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TORONTO (Reuters) - Teck Resources Inc TCKb.TO said on Wednesday it would defer C$1.5 billion ($1.51 billion) in capital spending planned through 2013 and implement a cost-cutting plan as Canada's largest diversified miner felt the pinch of a global economic slowdown.
Teck's shares were up more than 2 percent at midday, however, as its third-quarter earnings per share were not far off analysts' expectations despite a sharp fall in profit on sagging coal sales and prices.
Morningstar analyst Daniel Rohr applauded Teck's efforts to cut costs and defer spending, noting that profits will remain under pressure through the fourth quarter as lower metallurgical coal prices weigh.
"It's probably wise, despite a pretty strong balance sheet, that the company's going to be undertaking some counter-measures to conserve cash," he said.
Shipments of steelmaking materials coal and iron ore have dropped in recent months on slowing demand from China and other emerging nations, prompting some to worry that the decade-long commodity supercycle is coming to an end.
The tough market has led such coal miners as Alpha Natural Resources Inc ANR.N and Walter Energy Inc WLT.N, which produce both steelmaking and thermal coal, to cut output.
Teck, the world's second-largest exporter of seaborne steelmaking coal, said it remains on track to meet the lower end of its full-year coal production forecast of 24.5 million to 25.5 million metric tonnes (28.1 million tons).
Included in the Vancouver-based miner's capital spending cuts are two major development projects that have been delayed due to permitting issues.
At the Quebrada Blanca Phase 2 copper project in Chile, Teck now plans to resubmit its environmental assessment no sooner than the second quarter of 2013, while it now expects the restart of the Quintette coal mine in Western Canada in 2014.
Quintette was shut down in 2000 as the coal price sagged below $50 a metric tonne. Teck launched a feasibility study on restarting the project in 2010, with the mine expected to produce about 3.5 million tonnes of coal a year.
Teck also deferred construction of a new furnace at its Trail operations in British Columbia and said the feasibility study for its Relincho project in Chile has been paused on changes to local infrastructure plans.
Capital spending in 2012 will be reduced to C$1.8 billion, down by C$300 million, while 2013 capital spending is being cut by C$1.2 billion. Teck has also implemented a plan to reduce operating costs by at least C$200 million a year.
The company noted it has a cash balance of C$4.2 billion and is well positioned to move forward with its growth plans.
Teck's shares climbed 2.6 percent to C$31.34 on Wednesday at midday on the Toronto Stock Exchange.
Teck said its average realized coal price fell to $193 per tonne in the third quarter from $202 in the second quarter, while prices were down 33 percent from the same period a year earlier.
"Ongoing economic uncertainties in Europe and the United States and less robust growth rates in China, India and other emerging markets have impacted both demand and prices for some of our products", the company said.
Teck also warned that the recent weakness may continue into the first half of 2013, though the company noted it believes the medium- to long-term fundamentals for steelmaking coal are favorable. Teck operates numerous coal mines in Canada.
Coal production rose about 6 percent to 6.32 million tonnes in the quarter, while copper production increased 29 percent to a record 99,000 tonnes.
Net income fell to C$180 million, or 31 Canadian cents per share, in the quarter ended September 30. That compared with C$814 million, or C$1.38 per share, in the year-earlier period.
On an adjusted basis, third quarter profit fell 52 percent to 60 Canadian cents a share. Analysts on average had expected a profit of 61 Canadian cents per share, according to Thomson Reuters I/B/E/S.
Revenue fell 26 percent to C$2.5 billion, matching analyst expectations.
Reporting by Julie Gordon in Toronto and Sandhya Vijayan in Bangalore; Editing by Theodore d'Afflisio; and Peter Galloway