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Teck Resources forecasts lower coal mining costs; shares edge higher

Published: 04:44 25 Jul 2014 AEST

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Teck Resources Ltd. (TSE:TCK.B), Canada’s largest diversified mine operator, advanced in midday trading after projecting its coal mining costs 5 percent lower than previously expected this year after job cuts.

Shares were up 1.3 percent at C$25.94 at 2:11 p.m. in Toronto.

Production of each ton of coal will cost $52 to $57, down from the earlier estimate of $55 to $60, the Vancouver, British Colombia-based company said in a statement today. Teck expects to produce 6 million metric tons of coal in the third quarter.

Teck has been cutting jobs and delaying projects to reduce costs after a collapse in prices. Teck sold coal for an average $111 a ton in the second quarter, down 29 percent from a year earlier.

The company, which had set a target of 600 jobs, said it has cut 535 positions across its operations and it will continue to look for further reductions through attrition where possible.

Teck, which maintained its full-year output target of 26 million to 27 million tons, has agreed contracts to sell 5.5 million tons of coal in the third quarter at $120 a ton for the highest qualities.

Second-quarter net income fell to C$80 million, or C$0.14 per share, compared with last year's C$143 million or C$0.25 per share. 

Adjusted profit totaled C$72 million, or C$0.13 per share. The average analyst estimate had been for a profit of 12 cents per share,

Revenue fell 6.6 percent to C$2.01 billion, but exceeded the C$1.94 billion that analysts were projecting.

The company also said its realized price for copper, another key commodity it produces, fell to $3.08 per pound from $3.24 in the second quarter of 2013. Teck's realized price for zinc increased to 94 cents per pound, up from 83 cents a year ago.

The company said the lower price for coal was partially offset by the positive effect of a stronger U.S. dollar, lower corporate overhead spending and changes in pricing adjustments year-over-year.

"We are pleased with the performance of our operations this quarter and with our efforts to reduce our costs and capital spending to ensure we emerge stronger from the current challenging price environment, particularly the substantially lower steelmaking coal price that was prevalent in the second quarter of 2014 compared with last year," Chief Executive Officer Don Lindsay said in the statement.

 

 

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