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UNITED STATES
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Securities Exchange Act of 1934
Commission File Number: 001-13184
TECK RESOURCES LIMITED
(Exact name of registrant as specified in its charter)
Suite 3300 – 550 Burrard Street, Vancouver, British Columbia V6C
0B3
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(1):____
Note: Regulation S-T Rule 101(b)(1) only permits the submission
in paper of a Form 6-K if submitted solely to provide an attached
annual report to security holders.
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(7):____
Note: Regulation S-T Rule 101(b)(7) only permits the submission
in paper of a Form 6-K if submitted to furnish a report or other
document that the registrant foreign private issuer must furnish
and make public under the laws of the jurisdiction in which the
registrant is incorporated, domiciled or legally organized (the
registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded,
as long as the report or other document is not a press release, is
not required to be and has not been distributed to the registrant's
security holders, and, if discussing a material event, has already
been the subject of a Form 6-K submission or other Commission
filing on EDGAR.
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Vancouver, BC – Teck Resources Limited (TSX: TCK.A and TCK.B,
NYSE: TCK) (“Teck”) reported adjusted profit attributable to
shareholders of $29 million, or $0.05 per share, in the third
quarter of 2015. Teck also reported non-cash after-tax impairment
charges of $2.2 billion resulting in a third quarter loss
attributable to shareholders of $2.1 billion, or $3.73 per share.
The impairment charges are non-cash revaluations of assets to
reflect lower market expectations of commodity prices.
“We are taking significant steps to meet the challenge of low
commodity prices,” said Don Lindsay, President and CEO. “We have
reduced costs throughout the company and we’ve raised nearly $1
billion in two streaming transactions. We used a portion of those
proceeds to reduce debt by $400 million and our current cash
balance of $1.8 billion exceeds our remaining $1.5 billion share of
capital required for Fort Hills.”
Highlights and Significant Items
This management’s discussion and analysis is dated as at October
22, 2015 and should be read in conjunction with the unaudited
consolidated financial statements of Teck Resources Limited
(“Teck”) and the notes thereto for the three and nine months ended
September 30, 2015 and with the audited consolidated financial
statements of Teck and the notes thereto for the year ended
December 31, 2014. In this news release, unless the context
otherwise dictates, a reference to “the company” or “us,” “we” or
“our” refers to Teck and its subsidiaries. Additional information,
including our annual information form and management’s discussion
and analysis for the year ended December 31, 2014, is available on
SEDAR at
www.sedar.com
.
This document contains forward-looking statements. Please refer
to the cautionary language under the heading “CAUTIONARY STATEMENT
ON FORWARD-LOOKING INFORMATION” below.
Prices for our products continued to fall in the third quarter.
These declines have had a significant effect on our reported
earnings this period, as we recorded $141 million of negative
pricing adjustments in addition to the direct effect of lower
prices on gross profit. Furthermore, we recorded $2.9 billion
(pre-tax) ($2.2 billion after-tax) of impairment charges based on
market expectations of lower prices over the short, medium and long
terms. The details of these charges are noted below. Lower price
forecasts also resulted in negative credit rating actions. More
details on our credit rating impacts are included in the “Financial
Position and Liquidity” section below.
To meet the challenge of low prices, we have taken significant
steps. We reduced costs across all aspects of our organization in
an ongoing and highly focused program. We reduced capital
expenditures in the current year and are reducing our planned
spending in future years. After the end of the quarter, we
completed the sale of a silver stream linked to our share of the
Antamina mine. Taken together with the gold stream sold from the
Carmen de Andacollo Operation which closed during the third
quarter, these transactions have increased our cash position by
approximately $1 billion. Subsequent to quarter end we reduced our
debt, repaying US$300 million on October 1.
While we have reduced spending, we continue to advance our
growth plans on a selective basis. The construction of the Fort
Hills project remains on time and on budget and we continue to
advance permitting and design optimization activities for the
Quebrada Blanca Phase 2 project with a clear focus on capital
expenditure reduction. In the longer term, the merging of our
Relincho project with Goldcorp’s El Morro project in Project
Corridor is expected to result in a less capital intensive project
with higher potential returns. We continue to focus on capital
discipline and cost reduction.
