Highlights from the Teck Resources Limited Earnings Call Transcript

Teck Resources (TECK), based in Canada, might be the best resources company in the world. They just had a record-setting quarter, and they are making a ton of money.

Here are some unedited snippets from their latest earnings call:

  • Record first half for Teck.
  • Fort Hills oil sands achieved commercial production.
  • we expect to receive $1.2 billion in cash with the closing of the Waneta Dam transaction. And that would strengthen our cash balance to about $2.9 billion and our liquidity to close to $7 billion.
  • We also only have 220 million of debt maturities prior to 2022
  • On Slide 11, I’ve summarized changes in our cash during the second quarter. We generated $1.1 billion in cash flow from operations,
  • Full production at Fort Hills is expected at the beginning of the fourth quarter as well.
  • We aim to complete the Highland Valley 2040 pre-feasibility study also in Q4.
  • And then we also aim to complete the feasibility study at Zafranal in Peru and to submit the SEIA document in the quarter.
  • So there is a lot to look forward to in the next six to 12 months.
  • I would be remiss if I did not comment on the risks that have risen in the global economy and the volatility that have caused – results in markets in particular. But I do want to say that demand for our products and the underlying fundamentals of our commodity markets remains strong.
  • we have taken significant steps to insulate our Company from commodity price volatility. We have improved operations and reduced unit costs. We’ve strengthened our balance sheet by reducing debt and we have significant liquidity and strong cash flows. As a result, we are well positioned to navigate this period of uncertainty facing the global market.
  • Just a summary statement before we turn to questions. It really was an extraordinary quarter. Earnings itself of $653 million was terrific and it’s a record earnings for the first half of the yea
  • We have had I should say an awful lot of interest in people being our potential partner from around the world and many of them would have already known that this was a possibility and done their numbers.
  • Remember, we have about 100 years of resource at QB2.
  • As we’ve said we’ll have close to $7 billion of liquidity before the end of today.
  • Christopher Terry:

    Thanks. And then just the potentially use of cash depending on what that would be from sale down?

    Donald Lindsay:

    We’re very, very good position it’s an interesting question. As we’ve said we’ll have close to $7 billion of liquidity before the end of today. And then they’ll be some entry fee coming to QB2. So there are number choices first and foremost there’s always return of capital to shareholders and we’ll be making that decision at the November Board meeting as our policy describes and that would be a combination of cash dividends and buyback.

    However, if we go out a couple of years at 2020 or 2021 and the full debottlenecking is finished and it’s running with cash costs of C$20 a barrel or lower and running significantly above nameplate capacity. If we don’t get proper value recognition in our share price then we would look at some other form of transaction or something to ensure the shareholders benefit from the value that’s been created. And whether that was some sort of a spin out of a sale or partnering, I don’t know a lot we’ll look at it, but we wouldn’t look at it for at least a couple years.

    We need to finish the job right now. It’s gone really well, as you’ve seen we’ve increased our guidance for the year, and we’ve moved ahead the timetable from when we think it will be running a nameplate capacity. We need to finish the job first and do the debottlenecking next year to take it up even higher. But mid-10 to 2020 we are not getting recognition for it. Yes, we would do something, that’s our job.

  • And just one other factor, I mean there has been no letup in China’s commitment to environmental standards, much higher environmental standards. And if anything, they’re getting stricter on that. So that has had a big impact on potential mine and zinc production in China.
  • We just believe that given the experience the industry has had over the last 10 to 15 years putting all your eggs in one $5 billion basket isn’t really the prudent thing to do.
  • You know how hard it is to get a hold of a nice clean doable project in a decent geopolitical jurisdiction that has a really long life. Mine life to pay back ratios in excess of 10 or something, so to get a hold of that is really, really tough as just ask any of the other competing companies that are in the industry. It’s tough to find one and we’ve got one.