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Teck Reports Unaudited Annual and Fourth Quarter Results for 2021

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Teck Reports Unaudited Annual and Fourth Quarter Results for 2021

 

 

 

 

 

Record-setting annual and quarterly financial performance driven by high commodity prices and underpinned by business resilience

 

 

Teck Resources Limited (TSX: TECK.A and TECK.B) (NYSE: TECK) announced its unaudited annual and fourth quarter results for 2021.

 

“We closed out 2021 by setting a number of financial performance records, including our highest-ever quarterly and annual adjusted EBITDA and adjusted profit attributable to shareholders,” said Don Lindsay, President and CEO. “Teck’s record-setting performance was driven by the ongoing positive commodity price environment and made possible by the tremendous resilience of our people, who persevered through heatwaves, wildfires, floods, freezing temperatures and the global pandemic to continue safely and sustainably producing the essential resources the world needs.”

 

Highlights

  • Adjusted profit attributable to shareholders1 was a record $1.4 billion or $2.58 per share in Q4 2021, more than five times higher than the same period last year, and $3.1 billion or $5.74 per share for the year.
  • Profit attributable to shareholders of $1.5 billion or $2.79 per share in Q4 2021 was a quarterly record. Profit attributable to shareholders was $2.9 billion or $5.39 per share for the year.
  • Adjusted EBITDA1 was a record $2.5 billion in Q4 2021, more than 3 times higher than the same period last year, and $6.6 billion for the year. Profit before tax was a record $2.2 billion in Q4 2021 and $4.5 billion for the year.
  • We generated cash flows from operations of $4.7 billion in the year, ending the year with a cash balance of $1.4 billion and no amounts drawn on our US$4 billion committed credit facility. Our liquidity as at February 23, 2022 is $7.0 billion.
  • On February 23, 2022, we declared a $0.625 per share dividend, increased our annual base dividend to $0.50 per share and authorized up to $100 million share buyback.
  • Overall progress on our QB2 project has reached 77% completion.
  • Our copper business unit gross profit increased 20%, supported by an average realized copper price of US$4.46 per pound and copper production of 72,600 tonnes.
  • Our zinc business unit gross profit increased 48%, supported by an average realized zinc price of US$1.52 per pound.
  • Realized steelmaking coal prices of US$351 per tonne drove a $1.4 billion gross profit increase in our steelmaking coal business unit.
  • In 2021, we reached multi-year collective agreements at our Antamina, Quebrada Blanca, Fording River and Elkview Operations, and subsequent to year end, our Highland Valley Copper Operations.
  • We were named to the S&P Dow Jones Sustainability World Index for the 12th consecutive year and recognized as the #1 company in the Metals and Mining sector. We were recognized in January as one of the 2021 Global 100 Most Sustainable Corporations by Corporate Knights and the top-ranked mining company.

 

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 Q4 2021

 

Financial Metrics
(CAD$ in millions, except per share data)
Q4 2021 Q4 2020  
Revenue $                 4,406 $                 2,560  
Gross profit $                 2,076 $                    505  
Gross profit before depreciation and amortization1 $                 2,480 $                    911  
Profit (loss) before taxes $                 2,208 $                   (549 )
Adjusted EBITDA1 $                 2,521 $                    839  
Profit (loss) attributable to shareholders $                 1,487 $                   (464 )
Adjusted profit attributable to shareholders1 $                 1,377 $                    248  
Basic earnings (loss) per share $                   2.79 $                  (0.87 )
Diluted earnings (loss) per share $                   2.74 $                  (0.87 )
Adjusted basic earnings per share1 $                   2.58 $                   0.47  
Adjusted diluted earnings per share1 $                   2.54 $                   0.46  

 

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 continue to aggressively mitigate COVID-19 impacts on the project with a focus on our proactive vaccination and testing programs.
  • Overall project progress has reached 77% completion.
  • We have energized our port substations and continue pre-operational testing of the desalination plant, construction of which is more than 85% complete.
  • The water supply pipeline is more than 90% welded and the tailings starter dam construction is more than 85% complete.
  • We continue to expect production in the second half of 2022.
  • Based on ongoing COVID-19 conditions, we have put in place a variety of mitigation measures and incentives with our contractors.
  • Click here for a photo gallery and click here for a video of construction progress on QB2.

