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Press Release: Teck Reports Unaudited Second Quarter Results for 2018

26 Jul 2018 9:43 am

Teck Reports Unaudited Second Quarter Results for 2018

VANCOUVER, British Columbia, July 26, 2018 (GLOBE NEWSWIRE) -- Teck Resources Limited (TSX:TECK.A) (TSX:TECK.B) (NYSE:TECK) ("Teck") reported adjusted profit attributable to shareholders of $653 million ($1.14 per share) in the second quarter compared with $580 million ($1.00 per share) in 2017.

"Our results for the second quarter were strong, with adjusted profit of $653 million and adjusted EBITDA of $1.4 billion," said Don Lindsay, President and CEO. "Our operations continued to perform well, Fort Hills achieved commercial production in the quarter and is now ramping up to full capacity."

Highlights and Significant Items
   -- Profit attributable to shareholders was $634 million ($1.10 per share) in 
      the second quarter compared with $580 million ($1.00 per share) a year 
      ago. Adjusted profit was $653 million ($1.14 per share) in the second 
      quarter compared with $580 million ($1.00 per share) in the second 
      quarter of last year. 
 
   -- EBITDA was $1.4 billion in the second quarter compared with $1.3 billion 
      in the second quarter of 2017. 
 
   -- Gross profit was $1.2 billion in the second quarter compared with $1.1 
      billion a year ago. Gross profit before depreciation and amortization was 
      $1.6 billion in the second quarter compared with $1.4 billion in the 
      second quarter of 2017. 
 
   -- At Fort Hills, commissioning is now complete and production is expected 
      to ramp up to full capacity by the beginning of the fourth quarter of 
      2018. Systems relating to all three trains are running well and plant 
      start-up has exceeded expectations. We have included results from 
      operations in our earnings from June 1. 
 
   -- Steelmaking coal orders from customers were in place to exceed our sales 
      guidance of 6.7 million tonnes, however, sales volumes of steelmaking 
      coal were negatively affected due to strike preparations at CP Rail's 
      operations. There were two such events during the second quarter and the 
      strike was resolved, but sales were affected as port stocks remained low. 
 
   -- We continued to progress engineering work on the Quebrada Blanca Phase 2 
      project in anticipation of approval of the SEIA for the project and a 
      development decision in the fourth quarter. A decision to proceed with 
      development will be contingent upon regulatory approvals and market 
      conditions, among other considerations, and we are currently exploring 
      various potential financing alternatives for the project. We will shortly 
      launch a process to seek an additional partner for Quebrada Blanca Phase 
      2. Our objective is to ultimately hold a 60 -- 70% interest in the 
      project and a transaction would most likely be announced in the fourth 
      quarter. 
 
   -- The British Columbia Utilities Commission (BCUC) has approved the $1.2 
      billion sale of our two-thirds interest in the Waneta Dam to BC Hydro. We 
      expect closing of the sale to occur on July 26, 2018. 
 
   -- Our liquidity remains strong at over $5.6 billion inclusive of 
      $1.7 billion in cash at July 25, 2018 and US$3.0 billion of undrawn, 
      committed credit facilities. On completion of the Waneta transaction, we 
      will have $2.9 billion in cash and liquidity of $6.8 billion. In addition, 
      we only have US$220 million of debt due before 2022. 
 
   -- Antamina achieved record zinc production of 126,500 tonnes in the second 
      quarter, exceeding the previous record by 24,200 tonnes. 
 
   -- Strong mining performance from our steelmaking coal operations 
      contributed towards record material movement for the business unit in the 
      first half of the year, providing operational flexibility going forward. 
 
   -- We have updated our guidance for certain production items, unit costs, 
      capital expenditures and our annualized commodity price and foreign 
      exchange rate sensitivities. Further details are located in our Guidance 
      and Outlook sections. 
 
   -- We were named to the Best 50 Corporate Citizens of Canada for the twelfth 
      consecutive year by media and investment company, Corporate Knights. 
 
   -- We announced on July 25 that we will pay an eligible dividend of $0.05 
      per share on our outstanding Class A common shares and Class B 
      subordinate voting shares on September 28, 2018, to shareholders of 
      record at the close of business on September 14, 2018. 

