July 23 (Reuters) - Canadian miner Teck Resources Ltd reported a better-than-expected quarterly profit on Thursday, reflecting higher metals sales and lower costs, but said coal output could need further cutbacks if grim market conditions continue.
The company, the largest producer of steel-making coal in North America, has begun rotating shutdowns at six Canadian coal mines and said it may take further actions in the fourth quarter if the supply-demand balance does not improve.
That move will reduce Teck’s third-quarter coal production by about 1.5 million tonnes to 5.7 million tonnes, with sales seen in the range of 6 million to 6.5 million tonnes.
Hurt by a slowdown in Chinese demand and a glut of new supply from Australia, Teck forecasts annual coal production of 25 million to 26 million tonnes.
With prices for all its major commodities down significantly, the company said it is focusing on cost cutting and disciplined use of capital.
Vancouver-based Teck reported adjusted earnings of 14 Canadian cents per share, above analysts’ average estimate of 11 Canadian cents, according to Thomson Reuters I/B/E/S.
“Results were above expectations, primarily due to stronger coal, copper, and zinc sales than expected,” said RBC Capital Markets analyst Fraser Phillips in a note to clients. “Operating results were solid in each segment.”
Revenue of C$2 billion ($1.54 billion) was in line with estimates.
Average realized prices for coal fell 14 percent to $95 per tonne, while average realized prices for copper fell 11 percent to $2.74 per pound.
Teck said it has reached agreements with the bulk of its coal customers for the third quarter, based on a quarterly benchmark of $93 per tonne.
Copper output for 2015 was lowered by 5,000 to 10,000 tonnes, to 340,000-350,000 tonnes, due to lower production at Quebrada Blanca in Chile. Output was suspended last month due to ground movement issues, but partial production has since resumed.
The company had $4.2 billion of undrawn credit and C$1.5 billion in cash at quarter-end.
Earlier this month Teck agreed to sell future gold output from its Carmen de Andacollo copper mine to Royal Gold Inc for an upfront payment of $525 million.
Teck has said it could do more so-called “streaming” deals on silver output from its mines. Analysts speculate that Teck may want to raise funds for acquisitions or to help fund its portion of the Fort Hills oil sands development. ($1 = 1.3004 Canadian dollars) (Reporting by Susan Taylor in Toronto, Nicole Mordant in Vancouver and Anet Josline Pinto in Bengaluru; Editing by Sriraj Kalluvila and Meredith Mazzilli)