Teck Sees Lower Costs on Job Cuts Amid Coal Price Rout

Teck Resources Ltd., Canada’s largest diversified mine operator, said its coal mining costs will be 5 percent lower than previously expected this year after job cuts.

Production of each ton of coal will cost $52 to $57, down from the earlier estimate of $55 to $60, the Vancouver-based company said today in a statement. Teck expects to produce 6 million metric tons of coal in the third quarter.

Teck, the world’s second-largest exporter of seaborne coal used in steelmaking, announced in April plans to cut about 600 jobs, or 5 percent of its workforce. It has also delayed projects to reduce costs after a collapse in prices amid surplus supplies. Teck sold coal for an average $111 a metric ton in the second quarter, down 29 percent from a year earlier.

“Teck is having some success reversing the higher unit costs that alarmed investors when the company provided 2014 guidance,” Greg Barnes, a Toronto-based analyst at TD Securities Inc., said today in a note to clients. Still, “management is continuing to warn that despite production cuts being announced by a number of coal producers, increased production from Australia combined with lower imports into China have maintained the over-supply.”

The company, which maintained its full-year output target of 26 million to 27 million metric tons, has contracts to sell

5.5 million tons of coal in the third quarter, with the highest quality fuel priced at $120 a metric ton.

Second-quarter net income fell 44 percent to C$80 million ($75 million), or 14 cents a share, from C$143 million, or 25 cents, a year earlier, Teck said in the statement. Excluding one-time items, earnings were 13 cents a share, more than the 12-cent average of 25 analysts’ estimates compiled by Bloomberg.

Teck rose 1.2 percent to close at $24.15 in New York.

(An earlier version of this story corrected the 2013 earnings per share figure.)

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