Globe & Mail 07:29 AM EST, 01/28/2022 (MT Newswires) -- Teck Resources (TECK-B.TO, TECK-A.TO) overnight Thursday provided provided select unaudited Q4 and 2021 sales and production results in light of the impacts of recent logistics disruptions in British Columbia, and an update on the impact of COVID-19 across the business.
Demand for the company's steelmaking coal remains strong and the FOB price has risen from US$356 per tonne at the end of December to US$445 per tonne. Record high clean coal inventories at its mines are expected to result in sales exceeding production by 1.2 - 1.5 million tonnes in 2022. The strong pricing environment and increased sales volumes should result in strong cash flow in the first half of 2022.
Since the last guidance update on Dec 5, 2021, weather conditions have continued to affect infrastructure recovery efforts in BC. Interruptions and substantial reductions to rail service and port activities persisted from mid-November into the first two weeks of January, which affected critical transportation corridors. The provincial state of emergency was lifted on Jan 18, 2022.
Steelmaking Coal
The company's realized Q4 steelmaking coal sales were 5.1 million tonnes, compared with its revised guidance of 5.2 - 5.7 million tonnes. Teck's 2021 steelmaking coal production was 24.6 million tonnes, within the revised guidance of 24.5 - 25 million tonnes. Due to weather-related logistical challenges, clean steelmaking coal inventories at Teck's mine sites are near record-high levels. Further transportation disruptions may require production cutbacks to manage inventory levels, Teck said. CN and CP reported progress on recovery in mid-January, with improvements to train fluidity last week. Teck expects to recover delayed Q4 sales in the first half of 2022.
Despite the fourth quarter impacts of rail and port disruptions on sales, 2021 unaudited adjusted site cash cost of sales and transportation costs are $65 and $44 per tonne, within the previous guidance ranges of $64 - $66 and $44 - $46 per tonne, respectively. Logistics challenges and inflationary pressures drove higher fourth quarter adjusted site cash cost of sales and transportation costs of $72 and $49 per tonne, respectively, above the upper range of our annual guidance.
Increased costs in the fourth quarter were more than offset by continued strong prices. Realized steelmaking coal prices in the fourth quarter averaged US$351 per tonne. The increase in steelmaking coal prices from the third quarter further resulted in positive pricing adjustments of approximately $70 million.
Copper
The logistics chain disruptions had minimal impact to production at Highland Valley Copper, but resulted in sales of copper in concentrate from the operation being 5,600 tonnes lower than production in Q4 2021. The shortfall in sales versus production volumes at Highland Valley Copper was partially offset by strong sales at other operations, and total copper in concentrate sales were only 1,500 tonnes lower than production in the fourth quarter.
Overall, inflationary pressures and workers' participation related to strong copper prices resulted in fourth quarter net cash unit costs of US$1.52/lb for the copper business unit.
COVID-19
Higher COVID-19 cases in southeastern British Columbia has resulted in rising absenteeism at Teck's teelmaking coal operations in the Elk Valley. While absenteeism has so far not had a major impact on production, the situation poses a risk to Q1 2022 production. However, in recent days, the number of employees returning from COVID-19 isolation exceeded the number of new cases.
At the QB2 project in Chile Teck achieved its best quarter to date in Q4. However, a significant rise in COVID-19 cases in Chile has resulted in an increase in absenteeism in January..
Outlook
Teck is seeing inflationary cost pressures, notably in diesel prices, supplies and labour costs. Increases experienced in fourth quarter operating results across the business are expected to continue into 2022.