Early winter hits Teck’s Red Dog (November 10, 2008)

Teck (TCK. B-T, TCK-t) says that “adverse weather conditions” have forced it to send off its final container ship early and without a full load from its Red Dog zinc-lead mine in Alaska, easily the world’s largest producer of zinc concentrate.

The Red Dog mine and concentrator are situated in Alaska’s remote northwest, 90 miles north of the Arctic Circle and 46 miles inland from the Chuchki Sea, where Teck has its port facilities. Red Dog concentrate is shipped south to Teck’s Trail facility in B. C. for smelting and refining.

According to Japan’s IARCJAXA Information System (IJIS), the Arctic sea ice coverage has expanded about 15-20% in extent from a year ago, significantly shortening the Arctic shipping season.

Teck reports that the final tonnages shipped for 2008 were about 920,000 tonnes of zinc concentrate (510,000 tonnes contained metal) and 247,000 tonnes of lead concentrates (136,000 tonnes contained metal).

That amounts to a shortfall from the mine for 2008 of about 36,000 tonnes of zinc concentrate (20,000 tonnes contained metal) and 2000 tonnes of lead concentrate (1,100 tonnes contained).

Teck has thus sent force majeure notices to its customers, and accordingly lowered its zinc and lead sales guidance for the last quarter of 2008.

Zinc stocks in LME warehouses stood at 177,350 tonnes on Oct. 29, up from around 155,000 tonnes in early October.

Despite Teck’s news, spot zinc prices fell US2 to US$50.6 per lb.

Last year, when zinc prices averaged US$1.47 per lb., the wholly owned Red Dog mine generated a robust operating profit for Teck of $819 million on $1.43 billion in mine revenue.