(Reuters) - Teck Resources Ltd reported stronger-than-expected operating earnings on Thursday, and its share price rose even though weak commodity prices prompted the Canadian miner to write down the value of its coal and other assets by C$2.2 billion ($1.68 billion).
Teck, the largest producer of steel-making coal in North America, said coal demand from China was still dropping, weighing on prices despite production cuts around the world.
Coal producers globally have announced about 50 million tonnes of output cuts, about half of them implemented so far, Teck vice-president of coal marketing Réal Foley said. But that was not enough to lift prices.
“As those production cuts are happening, we are also seeing seaborne demand from China come down by very similar levels... That explains why prices are still under pressure,” he said on a conference call after Teck announced third quarter results.
Weaker prices for coal, copper and oil were behind a C$2.2 billion non-cash, after-tax writedown of Vancouver-based Teck’s assets in the third quarter as the miner reduced the long-term commodity price assumptions it uses to value its operations.
Even so, Teck’s stock rose 6 percent to C$8.89 as its coal and zinc operations performed better than the market expected.
Teck Chief Executive Don Lindsay said the company had no immediate plans to raise more money to cut debt through so-called “streaming” deals. He said the C$1.8 billion of cash it has on hand is enough to cover the outstanding C$1.5 billion it needs to fund its portion of the Fort Hills oil sands development in Alberta.
Teck has raised more than US$1.1 billion through streaming deals, which involve miners selling a portion of their future, usually by-product, production for upfront funds.
Earlier, the company reported a net loss of C$2.1 billion, or C$3.73 per share, in the three months to September. That compared with earnings of C$84 million, or 14 Canadian cents a share, a year earlier.
Excluding the impairment charge, Teck earned 5 Canadian cents per share, ahead of analysts’ expectations of 1 Canadian cent, according to Thomson Reuters I/B/E/S.
Its debt was little changed at $7.26 billion at the end of September. Three ratings have downgraded Teck’s credit rating to junk in the past two months, blaming weak commodity prices and heavy capital spending.
($1 = 1.3119 Canadian dollars)
Reporting by Nicole Mordant in Vancouver. Additional reporting by Anannya Pramanick in Bengaluru; Editing by Nick Zieminski and David Gregorio