceed our original target and end the year with a cash balance of approximately CAD$1.0 billion after having retired CAD$1.0 billion of debt, which was not contemplated in our original guidance.
- We set a number of quarterly and year-to-date sales and production records while reducing total costs in each of our business units.
- We expect total steelmaking coal sales, including spot sales, to be at or above 6.5 million tonnes in the fourth quarter of 2016. Our average realized fourth quarter price for steelmaking coal is expected to be in our typical range, in percentage terms, relative to the US$200 per tonne benchmark price which has been reported for the highest quality steelmaking coal.
- Construction of the Fort Hills oil sands project has surpassed 70% completion. Project execution is now effectively site-based, as the module program has been completed and substantially all the remaining construction components are now on-site.
- The Red Dog concentrate shipping season is expected to be completed in the first week of November after a two week extension due to favourable ice conditions. We expect to ship approximately 1,075,000 tonnes of zinc concentrate and 220,000 tonnes of lead concentrate.
- For the seventh 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.
Download/view Q3 2016 Report for the full text of this release.
Cautionary Statement On Forward-Looking Information
This news release contains certain forward-looking information and forward-looking statements as defined in applicable securities laws. All statements other than statements of historical fact are forward-looking statements. These forward-looking statements, principally under the headings “Outlook,” that appear in this release but also elsewhere in this document, include estimates, forecasts, and statements as to management’s expectations with respect to, among other things, anticipated cost and production forecasts at our business units and individual operations and expectation that we will meet our production guidance, sales volume and selling prices for our products (including settlement of steelmaking coal contracts with customers), capital expenditure guidance, our expectation that we will end the year with a cash balance of approximately $1.0 billion, our expectation that improved prices will provide additional profits and cash resources, our focus on achieving an investment grade rating, plans and expectations for our development projects, the targeted capital cost and mine life of Quebrada Blanca Phase 2, expected production, production capacity and capital intensity of Quebrada Blanca Phase 2, the potential to extend the Pend Oreille mine life to 2020, our expectation that we will close the acquisition of the outstanding 49% interest in the Teena/Reward zinc project, the impact of currency exchange rates, the expected timing and amount of production at the Fort Hills oil sands project and our remaining capital commitment at Fort Hills, and demand and market outlook for commodities. These forward-looking statements involve numerous assumptions, risks and uncertainties and actual results may vary materially.
These statements are based on a number of assumptions, including, but not limited to, assumptions regarding general business and economic conditions, the supply and demand for, deliveries of, and the level and volatility of prices of, zinc, copper and steelmaking coal and other primary metals and minerals as well as oil, and related products, the timing of the receipt of regulatory and governmental approvals for our development projects and other operations, our costs of production and production and productivity levels, as well as those of our competitors, power prices, continuing availability of water and power resources for our operations, market competition, the accuracy of our reserve estimates (including with respect to size, grade and recoverability) and the geological, operational and price assumptions on which these are based, conditions in financial markets, the future financial performance of the company, our ability to attract and retain skilled staff, our ability to procure equipment and operating supplies, positive results from the studies on our expansion projects, our steelmaking coal and other product inventories, our ability to secure adequate transportation for our products, our ability to obtain permits for our operations and expansions, our ongoing relations with our employees and business partners and joint venturers. Our expectation that we will end the year with a cash balance of approximately $1.0 billion is based on current prices and exchange rates and assumes no unusual transactions or events occur and that we meet our full year guidance for production, costs and capital expenditures. Assumptions regarding the capital cost, mine life and other parameters for Quebrada Blanca Phase 2 are based on current project assumptions and are subject to, among other matters, the final feasibility study. Acquisition of the 49% interest in the Teena/Reward zinc project is based on the assumption that all conditions to closing are satisfied. Assumptions regarding the impact of foreign exchange are based on current commodity prices. The foregoing list of assumptions is not exhaustive. Events or circumstances could cause actual results to vary materially.
Factors that may cause actual results to vary materially include, but are not limited to, changes in commodity and power prices, changes in market demand for our products, changes in interest and currency exchange rates, acts of foreign governments and the outcome of legal proceedings, inaccurate geological and metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources), unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications or expectations, cost escalation, unavailability of materials and equipment, government action or delays in the receipt of government approvals, industrial disturbances or other job action, adverse weather conditions and unanticipated events related to health, safety and environmental matters), union labour disputes, political risk, social unrest, failure of customers or counterparties to perform their contractual obligations, changes in our credit ratings, unanticipated increases in costs to construct our development projects, difficulty in obtaining permits, inability to address concerns regarding permits of environmental impact assessments, and changes or further deterioration in general economic conditions. Closing of the Teena/Rox acquisition may be affected by unanticipated difficulties with respect to satisfaction of closing conditions or other challenges. Our Fort Hills project is not controlled by us and construction and production schedules and costs may be adjusted by our partners.
Statements concerning future production costs or volumes are based on numerous assumptions of management regarding operating matters and on assumptions that demand for products develops as anticipated, that customers and other counterparties perform their contractual obligations, that operating and capital plans will not be disrupted by issues such as mechanical failure, unavailability of parts and supplies, labour disturbances, interruption in transportation or utilities, adverse weather conditions, and that there are no material unanticipated variations in the cost of energy or supplies. Statements regarding anticipated steelmaking coal sales volumes and average steelmaking coal prices for the quarter depend on timely arrival of vessels and performance of our steelmaking coal-loading facilities, as well as the level of spot pricing sales.
We assume no obligation to update forward-looking statements except as required under securities laws. Further information concerning risks and uncertainties associated with these forward-looking statements and our business can be found in our Annual Information Form for the year ended December 31, 2015, filed under our profile on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov) under cover of Form 40-F.
Webcast
Teck will host an Investor Conference Call to discuss its Q3/2016 financial results at 11:00 AM Eastern time, 8:00 AM Pacific time, on Thursday, October 27, 2016. A live audio webcast of the conference call, together with supporting presentation slides, will be available on our website at www.teck.com. The webcast will be archived at www.teck.com.
Download/view Q3 2016 Report for the full text of this release.
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