Teck Resources Ltd. is cutting its copper production forecast and hiking its costs just weeks after the Canadian miner’s focus narrowed significantly to rely only on metals.
Vancouver-based Teck on Thursday lowered its full year copper forecast by seven per cent to about 468,000 tonnes as it rolled out its second quarter financial results. The company also reduced its molybdenum forecast by 19 per cent.
Teck increased its copper cost forecast by two per cent to roughly US$2.10 a pound.
Teck’s copper issues stem mainly from challenges in the ongoing ramp up of its giant QB2 mine in Chile. The company is experiencing grade problems because it isn’t able to access certain areas of QB2 because of geotechnical issues and pit dewatering.
Teck put the copper mine in the high mountains of northern Chile into production last year after an arduous and expensive construction period. Teck’s costs ended up spiralling to about US$8.7-billion, or 85 per cent higher than a 2019 estimate.
Teck earlier this month closed the US$6.9-billion sale of 77 per cent of its metallurgical coal business to Glencore PLC of Switzerland. Teck had earlier sold the other 23 per cent of its coal segment to Japan’s Nippon Steel and South Korea’s POSCO.
Despite generating billions in free cash flow every year, over time fewer investors were willing to put money into Teck any more because of its exposure to coal. That’s because of ESG mandates that forbids many big investors from investing in fossil fuels. By focusing solely on metals such as copper, which doesn’t have the same dirty image as coal, Teck hopes to appeal to a wider class of investors.
The company’s B shares closed at an all-time high in May of $73.22 a share but have since pulled back by about 15 per cent. On Wednesday the shares were trading down by about 1.2 per cent in early trading on the Toronto Stock Exchange.
Glencore originally proposed buying all of Teck early last year, including the company’s copper and zinc mines, in a US$23.1-billion transaction. But Teck repeatedly rejected Glencore’s advances. Controlling Teck shareholder Norman B. Keevil said he was opposed to Glencore buying all of Teck, telling The Globe that “Canada is not for sale.”
Earlier this month, as Federal Industry Minister François-Philippe Champagne approved the Glencore takeover of Teck’s coal business, he sent a stern message that essentially echoed Mr. Keevil’s comments.
From now on, Mr. Champagne said he will only approve the acquisition of Canadian miners with significant critical minerals operations under the most exceptional of circumstances. That means that Teck and other big Canadian critical minerals miners are essentially takeover-proof.
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