This management's discussion and analysis is dated as at July 25, 2018 and should be read in conjunction with the unaudited condensed interim consolidated financial statements of Teck Resources Limited ("Teck") and the notes thereto for the three and six months ended June 30, 2018 and with the audited consolidated financial statements of Teck and the notes thereto for the year ended December 31, 2017. In this news release, unless the context otherwise dictates, a reference to "the company" or "us," "we" or "our" refers to Teck and its subsidiaries. Additional information, including our Annual Information Form and Management's Discussion and Analysis for the year ended December 31, 2017, is available on SEDAR at www.sedar.com.

This document contains forward-looking statements. Please refer to the cautionary language under the heading "CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION."

Overview

Prices for our principal products were strong in the second quarter and higher than a year ago, however, following the end of the quarter there has been significant weakness in commodity prices and market uncertainty.

In the second quarter steelmaking coal prices rose 10% from a year ago and averaged US$183 per tonne, copper prices averaged US$3.12 per pound, up 21% from a year ago, while zinc prices rose 20% from a year ago and averaged US$1.41 per pound. As result of the favorable prices, partially offset by a stronger Canadian dollar, we recorded higher gross profits of $1.2 billion and EBITDA of $1.4 billion in the second quarter compared with $1.1 billion and $1.3 billion, respectively, in the second quarter a year ago. Oil markets continued to strengthen in the second quarter, with prices trending higher. Western Canadian Select (WCS) averaged US$49 per barrel in the second quarter, up US$12 from a year ago and up US$10 from the first quarter of this year.

In May, the commissioning of the Fort Hills oil sands mining and processing operations was completed. The production volumes and product quality have exceeded expectations during start-up and production is expected to reach full capacity by the beginning of the fourth quarter of 2018, three months earlier than previously expected. While plant performance has exceeded expectations, unusually wet weather and resulting soft ground conditions have affected mine production in June and July. However, due to the strong start-up and commissioning, we now expect our production to be 8.5 million to 10 million barrels of bitumen and operating costs to be $28.50 to $32.50 per barrel for the year, versus 7.5 -- 9.0 million barrels and $35.00 to $40.00 per barrel previously.

With the completion of our Fort Hills project, our strong financial position and favourable demand for our key products, we are well positioned for ongoing profitability and strong cash flows. However, recent uncertainty in global markets and the associated effect on commodity prices could affect our results going forward.

Profit and Adjusted Profit(1)

Profit attributable to shareholders in the second quarter was $634 million, or $1.10 per share, compared with $580 million, or $1.00 per share, in the same period a year ago.

Adjusted profit attributable to shareholders, taking into account the items identified in the table below, was $653 million, or $1.14 per share, compared with $580 million, or $1.00 per share, in the second quarter last year.

The increase in our adjusted profit in the second quarter compared with a year ago was primarily attributable to substantially higher prices for our principal products. This was partly offset by higher unit costs in our steelmaking coal business unit, which was primarily attributable to higher diesel costs and our efforts to capture margin in the favourable steelmaking coal price environment. In addition, a stronger Canadian dollar in the second quarter compared with a year ago negatively affected our profit in the period.

Profit and Adjusted Profit
 
                              Three months        Six months 
                              ended June 30,       ended June 30, 
  (CAD$ in millions)          2018      2017         2018      2017 
Profit attributable to 
 shareholders             $      634  $   580    $   1,393   $ 1,136 
Add (deduct): 
 Debt repurchase losses           --       27           --       159 
 Debt prepayment option 
  loss (gain)                     15      (17)          24       (33) 
 Asset sales and 
  provisions                       3       (1)           3        (9) 
 Foreign exchange loss 
  (gains)                          1       (9)           1       (19) 
 Collective agreement 
  charges                         --       --           --         1 
 Other                            --       --          (15)       -- 
Adjusted profit           $      653  $   580    $   1,406   $ 1,235 
Adjusted basic earnings 
 per share(1)             $     1.14  $  1.00    $    2.45   $  2.14 
Adjusted diluted 
 earnings per share(1)    $     1.12  $  0.99    $    2.41   $  2.11 
 

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July 26, 2018 05:43 ET (09:43 GMT)
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