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Plenty of companies across the resource sector are panicking, but not Teck Resources Ltd. As its rivals slash outputs, cancel projects and suspend dividends, Vancouver-based Teck is maintaining the same steady course that it has throughout the recent bout of commodity price volatility.
As a result, there were no radical changes to be found in the miner’s fourth-quarter earnings on Thursday. Teck did not reduce its $518-million dividend payout, it did not announce any job reductions or sweeping production cuts, and it maintained a commitment to the costly Fort Hills oil sands project.
“We have continued to execute well by controlling the controllable,” chief executive Don Lindsay said on a conference call on Thursday.
Specifically, that means chipping away at operating costs while preserving liquidity. The company has achieved $640-million of savings under its current cost reduction plan, and has reduced unit costs at 10 of its 13 operations. The balance sheet is in good shape with $1.7-billion of cash and an untapped US$3-billion credit facility.
All the same, the stock has been pummelled. Despite a recent rally, it is down more than 30% since the start of 2014 because of weak commodity prices and investor concerns about Fort Hills. The stock closed Thursday at $18.73, up $1.12, or 6.4%.
Teck, which owns 20% of the Fort Hills project, has committed to spending $2.9-billion on it to reach first production in 2017. Only $1.1-billion has been spent to date, so there is a long way to go.
Many shareholders have been opposed to the Fort Hills investment for years. Even its supporters would acknowledge that the project will not generate much of a return if current weak oil prices hold.
Mr. Lindsay tried to shrug off those concerns on Thursday. He said higher oil prices are inevitable in the long run due to reduced drilling activity and the high decline rates of shale oil wells.
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