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Teck warns of C$1.13bn hit if Trudeau rejects Frontier project

21st February 2020 BY: Reuters

Canadian miner Teck Resources said on Friday it would write down the value of its proposed Frontier oil sands mine by C$1.13-billion should Prime Minister Justin Trudeau's government reject the project.

The fate of the C$20.6-billion mine is expected to be decided by next week in what has become a test of the government's commitment to reduce Canada's greenhouse gas emissions and repair relations with the country's indigenous people.

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At full capacity, the mine would be one of the largest in Alberta's oil sands, producing 260 000 barrels of crude oil per day.

Teck said that a negative decision would result in an impairment in the quarter in which the decision is received.

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The miner said it has taken steps to improve the economics of the project but did not provide details.

The warning came as Teck reported a 76% fall in fourth-quarter adjusted profit, hurt by lower prices for steelmaking coal, its biggest business, and warned the coronavirus outbreak would damage future earnings.

The stock was down about 9% in early trading.

A protracted tariff war between the United States and China and concerns of slower global growth have weakened prices of copper and other base metals.

The integrated miner, which mines copper and zinc as well as coking coal, used to make steel, warned the outbreak will have a material effect on the demand and price of its commodities as well as on its suppliers.

Teck said it reduced production and shut down its Neptune Bulk Terminals in British Columbia mainly because the virus had weakened demand in the short term. Weather is also a factor.

The company said production at its steelmaking coal operations fell 8.2% to 6.7-million tonnes. The average realised price for the commodity fell by 31%.

It reduced its steelmaking coal sales outlook to between 4.8 million tonnes and 5.2 million tonnes, down from its previous estimate of between 5.1-million tonnes and 5.4-million tonnes for the first quarter of 2020, citing weather-related rail and terminal disruptions in British Columbia.

The company also said it expects steelmaking coal production for the full-year 2020 to be between 23.0-million tonnes and 25.0-million tonnes.

The company said it took non-cash, impairment charges totalling C$999-million in the quarter, which included C$910-million related to its Fort Hills oil sands mining. 

EDITED BY: Reuters
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