Teck earns $260M in Q2

VANCOUVER — After flirting with bankruptcy during the early days of global recession, Teck Resources (TCK. B-T, TCK-N) has rebounded with style. In the second quarter of 2010, the major earned $260 million after repaying the last of its $9.8- billion debt two years ahead of schedule.

In 2008, Teck bought Fording Canadian Coal Trust for US$14 billion at the peak of the coal market, of which US$9.8 billion was debt. When the recession hit, the company’s revenue streams fell dramatically and Teck was forced to restructure the two-part debt while watching its share price fall more than 90%.

Now, 18 tumultuous months after the original deal, Teck has repaid the entire Fording debt. And with the coal market having rebounded nicely from its early 2009 lows, Teck has reinstated a dividend and produced a profit. The turnaround led major credit ratings agencies to reassign their investment-grade ratings for Teck.

In the second quarter of 2010, Teck netted $260 million, or 44¢ a share, on an operating profit of $1 billion. Revenues for the three months totaled $2.1 billion. Coal sales helped those numbers considerably — the company sold 6.4 million tonnes during the quarter, a 29% increase over the second quarter of 2009.

Looking forward, Teck says it has agreed with “the majority of its contract customers” on high-quality coking coal prices at or above US$225 per tonne. Teck expects its weighted-average coal price to be between US$195 and US$200 per tonne.

And after an engineering inspection, Teck does not expect the recent explosion at its Greenhills coal processing plant to have a significant impact on its third quarter or overall annual results. In late June, an explosion in the dryer building at the plant near Elkford, B.C., damaged the exhaust side of the dryer system beyond repair. No one was hurt in the incident.

Engineers are now establishing a scope of work and timeline for the rebuild. Meanwhile, Teck plans to bypass the dryer, which will allow the company to produce and ship wet coal for blending with dry coal from other mines. The company is shipping some raw coal to its Fording River facilities.

Teck began mining at the Aqqaluk deposit, which will provide the primary feed at its Red Dog zinc mine in Alaska starting in 2013. The move was significant because it appeared for some time that permitting hurdles might have delayed the kick off at Aqqaluk, and Teck needed to start mining by October in order to ensure continuous mill feed to one of the world’s biggest zinc mines.

Teck’s share price fell 52¢ on the quarterly results news to close at $35.38. The company has a 52-week trading range of $24.50-$46.92 and 580 million shares outstanding.