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Teck Reports Unaudited First Quarter Results for 2022

Press Release

Vancouver, B.C. – Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK) (“Teck”) today announced its unaudited first quarter results for 2022.

“We had an exceptional start to 2022 with continued high commodity prices driving record-setting financial results across our business. Our intention to repurchase a further US$500 million in Class B subordinate voting shares demonstrates both our confidence in the outlook for our business and our commitment to balance growth with shareholder returns,” said Don Lindsay, President and CEO. “This is a transformational year for Teck as we drive towards first copper at our QB2 project in the later part of the year, advance our copper growth strategy and further strengthen our existing high-quality assets through our RACE technology transformation program and sustainability strategy.”

Highlights

  • Adjusted profit attributable to shareholders1 was a quarterly record $1.6 billion or $3.02 per share in Q1 2022 and more than four times higher than the same period last year.
  • Profit attributable to shareholders was a quarterly record at $1.6 billion or $2.93 per share in Q1 2022.
  • Adjusted EBITDA1 was a quarterly record at $3.0 billion in Q1 2022 and more than three times higher than the same period last year. Profit before tax was a record $2.5 billion in Q1 2022.
  • We generated cash flows from operations of $2.3 billion in Q1 2022, redeemed US$150 million of our maturing 4.75% term notes and ended the quarter with a cash balance of $2.5 billion. Our liquidity is $8.0 billion as at April 26, 2022.
  • We returned $337 million to shareholders through dividends in Q1 2022 and in April we completed $100 million in Class B subordinate voting share buybacks.
  • We announced that we intend to repurchase a further US$500 million in Class B subordinate voting shares and will continue to regularly consider additional buybacks in the context of market conditions at the time.
  • At QB2, we now have more than 12,000 workers on site, the highest to date, evidencing the recovery from the impacts of the Omicron virus early in the quarter when absenteeism exceeded 20% at times. Steady progress has allowed us to surpass 82% complete, we expect first copper in Q4 this year, and our capital cost guidance remains unchanged. Notably, QB2 has been named by Bechtel as their construction project of the year.
  • Our copper business unit gross profit increased 23% from a year ago, supported by an average realized copper price of US$4.51 per pound and copper sales volumes of 69,300 tonnes.
  • Our zinc business unit gross profit increased 98% from a year ago, supported by an average realized zinc price of US$1.65 per pound and quarterly zinc in concentrate sales volumes of 168,700 tonnes.
  • Realized steelmaking coal prices of US$357 per tonne drove a $1.6 billion gross profit increase in our steelmaking coal business unit.
  • While our underlying key mining drivers remain relatively stable, like others in the industry, we continue to face inflationary cost pressures. Inflationary pressures have increased our operating costs by 13% compared to the same period last year, of which approximately half relates to an increase in diesel costs.

Note:
1.    This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.

Financial Summary Q1 2022

Financial Metrics
(CAD$ in millions, except per share data)

Q1 2022

Q1 2021

Revenues $5,032 $2,547
Gross profit   $2,568 $654
Gross profit before depreciation and amortization1 $3,017 $1,032
Profit before taxes $2,450 $501
Adjusted EBITDA $3,044 $967
Profit attributable to shareholders $1,571 $305
Adjusted profit attributable to shareholders $1,620 $326
Basic earnings per share $2.93 $0.57
Diluted earnings per share $2.87 $0.57
Adjusted basic earnings per share $3.02 $0.61
Adjusted diluted earnings per share $2.96 $0.61

Note:
1. This is a Non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.

Key Updates

Executing on our copper growth strategy – QB2 a long-life, low-cost operation with major expansion potential

  • We now have more than 12,000 workers on site, the highest to date, evidencing the recovery from the impacts of the Omicron virus early in the quarter when absenteeism exceeded 20% at times. Steady progress has allowed us to surpass 82% complete;
  • Focus going forward is on system completion and handover;
  • Energization of the high voltage power transmission system is in progress;
  • The seawater intake and outlet pipes are in place on the seafloor in preparation for water extraction;
  • We have commenced hydrotesting of the water pipeline;
  • We have completed the mass earthworks for the tailings starter dam construction and the mine fleet has transitioned to open pit activities;
  • We expect first copper from Line 1 in Q4 this year, assuming no further COVID waves or other major disruptions, consistent with our prior guidance; and
  • Our capital cost guidance remains unchanged from our previous release.
  • Click here for a photo gallery and click here for a video of construction progress on QB2.

Safety and sustainability leadership

  • Our High Potential Injury Frequency remained low at a rate of 0.14 in the first quarter.
  • We were named to the 2022 Bloomberg Gender-Equality Index in recognition of a high level of disclosure and performance in gender equality.
  • We expanded our climate action strategy to include a new short-term goal to achieve net-zero Scope 2 (purchased electricity) greenhouse gas (GHG) emissions by 2025 and an ambition to achieve net-zero Scope 3 (value chain) emissions by 2050, building on our existing commitment to achieve net-zero emissions across operations by 2050.
  • Our Highland Valley Copper operation was the first Canadian mine site to be awarded the Copper Mark verification for its responsible mining practices.

