Teck Resources (TSX: TECK.B; NYSE: TECK), Canada’s largest diversified miner, could see its Quebrada Blanca Phase 2 (QB2) expansion project in Chile delayed by up to six months due to Covid-19.
Delivering results for the second-quarter, in which Teck recorded a $149-million loss, the Vancouver-based miner said all its mines across Canada, the United States, Chile and Peru had continued operating.
Construction activities related to the second phase of the expansion of Teck’s Quebrada Blanca copper mine were suspended in March to comply with Chile’s efforts to limit the spread of Covid-19.
The measure, originally intended to last two weeks, impacted about 15,000 workers.
While the company is gradually ramping up work at QB2, it noted that completion of the project would take between five and six months more than the expected fourth quarter of 2021 deadline.
The delay would come at a cost of $260-290 million (excluding interest), assuming the ramp-up activities in the third quarter of the year go according to plan, Teck said.
The miner suspended construction activities in March to help limit the transmission of the coronavirus. The field workforce was reduced to 500 people, following demobilization activities, although it has since been gradually increased again.
Currently, there are more than 3,000 people on site. As conditions allow, Teck plans to have 4,000 workers back at Quebrada Blanca by the end of July and 8,000 by the end of October.
Teck sees the Quebrada Blanca Phase 2 as its most significant growth opportunity, with the potential to double its copper business. It is expected to extend the ageing deposit’s life by 28 years and substantially boost production to 300,000 tonnes copper per year from 23,400 tonnes in 2017.
The Canadian mining giant is already studying a Phase 3 for the mine, which will double its capacity to 600,000 tonnes copper per year. The potential extension will make the mine Chile’s second-largest copper operation after Escondida. It will also situate Quebrada Blanca among the world’s top five copper mines.
In terms of costs, Phase 3 would need a $5 billion investment, as it would have to include the installation of a new concentrator.
Copper is one of four business units at Teck besides steelmaking coal, oil and zinc, and is considered a company priority.
Teck’s loss in the three months ended June 30 amounted to 28¢ per share, compared with a 41¢ per share, or $231-million profit in the same period last year.
Excluding one-time items, its adjusted profit fell to $89 million, or 17¢ per share, down from $498 million, or 88¢ per share, a year earlier.
Revenues decreased to $1.72 billion from $3.1 billion in the second quarter of 2019.
Teck had suspended its 2020 outlook in April, due to the impact of the coronavirus outbreak.
It now expects to produce 11-12 million tonnes of steelmaking coal, and 145,000-160,000 tonnes copper during the second half of the year.
It also forecasts zinc production between 315,000 and 345,000 tonnes.
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