Although Teck Resources Ltd. (TSX:TCK.B) recorded increased production of its three mainstay commodities in 2013 and saved hundreds of millions in annual costs, profit for the Vancouver-based mining giant plummeted last year, the company announced February 13.
Teck's 2013 adjusted profit was $1 billion, or $1.74 per share, down from $1.8 billion, or $3.03 per share, in 2012.
Adjusted profit for 2013's fourth quarter was $227 million, or $0.40 per share, down from $409 million, or $0.70 per share, last year.
Teck blamed sagging commodity prices for the drop in profit. The company primarily mines metallurgical coal, zinc and copper. According to a Teck presentation, the coal price was down 11% in Q4 alone, while copper dropped 10% and zinc was down 2% over the same period.
Despite the sluggish commodity market, production was up in 2013. Teck produced 25.6 million tonnes of steelmaking coal last year, about one million more than the company had initially forecast, and 364,000 tonnes of copper, 105,000 tonnes of which was produced in a record-breaking Q4.
Zinc production hit 623,000 tonnes in 2013, 33,000 more than expected.
"We had strong operation performance in 2013," Teck president and CEO Don Lindsay said in a February 13 conference, "and we met or exceeded all of our annual production targets."
To save money, Teck said it has found $380 million in potential annual savings – $360 million of which was implemented as of December 31. Lindsay said the company would continue to cut costs.
On October 30, Teck announced that construction of the $13.5 billion Fort Hills oilsands project would proceed. Teck, which has a 20% ownership share in Fort Hills, is partners with Calgary's Suncor Energy (TSX:SU) and Paris-based Total SA (NYSE:TOT) on the project.
Fort Hills has an estimated reserve of 3.3 billion barrels of bitumen. Teck's share of production, which could begin as early as 2017's fourth quarter, is 36,000 barrels per day, or 13 million barrels per year. Teck plans to spend $850 million on Fort Hills in 2014.
"[Fort Hills] will create significant value over the long term as it generates substantial cash flow across many price cycles," said Lindsay.
Teck will not restart its Quintette coal mine in northeast B.C. until the market improves. If the company decides to reopen the mine, a decision Teck does not anticipate making until mid-2014, it could be in production within 14 months.
"We are prudently allocating capital to the best risk-reward projects for future growth," said Lindsay, "and we are responding to market conditions in the short term to manage our capacity to invest." •
