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Teck Resources Q1 Steelmaking Coal Sales Fall Y/Y

Teck Resources Limited TECK has provided an update on its first-quarter 2024 steelmaking coal sales volumes and realized prices. Steelmaking coal sales were at 5.9 million tons, marking a 5% decrease from the 6.2 million tons reported in the year-ago quarter. The figure aligned with the lower end of the company’s guidance of between 5.9 million tons and 6.3 million tons.

During the same period, Teck Resources reported an average realized steelmaking coal price of $297 per ton, higher than $282 per ton in the first quarter of 2023. TECK is likely to report a provisional pricing adjustment of negative $94 million in its first-quarter 2024 results, scheduled on Apr 25, 2024.

The steelmaking coal segment will be around $2.36 billion for the first quarter of 2024. This reflects a 2% decline year over year as the gains from higher steelmaking coal prices will be offset by the dip in sale volume for the quarter.

On Nov 13, 2023, Teck Resources announced that it has agreed to sell its entire stake in its steelmaking coal business, Elk Valley Resources (“EVR”), for an implied enterprise value of $9 billion. The majority of the sale (77%) will be made to Glencore plc GLNCY and 20% to Nippon Steel Corporation. Proceeds will be used to strengthen TECK’s balance sheet while returning cash to shareholders. It will help the company focus on growing its extensive copper portfolio and thereby capitalize on the energy transition trend.

Glencore will acquire a 77% stake in EVR for $6.9 billion in cash. The deal, subject to customary closing adjustments, is expected to close by the third quarter of 2024. Nippon Steel Corporation completed the acquisition of the 20% interest in EVR on Jan 3, 2024, with a payment of $1.3 billion in cash to Teck.

POSCO PKX has taken up the remaining 3% interest in EVR. This will be in exchange for Posco’s current 2.5% interest in Elkview Operations and its 20% interest in the Greenhills joint venture.

Until the deal is closed, Teck will continue to operate the steelmaking coal business and will retain all cash flows, which are estimated to be around $1 billion.

Teck Resources expects steelmaking coal production between 24 million tons and 26 million tons for 2024. It had produced 23.7 million tons in 2023. Production is expected to remain at these levels throughout 2025 to 2027.

Price Performance

Shares of Teck Resources have gained 6.7% in the past year compared with the industry’s 6.5% growth.

Source: Zack’s Investment Research