Teck Mining Company's zinc and lead smelting and refining complex is pictured in Trail, B.C., on Nov. 26, 2012.DARRYL DYCK/The Canadian Press
Investors brushed off a tough second quarter at Teck Resources Ltd. as the long-time head of Canada’s biggest diversified metals company expressed optimism the worst of the pandemic may be behind it.
The Vancouver-based metallurgical coal, zinc, copper and heavy oil producer reported a net loss of $149-million for the quarter ending June 30, saying that COVID-19 had a “significant negative effect” on its results.
Early on in the pandemic, Teck idled its Antamina mine in Peru, reduced its steel-making coal output in British Columbia and halted construction of a multibillion-dollar copper mine in Chile – all in an attempt to reduce the risk of virus spread.
Teck’s energy unit performed disastrously during the quarter after a COVID-related crash in the commodity. The Fort Hills oil sands operation in Alberta, in which Teck owns a 21.3-per-cent stake, lost $95-million in the quarter. The company sold heavy oil at an average of only $6.03 a barrel during the period, a 90-per-cent year over year drop.
“Q2 2020 was a tough one, for sure” said Don Lindsay, chief executive officer of Teck, in a conference call with analysts on Thursday.
“Things have improved significantly.”
In his more than 15 years as Teck’s CEO, Mr. Lindsay has weathered a number of crises, including the great financial crash of 2008, and a serious debt spiral after the company overpaid for a blockbuster acquisition in the coal sector.
There are now signs the COVID-19 cloud is lifting. All of Teck’s shuttered or slowed down operations have started up again, including the construction of the new copper mine in Chile. More than 3,000 workers are on the site called QB2, and Teck hopes to have an additional 5,000 on the ground by the end of October.
But Teck is ramping up in South America as the continent deals with an increasingly out of control COVID-19 situation. More than 338,000 people have tested positive for the virus in Chile alone, surpassing some of the worst-affected countries in Europe, including Italy.
Alex Christopher, senior vice-president, exploration, projects and technical services with Teck, said during the conference call that the company is working closely with the government in Chile, and doing its best to protect its employees on the ground.
“Our priorities here continue to be the safety of our work force and supporting the Chilean efforts to limit the transmission of COVID-19,” he said.
“The government’s been up and inspected and are quite complimentary in terms of what we’re doing. We have a trigger-action response plan in place to manage the situation should we see an outbreak.”
QB2 is an attempt by Teck to both reduce its dependence on poorly performing metallurgical coal and increase its exposure to copper, which has been on a tear lately. While the key industrial metal crashed earlier in the year when the pandemic first took hold, it has rallied strongly over the past three months, after governments around the world have injected billions of dollars in stimulus.
But the move away from coal will take years and isn’t coming cheap. QB2′s total capital cost is projected at about US$5.5-billion and the mine is only about 29-per-cent complete. On Thursday, Teck pushed back the mine’s expected start-up date by roughly six months to the end of 2022.
Teck’s Class B shares rose by 6.9 per cent on the Toronto Stock Exchange to close at $15.50 apiece on Thursday.
“The quarter wasn’t too bad,” said Robert Sneddon, chief portfolio manager with Castlemoore Inc. who is also a shareholder in Teck.
One of the reasons he likes Teck is because of its strong balance sheet and it is one of the few companies in the world building a major new copper mine.
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