Teck provides update on severe weather impacts in BC

Teck provides update on severe weather impacts in BC
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VANCOUVER – Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK) today provided an update to sales and production guidance, related to logistics disruptions caused by heavy rain, flooding and mudslides in British Columbia, Canada.

Rail service between west coast terminals and Teck’s B.C. operations remains impacted by recent heavy rains and flooding, with both CN and CP operating at reduced levels following service interruptions.

As a result of the rail disruption, primarily affecting shipments to Neptune and Westshore terminals in the Lower Mainland, they now estimate fourth quarter steelmaking coal sales at 5.2 – 5.7 million tonnes, compared to 6.4 – 6.8 million tonnes previously. Teck has diverted shipments to Ridley Terminals in Prince Rupert to maximize sales during the quarter, which will affect the transportation costs for the quarter. CN and CP are reporting positive progress on restoring service capacity and are continuing to increase Teck shipments to Lower Mainland terminals. They say they expect that when rail service is fully restored the company will be able to substantially recover delayed fourth quarter sales in the first half of 2022.

Strong logistics chain performance leading up to the heavy rain events resulted in historically low clean coal inventories at the operations, mitigating impacts on production volumes. To date, they have not idled any processing facilities and continue to stockpile clean coal at sites and manage available railing capacity to minimize production impacts. As a result, they say that they expect annual steelmaking coal production of 24.5 – 25.0 million tonnes, compared to previous guidance following the wildfires in the third quarter of nearly 25 million tonnes.

They now estimate the 2021 annual adjusted site cash cost of sales to be approximately $64 – $66 per tonne, slightly above the upper end of the previous guidance of $59 – $64 per tonne.

Due to the ongoing rain-related rail disruptions and associated demurrage costs in the fourth quarter, in addition to previously disclosed wildfire impacts and inflationary pressures, they now expect 2021 full year transportation costs of $44 – $46 per tonne compared to our previous guidance of $42 per tonne or slightly higher for the year.

Note that increased costs are more than offset by continued strong steelmaking coal prices through the second half of 2021. The average steelmaking coal price for the three months ending November 30, 2021 settled at US$371 per tonne, US$168 higher per tonne on an FOB basis than the three month average at end of August 2021, and US$254 higher than the three month average at the end of May 2021, compared to only $3 per tonne higher transportation cost, based on the mid-point of updated annual guidance.

While there has been no impact to production at Highland Valley Copper, up to 4,500 tonnes contained copper in concentrate sales are also at risk of being delayed into the first quarter of 2022 due to logistics chain disruptions.

Teck says it is focused on protecting the health and safety of employees and contractors, and there is currently no risk to health and safety or infrastructure at Teck’s B.C. operations from heavy rain impacts.

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