 

Neptune drives resiliency in our steelmaking coal supply chain – response to unprecedented disruptions

  • Neptune Bulk Terminals, following our port upgrade project, achieved periods where it exceeded design capacity during the quarter, driving steelmaking coal mine inventories to historic lows in the first half of November.
  • In mid-November, the steelmaking coal supply chain was affected by an unprecedented disruption as a result of the B.C. flood events that damaged rail infrastructure and severed the rail link to Vancouver terminals. Extreme cold weather following the flood events lasted through the first half of January, prolonging the recovery and resulting in steelmaking coal mine inventories rising to record highs.
  • We expect that these inventories will be reduced in the first half of 2022, with Neptune being a key enabler to recover sales volumes.

 

Safety and sustainability leadership

  • Our High Potential Injury Frequency was the lowest ever, down 38% for 2021 compared to 2020.
  • Teck is currently ranked #1 in the Metals and Mining industry on the S&P Corporate Sustainability Assessment, #2 in the Diversified Metals industry by Sustainalytics, #1 among North America Metals and Mining companies by Moody’s ESG (formerly Vigeo Eiris) and ranked AA by MSCI for ESG performance.
  • We were named one of Canada’s Top 100 Employers for the fifth consecutive year and named to Forbes Canada’s Best Employers 2022 List, Forbes World’s Best Employer List and Canada’s Top Employer for Young People List.
  • We continue to make progress on our goal of becoming carbon neutral by 2050, including an agreement with Oldendorff Carriers to employ energy efficient bulk carriers for shipments of Teck steelmaking coal from the Port of Vancouver to international destinations, reducing supply chain CO2 emissions by 30 — 40% for shipments handled by Oldendorff. In January, we announced an agreement with Caterpillar Inc. to work towards deploying 30 of Caterpillar’s zero-emission, large haul trucks at Teck mining operations.

 

Guidance

  • Summary guidance for 2022 is outlined below and our usual guidance tables, including three-year production guidance, can be found on pages 34 — 37 of Teck’s full fourth quarter results for 2021 at the link below.
  • Like others in the industry, we are seeing inflationary cost pressures, notably in diesel prices, mill steel, supplies and replacement parts and labour costs. 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. These price increases impacted our fourth quarter operating costs across our business units and we expect continued upward pressure on our cash unit costs into 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 – Q1 2022  
Red Dog zinc in concentrate sales (000’s tonnes) 130 – 150
Steelmaking coal sales (million tonnes) 6.1 – 6.5
Unit Cost Guidance  
Copper net cash unit costs (US$/lb.)1 1.40 – 1.50
Zinc net cash unit costs (US$/lb.)1 0.32 – 0.38
Steelmaking coal adjusted site cash cost of sales (CAD$/tonne)1 72 – 77
Steelmaking coal transportation costs (CAD$/tonne) 43 – 46
Bitumen adjusted operating costs (CAD$/barrel)1 26 – 30

 

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 fourth quarter results for 2021.

 

USE OF NON-GAAP FINANCIAL MEASURES AND RATIOS

 

Our financial results are prepared in accordance with International Financial Reporting Standards 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.

 

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 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 divided by average number of shares outstanding in the period.

 

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

 

Profit (Loss) Attributable to Shareholders and Adjusted Profit Attributable to Shareholders

 

  Three months ended December 31, Year ended December 31,
 (CAD$ in millions)   2021     2020     2021     2020  
         
 Profit (loss) attributable to shareholders $       1,487   $         (464 ) $       2,868   $         (864 )
 Add (deduct) on an after-tax basis:        
    Asset impairment (impairment reversal)            (150 )              438              (150 )              912  
    COVID-19 costs                —                  —                  —                233  
    QB2 variable consideration to IMSA and ENAMI              (16 )                —                124                (34 )
    Environmental costs               19                201                 79                210  
    Inventory write-downs                 8                 15                   2                 91  
    Share-based compensation               32                 21                 94                 34  
    Commodity derivatives               10                (15 )               15                (46 )
    Other              (13 )               52     25                 25  
         
 Adjusted profit attributable to shareholders $       1,377   $          248   $       3,057   $          561  
         
 Basic earnings (loss) per share $         2.79   $        (0.87 ) $         5.39   $        (1.62 )
 Diluted earnings (loss) per share $         2.74   $        (0.87 ) $         5.31   $        (1.62 )
 Adjusted basic earnings per share $         2.58   $         0.47   $         5.74   $         1.05  
 Adjusted diluted earnings per share $         2.54   $         0.46   $         5.66   $         1.04  
         