Profit and Adjusted Profit
(1)
Profit (loss) attributable to shareholders was $(2.1) billion,
or $(3.73) per share, in the third quarter compared with $84
million or $0.14 per share in the same period last year.
Adjusted profit attributable to shareholders, before items
identified in the table below, was $29 million, or $0.05 per share,
in the third quarter compared with $159 million or $0.28 per share
in the same period last year.
Profit and Adjusted Profit
During the quarter we recorded asset and goodwill impairment
charges on a number of our operating assets, including our
investment in the Fort Hills project, the Carmen de Andacollo and
the Pend Oreille zinc mines and a number of our steelmaking coal
mines. These charges total $2.9 billion on a pre-tax basis and $2.2
billion on an after-tax basis. The write-downs were triggered
primarily by lowered expectations for commodity prices in both the
short and long-term. The economic models we use in determining the
amount of impairment charges use current prices in the initial
years and transition to longer term prices in years three to five.
Long-term assumptions are as follows; steelmaking coal US$130 per
tonne, copper US$3.00 per pound, zinc US$1.00 per pound, WTI US$75
per barrel and $1.25 Canadian to U.S. dollar exchange rate.
A 5.8% real, 7.9% nominal, post-tax discount rate was used to
discount our cash flow projections. Discount rates are based on the
weighted average cost of capital for a mining industry peer
group.
Adjusted profit of $29 million includes inventory write-downs
totaling $61 million resulting from low commodity prices, and final
pricing adjustments of $141 million primarily on our copper and
zinc receivables. These total $129 million on an after-tax basis
and are included in reported adjusted profits.
Our revenue, gross profit before depreciation and amortization,
and gross profit by business unit are summarized in the table
below.
Gross profit before depreciation and amortization from our
steelmaking coal business unit increased from year ago levels as
the benefits of our cost reduction program and lower diesel prices
more than offset lower sales volumes and realized steelmaking coal
prices.
The average realized steelmaking coal price of US$88 per tonne
was 20% lower than the third quarter of 2014, reflecting
oversupplied steelmaking coal market conditions and a decline in
spot price assessments. The favourable effect of a stronger U.S.
dollar in the third quarter partly offset the lower price, which
weakened by 3% in Canadian dollar terms compared with the same
period a year ago.
Third quarter production of 5.5 million tonnes was 19% lower
than the same period a year ago matching our guidance for the
period as all of our sites completed the three week shutdown
previously announced. Unit production costs at the mines were 10%
lower this quarter than in the comparative period, despite the
lower production rates as a result of the ongoing effects of
existing and new initiatives undertaken through our cost reduction
program, and lower diesel prices.
The table below summarizes the gross profit changes, before
depreciation and amortization, in our steelmaking coal business
unit for the quarter:
Property, plant and equipment expenditures totaled $21 million
in the third quarter, of which $13 million was spent on sustaining
capital. Capitalized stripping costs were $84 million in the third
quarter compared with $81 million a year ago.
We continue to implement the water quality management measures
contemplated by our Elk Valley Water Quality Plan. The water
treatment facility built at our Line Creek Operations is now in the
process of being commissioned and is expected to be operating at
design capacity in early 2016.
Steelmaking coal prices declined further during the quarter.
Although Chinese imports have declined substantially compared to
the prior year, demand in the rest of the world continues to be
strong for our products. However, given oversupply in the market,
we do not expect a substantial recovery in price until additional
supply cuts occur or demand increases.
Steelmaking coal prices for the fourth quarter of 2015 have been
agreed with the majority of our quarterly priced customers based on
US$89 per tonne for the highest quality products. This is
consistent with prices reportedly achieved by our competitors.
Additional sales priced on a spot basis will reflect market
conditions when sales are concluded.
