Teck announces layoffs, suspension of Coal Mountain expansion

Bituminous coal (wikimedia commons)

Christian Davis

In a news release issued November 17, Vancouver based Teck Resources Ltd. announced a planned reduction of $650 million in spending in 2016 "to be achieved through $350 million of capital spending reductions and deferrals and $300 million of operating cost savings identified as part of the 2016 operating budget". Teck plans to eliminate 1000 positions across their global offices through a combination of layoffs and attrition, for a total of approximately 2000 such 'redundancies' over the past 18 months. Teck currently employs approximately 11,000 people. Teck will also be suspending its Coal Mountain Phase 2 project, which is located in southeastern British Columbia, approximately 15 kilometers south of Sparwood. The measures come "In response to persistent low commodity prices".

“We are implementing these additional measures to conserve capital, lower our operating costs and maintain financial flexibility in light of very difficult market conditions,” said Teck Coal President and CEO Don Lindsay.

According to the news release, "The suspension of CMO Phase 2 means that mining will conclude at the existing Coal Mountain Operations in the fourth quarter of 2017."

According to Teck's website, "Proven and probable reserves" at the currently operating Coal Mountain operation "are projected to support mining at planned production rates for a further three years," as of March 2015. Mining is expected to end at the existing Coal Mountain operations in the fourth quarter of 2017.  According to yesterday's news release "Teck will identify options between now and the end of 2017 to potentially replace the 2.25 million tonnes of annual coal production that were planned from CMO Phase 2 by optimizing production from its five other steelmaking coal mines."

In an October 2014 news release Teck said "Gross profit before depreciation and amortization was $670 million in the third quarter compared with $752 million in the third quarter of 2014." Teck reported a $2.1 billion loss for the third quarter of 2015 after an asset write-down.

Teck implemented temporary shutdowns at all six of its steel-making coal operations in the third quarter of 2015 "in order to align production and inventories with changing coal market conditions".

Teck Resources Ltd. (TCK.B) was trading in the area of $6.11 today after the news release was issued, down almost 2%.  At its height in January 2011 it traded at $62.22.

Snapshot of Teck Resources Ltd (TSE:TCK.B) from Google Finance, Nov. 19, 2015

Teck Resources Ltd. TCK.B stock price (5 years) from web.tmxmoney.com