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Teck Resources Limited Management Discusses Q2 2012 Results - Earnings Call Transcript

Stocks in this article: TCK

Turning to our operating results for the quarter on Slide 8. In our coal business, production was 5.7 million tonnes and sales were 1 million tonnes higher at 6.7 million tonnes as customer demand was strong. Production was approximately 700,000 tonnes lower than expected due to the CP Rail strike. Adjusting for these, production would have been 6.4 million tonnes or about 26 million tonnes on an annualized basis. The average realized price for the second quarter was USD 203 per tonne and that's about a 3% discount to the benchmark price of $210 per tonne for the premium brands of coal. Now usually, the average realized price is about a 10% discount to the benchmark price due to the mix of products including some lower PCI and thermal coals.

Second quarter 2012 unit site costs were $77 per tonne and distribution costs came in at $37 per tonne, and this gave us a combined cost of CAD 114 per tonne. And increased waste dripping during the second quarter gave rise to a higher unit site costs, which was related to the CP strike.

Turning to Slide 9. The start of the second quarter, well-positioned due to our inventory build during Q1 2012 and Q4 2011. As a result, we were able to deal with our main rail carrier's labor disruption and then increased customer demand by drawing down our stock calls at the ports. The rail strike, however, did impact production at our Elk Valley operations. The inability to move coal out of the valley pushed mine-ified inventories to capacity and resulted in shutdowns at most of the operations. We estimate lost production to be approximately 700,000 tonnes. Total material moved in the quarter, combining raw coal production and waste rock increased 10% on a year-over-year basis and is now stabilizing at the rate that we feel is necessary to achieve our production target.

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