Each of the mines were shut down for three weeks during the
quarter with shipments to customers fulfilled from existing
inventories where required. Line Creek recovered quickly and
efficiently from the landslide event they experienced in early July
and by the end of the quarter had made up the vast majority of the
production lost while down for repairs to the critical
infrastructure including the site’s main access road and raw
steelmaking coal conveyance system. In addition, the business
unit’s processing yields remained higher than budget and site costs
were lower than in the comparative period.
Our cost reduction initiatives continue to produce significant
results and remain focused on improvements in equipment and labour
productivity, reduced use of contractors, reduced consumable usage
and limiting the use of higher cost equipment. However, a number of
factors have partially offset the strong performance of our cost
reduction program. These included the effects of the strengthening
U.S. dollar on some inputs and higher electricity costs.
In the third quarter of 2015, we continued to experience the
positive effects of lower diesel prices. Combined with reduced
usage from a number of our cost reduction initiatives and slightly
shorter haul distances, diesel costs per tonne produced have
decreased by 38% compared to the third quarter of 2014.
Site cost of sales in the third quarter of 2015, before
depreciation and inventory write-downs, was $45 per tonne, $5 per
tonne or 10% lower than a year ago.
Our total cost of sales for the quarter also included a $10 per
tonne charge for the amortization of capitalized stripping costs
and $18 per tonne for other depreciation. In U.S. dollar terms,
unit costs have fallen by $20 per tonne from $84 per tonne to $64
per tonne due to reductions in the site costs as shown in the
Canadian dollar unit cost table and the change in exchange
rates.
Vessel nominations for quarterly contract shipments are
determined by customers and final sales and average prices for the
quarter will depend on product mix, market direction for spot
priced sales, timely arrival of vessels, as well as the performance
of the rail transportation network and steelmaking coal-loading
facilities.
We continue to expect our 2015 steelmaking coal production to be
in the range of 25 to 26 million tonnes and now expect unit costs
to be in the range of $83 to $86 per tonne (US$64 to US$66 per
tonne). In addition, capital expenditures are now expected to total
$500 million, including $395 million of capitalized mining.
Gross profit before depreciation and amortization from our
copper business unit decreased by $91 million in the third quarter
compared with a year ago (see table below). This was primarily due
to lower realized copper prices and inventory write-downs, which
was partially offset by lower unit operating costs and the positive
effects of the stronger U.S. dollar.
Copper production increased by 13% (10,000 tonnes) compared to a
year ago, despite reduced production as a result of ground movement
at Quebrada Blanca in June and the closure of Duck Pond which
ceased operating on June 30, 2015. Copper production at Highland
Valley Copper was 10,500 tonnes higher than a year ago primarily
due to higher grade and recoveries while our share of production
from Antamina increased by 6,500 tonnes as a result of record mill
throughput during the quarter. Copper production was also higher at
Carmen de Andacollo, although production was lower at Quebrada
Blanca after processing facilities were temporarily shut down due
to unanticipated ground movement in late June.
The table below summarizes the changes in gross profit, before
depreciation and amortization, in our copper business unit for the
quarter:
Capital expenditures totaled $69 million, including $37 million
for sustaining capital and $25 million for new mine development, of
which $21 million was for the Quebrada Blanca Phase 2
project. Capitalized stripping costs were $51 million in the
third quarter, lower than the $55 million a year ago.
LME copper prices averaged US$2.39 per pound in the third
quarter of 2015, down 13% over the prior period. Copper prices
remained volatile trading to the lowest levels since 2009.
Total reported exchange stocks rose 51,872 tonnes during the
quarter to 0.5 million tonnes. Total reported global copper stocks
are now estimated to be 8.3 days of global consumption, below the
estimated 25 year average of 28 days of global consumption.
Operational issues at copper mines continue to impact current
and future mine production. As a result of these supply disruptions
and price related mine suspensions, large copper surpluses
originally forecast for 2015 and 2016 have moved closer to balance
despite weaker demand growth. Market fundamentals remain positive
over the medium to long-term with supply constrained by lower
grades, ongoing operational difficulties and project delays or
deferrals due to the current low prices.
