April 22, 2014 / 10:54 AM / 5 years ago

Teck Resources to cut five percent of its workforce as profit drops

(Reuters) - Diversified Canadian miner Teck Resources Ltd TCKb.TO said it would cut about 600 jobs, or 5 percent of its global workforce, after a sharp fall in earnings and revenue in the first quarter.

The company said it would also reduce other costs by 5 percent to save a total of about C$200 million.

Teck’s net profit fell 78.4 percent to C$69 million ($62.62 million), or 12 Canadian cents per share, in the three months to March 31, from C$319 million, or 55 Canadian cents per share, a year earlier, mainly due to weak coal and copper prices.

However, Teck said the outlook for zinc had brightened and it would restart its Pend Oreille zinc mine in Washington state.

Teck said it would continue to delay the reopening of its Quintette coal mine in British Columbia, which was expected to produce 3-4 million metric tons of steelmaking coal annually, until market conditions improve.

North American coal miners are having a tough time due to weak demand and soft prices.

U.S.-based Walter Energy Inc WLT.N said last week it would idle its Canadian coal mines and lay off about 700 workers.

James River Coal Co JRCC.O filed for Chapter 11 bankruptcy protection earlier this month.

Teck several of its mines achieved higher output in the quarter, including the its big Red Dog zinc mine in Alaska, which boosted production of zinc concentrate by 19 percent.

“However, profits are lower than last year as a result of lower prices for most of our principal products, especially coal as increased supply from Australian mines has affected markets,” the company said.

Coal prices fell 19 percent in the quarter in U.S. dollar terms, the lowest levels since 2007, while copper prices dropped 11 percent, Teck said.

The Vancouver-based company said its margin was the weakest in 10 years, even with the help of the weak Canadian dollar.

Coal revenue fell 17 percent to C$880 million, while copper revenue fell about 5 percent to C$652 million and zinc revenue fell about 6 percent to C$551 million.

Most of Teck’s coal production comprises metallurgical, or steelmaking coal. This is typically more profitable than thermal coal, which is used to generate electricity.

The company said it continued to expect 2014 coal production of 26-27 million metric tons and an annual cost of product sold, including transportation, of $85-93 per metric ton.

On an adjusted basis, Teck earned 18 Canadian cents per share. Revenue fell about 11 percent to C$2.08 billion.

Analysts on average had expected a profit of 24 Canadian cents per share on revenue of C$2.1 billion, according to Thomson Reuters I/B/E/S.

Teck Resources shares closed down 1.2 percent at C$24.01 on the Toronto Stock Exchange on Monday. ($1 = 1.1018 Canadian dollars)

Reporting by Nicole Mordant in Vancouver and Sneha Banerjee in Bangalore; Editing by Ted Kerr

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