Teck Resources Faces Challenges with Decline in Copper Production

Teck Resources, a Canadian mining company, experienced a decline in its copper production for 2023, falling short of its target. This setback has led to increased pressure on the company's shares and warnings of continued cost pressures.

Share Performance

In morning trading, Teck Resources' shares were down 0.9% in Toronto, currently trading at C$50.54. Over the past 12 months, the shares have declined by 7.6%. On the New York Stock Exchange, shares were trading down 1.6% at $37.21, representing a drop of 8.9% over the last year.

Reasons for Decline in Copper Production

Teck's copper operations were affected by several factors that contributed to a decrease in production. The slower ramp-up at its Quebrada Blanca phase 2 expansion in Chile and a localized geotechnical fault at the Highland Valley operation in British Columbia during August impacted the final quarter of last year. As a result, the company's copper production for the year totaled 296,500 tons, missing its guidance range of 320,000 to 365,000 tons. Additionally, production at QB2 only reached 62,800 tons for the year, falling well below the target of 90,000 to 110,000 tons set by the company.

Positive Outlook for Steelmaking Coal Production

Despite the challenges faced in copper production, Teck's steelmaking coal production exceeded its target. The company produced 23.7 million tons of steelmaking coal, surpassing its forecast range of 23 million to 23.5 million tons. Teck is set to finalize the sale of the majority stake in its coal business to Glencore in the third quarter of this year.

Future Expectations

Teck Resources has set ambitious targets for copper production in the coming years. It aims to achieve an output of between 465,000 and 540,000 tons by 2024. This growth will be driven by the expansion of Quebrada Blanca and an increase in output at Highland Valley. Looking further ahead, Teck projects production figures of 550,000 to 620,000 tons in 2025 and 2026, and between 530,000 and 600,000 tons in 2027.

Challenges Ahead

While Teck anticipates a decrease in capital expenditure as the QB2 project nears completion, the company is concerned about inflationary pressures on key input costs. Rising costs for important supplies such as mining equipment, labor, contractors, energy in Chile, and changing diesel prices are expected to impact the copper operation and coal business throughout this year and until 2024.