* Coal prices fall 28 pct, copper down 8 pct
* Adjusted profit C$252 mln vs C$425 mln
* Says coal prices too low to maintain industry’s production
Oct 24 (Reuters) - Teck Resources Ltd reported a drop in third quarter adjusted earnings on Thursday on weakening coal, copper and zinc prices, but results from Canada’s largest diversified miner beat analysts’ expectations and the stock jumped in early trading.
Coal volumes and costs per tonne were better than expected, BMO Capital Markets analyst Meredith Bandy said in a note to clients. Shares were up 5.2 percent at C$30.94 midmorning on the Toronto Stock Exchange.
Teck also said it is making progress reducing its operating costs. It has identified more than C$330 million ($318 million) in annual savings, and has made about C$300 million of those cuts so far, progressing from the roughly C$220 million in cuts the company reported as of the second quarter.
“While we believe that the longer term fundamentals for steelmaking coal, copper and zinc are favorable, the recent weakness in these markets may well persist for some time,” the Vancouver-based company said in a statement.
A 28-percent decline in coal prices and an 8-percent fall in copper prices from a year earlier reduced revenue by about C$410 million in the quarter, the company estimated.
Teck said it has commitments in place to sell 5.6 million tonnes of coal in the current quarter, at an average price of US$145 per tonne
“The current price for steelmaking coal remains below what we believe is required to sustain adequate production in the industry in the long term,” Chief Executive Don Lindsay said in the statement.
A weak steel market has hurt the price of steelmaking coal, which is typically more profitable than thermal coal used to produce electricity. Nearly all of Teck’s coal reserves are steelmaking, or metallurgical, coal.
At the same time, a slowdown in China’s economic growth has weighed on copper prices as supply rises, and many believe the market will be in surplus both this year and next.
Teck’s earnings rose to C$267 million, or 46 Canadian cents a share, from C$256 million, or 44 Canadian cents, a year earlier, when earnings were hurt by a C$196 million charge related to refinancing some of its debt.
Excluding that year-earlier charge and other items, adjusted profit dropped to C$252 million, or 44 Canadian cents a share, from C$425 million, or 73 Canadian cents.
Revenue was little changed, C$2.52 billion compared with C$2.51 billion a year earlier.
Analysts had been expecting earnings of 38 Canadian cents a share on revenue of C$2.25 billion, according to Thomson Reuters I/B/E/S.
Coal sales rose 36 percent to 7.6 million tonnes, and cost of sales declined to $50 per tonne in the third quarter compared with $58 per tonne a year earlier.