Teck's Elkview operations seen from Sparwood. (Scott Tibballs / The Free Press)

Teck profits up, coal sales to China a priority

The company is continuing to see increased interest in Elk Valley coal from China

Teck has released it’s first quarter results for 2021, reporting that profits attributable to shareholders were up by 247 percent compared to the same time in 2020, when the pandemic was first biting into the global mining sector.

In the first quarter of the year, profit attributable to shareholders was $305 million – well up from a loss of $312 million in Q1 2020.

According to the company report, the increase in profit is partially due to increased prices for copper zinc and blended bitumen, but not steel-making coal which is fetching the same price in US dollars now as it was in Q1 2020. In Canada, realized prices for coal are lower this year due to a stronger Canadian dollar.

Despite this, steel-making coal remains Teck’s biggest hitter when it comes to sheer revenue, with the division netting $1.04 billion in Q1. When run through the mill of depreciation of amortization, gross profits for the division were $196 million – down from $246 million in Q1 2020.

Teck reported that the lower profits was due to the stronger Canadian dollar, which had offset higher sales volumes and lower operating costs.

First quarter sales of 6.2 million tonnes were within guidances for the company, and nine percent higher than Q1 2020.

The company appears to be leaning into opportunities presented by a rough relationship between China and Australia with regards to coal, especially as the Chinese market recovers from 2020.

“Sales to China in the first quarter represented approximately 2 million tonnes of our total sales, consistent with our previously disclosed target to increase sales to China and in response to increased demand due to restrictions on Australian coal imports,” reads the report.

Full-year steel production in China reached 1.1 billion tonnes in 2020 was a record high, and Teck said it was a lucrative market.

“We contracted increased sales with a number of long-term Chinese customers. In addition, we continue to sell spot volumes to customers who have inquired for availability of cargos throughout the first quarter and further into 2021.”

While China is paying more for coal, by the same token, Australian coal and coal originally destined for China being diverted elsewhere was adversely affecting prices outside of China, pushing them down.

Operationally, Teck’s steel-making coal mines have recovered to historical levels after a dip in the first half of 2020.

“Our production in the first quarter of 2021 of 5.9 million tonnes increased by 22 percent compared to the same period last year,” reads the report.

Outlook for production over the whole of 2021 remains unchanged (25.5-26.5 million tonnes), while sales guidance for the second quarter of the year is 6.0-6.4 million tonnes, with the company saying it would continue to prioritise spot sales to China.

“Market fundamentals remain supportive of our sales plan. We have restructured our sales book to target approximately 7.5 million tonnes sales to China in 2021, unchanged from our previous guidance.”

The company dedicated a decent chunk of words to its water management plan update in the quarterly report, with 2021 priorities listed as the completion of the Fording River South active water treatment facility, the completion of the Elkview phase 2 saturated rock fill (SRF) plant and the beginning of the first phase of the Eagle 4 SRF at Fording River.

The Eagle 4 SRF will have capacity for 7 million litres per day in its first phase, with capacity to be expanded to 30 million litres per day by the end of 2022.

The Elkview SRF has already been commissioned as of May 2021, and is treating water for selenium and nitrate. The Fording River South project will be completed in the third quarter of the year. A change in contractor delayed the project.

In total, $255 million will be spending on water treatment projects through 2021, with total capacity across operations expected to be 50 million litres per day by 2022. Another $300 million is earmarked for spending between 2022 and 2024, with a planned capacity of 90 million litres per day by the time all current and planned projects are online.

READ MORE: Teck Coal pleads guilty to fisheries violations, fined $60 million



scott.tibballs@thefreepress.ca
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