Canada’s largest diversified mining company, Teck Resources, on Thursday reported lower third-quarter revenue, as global economic uncertainties have pushed down the prices of the products that it produces.

President and CEO Don Lindsay said in a news release that steelmaking coal was particularly badly affected by the global economic turmoil. The benchmark steelmaking coal price has declined from $210/t in the first quarter to $178/t in the third quarter and the current spot market price sits at $150/t.

Teck suffered a 9% decrease in the average realised steelmaking coal price during the quarter, as well as a 5% decrease in copper and a 7% decrease in zinc prices.

The lower prices and a decrease in sales volumes in the steelmaking coal business unit were almost entirely responsible for a $222-million decrease in gross profit between the third quarter of last year and the quarter under review. However, the strength of the energy unit has offset weak base metal and metallurgical coal prices, with the unit increasing revenue by 22% to C$255-million in the quarter.

Overall, revenue reduced from C$3.21-billion in the third quarter of 2018, to C$3.04-billion in the quarter under review.

Profit attributable to shareholders in the third quarter was $369-million, or C$0.66 a share, compared with C$1.3-billion, or C$2.23 a share, in the same period a year ago. Adjusted profit was C$403-million, or C$0.72 a share, compared with C$466-million, or C$0.81 a share.

According to Reuters, its performance was better than the $0.66 a share that analysts have forecast.

DEFERRED SPENDING
While the major remained confident in the longer-term outlook for the commodities, the negative impact that the trade war between the US and China and slower global growth brought had necessitated a company-wide cost reduction programme. Teck announced that it would target savings of about $500-million by the end of 2020, and said that it would defer some of its planned capital projects.

Its capital spending for 2019 would be C$125-million less than previously guided at $1.78-billion, with about C$70-million in spending deferred in the steelmaking coal unit and C$55-million in the copper unit.

"Over the past few years, we have focused our attention on maximising production to capture margin during periods of higher commodity prices. However, current global economic uncertainties are having a significant negative effect on the prices for our products, particularly steelmaking coal. As a result, we are focusing our attention on our RACE21 programme to improve efficiency and productivity across our business, the development of the QB2 project, which is a key component of Teck’s future growth, and the execution of our priority project at Neptune," said Lindsay.

The group reported that construction at the Quebrada Blanca Phase 2 (QB2) copper project in the Tarapacá region of northern Chile continued, with more than 5 000 people working across the six major construction areas on the project. All major contractors have mobilised and the project continued to target construction completion in the fourth quarter of 2021, with ramp-up to full production expected during 2022.

Teck said that the $2.5-billion limited recourse project financing to fund the development of the QB2 project was expected to close in the fourth quarter. With funding from the project financing and the partnering transaction with Sumitomo Metal Mining and Sumitomo, the company's first contributions to the project were not expected until early 2021.