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Teck Reports Unaudited Fourth Quarter Results for 2016
February 15, 2017 Download | PDF [1.27 Mb]

Vancouver, BC – Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK) (“Teck”) reported unaudited record fourth quarter adjusted profit attributable to shareholders of $930 million, or $1.61 per share, compared with $16 million, or $0.03 per share, in the fourth quarter of 2015. Annual adjusted profit attributable to shareholders for 2016 was $1.1 billion, or $1.91 per share, compared with $188 million, or $0.33 per share in 2015. 

“We had a very good year in 2016. We came through one of the longest and deepest down cycles our industry has faced and emerged as a stronger company,” said Don Lindsay, President and CEO. “We set a number of production and sales records while continuing to reduce our costs. We used the significant increase in cash generated by the higher steelmaking coal and zinc prices to reduce our debt by over $1.0 billion in the last few months.”

Highlights and Significant Items 

  • Record adjusted profit attributable to shareholders in the fourth quarter of $930 million, or $1.61 per share, compared with $16 million in 2015, or $0.03 per share. Annual adjusted profit attributable to shareholders was $1.1 billion, or $1.91 per share, compared with $188 million in 2015, or $0.33 per share. 
  • Record gross profit before depreciation and amortization of $2.0 billion in the fourth quarter compared with $614 million in the fourth quarter of 2015. Gross profit before depreciation and amortization in 2016 was $3.8 billion compared with $2.6 billion in 2015.  
  • Record cash flow from operations of $1.5 billion in the fourth quarter of 2016 compared with $693 million a year ago. Cash flow from operations was $3.1 billion in 2016 compared with $2.0 billion last year. 
  • Profit attributable to shareholders was $697 million in the fourth quarter compared with a loss of $459 million in the fourth quarter of 2015. Annual profit attributable to shareholders was $1.0 billion compared with a loss of $2.5 billion in 2015. 
  • In late September and early October, we repurchased US$759 million (CAD$1.0 billion) principal amount of our outstanding notes in market transactions, recording a gain of CAD$76 million. At December 31, 2016, our outstanding notes totaled US$6.1 billion, down from US$7.2 billion at September 30, 2015. Our liquidity is strong at CAD$5.5 billion including approximately CAD$1.6 billion in cash at February 14, 2017 and US$3.0 billion of undrawn, committed credit facilities. We exceeded our original target to end the year with a cash balance of at least CAD$500 million even after retiring CAD$1.0 billion of debt not contemplated in our original guidance.
  • We set a number of quarterly and annual sales and production records while reducing total costs in each of our business units on an annual basis.
  • We have reached agreements with the majority of our steelmaking coal customers for the first quarter of 2017, based on a quarterly benchmark of US$285 per tonne for the highest quality product, and we expect total sales in the first quarter, including spot sales, to be approximately 6.0 million tonnes of steelmaking coal.
  • Construction of the Fort Hills oil sands project as of year end has surpassed 76% of completion, with two of the six major project areas (mining and infrastructure) turned over to operations. All major plant equipment and materials are on site, and all major vessels and process modules have been installed. Mobilization for operation has begun and the project remains on track to produce first oil in late 2017. The revised total project capital forecast is approximately 10% above the project sanction estimate, excluding foreign exchange impacts. Our share of project capital costs through to completion (including foreign exchange) is now expected to be $805 million, of which approximately $640 million will be spent in 2017. Due to the increase in capital cost, we recorded a pre-tax impairment charge of $222 million in our fourth quarter results.
  • Unionized employees at the Fording River and Elkview steelmaking coal mines each ratified new five-year collective agreements.
  • Our quarterly profit was reduced by impairment charges of $268 million ($198 million on an after-tax basis) including $222 million on the Fort Hills oil sands project and $46 million on non-core assets ($164 million and $34 million, respectively, on an after-tax basis). For 2016, total pre-tax asset impairment charges were $294 million and $217 million on an after-tax basis. 

Download/view Q4 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), capitalized stripping guidance, capital expenditure guidance, our expectation that we will be able to offset Coal Mountain production with increased production at other coal sites, 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 of Quebrada Blanca Phase 2, and the estimated key project operating parameters and project economics of that project, 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, total Fort Hills project capital costs, the expected amount and timing of Teck’s share of costs, the timing of completion and commissioning of the secondary extraction units, the expected average production rate and timing of achieving 90% of the expected production rate 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. Assumptions regarding Quebrada Blanca Phase 2 are based on current project assumptions and the final feasibility study. Assumptions regarding Fort Hills are based on the approved project development plan, as revised including by the updated schedule and project cost projections and the assumption that the project will be developed and operated in accordance with that plan, assumptions regarding the performance of the plant and other facilities at Fort Hills and the operation of the project. Acquisition of the 49% interest in the Teena/Reward zinc project is based on the assumption that all conditions to closing are satisfied and closing not otherwise being delayed. 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 Q4/2016 financial results at 11:00 AM Eastern time, 8:00 AM Pacific time, on Wednesday, February 15, 2017. 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 Q4 2016 Report for the full text of this release.

Investor Contact:
Greg Waller
Senior Vice President, Investor Relations and Strategic Analysis
604.699.4014
greg.waller@teck.com

Media Contact: 
Marcia Smith
Senior Vice President, Sustainability and External Affairs
604.699.4616
marcia.smith@teck.com

17-5-TR

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Teck is a diversified resource company committed to responsible mining and mineral development with business units focused on copper, zinc, steelmaking coal and energy.