Highland Valley Copper
Copper production was 40,200 tonnes in the third quarter or 35%
higher than a year ago, due to higher copper grades and higher
recoveries. Mill throughput was lower than a year ago due to harder
ore in the current phase of the Valley pit. Molybdenum production
declined to 0.7 million pounds from 1.6 million pounds a year ago
primarily due to lower grade, partially offset by higher
recovery.
Operating costs increased $18 million or 16% compared to the
same period a year ago as a result of higher sales. Unit costs
declined significantly compared to a year ago due to higher sales
and substantial progress on cost savings programs.
As we continue to mine the higher grade but harder ore in the
current phase of the Valley pit, throughput is expected to remain
similar for the remainder of 2015. Grades are expected to be lower
in the final quarter compared to the previous quarter, but will
remain above reserve grade. The crusher relocation project for the
Valley pit was successfully completed in the third quarter for a
total cost of $56 million, well below the budget of $69 million.
This project provides access to over 30 million tonnes of reserves
as part of our current life of mine plan.
Copper production in the third quarter increased by 36% compared
with a year ago primarily as a result of higher mill throughput.
The mix of mill feed in the quarter was 57% copper-only ore and 43%
copper-zinc ore compared to 63% and 37%, respectively, in the same
period a year ago. Our share of zinc production of 16,300 tonnes in
the third quarter decreased by 1% compared with a year ago due to
lower grades, partially offset by higher mill throughput and
greater copper-zinc ore processed.
Antamina achieved mill throughput of 14.3 million tonnes for the
quarter, an average of 155,400 tonnes per day, 16% higher than the
same period last year. Recent debottlenecking projects focused
primarily on the crushing and conveying system have enabled
throughputs much higher than the 130,000 tonnes per day design
capacity of the original expansion project. Throughput rates going
forward will be dependent on ore hardness and the mix of ore feeds
to the plant, but are expected to continue above original design
capacity rates.
Operating costs in the third quarter were 14% higher compared to
a year ago due to higher sales. Significant progress has been made
in reducing U.S. dollar unit costs, with savings more than offset
by foreign currency translation and the effects of the weaker
Canadian dollar.
On October 7, 2015, we announced that we and a subsidiary had
entered into a long-term streaming agreement with a subsidiary of
Franco-Nevada Corporation (Franco-Nevada) linked to production at
the Antamina mine. Compañia Minera Antamina S.A., in which we hold
a 22.5% interest and which owns and operates Antamina is not a
party to the agreement and operations will not be affected.
Franco-Nevada made a payment of US$610 million and will pay 5% of
the spot price at the time of delivery for each ounce of silver
delivered under the agreement. We will deliver silver to
Franco-Nevada equivalent to 22.5% of payable silver sold by CMA,
using a silver payability factor of 90%. After 86 million ounces of
silver have been delivered under the agreement, the stream will be
reduced by one third.
Copper production in the third quarter decreased by 46% compared
with a year ago due to the precautionary suspension of mining in
the area adjacent to the SX/EW plant and a temporary shutdown of
the processing facilities. Heap leach ore placed decreased by 37%
as a result of the ground movement. Normal operations resumed in
August, although mining continues to be restricted and stable
operations were achieved for the month of September at better than
planned unit costs. We will continue to operate the south side of
the EW plant only which has sufficient production capacity for the
remainder of the mine life.
Production for 2015 is expected to be about 38,000 tonnes of
copper cathode. The full impact on the mine life and future
operating plans continues to be assessed in conjunction with
remedial plans to ensure stability of the mine, plant and
associated infrastructure. These plans will be finalized by the end
of the year as we complete our engineering assessments, budgeting
and further cost reduction processes.
Operating costs increased by $32 million or 49% compared with
the same period a year ago primarily as a result of inventory
write-downs to reflect lower copper prices and the effects of the
weaker Canadian dollar.
