Third quarter profits for Teck Resources (TSX:TECK.B, NYSE:TECK) were down by about half compared to Q3 2019, but snapped back considerably compared to the second quarter of 2020.
Restrictions resulting from the COD-19 pandemic cut into Teck’s second quarter profits, but production and sales snapped back fairly quickly for Q3.
“Despite the ongoing challenges, our financial performance recovered strongly from a second quarter that clearly was very significantly and negatively impacted by COVID-19,” Teck CEO Don Lindsay said in a third quarter earnings calls Tuesday morning.
Because Teck is a diversified mining company, producing key industrial materials, Teck’s performance provides a snapshot of the global economy. Teck produces steelmaking coal, Alberta bitumen, copper and zinc.
Not surprisingly, the biggest hit to Teck’s profits were on the coal and oil side, offset somewhat by copper prices.
Teck posted gross profits of $291 million in Q3, compared to $787 million in Q3 2019, and profits attributable to shareholders of $61 million, compared to $369 million in Q3 2019. That compares to a $149 loss attributable to shareholders in the second quarter of this year.
Globally, oil demand and prices have taken a significant hit. Demand for steelmaking coal, notably from China, was also down, as a result of steelmaking furnaces being shut down in the earlier part of 2020, as China struggled to contain the virus.
As a result, third quarter prices were down 35% for steelmaking coal and 27% for oil (about US$33 per barrel compared to US$45 per barrel in Q3 2019) from the Fort Hills operation in Alberta, which Teck co-owns with Suncor Energy (TSX:SU) . In response to falling oil demand, one production train at the Fort Hills oil sands mine was shut down.
Going forward, Teck expects the Government of Alberta to remove production restrictions on oil producers in 2021.
Copper prices, on the other hand, were up 13%, compared to Q3 2019.
Teck notes that construction of an upgrade to the Neptune coal shipping terminal in Vancouver, which Teck co-owns – shut down for several months this year for an upgrade -- is nearing completion. Teck also noted that construction of its QB2 copper mine expansion is Chile resumed, after a brief pause, and currently employs 7,000 workers.
