Teck Reports Unaudited First Quarter Results for 2023
Press Release
April 25, 2023
Significant milestones achieved in copper growth strategy and strong financial results in the first quarter
Vancouver, B.C. – Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK) (Teck) today announced its unaudited first quarter results for 2023.
“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 Jonathan Price, CEO. “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. The progress in our copper growth pipeline reinforces the underlying value and optionality in our base metals business.”
Highlights
- Adjusted profit attributable to shareholders1 of $930 million or $1.81 per share in Q1 2023.
- Profit from continuing operations attributable to shareholders1 of $1.2 billion or $2.27 per share in Q1 2023.
- Adjusted EBITDA1 was $2.0 billion in Q1 2023 driven by continued robust commodity prices and strong steelmaking coal sales volumes. Profit from continuing operations before taxes was $1.9 billion in Q1 2023.
- We generated cash flows from operations of $1.1 billion in the quarter, ending with a cash balance of $2.3 billion. Our liquidity as at April 25, 2023 is $8.0 billion, including $2.6 billion of cash.
- We returned $321 million to shareholders through dividends in Q1 2023.
- At QB2, we have produced our first bulk copper concentrate, continue to advance commissioning and will ramp-up to full production through 2023.
- We successfully closed transactions related to the joint venture partnerships for the NewRange and San Nicolás projects, which are key milestones in advancing our copper growth strategy, and the sales of Quintette and our interest in Fort Hills.
Note:
. This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.
Financial Summary Q1 2023
| Financial Metrics (CAD$ in millions, except per share data) |
Q1 2023
|
Q1 2022 |
||||||
| Revenues | $3,785 | $4,616 | ||||||
| Gross profit | $1,666 | $2,478 | ||||||
| Gross profit before depreciation and amortization1 | $2,089 | $2,893 | ||||||
| Profit from continuing operations before taxes | $1,856 | $2,368 | ||||||
| Adjusted EBITDA1 | $1,972 | $3,044 | ||||||
| Profit from continuing operations attributable to shareholders | $1,166 | $1,519 | ||||||
| Adjusted profit attributable to shareholders1 | $930 | $1,620 | ||||||
| Basic earnings per share from continuing operations | $2.27 | $2.84 | ||||||
| Diluted earnings per share from continuing operations | $2.23 | $2.78 | ||||||
| Adjusted basic earnings per share1 | $1.81 | $3.02 | ||||||
| Adjusted diluted earnings per share1 | $1.78 | $2.96 | ||||||
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
- QB2 is in commissioning of Line 1 at the concentrator and our focus continues to be on system completion and handover as part of the continuous commissioning and ramp-up plan through 2023.
- The start of Line 1 commissioning commenced in January; however, our first copper milestone was not achieved until late March. This delay, combined with recent foreign exchange impacts, has resulted in pressure on our project capital cost guidance for QB2 which could increase total capital costs for the project to US$8.0 to $8.2 billion. Over 30% of the increase from our previously disclosed guidance relates to non-controllable foreign exchange impacts. Significant efforts are ongoing to mitigate the cost pressures.
- Our 2023 production guidance is unchanged and we continue to expect QB2 to be operating at full production rates by the end of 2023.
Safety and Sustainability Leadership
- Our High Potential Incident Frequency remained low at a rate of 0.10 in the first quarter.
- We issued a report on our low-carbon Special High Grade (SHG) refined zinc product, confirming each tonne of SHG zinc from Trail Operations generates 0.93 tonnes of carbon dioxide equivalent (CO2e) compared to the estimated global average of 3 — 4 tonnes of CO2e per tonne.
- We released our 22nd Annual Sustainability Report, outlining Teck’s sustainability performance including improvements in health & safety, climate action, diversity and other areas.
Guidance
There has been no change in our previously issued annual guidance, with the exception of QB2 capital cost guidance, as noted above. Our guidance is outlined in summary below and our usual guidance tables, including three-year production guidance, can be found on pages 27 — 31.
| 2023 Guidance – Summary | |
| Production Guidance |
Current |
| Copper (000’s tonnes) |
390 – 445 |
| Zinc (000’s tonnes) |
645 – 685 |
| Refined zinc (000’s tonnes) |
270 – 290 |
| Steelmaking coal (million tonnes) |
24.0 – 26.0 |
| Sales Guidance – Q2 2023 |
|
| Red Dog zinc in concentrate sales (000’s tonnes) |
45 – 55 |
| Steelmaking coal sales (million tonnes) |
6.2 – 6.6 |
| Unit Cost Guidance |
|
| Copper net cash unit costs (US$/lb.) 1 2 |
1.60 – 1.80 |
| Zinc net cash unit costs (US$/lb.) 1 |
0.50 – 0.60 |
| Steelmaking coal adjusted site cash cost of sales (CAD$/tonne) 1 |
88 – 96 |
| Steelmaking coal transportation costs (CAD$/tonne) |
45 – 48 |
Note:
1. This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.
2. Excludes Quebrada Blanca
Click here to view Teck’s full first quarter results for 2023.
WEBCAST
Teck will host an Investor Conference Call to discuss its Q1/2023 financial results at 11:00 AM Eastern time, 8:00 AM Pacific time, on April 26, 2023. 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
Reference:
Investor Contact:
Fraser Phillips
Senior Vice President, Investor Relations and Strategic Analysis
604.699.4621
[email protected]
Media Contact:
Chris Stannell
Public Relations Manager
604.699.4368
[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 (loss) 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.
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.
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.
Unit costs – Unit costs for our steelmaking coal operations are total cost of goods sold, divided by tonnes sold in the period, excluding depreciation and amortization charges. We include this information as it is frequently requested by investors and investment analysts who use it to assess our cost structure and margins and compare it to similar information provided by many companies in the industry.
