Teck Beats Street, but Shares Slide on Coal Demand

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Posted by Joseph Keefe

Canadian miner Teck Resources Ltd reported a
better-than-expected quarterly profit on Wednesday, lifted by a
surge in the price of coal for steelmaking, but weaker demand at
the start of the year spooked investors, sending its shares

Teck, North America's largest producer of steelmaking - or coking
- coal, said that inquiries from buyers had picked up recently
and that it expects sales to be weighted toward the second half
of this quarter after a slow start.

"I actually feel much better today than I did three weeks ago,"
Teck Chief Executive Donald Lindsay said on a conference call.

Teck blamed the weaker start on customers drawing down coal
inventories following a fourth-quarter buying binge, sparked by
global supply worries that were ultimately unfounded. The Lunar
New Year holidays also crimped demand in Asia.

Shares of the Vancouver-based company, which also mines copper,
gold and silver, were down 9 percent at C$29.70 in mid-afternoon
trading. It was the best-performing stock on the Toronto Stock
Exchange in 2016.

Teck has reached agreements with the majority of its coal
customers for the first quarter, based on a quarterly benchmark
price of $285 per tonne.

But since that benchmark was set in early December, spot prices
have plunged to about $155 per tonne. Teck expects an average
realized price this quarter of about 70 percent to 75 percent of
the $285-per-tonne benchmark.

Teck forecast first-quarter steelmaking coal sales of
approximately 6 million tonnes, down from 7.3 million tonnes last

But Lindsay said the miner's top priority was reducing debt, and
it was aiming to get debt levels, possibly this year, below $5
billion from $6.1 billion at the end of 2016.

A surge in coal prices last year from below $80 a tonne to above
$300 had raised expectations of mine restarts. Real Foley, Teck's
coal marketing vice president, said less than 15 million tonnes
of coking coal had come online globally and that there had been
no restarts since last October.

The company forecast 2017 steelmaking coal production of 27
million to 28 million tonnes, but said output may be adjusted
depending on demand.

Teck, the world's second-biggest exporter of seaborne coking
coal, reported an adjusted profit of C$1.61 per share in the
three months to the end of December, ahead of analysts' consensus
estimate of C$1.56.

Reporting by Susan Taylor

Feb 15, 2017

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