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TORONTO, CALGARY – Canada’s largest diversified miner is cutting back in the face of a global economic slowdown.
Buffeted by volatile markets for the commodities it produces, Teck Resources Ltd. is deferring some $1.5-billion in capital spending over the next year or so, the latest in a string of Canadian resource companies to rewrite its plans in response to rising costs and an unpredictable outlook for the economy.
Among the casualties announced was Fort Hills, an oil sands joint venture in which Teck is a 20-per-cent partner along with Suncor Energy Inc. and Total SA. The project is not scheduled to begin producing oil until after 2017, but now some of the pre-production work will occur at a slower pace.
Canadian mining companies are increasingly joining the ranks of resource businesses that are being forced to rethink capital spending as the demand drops for key industrial commodities. The commodities cycle is sputtering along with the economies of the United States and Europe and as growth slows in China.
Suncor said in July that it was reevaluating tens of billions of dollars of planned spending, and pledged to apply “rigorous scrutiny” to the cost of three projects, including Fort Hills. A Total spokesperson referred questions back to Suncor, the project operator, but said there hadn’t been a formal announcement on any delays. A Suncor spokesperson declined to provide specifics.
Teck is one of the world’s largest exporters of coking coal used in steel production and a key supplier to China, where falling demand for commodities helped slash the company’s third-quarter profit by more than half. Teck earned $349-million in the third quarter or 60 cents a share, compared with $742-million or $1.26 in the same quarter a year ago. The result was in line with the average forecast of analysts polled by Bloomberg of 59 cents a share.
Beside Fort Hills, other projects affected by the deferral include two copper projects in Chile – Quebrada Blanca (phase two) and Relincho – and the Quintette steel-making coal project in British Columbia. And at the Trail zinc operations, also in B.C., Teck has shelved construction of a new slag fuming furnace.
“We would really like to do it, but we looked at the overall economic scene and we want to make sure that we’re living within our means, if you like, and margins have compressed in coal and zinc and we’re just being careful with our spending,” Teck chief executive officer Don Lindsay said on a conference call with analysts.
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