November 25th, 2015 ~ Vol. 85 No. 46
Teck cuts 1,000 jobs, lowers dividend, withdraws Coal Mountain expansion
Crowsnest Pass Herald Front Page
Herald contributor photo
Teck is not moving forward with the Coal Mountain Phase 2 expansion project and the company is eliminating 1,000 jobs corporately. The latest cuts brings the total number of jobs lost at Teck in the last 18 months to 2,000.
Pass Herald Reporter
Teck Resources Ltd. is shedding jobs and cutting costs in response to stubbornly low commodity prices.

The Vancouver based mining company is eliminating 1,000 jobs and withdrawing its Coal Mountain Phase 2 project from the environmental assessment process as part of a plan to reduce spending next year by $650 million.

The latest cuts bring the total number of jobs lost at Teck in the last 18 months to 2,000. The job cuts will come through a combination of layoffs and attrition and even senior managers might not be spared, said the company in a statement.

The suspension of Coal Mountain Phase 2 means that mining will conclude at the existing Coal Mountain Operations at the end of 2017.

About $350 million of the spending cuts will come out of Teck’s capital projects and $300 million from operating costs.

“We are implementing these additional measures to conserve capital, lower our operating costs and maintain financial flexibility in light of very difficult market conditions,” said Don Lindsay, President and CEO.
The company now has two years to sort out where Coal Mountain’s present workforce of more than 300 will wind up.
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“The Coal Mountain Phase 2 project is not economically feasible under current market conditions,” said Ian Kilgour, Executive Vice President and Chief Operating Officer. “We will be working to identify opportunities for existing Coal Mountain employees to transition to Teck’s other steelmaking coal operations where possible.”

Teck implemented temporary shutdowns at its six Canadian steelmaking coal mines last summer and deferred the restart of its Quintette Coal Project in B.C., which has not been in operation since 2000.

As it faces plunging commodity prices, Teck is investing about $3 billion into the Fort Hills oilsands project, which is a joint venture with Suncor Energy Inc. slated to begin oil production in 2017. It’s credit rating has been cut to junk status by several rateing agencies and it is $9.7 billion in debt.

On Monday, the company’s share price was trading at $5.54 on the Toronto Stock Exchange, down from its 2011 high of $60, a 90 per cent drop. It is lowering its semi-annual dividend to 5 cents a share compared to earlier semi-annual payments to shareholders of 15 cents.
Canada’s coal export market, consisting mostly of steelmaking coal, continues to suffer as Chinese demand weakens and a supply glut persists. The industry has seen prices fall from more than US$300 per tonne in 2011 to its current price of less than US$75 per tonne.
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A report prepared for the Coal Association of Canada’s 2015 Annual Conference by Wood Mackenzie Ltd. said Chinese demand for steel is weak while its domestic metallurgical coal production is rising, causing an oversupply problem.

Falling costs of producing metallurgical coal helped prolong the oversupply. The average costs of mining have fallen 36 per cent since 2012 to US$80 per tonne in 2015. More than half of the total cost reduction was due to lower mining costs.

Under current market conditions, mines in the United States are most at risk followed by those in Mozambique, Canada, Australia and Vietnam, said the report.

Chinese metallurgical coal producers are also in trouble. A third of their operations have greater costs than revenue. Since 2013, rail tariff increases and resource tax reforms have outweighed the low cost of labour.
November 25th ~ Vol. 85 No. 46
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