 

 

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

 

  Three months ended December 31, Year ended December 31,
 (Per share amounts)   2021     2020     2021     2020  
         
 Basic earnings (loss) per share $         2.79   $        (0.87 ) $         5.39   $        (1.62 )
 Add (deduct):        
    Asset impairment (impairment reversal)            (0.28 )             0.82              (0.28 )             1.71  
    COVID-19 costs                —                  —                  —               0.44  
    QB2 variable consideration to IMSA and ENAMI            (0.03 )                —               0.23              (0.06 )
    Environmental costs             0.04               0.37               0.15               0.39  
    Inventory write-downs             0.01               0.03                  —               0.17  
    Share-based compensation             0.06               0.04               0.18               0.06  
    Commodity derivatives             0.02              (0.03 )             0.03              (0.09 )
    Other            (0.03 )             0.11               0.04               0.05  
         
 Adjusted basic earnings per share $         2.58   $         0.47   $         5.74   $         1.05  
         

 

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

 

  Three months ended December 31, Year ended December 31,
 (Per share amounts)   2021     2020     2021     2020  
         
 Diluted earnings (loss) per share $         2.74   $        (0.87 ) $         5.31   $        (1.62 )
 Add (deduct):        
    Asset impairment (impairment reversal)            (0.28 )             0.82              (0.28 )             1.70  
    COVID-19 costs                —                  —                  —               0.43  
    QB2 variable consideration to IMSA and ENAMI            (0.03 )                —               0.23              (0.06 )
    Environmental costs             0.04               0.37               0.15               0.39  
    Inventory write-downs             0.01               0.03                  —               0.17  
    Share-based compensation             0.06               0.04               0.18               0.07  
    Commodity derivatives             0.02              (0.03 )             0.03              (0.09 )
    Other            (0.02 )             0.10               0.04               0.05  
         
 Adjusted diluted earnings per share $         2.54   $         0.46   $         5.66   $         1.04  
         

 

Reconciliation of EBITDA and Adjusted EBITDA

 

  Three months ended December 31, Year ended December 31,
 (CAD$ in millions)   2021     2020     2021     2020  
         
 Profit (loss) before taxes $       2,208   $         (549 ) $       4,532   $      (1,136 )
 Finance expense net of finance income               53                 44                210                268  
 Depreciation and amortization              404                406             1,583             1,510  
         
 EBITDA           2,665                (99 )           6,325                642  
         
 Add (deduct):        
    Asset impairment (impairment reversal)            (215 )              597              (215 )           1,244  
    COVID-19 costs                —                  —                  —                336  
    QB2 variable consideration to IMSA and ENAMI              (27 )                —                141                (56 )
    Environmental costs               26                258                108                270  
    Inventory write-downs               11                 23                   1                134  
    Share-based compensation               43                 29                125                 47  
    Commodity derivatives               15                (20 )               22                (62 )
    Other                 3                 51                 66                 15  
         
 Adjusted EBITDA $       2,521   $          839   $       6,573   $       2,570  

 

 

Reconciliation of Gross Profit Before Depreciation and Amortization 

 

  Three months ended December 31, Year ended December 31,
 (CAD$ in millions)   2021     2020     2021     2020  
 Gross profit $       2,076   $          505   $       5,081   $       1,333  
 Depreciation and amortization              404                406             1,583             1,510  
 Gross profit before depreciation and amortization $       2,480   $          911   $       6,664   $       2,843  
         
 Reported as:        
 Copper        
    Highland Valley Copper $          195   $          185   $          883   $          476  
    Antamina              284                210                992                566  
    Carmen de Andacollo               44                 63                209                170  
    Quebrada Blanca               13                 12                 42                 30  
               536                470             2,126             1,242  
         
 Zinc        
    Trail Operations               10                 27                 84                 65  
    Red Dog              273                188                822                717  
    Other                 2                   2                 12                 33  
               285                217                918                815  
 Steelmaking coal           1,668                248             3,657             1,009  
 Energy                (9 )              (24 )              (37 )            (223 )
 Gross profit before depreciation and amortization $       2,480   $          911   $       6,664   $       2,843  
 

 

 

 

Posted February 24, 2022

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