Teck dealing with falling coal prices

With the price of coal continuing to drop, Teck is doing its best to adjust following a sharp drop in quarterly profits.

With the price of coal continuing to drop, Teck is doing its best to adjust following a sharp drop in quarterly profits.

The mining company’s Vancouver based head office reported on October 24 that Teck Resources posted a third quarter profit of $349 million, in comparison to $742 million during the same period in 2011.

“Uncertainty in global economic conditions has led to overall results in lower commodity prices, and steel making coal is part of that,” said Nic Milligan, Manager of Community and Public Affairs for Teck Coal. “During the quarter we reduced our productions to align with the declining market demand.”

The company said that gross profit from sales of premium grade steelmaking coal fell $649 million compared to third quarter profits in 2011, as a result of significantly lower coal prices, reduced sales volumes, and higher total unit costs. Those factors offset a six per cent increase in coal production compared to the same period a year earlier.

With five active mining sites in and around the Elk Valley, Milligan was unable to provide any information as to how labour and local employees would be affected. He remarked, “Right now we’re just focused on adjusting our costs based on our current model.”

Milligan explained cost reduction programs have been designed to reduce Teck Coal’s costs to a minimum of $200 million from the company’s annual operating costs. “We’re addressing efficiencies throughout our business to bring our costs in line. One of those is an increase in the number of train cars per set, so that reduces our transportation costs,” stated Milligan. “At each operation we’re looking for cost saving measures, like managing consumables such as explosives and power.”

He added, “We remain optimistic, but it’s very difficult to predict the future, so our current thinking is to contain our costs and do our best to weather this slump in demand.”

In addition to steelmaking coal, Teck Resources also produces copper, lead, zinc, and molybdenum, and has several operations throughout Canada and South America. The company stated it has cut its capital expenditure target by roughly $1.2 billion for the rest of 2012 and 2013, with about $300 million of new cuts coming this year.

 

 

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