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Teck Reports Unaudited Second Quarter Results for 2021

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Teck Reports Unaudited Second Quarter Results for 2021

 

 

 

 

 

Strong quarterly results supported by positive market backdrop and progress on key projects

 

 

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

 

“Solid performance at our operations and key projects against the backdrop of improving market conditions made for a very positive second quarter of 2021, with adjusted profit up 281% compared to the same period last year,” said Don Lindsay, President and CEO. “We managed through the most acute COVID-19 conditions in Chile since the start of the pandemic while safely achieving our best quarterly progress to date on our flagship QB2 copper growth project. The COVID-19 situation in Chile has improved in recent weeks and vaccination rates at QB2 are high, which is contributing to strong momentum on the project heading into the third quarter. Our Neptune port upgrade project is operational and ramping up to full capacity, and the new facility is being integrated into our logistics chain, which will reduce costs, enhance flexibility and improve performance.”

 

Highlights

 

  • Adjusted EBITDA1 of $989 million in Q2 2021, an increase of 104% compared to the same period last year.
  • Adjusted profit attributable to shareholders1 of $339 million or $0.64 per share in Q2 2021, an increase of 281% compared to the same period last year. Profit attributable to shareholders was $260 million, or $0.49 per share in Q2 2021.
  • Despite the largest COVID-19 wave to date in Chile, the construction of our QB2 project continued to advance with the best quarterly progress to date.
  • Our financial results are significantly improved compared to the same period last year supported by the positive market backdrop of improved commodity prices, production in line with plan across our business units and sales meeting our Q2 2021 guidance.
  • Our copper business unit had a strong Q2 2021 with a 198% increase in gross profit before depreciation and amortization1 compared to the same period last year, supported by an average realized copper price of US$4.39 per pound and copper production of 72,100 tonnes, in line with plan.
  • Our zinc business unit had a strong Q2 2021 operating performance with an increase in zinc production at our Red Dog Operations of 67% compared to the same period last year, resulting in an increase to our 2021 annual zinc in concentrate production guidance range.
  • Sales of steelmaking coal were 6.2 million tonnes in Q2 2021, with approximately 2 million tonnes sold to China at significantly higher prices than FOB Australia prices. The FOB Australia and CFR China price assessments increased sharply in the latter half of Q2, the impact of which will be reflected in our Q3 financial performance.
  • Liquidity of $6.1 billion as at July 26, 2021.
  • We were named to the Best 50 Corporate Citizens in Canada ranking as one of the top 50 companies in Canada for corporate citizenship for the 15th consecutive year.

Note:
1.  Non-GAAP Financial Measure. See “Use of Non-GAAP Financial Measures” section below for further information and reconciliation.

 

 

Financial Summary Q2 2021

 

Financial Metrics
(CAD$ in millions, except per share data)
Q2 2021 Q2 2020
Revenues $ 2,558    $ 1,720    
Gross profit before depreciation and amortization1 $ 1,059    $ 453    
Gross profit $ 689    $ 139    
Adjusted EBITDA1 $ 989    $ 485    
Profit (loss) attributable to shareholders $ 260    $ (149 )  
Adjusted profit attributable to shareholders1 $ 339    $ 89    
Basic earnings (loss) per share $ 0.49    $ (0.28 )  
Diluted earnings (loss) per share $ 0.48    $ (0.28 )  
Adjusted basic earnings per share1 $ 0.64    $ 0.17    
Adjusted diluted earnings per share1 $ 0.63    $ 0.17    

Note:

  1. Non-GAAP Financial Measure. See “Use of Non-GAAP Financial Measures” section below for further information and reconciliation.

 

Key Updates

 

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

 

  • Despite Q2 2021 seeing the largest COVID-19 wave to date in Chile, construction continued to advance with the best quarterly progress to date;
  • As COVID-19 cases in Chile started declining in June 2021, and coupled with the country’s high rates of vaccination, we are aggressively ramping-up to peak workforce levels;
  • Overall project progress of 60% is expected in early August;
  • First production continues to be expected in the second half of 2022;
  • The capital cost estimate remains unchanged at US$5.2 billion before COVID-19 related capital costs; and
  • Assuming that our COVID-19 management plan progresses in accordance with our expectations, COVID-19 related capital costs are now expected to be approximately US$600 million.
  • Click here for a photo gallery and click here for a video of construction progress on QB2.

 

Neptune Bulk Terminals – securing a low-cost reliable supply chain for our steelmaking coal business unit

 

  • Our Neptune port upgrade project is in the site wide ramp-up phase, which continues as planned.
  • Click here for a photo gallery of progress on the Neptune port upgrade project.

 

Guidance

 

  • Our previously issued 2021 annual guidance, outlined in summary below, has been updated for changes to zinc, refined zinc, steelmaking coal and bitumen production, zinc net cash unit costs, steelmaking coal transportation costs, bitumen adjusted operating costs and steelmaking coal growth capital and capitalized stripping expenditures.
  • Our usual guidance tables, including three-year production guidance, can be found on pages 28 — 32 of Teck’s full second quarter results for 2021 at the link below.

 

2021 Guidance – Summary

 
Production Guidance  
Copper (000’s tonnes) 275 – 290
Zinc (000’s tonnes) 605 – 630
Refined zinc (000’s tonnes) 290 – 300
Steelmaking coal (million tonnes) 25 – 26
Bitumen (million barrels) 6.6 – 8.1
Sales Guidance – Q3 2021  
Red Dog zinc in concentrate sales (000’s tonnes) 180 – 200
Steelmaking coal sales (million tonnes) 5.7 – 6.1
Unit Cost Guidance  
Copper net cash unit costs (US$/lb.) $ 1.30 – 1.40
Zinc net cash unit costs (US$/lb.) $ 0.35 – 0.40
Steelmaking coal adjusted site cash cost of sales (CAD$/tonne) $ 59 – 64
Steelmaking coal transportation costs (CAD$/tonne) $ 39 – 42
Bitumen adjusted operating costs (CAD$/barrel) $ 40 – 44

 


Click here
 to view Teck’s full second quarter results for 2021.

