The COVID-19 pandemic has taken a big bite out of Teck Resources Ltd. (TSX:TECK.B) profits, resulting in a $312 million loss for shareholders, according to the company’s first quarter financials.
That compares to a shareholder profit of $630 million for the first quarter of 2019. The company’s first quarter earnings before interest, taxes, depreciation and amortization (EBITDA) was $45 million, compared with $1.4 billion in Q1 2019.
“COVID-19 has had a significant effect on our business and contributed to significant reductions in the prices we receive for the commodities we produce,” the company said in a press release.
Teck recorded a $474 million impairment as a result of the company and its partner, Suncor Energy (TSX:SU), cutting production at the new Fort Hills oil sands project in Alberta.
An oil price crash has resulted in a number of companies in North America resorting to production cuts, as North American producers run out of both storage and customers, due to the pandemic’s shutting down big chunks of the global economy.
Teck also incurred $44 million in costs when it decided to suspend its QB2 copper mines expansion project in Chile.
Even at mines that have continued operating, Teck has reduced production and work forces as part of measures to reduce the risk of spreading the COVID-19 virus at mine sites.
“The pandemic has had a significant negative impact on the global economy and commodity markets and the outlook is uncertain,” said Teck CEO Don Lindsay in a press release.
“However, almost all of our sites are currently operating, with some at reduced production, and our steelmaking coal operations had a strong finish to the quarter, exceeding our sales guidance with site costs well below expectations.”
Going forward, the company expects to increase efficiencies, production capacity and profits, following the completion this month of an expansion at its Elkview operations.
“In April, we completed the major expansion of our Elkview operations plant, increasing the annual capacity to 9 million tonnes,” the company said.
“This will allow us to replace higher cost production from Cardinal River operations with lower cost production from Elkview and maintain our overall steelmaking coal production capacity."
The company expects the increased efficiencies from the expansion to result in $160 million in increased revenue, presuming steel making coal prices stay in the US$150 per tonne range.
