With the sale of its coal business now firmly in the rear-view mirror, Canadian miner Teck Resources Ltd. marked its transition to a pure-play metals company by achieving record copper production in its second quarter.
The Vancouver-based mining company said Wednesday it produced its best-ever copper output at 110,400 tonnes in the three months ending June 30, up 71 per cent from the same period last year.
Of that total, 51,300 tonnes were produced at Teck's flagship Quebrada Blanca mine in Chile, where work continues to ramp up the US$8.7-billion second phase of the project.
The QB project is key to Teck's efforts to shift towards metals considered key to the global energy transition. Copper is a crucial component in solar panels, wind turbines, electric vehicles and batteries.
"This is an exciting new era. Teck is now focused entirely on providing metals that are essential to global development and the energy transition," said CEO Jonathan Price on a conference call with analysts to discuss the company's quarterly financial results.
"Teck is now on track to becoming a top-ten global copper producer — doubling copper production with the ramp-up of QB, and with the pathway to further increase production by 30 per cent starting as early as 2028."
Price's comments came less than two weeks after Teck successfully closed the sale of its remaining 77 per cent interest in its steelmaking coal business, Elk Valley Resources, to Swiss commodities giant Glencore. The blockbuster sale was approved by the federal government in early July.
The transaction not only allowed Teck to exit the coal game entirely, but saw it receive cash proceeds of US$7.3 billion. The company plans to use the cash to reduce debt, fund its near-term copper growth, and reward shareholders in the form of buybacks and dividends.
Teck reported its second-quarter profit fell compared with a year ago due in part to its reduced ownership in steelmaking coal business Elk Valley Resources, along with lower steelmaking coal prices.
The company — which said it earned $363 million or 70 cents per diluted share in the second quarter, compared with $510 million or 98 cents per share in the same quarter last year — said it is already seeing the QB project start to contribute to its financial results. Teck said the Chilean mine project generated $284 million in gross profit before depreciation and amortization in the first half of the year, even while still ramping up production levels.
Teck expects the QB mine to reach full production capacity by the end of this year.
But while Teck's overall outlook for the QB asset is positive, the project did encounter a few hiccups in the second quarter. Geotechnical challenges at site and temporary filter plant issues at port constrained operations slightly, resulting in Teck lowering its overall copper production forecast for the year.
The company now expects to produce a total of 435,000 to 500,000 tonnes of copper from all of its properties in 2024, down from the 465 to 540,000 tonnes it originally forecast.
During the second quarter, spot copper prices hit a record high of US$4.92 per pound at the end of May, and Teck's realized copper price in the second quarter was US$4.44 per pound, up 17 per cent compared to the same period last year.
However, in the last week, copper prices have fallen to three-month lows due to concerns over weakening Chinese demand.
Price said Teck is already eyeing future de-bottlenecking projects at QB, which could allow for additional production increases without significant capital expense.
"The long-term outlook for copper is highly resilient," he said.
Teck's revenue totalled $3.87 billion in the second quarter, up from $3.52 billion in the second quarter of 2023.
On an adjusted basis, Teck said it earned 79 cents-per-diluted share from continuing operations, down from $1.22 per diluted share a year earlier.
This report by The Canadian Press was first published July 24, 2024.
Companies in this story: (TSX: TECK. B)
Amanda Stephenson, The Canadian Press
