June 25, 2009 / 8:58 AM / 9 years ago

UPDATE 2-Teck cuts copper output due to pit wall movement

* Closes off area of Highland Valley mine

* Copper output to fall slightly this year, 13 pct in 2010

* Shares down 1.4 percent, despite copper strength (Adds details, changes dateline from London; in U.S. dollars unless noted)

By Cameron French

TORONTO, June 25 (Reuters) - Teck Resources TCKa.TO has cut its copper output expectations for this year and next due to movement of a pit wall at its Highland Valley mine in British Columbia, the company said on Thursday, sparking a 1.4 percent drop in its shares.

Copper production at Highland Valley will fall by about 16,000 tonnes to 117,000 tonnes in the second half of this year and by 52,000 tonnes to 85,000 tonnes next year, Teck said. This will reduce Teck’s overall 2010 copper output by 13 percent to about 343,000 tonnes.

Company spokesman Greg Waller said officials discovered a crack running up the east wall of the Valley Pit, one of three pits at the Highland Valley operation.

The company has closed off that part of the pit, blocking access to a large body of ore that was to have been mined over the next few years.

“The way to deal with it is we have to remove more waste form the top of the wall to reduce the load on it, and then you take some of that waste and put it at the bottom of the wall just to form a bit of a buttress,” said Waller.

Lost production will be partly made up by increased mining from the other two pits. Output should return to normal by 2011, he said, although the operation’s life-of-mine’s reserves are expected to be reduced by about 2 percent.

Highland Valley, which produced 122,300 tonnes last year, had been expected to boost output by about 10,000 tonnes this year due to improvements in ore grades and recoveries.

In addition to copper, Teck is among the world’s top producers of zinc and metallurgical coal, which is used in the steel-making process. It also has assets in Alberta’s oil sands.

Just after midday, Teck’s shares were down 1.4 percent at C$18.24 on the Toronto Stock Exchange, the weakest Toronto-listed base metals miner. Other copper miners were up sharply as the metal price hit two-week highs.

The stock has more than quintupled since early March, as Teck has successfully paid down or deferred a $5.8 billion bridge loan taken on to finance last year’s acquisition of Fording Canadian Coal Trust.

UBS analyst Brian MacArthur cut his 12-month stock target to C$21 from C$22 on the news, and maintained a “buy rating”, noting that coal production remains the largest driver of earnings and cash flow for the company.

Teck said it has engaged third-party geotechnical consultants to further assess the extent of the Highland Valley problems. That work is expected to be completed by the end of 2009.

$1=$1.16 Canadian Additional reporting by Veronica Brown and Pratima Desai in London; editing by Rob Wilson

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