Teck Takes $1.68 Billion Writedown Amid Commodity Collapseby
Impairment charge includes C$1.5 billion on steel-making coal
Shares climb as third-quarter sales beat analysts' estimates
Teck Resources Ltd., suffering from a meltdown in commodity prices, said it was writing down the value of its assets by C$2.2 billion ($1.68 billion), while cost-cutting measures helped to stem losses for shareholders.
Teck, Canada’s largest diversified miner, took a C$1.5 billion impairment charge on its steel-making coal assets, the company said Thursday in a statement. It also impaired copper assets by C$300 million and the Fort Hill oil sands project by C$400 million, it said.
The writedown resulted in quarterly loss of C$2.1 billion. That compares with profit of C$84 million a year earlier, the Vancouver-based company said. Third-quarter earnings, excluding one-time items, totaled C$29 million, or 5 cents a share, from C$159 million, or 28 cents, a year earlier. That beat the 2-cent average of 24 estimates compiled by Bloomberg.
Teck continues to bear the consequences of an ill-timed expansion into metallurgical coal. The 2008 acquisition of Fording Canadian Coal Trust saddled it with an additional $9.8 billion in debt and led to its spiral into junk credit-rating status as the financial crisis struck. Teck regained its investment grade in 2010 only to be relegated to junk again this year with downgrades from Moody’s Investor Service and Fitch Rating.
The company joined a cost-cutting drive by commodity producers worldwide as a slowdown in Chinese demand feeds gluts in everything from zinc to coal, overshadowing the benefits of a weaker Canadian dollar and lower energy prices. Sales fell to C$2.1 billion from C$2.25 billion in the third quarter, beating the C$1.99 billion average estimate.
“We are taking significant steps to meet the challenge of low commodity prices,” Chief Executive Officer Don Lindsay said in the statement. “We have reduced costs throughout the company and we’ve raised nearly $1 billion in two streaming transactions.”
Teck rose 5.1 percent to C$8.79 at the close in Toronto.
Earlier this month, the company agreed to sell future silver production on its Antamina mine in Peru to Franco-Nevada Corp. The so-called streaming deal includes a $610 million upfront payment. In August, Teck and Vancouver-based Goldcorp Inc. said they would combine their Relincho and El Morro copper-and-gold projects in Chile in a joint venture.
Teck’s shares have slumped 50 percent in the past year in Toronto, more than the 25 percent average decline by peers tracked by Bloomberg.
(An earlier version of this story corrected the currency in the second paragraph.)