Guidance

  • There has been no change in our previously issued annual guidance, outlined in summary below, except for our annual steelmaking coal unit cost, bitumen unit costs, and steelmaking coal capitalized stripping guidance. Our usual guidance tables, including three-year production guidance, can be found on pages 28 — 32 of Teck’s full first quarter results for 2022 at the link below.
  • Like others in the industry, we continue to face inflationary cost pressures, which have increased our operating costs by 13% compared to the same period last year, approximately half of which relates to diesel costs at our operations and in our transportation costs. Diesel prices have increased by 52% compared to the same period last year. The increases in the cost of certain key supplies, including mining equipment, fuel, tires and explosives, are being driven largely by price increases for underlying commodities such as steel, crude oil and natural gas. While our underlying key mining drivers remain relatively stable, inflationary pressures on diesel prices and other key input costs, as well as profit-based compensation and royalties continue to put upward pressure on our unit cost and capitalized stripping guidance through 2022.
2022 Guidance – Summary
Production Guidance

  Copper (000’s tonnes)

273 – 290

  Zinc (000’s tonnes)

630 – 665

  Refined zinc (000’s tonnes)

270 – 285

  Steelmaking coal (million tonnes)

24.5 – 25.5

  Bitumen (million barrels)

12.0 – 14.4

Sales Guidance – Q2 2022

  Red Dog zinc in concentrate sales (000’s tonnes)

50 – 70

  Steelmaking coal sales (million tonnes)

6.3 – 6.7

Unit Cost Guidance

  Copper net cash unit costs (US$/lb.) 

1.40 – 1.50

  Zinc net cash unit costs (US$/lb.) 

0.32 – 0.38

  Steelmaking coal adjusted site cash cost of sales (CAD$/tonne) 

79 – 83

  Steelmaking coal transportation costs (CAD$/tonne)

43 – 46

  Bitumen adjusted operating costs (CAD$/barrel)

28 – 32

Note:
1. This is a Non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios”  for further information.

Click here to view Teck’s full first quarter results for 2022.

WEBCAST

Teck will host an Investor Conference Call to discuss its Q1/2022 financial results at 11:00 AM Eastern time, 8:00 AM Pacific time, on April 27, 2022. A live audio webcast of the conference call, together with supporting presentation slides, will be available at our website at www.teck.com. The webcast will be archived at www.teck.com.

Investor Contact:
Fraser Phillips
Senior Vice President, Investor Relations and Strategic Analysis
604.699.4621
[email protected]

Media Contact:
Marcia Smith
Senior Vice President, Sustainability and External Affairs
604.699.4616
[email protected]

USE OF NON-GAAP FINANCIAL MEASURES AND RATIOS

Our financial results are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. This document refers to a number of non-GAAP financial measures and non-GAAP ratios which are not measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS or by Generally Accepted Accounting Principles (GAAP) in the United States.

The non-GAAP financial measures and non-GAAP ratios described below do not have standardized meanings under IFRS, may differ from those used by other issuers, and may not be comparable to similar financial measures and ratios reported by other issuers. These financial measures and ratios have been derived from our financial statements and applied on a consistent basis as appropriate. We disclose these financial measures and ratios because we believe they assist readers in understanding the results of our operations and financial position and provide further information about our financial results to investors. These measures should not be considered in isolation or used in substitute for other measures of performance prepared in accordance with IFRS.

Adjusted profit attributable to shareholders – For adjusted profit attributable to shareholders, we adjust profit attributable to shareholders as reported to remove the after-tax effect of certain types of transactions that reflect measurement changes on our balance sheet or are not indicative of our normal operating activities.

EBITDA – EBITDA is profit before net finance expense, provision for income taxes, and depreciation and amortization.

Adjusted EBITDA – Adjusted EBITDA is EBITDA before the pre-tax effect of the adjustments that we make to adjusted profit attributable to shareholders as described above.

Adjusted profit attributable to shareholders, EBITDA, and Adjusted EBITDA highlight items and allow us and readers to analyze the rest of our results more clearly. We believe that disclosing these measures assists readers in understanding the ongoing cash generating potential of our business in order to provide liquidity to fund working capital needs, service outstanding debt, fund future capital expenditures and investment opportunities, and pay dividends.

Gross profit before depreciation and amortization – Gross profit before depreciation and amortization is gross profit with depreciation and amortization expense added back. We believe this measure assists us and readers to assess our ability to generate cash flow from our business units or operations.

