NEW YORK Teck Resources Ltd.s second-quarter earnings were dented by weaker copper results, but profits from its zinc business surged due in part to stronger sales and higher pricing.
The Vancouver, British Columbia-based company posted net income of Canadian $80 million ($74.4 million) for the three months ended June 30, down 44.1 percent from the same period last year on sales that slid 6.6 percent to $2.01 billion ($1.87 billion).
The companys gross profit on copper totaled C$160 million ($148.9 million) in the second quarter, down 33.3 percent from $240 million a year earlier, while gross profit on zinc jumped 77.8 percent to C$112 million ($104.2 million) from C$63 million.
Copper production totaled 87,000 tonnes in the second quarter, up 2.4 percent from 85,000 tonnes a year earlier, while refined zinc production increased 2.9 percent to 72,000 tonnes from 70,000 tonnes in the same comparison.
Average copper prices on the London Metal Exchange fell 4.9 percent to $3.08 per pound in the second quarter from $3.24 a year ago, although this was partially offset by a stronger U.S. dollar and lower unit costs at its Highland Valley project, where a mill optimization program led to average daily throughput of 140,000 tonnes, 10,000 tonnes above design capacity.
"We have had very good recoveries (from the mill optimization)," Dale Andres, senior vice president for copper, said during the companys earnings conference call. "Throughput going forward depends on mix of feeds; there can be some variation depending on sources. At times we get very soft material, but thats not always the expectation. Were confident that this level of throughput will continue if we get similar feeds."
The company expects a deficit in the copper market in 2014, but anticipates a surplus next year and lower prices as a result.
Teck said it is on schedule for the reopening of its Pend Oreille underground zinc mine in northwest Washington, with production expected to begin in December.
Strong performance from its Red Dog zinc mine in northwest Alaska has bolstered the companys guidance for zinc production in 2014 to 600,000 to 615,000 tonnes from an earlier guidance of 555,000 to 585,000 tonnes. Copper guidance for the year remains at 320,000 to 340,000 tonnes.
The companys cost cutting is on track in its coal business (amm.com, April 22). "Our cost-reduction program has exceeded our initial goals, with C$150 million ($139.6 million) of annualized reductions realized to date," the company said. "We are targeting a further C$50 million ($46.5 million) of annualized cost reductions. We are also on target to achieve C$150 million of capital expenditure reductions."