Teck eyes more production cuts

Six coal mines to be idled for now in firm’s response to global glut

Teck Resources Ltd., one of Canada’s largest mining companies, says it may cut more coal production than the 1.5 million tonnes already planned this year if the market doesn’t improve.

The miner is temporarily shutting down its six coal mines for three weeks this summer to reduce supply in a global market that it estimates has 10 million to 15 million tonnes more coal than needed.

“Our industry continues to face difficult conditions,” president and CEO Don Lindsay said in a conference call Thursday.

“Q2 prices for all of our major commodities were lower than the same quarter last year.”

Teck Resources won’t be able to determine until the end of September whether any further production cuts are necessary, Lindsay said.

But he added that if the company decides to do that, it would likely be on the same scale or less than the production cuts for this summer, some of which are underway. The warning came as Teck Resources said it earned a profit attributable to shareholders of $ 63 million or 11 cents per share in the quarter ended June 30, down from $ 80 million of 14 cents per diluted share in the same quarter last year.

Lindsay said Teck has been helped by the low Canadian dollar, while the strong U. S. dollar has contributed to at least six American coal companies declaring bankruptcy and others have delisted or consolidated shares.

“The currency effect of course is very powerful,” he said.

“It’s helped us in Canada and it’s certainly helped Australia, and it doesn’t help the U. S.”

The company’s average realized price for coal in the quarter was US$ 95 per tonne, down from US$ 111 a year ago. But in Canadian dollars, the average realized price slipped to $ 116 per tonne from $ 122 last year.

The coal industry has been hit with a glut of supply from lowcost Australian producers as well as dropping demand from a slowing Chinese economy.

At the end of June, ratings agencies Standard & Poor’s and Moody’s both changed their outlook on Teck Resources to negative in light of the market conditions and concerns about the company’s debt- to- earnings ratio.

Lindsay said the company wouldn’t raise money by issue equity so it can pay down debt to protect its credit rating.

Excluding one- time items, Teck Resources says it earned an adjusted profit of $ 79 million or 14 cents per share for the quarter, up from $ 72 million or 13 cents per share a year ago.

Revenue totalled nearly $ 2 billion, down slightly from just over $ 2 billion in the same quarter last year.

The company has zinc, copper and coal operations in Canada and around the world.