Adjusted site cash cost of sales – Adjusted site cash cost of sales for our steelmaking coal operations is defined as the cost of the product as it leaves the mine excluding depreciation and amortization charges, out-bound transportation costs and any one-time collective agreement charges and inventory write-down provisions.

Total cash unit costs – Total cash unit costs for our copper and zinc operations includes adjusted cash costs of sales, as described below, plus the smelter and refining charges added back in determining adjusted revenue. This presentation allows a comparison of total cash unit costs, including smelter charges, to the underlying price of copper or zinc in order to assess the margin for the mine on a per unit basis.

Net cash unit costs – Net cash unit costs of principal product, after deducting co-product and by-product margins, are also a common industry measure. By deducting the co- and by-product margin per unit of the principal product, the margin for the mine on a per unit basis may be presented in a single metric for comparison to other operations.

Adjusted cash cost of sales – Adjusted cash cost of sales for our copper and zinc operations is defined as the cost of the product delivered to the port of shipment, excluding depreciation and amortization charges, any one-time collective agreement charges or inventory write-down provisions and by-product cost of sales. It is common practice in the industry to exclude depreciation and amortization as these costs are non-cash and discounted cash flow valuation models used in the industry substitute expectations of future capital spending for these amounts.

Adjusted operating costs – Adjusted operating costs for our energy business unit is defined as the costs of product as it leaves the mine, excluding depreciation and amortization charges, cost of diluent for blending to transport our bitumen by pipeline, cost of non-proprietary product purchased and transportation costs of our product and non-proprietary product and any one-time collective agreement charges or inventory write-down provisions.

Adjusted basic earnings per share – Adjusted basic earnings per share is adjusted profit attributable to shareholders divided by average number of shares outstanding in the period.

Adjusted diluted earnings per share – Adjusted diluted earnings per share is adjusted profit attributable to shareholders divided by average number of fully diluted shares in a period.

Profit Attributable to Shareholders and Adjusted Profit Attributable to Shareholders

Three months

ended March 31,

(CAD$ in millions) 2022 2021
Profit attributable to shareholders $1,571 $305
Add (deduct) on an after-tax basis:
QB2 variable consideration to IMSA and ENAMI 59 30
Environmental costs (60) (33)
Inventory write-downs (reversals) (6)
Share-based compensation 82 10
Commodity derivatives (37) 15
Other 5 5
Adjusted profit attributable to shareholders $1,620 $326
Basic earnings per share $2.93 $0.57
Diluted earnings per share $2.87 $0.57
Adjusted basic earnings per share $3.02 $0.61
Adjusted diluted earnings per share $2.96 $0.61

 

Reconciliation of Basic Earnings per share to Adjusted Basic Earnings per share

Three months

ended March 31,

(Per share amounts) 2022 2021
Basic earnings per share $2.93 $0.57
Add (deduct):
QB2 variable consideration to IMSA and ENAMI 0.11 0.05
Environmental costs (0.11) (0.06)
Inventory write-downs (reversals) (0.01)
Share-based compensation 0.15 0.02
Commodity derivates (0.07) 0.03
Other 0.01 0.01
Adjusted basic earnings per share $3.02 $0.61

Reconciliation of Diluted Earnings per share to Adjusted Diluted Earnings per share

Three months

ended March 31,

(Per share amounts) 2022 2021
Diluted earnings per share $2.87 $0.57
Add (deduct):
QB2 variable consideration to IMSA and ENAMI 0.11 0.05
Environmental costs (0.11) (0.06)
Inventory write-downs (reversals) (0.01)
Share-based compensation 0.15 0.02
Commodity derivatives (0.07) 0.03
Other 0.01 0.01
Adjusted diluted earnings per share $2.96 $0.61

Reconciliation of EBITDA and Adjusted EBITDA

Three months

ended March 31,

(CAD$ in millions) 2022 2021
Profit before taxes $2,450 $501
Finance expense net of finance income 49 51
Depreciation and amortization 449 378
EBITDA 2,948 930
Add (deduct):
QB2 variable consideration to IMSA and ENAMI 99 50
Environmental Costs (82) (46)
Inventory write-downs (reversals) (10)
Share-based compensation 110 14
Commodity derivatives (49) 20
Other 18 9
Adjusted EBITDA $3,044 $967

Reconciliation of Gross Profit Before Depreciation and Amortization

Three months

ended March 31,

(CAD$ in millions) 2022 2021
Gross Profit $2,568 $654
Depreciation and amortization 449 378
Gross profit before depreciation and amortization $3,017 $1,032
Reported as:
Copper
Highland Valley Copper $246 $202
Antamina 258 202
Carmen de Andacollo 39 47
Quebrada Blanca 13 11
Other
556 462
Zinc
Trail Operations 34 43
Red Dog 274 125
Other (3) 3
305 171
Steelmaking coal 2,032 412
Energy 124 (13)
Gross profit before depreciation and amortization $3,017 $1,032

IBF4

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