Teck tables QB2 estimate ahead of shareholder vote

Teck Resources Ltd. (TECK.B-TSX, TECK.A-TSX, TECK-NYSE) says the capex budget for the recently completed QB2 project in Chile could further escalate to between US$8.0 and US$8.2 billion or by another 7.0% from previous estimates.

In a press released that detailed slightly weaker than expected first quarter, 2023 results, the Vancouver company attributed the increase to start-up delays and negative currency impacts.

However, the press released contained no update on today’s shareholder vote on a proposed plan that will see Teck separating its operations into two independent, publicly-listed companies that will contain the company’s metal and steelmaking coal operations.

“We had a positive start to the year with strong financial performance in the first quarter driven by strong commodity prices and steelmaking coal sales,’’ said Teck CEO Jonathan Price. “We achieved a number of significant milestones in our copper growth strategy this quarter, including first copper concentrate production at QB2, the cornerstone of our copper growth strategy, while making advances across our pipeline of near and medium-term projects,’’ he said.

“The progress in our copper growth pipeline reinforces the underlying value and optionality in our base metals business.”

At QB2, Teck said it produced its first bulk copper concentrate, continues to advance commissioning and will ramp up to the full production through 2023.

The company said the start of Line 1 commissioning commenced in January. However, Teck said its first copper milestone was not achieved until late March. This delay, combined with recent foreign exchange impacts, has resulted in pressure on its project capital cost guidance, which could increase total capital costs to US$8.0 to US$8.2 billion.

Over 30% of the increase from previously disclosed guidance related to non-controllable foreign exchange impacts. However, the company said there has been no change in its previously issued annual guidance, with the exception of capital cost guidance at QB2.

Meanwhile, the company has reported a profit attributable to shareholders of $930 million or $1.81 per share in the first quarter of 2023. Profit from continuing operations attributable to shareholders was $1.2 billion or $2.27 per share in the first quarter.

Teck generated cash flows from operations of $1.1 billion in the quarter, ending with a cash balance of $2.3 billion.

Teck ranks as the world’s second-largest seaborne exporter of steelmaking coal, with six operations in Western Canada and significant steelmaking coal reserves. They include Elkview, Fording River, Greenhills and Line Creek in southeastern British Columbia.

Teck recently rejected an unsolicited $23 billion takeover bid from Swiss metals trading giant Glencore Plc.  The takeover bid was launched after Teck recently made a series of announcements, including the spin out of its metallurgical its metallurgical coal operations as well as a sunset period for its dual class share structure. Shareholders are scheduled to vote on the plan today.

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