 

USE OF NON-GAAP FINANCIAL MEASURES

 

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 which are not measures recognized under IFRS and do not have a standardized meaning prescribed by IFRS or Generally Accepted Accounting Principles (GAAP) in the United States.

 

The Non-GAAP Measures described below do not have standardized meanings under IFRS, may differ from those used by other issuers, and may not be comparable to such measures as reported by others. These measures have been derived from our financial statements and applied on a consistent basis as appropriate. We disclose these measures because we believe they assist readers in understanding the results of our operations and financial position and are meant to 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, 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. We believe adjusted profit helps us and readers better understand the results of our normal operating activities and the ongoing cash generating potential of our business.

 

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.

 

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.

 

The adjustments described above to profit attributable to shareholders and 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 the 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.

 

 

Profit (Loss) and Adjusted Profit

 

  Three months
ended June 30,
Six months
ended June 30,
(CAD$ in millions) 2021   2020   2021   2020  
         
Profit (loss) attributable to shareholders $ 260   $ (149 ) $ 565   $ (461 )
Add (deduct) on an after-tax basis:        
Asset impairment       474  
COVID-19 costs   147     169  
Environmental costs 44   69   11   (18 )
Inventory write-downs (reversals)   38   (6 ) 65  
Share-based compensation 24   17   34   (5 )
Commodity derivatives (20 ) (20 ) (5 ) (5 )
Taxes and other 31   (13 ) 66   (36 )
         
Adjusted profit attributable to shareholders $ 339   $ 89   $ 665   $ 183  
Adjusted basic earnings per share $ 0.64   $ 0.17   $ 1.25   $ 0.34  
Adjusted diluted earnings per share $ 0.63   $ 0.17   $ 1.23   $ 0.34  

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

 

  Three months
ended June 30,
Six months
ended June 30,
(Per share amounts) 2021   2020   2021   2020  
         
Basic earnings (loss) per share $ 0.49   $ (0.28 ) $ 1.06   $ (0.86 )
Add (deduct):        
Asset impairment       0.88  
COVID-19 costs   0.28     0.31  
Environmental costs 0.08   0.13   0.02   (0.03 )
Inventory write-downs (reversals)   0.07   (0.01 ) 0.12  
Share-based compensation 0.05   0.03   0.06   (0.01 )
Commodity derivatives (0.04 ) (0.04 ) (0.01 ) (0.01 )
Other 0.06   (0.02 ) 0.13   (0.06 )
         
Adjusted basic earnings per share $ 0.64   $ 0.17   $ 1.25   $ 0.34  

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

 

  Three months
ended June 30,
Six months
ended June 30,
(Per share amounts) 2021   2020   2021   2020  
         
Diluted earnings (loss) per share $ 0.48   $ (0.28 ) $ 1.05   $ (0.86 )
Add (deduct):        
Asset impairment       0.88  
COVID-19 costs   0.28     0.31  
Environmental costs 0.08   0.13   0.02   (0.03 )
Inventory write-downs (reversals)   0.07   (0.01 ) 0.12  
Share-based compensation 0.04   0.03   0.06   (0.01 )
Commodity derivatives (0.04 ) (0.04 ) (0.01 ) (0.01 )
Other 0.07   (0.02 ) 0.12   (0.06 )
         
Adjusted diluted earnings per share $ 0.63   $ 0.17   $ 1.23   $ 0.34  

Reconciliation of EBITDA and Adjusted EBITDA

 

  Three months
ended June 30,
Six months
ended June 30,
(CAD$ in millions) 2021   2020   2021   2020  
         
Profit (loss) $ 260   $ (185 ) $ 552   $ (496 )
Finance expense net of finance income 51   114   102   161  
Provision for (recovery of) income taxes 209   (66 ) 418   (135 )
Depreciation and amortization 370   314   748   692  
         
EBITDA 890   177   1,820   222  
         
Add (deduct):        
Asset impairment       647  
COVID-19 costs   185     229  
Environmental costs 61   96   15   (25 )
Inventory write-downs (reversals)   57   (10 ) 93  
Share-based compensation 33   23   47   (7 )
Commodity derivatives (27 ) (28 ) (7 ) (7 )
Taxes and other 32   (25 ) 91   (59 )
Adjusted EBITDA $ 989   $ 485   $ 1,956   $ 1,093  

Reconciliation of Gross Profit Before Depreciation and Amortization

 

  Three months
ended June 30,
Six months
ended June 30,
(CAD$ in millions) 2021   2020   2021   2020  
         
Gross profit $ 689   $ 139   $ 1,343   $ 537  
Depreciation and amortization 370   314   748   692  
Gross profit before depreciation and amortization $ 1,059   $ 453   $ 2,091   $ 1,229  
         
Reported as:        
Copper        
Highland Valley Copper $ 194   $ 93   $ 396   $ 170  
Antamina 254   60   456   183  
Carmen de Andacollo 59   16   106   76  
Quebrada Blanca 11   4   22   7  
Other   1      
         
  518   174   980   436  
         
Zinc        
Trail Operations (3 ) 13   40   24  
Red Dog 91   116   216   274  
Other 8   3   11   17  
           
  96   132   267   315  
           
Steelmaking coal 457   220   869   641  
         
Energy (12 ) (73 ) (25 ) (163 )
         
Gross profit before depreciation and amortization $ 1,059   $ 453   $ 2,091   $ 1,229  

 

 

Posted July 27, 2021

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