Teck Resources Costs Seen Higher in 2H; FY Production Targets Lowered

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By Adriano Marchese

West-coast wildfires and higher transportation costs will weigh on Teck Resources Ltd.'s second half, while adjusted earnings in its second quarter came in slightly below views, and production guidance for the year was adjusted slightly downward as a result.

The Vancouver-based diversified natural resources company said early on Tuesday that adjusted earnings per share were 63 Canadian cents (50 cents), above the C$0.17 in the prior year period on revenue of C$2.56 billion, up from C$1.72 billion.

Analyst expectations were for adjusted earnings of C$0.67 a share, taken from FactSet.

"Teck reported slightly weaker-than-anticipated second-quarter results and disclosed several relatively minor downward revisions to guidance, mostly related to the impact of west coast wildfires on transportation along with some cost inflation," Scotiabank said.

Scotiabank had forecasted adjusted EPS of C$0.70.

Looking ahead to the full year, Teck said that continued pandemic-related uncertainty could affect its operations, and the company has downgraded its expectations for its production of refined zinc as well as steelmaking coal and bitumen.

Refined zinc production for 2021 is now expected to be between 290,000 metric tons and 300,000 tons, down from a previous range of between 300,000 tons and 310,000 tons.

Steelmaking coal production expectations were also revised slightly down to a range of 24 million tons to 26 million tons from a range of 25.5 million to 26.5 million.

Bitumen production is also expected to be lower by a range of between 2 million and 4 million barrels, offering a new range of between 6.6 million barrels and 8.1 million barrels for the year.

However, zinc production expectations for the year are higher by 20,000 tons, between 510,000 tons and 530,000 tons.

Additionally, Teck said that costs for the second half are also expected to rise for certain key supplies, including mining equipment, fuel, tires and explosives, driven largely by price increases for underlying commodities such as steel, crude oil and natural gas.

"While the impact on our second quarter results was slight, we expect these price increases to put modest upward pressure on our cash unit costs in the second half of 2021," the company said.

Meanwhile, the company said its Quebrada Blanca phase two project in Chile is progressing well, despite a large wave of Covid-19 in the country.

It said overall project progress is expected to be at 60% by early August, and it continues to anticipate first production in the second half of 2022.

Write to Adriano Marchese at adriano.marchese@wsj.com

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