View of Teck Trail Ops from the downtown Esplanade. (Sheri Regnier photo)

View of Teck Trail Ops from the downtown Esplanade. (Sheri Regnier photo)

Teck Trail earnings down in 2017

The company reports almost double the profit in 2017, but Trail grosses were down

Despite overall record revenues reported by Teck Resources, the same can’t be said locally.

Teck has reported a fourth-quarter (Q4) profit of $63 million over 2016 yields.

In 2017, the company states, “We achieved record revenues of $12 billion and record cash flow from operations of $5.1 billion as a result of a favourable commodity price environment and our ongoing focus on cost control at all key assets.”

At the Trail smelter, however, fourth quarter and year-end earnings took a hit.

Teck Trail Operations reports an $11 million drop and a $47 million reduction in overall profit respectively.

“Gross profit at Trail Operations was $39 million in Q4 2017 versus $50 million in Q4 2016,” confirmed Teck spokesperson Catherine Adair. “For the year ended December 2017, gross profit at Trail Operations was $131 million versus $178 million in 2016.”

Mechanical difficulties in a fuming furnace primarily resulted in reduced lead concentrate treatment in Q4 and an 18 per cent decrease in refined lead production compared to a year ago, according to Teck’s fourth-quarter report.

Silver production was also 18 per cent lower. The company states this was primarily due to changes to the feed mix caused by operating disruptions at some mines that supply lead concentrates, which required alternative concentrates to be processed.

Refined zinc production of 80,100 tonnes in the fourth quarter was similar to the same period a year ago.

Q4 operating costs in Trail were six per cent lower at $103 million due to reduced labour costs and consumption of coke, coal and natural gas.

Capital expenditures in the quarter included $31 million for advancing the Number 2 Acid Plant and $23 million for various small projects.

In 2018, Teck Trail Operations is projected to produce 305,000 to 310,000 tonnes of refined zinc, approximately 70,000 tonnes of refined lead and approximately 16 to 18 million ounces of silver. Zinc production from 2019 to 2021 is expected to increase to 310,000 to 315,000 while lead production is expected to rise to 95,000 to 105,000 tonnes. Silver production is dependent on the amount of silver contained in the purchased concentrates.

According to the company’s report, environmental inspections resulted in closures and production curtailments at mines and smelters across China, which continue to limit production.

Spot treatment charges have fallen to historically low levels, which is a net benefit to Teck as the positive effect of lower treatment charges at the company’s mines more than offsets the negative effect at Trail operations.

“Treatment charges are fees paid by a mine to a smelter for processing /converting mine concentrate into metal,” Adair clarified. “As such, treatment charges are generally a cost for a mine and a revenue source for a smelter. Teck produces more concentrate at our mines (combined) than we process at Trail operations, so having lower treatment charges is a net benefit to Teck and our integrated zinc business overall.”

Closures and production curtailments limit production and thus put upward pressure on zinc prices, Adair added.

“And higher prices benefit Trail in addition to our zinc mines.”

Teck does not source zinc from China.