Yahoo Finance Teck misses copper guidance, expects more extreme weather events
Extreme weather events hurt Teck Resources Ltd. in 2022 as the Vancouver-based miner missed its copper and steelmaking coal output goals, the company said on Jan. 31.
The miner produced 65,400 tonnes of copper in its fourth quarter that ended on Dec. 31, pushing its overall annual production to 270,500 tonnes in 2022. That was lower than its estimate of 273,000 to 290,000 tonnes. In 2021, the company produced 72,000 tonnes of copper in its fourth quarter and 287,000 tonnes overall.
Teck attributed the lower production to a temporary closure from a geotechnical event at its Highland Valley Copper operations in south-central British Columbia, and “unplanned maintenance” and “extreme weather” at its Carmen de Andacollo operations in Chile.
Copper is expected to play a key role in the shift away from fossil fuels in the future, given it is essential for most electricity-related infrastructure. For example, it is used in wind turbines, solar photovoltaic panel wiring, and to transfer electricity.
In its critical minerals strategy released in December, Canada listed copper as one of the top six critical minerals, along with lithium, graphite, nickel, cobalt and rare earth elements, due to its importance in the clean technology sector.
Teck aims to boost its copper production to the range of 390,000 to 445,000 tonnes in 2023, buoyed by the expected start of its Quebrada Blanca 2 (QB2) operations in Chile, the company’s biggest-ever construction project and one that’s expected to play a major role in rebalancing its portfolio towards metals needed for the energy transition.
Increased production is expected to be partially offset by lower output at its Highland Valley Copper mine and Antamina project in Peru, the company said.
Teck expects to further increase its copper production to between 545,000 and 640,000 tonnes per year from 2024 to 2026, it added.
The guidance range reflects “increased frequency of extreme weather events and other potential disruptions,” the company said.
The company also fell slightly short of meeting its steelmaking coal target as it produced 21.5 million tonnes in 2022 as opposed to guidance of 22 to 22.5 million tonnes. In Q4 2022, it produced 4.9 million tonnes, lower than the 6.3 million tonnes it produced during the same quarter in 2021.
The lower production reflects a two-month outage at its Elkview operations in B.C., amid repairs, labour constraints and extreme weather events, Teck said.
While the company met its zinc targets with 650,500 tonnes produced, it missed its refined zinc goal, producing 248,900 tonnes compared to guidance of 257 to 267,000 tonnes as a result of “unplanned downtime” in December due to “extreme cold weather.”
Teck said “key mining drivers” remained stable, but inflationary pressures on diesel and other input costs, along with profit-based compensation, increased costs in 2022. Those impacts are expected to last through 2023.
“Like others in the industry, we continue to face inflationary cost pressures, which have increased our operating costs compared to prior years. The increase 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,” the company said.
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Bank of Montreal analyst Jackie Przybylowski described Teck’s update as negative and lowered the bank’s one-year target to $45 per share from $48 in a note to clients on Jan. 31.
“These results are generally worse than previous guidance and previous expectations,” she said. “Given some of these guidance items had been revised or reiterated as recently as Oct. 27, 2022, the negative guidance revisions could be disappointing.”
She added that the new guidance for QB2’s production in 2023 is 150 to 180,000 tonnes of copper, which is below the previous guidance of 170 to 300,000 tonnes.
Bank of Nova Scotia analyst Orest Wowkodaw, however, said the update was positive “given the recent market fears of a potential material startup delay at QB2.”
He added that Teck’s copper production was higher than the bank’s estimate of 61,000 tonnes for the quarter. However, its zinc output of 143,700 tonnes was lower than Scotiabank’s estimate of 154,000.
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