May 26th, 2024

BHP’s proposed takeover of Anglo a validation of copper focus: Teck CEO

By Ian Bickis, The Canadian Press on April 25, 2024.

A journalist is silhouetted before the Teck Resources special meeting of shareholders, in Vancouver, B.C., Wednesday, April 26, 2023. Teck Resources Ltd. reported its first-quarter profit fell compared with a year ago due in part to its reduced ownership in its steelmaking coal business as well as lower copper and zinc prices and higher costs.THE CANADIAN PRESS/Darryl Dyck

Teck Resources Ltd. saw copper production surge in the first quarter compared with a year earlier as its Quebrada Blanca expansion project ramped up toward full production.

The roughly US$8.7-billion project in Chile is at the heart of the company’s efforts to shift focus towards metals crucial to the energy transition.

The company completed all major construction at the project in the quarter, including a molybdenum plant and a ship loader that allowed it to start shipping mine concentrate, chief executive Jonathan Price told investors Thursday during a conference call to discuss the company’s latest results.

“It was a beautiful sight,” said Price, who was in there to see the second shipment of concentrate loaded onto a ship.

Price made the comments the same day as news broke that BHP Group has made a takeover offer worth about US$39 billion for Anglo American PLC.

BHP said a key reason for the acquisition attempt was to increase its exposure to “future facing” commodities through Anglo’s copper assets, a premise that Price said validates Teck’s own strategy.

“The proposed or potential takeover here, of Anglo by BHP, just reinforces the attractiveness of the long-term fundamentals for copper markets. And, you know, long-term fundamentals around which we have centred our strategy for the years ahead.”

Copper is expected to be in high demand in the energy transition as everything from electric vehicles to wind turbines to the power grid to connect them will all require reams of the red metal.

“It’s an exciting time in the copper market,” said Price, as copper prices have recently jumped up past US$4.40 a pound from a first-quarter average of US$3.83.

“The world is fast turning from debating whether demand for copper would really rise so quickly, to wondering where and how we’re going to find more.”

RBC analyst Sam Crittenden noted Teck is still working to smooth out operations though, and a slower ramp-up led to copper production of 43,000 tonnes at QB that was about 12 per cent weaker than analyst expectations.

Total copper production was still up 74 per cent to 99,000 tonnes from the first quarter last year, thanks both to the Quebrada Blanca ramp-up and strong performance at its Antamina mine, the company said.

While the copper production ramp up at the mine in Chile was slow in the first quarter, the company maintained its full-year copper in concentrate production guidance of 230,000 to 275,000 tonnes and also kept its cost guidance unchanged.

The company also kept its latest capital cost guidance unchanged, something analysts have been watching as the original estimate for the Quebrada Blanca expansion project was around US$4.7 billion.

Teck is working to increase copper production as it moves away from its steelmaking coal business that it has a deal to sell to Glencore. The company received US$1.3-billion in cash from Nippon Steel in the quarter for a minority stake in the business, while regulators are still looking at the Glencore side of the deal for the majority of the business.

The company’s steelmaking coal business was hit by freezing weather in January that led to some equipment failures that contributed to a drop in sales, while its zinc business has been suffering from low prices for much of the past year.

Overall, the Vancouver-based mining company said it earned a profit attributable to shareholders of $343 million or 65 cents per diluted share for the quarter ended March 31. The result compared with a profit of $1.14 billion or $2.18 per diluted share in the same quarter last year.

Revenue totalled $3.99 billion, up from $3.79 billion in the first quarter of 2023.

On an adjusted basis, Teck says it earned 75 cents per diluted share from continuing operations, down from $1.78 per diluted share a year earlier.

This report by The Canadian Press was first published April 25, 2024.

Companies in this story: (TSX:TECK.B)

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