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 site cash cost of sales per tonne – Adjusted site cash cost of sales per tonne is a non-GAAP ratio comprised of adjusted site cash cost of sales divided by tonnes sold. There is no similar financial measure in our consolidated financial statements with which to compare. Adjusted site cash cost of sales is a non-GAAP financial measure.
Profit Attributable to Shareholders and Adjusted Profit Attributable to Shareholders
|
Three months ended March 31, |
||||
| (CAD$ in millions) | 2023 | 2022 | ||
| Profit from continuing operations attributable to shareholders | $1,166 | $1,519 | ||
| Add (deduct) on an after-tax basis 1: | ||||
| QB2 variable consideration to IMSA and ENAMI | 2 | 59 | ||
| Environmental costs | 13 | (60) | ||
| Share-based compensation | 18 | 82 | ||
| Commodity derivatives | (4) | (37) | ||
| Loss (gain) on sale or contribution of assets | (186) | 1 | ||
| Elkview business interruption claim | (68) | – | ||
| Profit from discontinued operations 2 | – | 52 | ||
| Other | (11) | 4 | ||
| Adjusted profit attributable to shareholders | $930 | $1,620 | ||
| Basic earnings per share from continuing operations | $2.27 | $2.84 | ||
| Diluted earnings per share from continuing operations | $2.23 | $2.78 | ||
| Adjusted basic earnings per share | $1.81 | $3.02 | ||
| Adjusted diluted earnings per share | $1.78 | $2.96 | ||
Note:
1. Adjustments for the three months ended March 31, 2022 are as previously reported.
2. Adjustment required to remove the effect of discontinued operations for the three months ended March 31, 2022.
Reconciliation of Basic Earnings per share to Adjusted Basic Earnings per share
|
Three months ended March 31, |
||||
| (Per share amounts) | 2023 | 2022 | ||
| Basic earnings per share from continuing operations | $2.27 | $2.84 | ||
| Add (deduct) 1: | ||||
| QB2 variable consideration to IMSA and ENAMI | – | 0.11 | ||
| Environmental costs | 0.03 | (0.11) | ||
| Share-based compensation | 0.03 | 0.15 | ||
| Commodity derivates | (0.01) | (0.07) | ||
| Loss (gain) on sale or contribution of assets | (0.36) | – | ||
| Elkview business interruption claim | (0.13) | – | ||
| Profit from discontinued operations 2 | – | 0.09 | ||
| Other | (0.02) | 0.01 | ||
| Adjusted basic earnings per share | $1.81 | $3.02 | ||
Reconciliation of Diluted Earnings per share to Adjusted Diluted Earnings per share
|
Three months ended March 31, |
||||
| (Per share amounts) | 2023 | 2022 | ||
| Diluted earnings per share from continuing operations | $2.23 | $2.78 | ||
| Add (deduct) 1: | ||||
| QB2 variable consideration to IMSA and ENAMI | – | 0.11 | ||
| Environmental costs | 0.03 | (0.11) | ||
| Share-based compensation | 0.03 | 0.15 | ||
| Commodity derivatives | (0.01) | 0.07 | ||
| Loss (gain) on sale or contribution of assets | (0.36) | – | ||
| Elkview business interruption claim | (0.13) | – | ||
| Profit from discontinued operations 2 | – | 0.09 | ||
| Other | (0.01) | 0.01 | ||
| Adjusted diluted earnings per share | $1.78 | $2.96 | ||
Note:
1. Adjustments for the three months ended March 31, 2022 are as previously reported.
2. Adjustment required to remove the effect of discontinued operations for the three months ended March 31, 2022.
Reconciliation of EBITDA and Adjusted EBITDA
|
Three months ended March 31, |
||||
| (CAD$ in millions) | 2023 | 2022 | ||
| Profit from continuing operations before taxes | $1,856 | $2,368 | ||
| Finance expense net of finance income | 30 | 43 | ||
| Depreciation and amortization | 423 | 415 | ||
| EBITDA | 2,309 | 2,826 | ||
| Add (deduct) 1: | ||||
| QB2 variable consideration to IMSA and ENAMI | 2 | 99 | ||
| Environmental Costs | 17 | (82) | ||
| Share-based compensation | 22 | 110 | ||
| Commodity derivatives | (6) | (49) | ||
| Loss (gain) on sale or contribution of assets | (258) | 2 | ||
| Elkview business interruption claim | (102) | – | ||
| Profit from discontinued operations 2 | – | 122 | ||
| Other | (12) | 16 | ||
| Adjusted EBITDA | $1,972 | $3,044 | ||
Note:
1. Adjustments for the three months ended March 31, 2022 are as previously reported.
2. Adjustment required to remove the effect of discontinued operations for the three months ended March 31, 2022.
Reconciliation of Gross Profit Before Depreciation and Amortization
|
Three months ended March 31, |
||||
| (CAD$ in millions) | 2023 | 2022 | ||
| Gross Profit | $1,666 | $2,478 | ||
| Depreciation and amortization | 423 | 415 | ||
| Gross profit before depreciation and amortization | $2,089 | $2,893 | ||
| Reported as: | ||||
| Copper | ||||
| Highland Valley Copper | $136 | $246 | ||
| Antamina | 230 | 258 | ||
| Carmen de Andacollo | 12 | 39 | ||
| Quebrada Blanca | (1) | 13 | ||
| Other | (4) | – | ||
| 373 | 556 | |||
| Zinc | ||||
| Trail Operations | 36 | 34 | ||
| Red Dog | 127 | 274 | ||
| Other | 10 | (3) | ||
| 173 | 305 | |||
| Steelmaking coal | 1,543 | 2,032 | ||
| Gross profit before depreciation and amortization | $2,089 | $2,893 | ||
IBF4
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