We continue to progress the updating of environmental permits
for the existing facilities for the supergene operation. The review
and indigenous consultation processes by the relevant regulatory
agencies are still in progress as we await approval.
All three labour agreements at Quebrada Blanca were successfully
negotiated during the quarter, each with a term of two years.
Carmen de Andacollo
Copper production in the third quarter increased by 9% compared
with a year ago primarily as a result of higher copper recovery and
higher throughput.
In late September, a major earthquake in the region damaged our
ship loading facilities at the port of Coquimbo. To date production
has not been materially affected, but shipments of concentrate have
been temporarily suspended through the port facility while the
operator completes damage assessments and repairs. Alternate
loading arrangements are being arranged with resumption of shipping
anticipated within the next two weeks. There is sufficient storage
capacity at the port and mine site through to the end of
October.
Operating costs decreased by $4 million or 5% compared with a
year ago due to lower sales, and partially offset by the effect of
the stronger U.S. dollar. U.S. dollar unit costs were similar to
the same period a year ago.
During the quarter and extending into early October, both Carmen
de Andacollo labour agreements were successfully re-negotiated for
a four-year term.
On July 8th, 2015, our subsidiary Compañia Minera Teck Carmen de
Andacollo (Carmen de Andacollo) sold an interest in gold reserves
and resources from the Carmen de Andacollo mine to RGLD Gold AG
(RGLDAG), a wholly owned subsidiary of Royal Gold, Inc. Under the
terms of the agreement, RGLDAG is entitled to an amount of gold
equal to 100% of the payable gold produced from the Andacollo mine
until 900,000 ounces have been delivered, and 50% thereafter.
RGLDAG will pay a cash price of 15% of the monthly average gold
price at the time of each delivery. Carmen de Andacollo and Royal
Gold Chile Limitada, a wholly owned subsidiary of Royal Gold, Inc.,
terminated an earlier royalty agreement entered into in 2010. Royal
Gold Chile Limitada was entitled to a payment based on 75% of
payable gold produced from the Andacollo mine until 910,000 ounces
had been delivered, and 50% thereafter. Approximately 260,000
ounces of payable gold subject to the royalty agreement were
produced through June 30, 2015, the effective date of the
termination. Net cash proceeds to us from the transaction were
US$162 million.
Unit cash costs of product sold in the third quarter of 2015 as
reported in U.S. dollars, before cash margins for by-products,
decreased primarily due to higher sales volumes, continued cost
reduction efforts and the favourable effects of a stronger U.S.
dollar at our Canadian operations.
Quebrada Blanca Phase 2
During the third quarter of 2015, activities continued to focus
on capital optimization and permitting for the Quebrada Blanca
Phase 2 project. A decision has been made to move the proposed
tailings facility to a location closer to the mine site. The
proposed facility is expected to provide sufficient capacity for
tailings from ore mined during the first 25 years of the mine life.
This decision, as well as other plant and infrastructure
optimizations in the current design, is expected to materially
reduce initial capital costs for the project. We expect to complete
a new cost estimate in the first half of 2016 as engineering on
these design changes progresses. The design is expected to have a
lower capital intensity as throughput and production rates are not
anticipated to be lower. Additional baseline work is required as a
result of these changes and we now anticipate submitting an
Environmental Impact Assessment to the authorities mid to late
2016.
In August we announced an agreement with Goldcorp Inc. to
combine the El Morro and Relincho projects, located approximately
40 kilometres apart in the Huasco Province in the Atacama region of
Chile, into a single project. Teck and Goldcorp will contribute
their respective project interests into a 50/50 joint venture with
closing of the transaction anticipated in the fourth quarter. In
combination with community consultation, a pre-feasibility study is
expected to commence in early 2016 and be completed in
approximately 18 months.
We continue to minimize expenditures on all other copper
projects. Targeted studies continue at the Galore Creek, Schaft
Creek and Mesaba projects as we further explore ways to enhance the
value of these projects. The pre-feasibility study continued to
progress at our 50% owned Zafranal copper-gold project located in
southern Peru and is now anticipated to be complete at the end of
the first quarter in 2016.
