Teck Resources Ltd. TECK-B-T has cut its full-year copper forecast yet again owing to setbacks at multiple mines, including at its giant QB2 copper operation in Chile.
Vancouver-based Teck said on Thursday that its 2024 copper production will be between 420,000 tonnes and 455,000 tonnes, about 6.5 per cent lower than predicted. The downgrade was driven in part by issues with its haul trucks at its Highland Valley mine in British Columbia, including labour availability and problems with its autonomous system. Teck also cut its guidance for the QB2 mine in Chile, reducing its forecast by 6 per cent to roughly 205,000 tonnes.
This was the second quarter in a row that Teck cut its copper forecast owing to setbacks at QB2. In July, the Canadian miner shaved its guidance by 7 per cent in part because of geotechnical challenges around ore grades at QB2.
For years Teck has marketed QB2 to investors as the anchor mine that will underpin its revamp to a fully focused critical-minerals company after it recently unloaded its legacy coal business. But QB2 has been a big disappointment with major cost overruns during construction and now many problems with the ramp-up to full production.
Teck on Thursday reduced its 2025 production outlook for QB2 by 12 per cent to a range of between 240,000 tonnes and 280,000 tonnes.
In a note to clients, RBC Dominion Securities Inc. analyst Sam Crittenden said the negative guidance at Teck “cast a shadow on the first quarter in the post-coal era.”
Teck’s class B shares fell by 5.4 per cent on the Toronto Stock Exchange on Thursday to close at $64.85 apiece, the worst performer of the 52-member TSX Materials Capped Index.
Teck in July closed the sale of 77 per cent of its metallurgical coal business to Glencore PLC of Switzerland for US$7.3-billon. Teck had already sold the other 23 per cent to Japan’s Nippon Steel Corp. and South Korea’s POSCO. The sale of the coal business has allowed Teck to reduce its debt significantly and given it increased firepower to buy back stock to boost its share price. But over the past few months, as Teck has been trying to reinvent itself, it continues to be plagued by issues at QB2.
Teck chief executive officer Jonathan Price on Thursday was battered with questions about QB2 in an hour-long conference call with analysts and investors after the release of the company’s third-quarter results.
Orest Wowkodaw, analyst with Scotia Capital Inc., asked Mr. Price what confidence he had in the 2025 QB2 forecast, given the company has revised those numbers down already in back-to-back quarters.
Mr. Price replied that he believed the guidance is “very much achievable,” but added that given the broad production range that Teck has given around QB2, there is “ongoing uncertainty” around a mine that is still in the ramp-up phase.
Teck in July said it was experiencing grade problems at QB2 because of geotechnical issues and pit dewatering. The company on Thursday said that those issues have since stabilized.
“The lower guidance for 2025 in the context of better Q4 grade expectations, I think that’s a bit surprising,” said Lucas Pipes, managing director with B. Riley Securities in an interview.
“I like to think that these are growing pains, but after the history with this project, investors would like to move on and have all these things fully buttoned up.”
Many of the current issues with QB2 revolve primarily around the processing of ore, both the amount that is processed, referred to as “throughput,” and the percentage of metal that is ultimately extracted, known as “recoveries.”
Mr. Price in the investor call said that the company is happy with the progress it is making on throughput at QB2, but added that recoveries “are very much a work in progress.”
Teck put the copper mine in the high mountains of northern Chile into production last year after a difficult construction period. Commissioned in 2018, its construction costs were revised upward multiple times, as Teck dealt with myriad issues, including engineering setbacks, COVID-19-induced inflation and challenges in building some of the port’s infrastructure. QB2′s costs eventually spiralled to about US$8.7-billion, or 85 per cent higher than predicted.