We expect full year production for copper in the range of 345 to
350 thousand tonnes.
Gross profit before depreciation and amortization from our zinc
business unit was unchanged year over year. A lower realized zinc
price in U.S. dollars and lower contributions from co-products and
by-products were offset by the favourable impact of a stronger U.S.
dollar, lower royalties, higher sales and lower operating
costs.
Refined zinc production from our Trail Operations increased by
11% compared to last year due to improved operating efficiencies in
the electrolytic plant and to the improved reliability of the new
acid plant, leading to higher throughput.
The table below summarizes the gross profit change, before
depreciation and amortization, in our zinc business unit for the
quarter.
Capital expenditures include $30 million for sustaining
capital.
LME zinc prices averaged US$0.84 per pound in the third quarter
of 2015, down 16% over the prior quarter. Zinc prices fell to a low
of US$0.71 per pound in the quarter, the lowest level since
2009.
Reported zinc exchange stocks rose 111,560 tonnes during the
quarter to end at 756,060 tonnes. Total global reported stocks are
now estimated at 19 days of global consumption down from the 25
year average of 42 days. Demand for refined zinc in our key North
American markets remains weaker again this quarter with our
customers facing headwinds from reduced demand and continued
imports of low-cost galvanized sheet. Zinc stocks continue to
decline in both metal and concentrates year to date. Zinc supply
will become further constrained later in 2015 and into 2016 with
planned mine closures including the recently announced closures
from major suppliers taking effect.
Zinc grade and recovery was similar to 2014, however, mill
throughput was lower than the third quarter of 2014 due to lower
throughput rate and unplanned mill downtime resulting in 12% less
zinc production. Higher lead grade offset by lower recovery and
throughput than in 2014 resulted in 8% less lead production.
Zinc sales volumes were similar to the third quarter of
2014.
Operating costs in the current quarter increased due to the
effects of the stronger U.S. dollar. Capitalized stripping costs
were $11 million in the third quarter compared with $9 million a
year ago.
Zinc production was 11% higher this quarter than in the third
quarter of 2014 as a result of improved reliability of the new acid
plants and good current efficiency in the zinc cell house. Lead
production was 8% lower than a year ago as the annual KIVCET
shutdown was advanced from the fourth quarter to the third
quarter.
Cost of sales increased by 5%, largely related to higher zinc
production and sales during the quarter.
Mill throughput was 81% of design capacity of 2,000 tonnes per
day during the third quarter due to delays in fully implementing
pillar recovery mining. The concentrator is performing as
anticipated with recoveries expected to improve as mill feed
variability is reduced.
The Pend Oreille mine is forecasted to reach the full production
rate of 44,000 tonnes per year of zinc metal at the end of the
fourth quarter of 2015 once pillar recovery mining is fully
implemented.
The 2015 shipping season is expected to be completed on October
22, 2015 following the shipment of 1,048,000 tonnes of zinc
concentrate and 216,000 tonnes of lead concentrate compared with
1,025,000 tonnes and 205,000 tonnes, respectively, for the 2014
season. This represents all of Red Dog’s concentrates available to
be shipped from the operation. Sales volumes of contained zinc are
estimated at approximately 200,000 tonnes in the fourth quarter of
2015.
Construction of the Fort Hills project is progressing
substantially in accordance with the project schedule. In the third
quarter of 2015 our capital expenditures were $217 million compared
with a cash spending estimate of $213 million. Our capital
expenditures in 2015 were $664 million to date compared with our
cash forecast spending estimate which was $691 million. Our share
of Fort Hills cash expenditures in 2015 is estimated at $850
million.
Since sanction, the project has achieved and continues to track
to key milestones. Engineering activity is progressing well, and is
now 94% complete, construction is progressing per plan and is now
approximately 43% complete. Equipment and material deliveries are
continuing and off-site modular fabrication, site civil works and
process facility...
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