10/24/2012 05:29 EDT | Updated 12/24/2012 05:12 EST

Teck Resources sees Q3 revenue, profit plummet; slashes capital spending plans

Teck Resources Ltd. (TSX:TCK.B) has slashed its capital spending for this year and next by a total of $1.5 billion and said Wednesday it will look to cut annual operating costs by at least $200 million amid the sluggish global economy.

The Vancouver-based miner of copper, coal and other metals announced the cuts as it reported sharply lower profits and revenue compared with a year ago due to lower commodity prices and sales volumes for steelmaking coal.

Teck president and chief executive Don Lindsay said the majority of capital spending cuts were the result of permitting and other project delays, but conceded that had they not happened the company may have faced a similar decision.

"If the regulatory delays weren't there perhaps we would have made the choices anyway," he told a conference call with financial analysts.

Lindsay emphasized the capital spending cuts were mostly deferrals on projects Teck still wants to build, now just not as quickly as it had hoped.

"We will still need the capital at some point in the future, we hope not in the too distant future," he said, referring to the company's $4.2-billion cash balance.

"We are still very committed to our stated core strategy."

However, Lindsay also said Wednesday that Teck was no longer looking for an iron ore asset to buy. Teck has said repeatedly in the past that iron ore would be a good fit in its portfolio of metals and would look to acquire a project.

Lindsay told analysts that while iron ore still makes sense, the company is no longer actively looking to add iron ore after reviewing several opportunities but not finding something at the right price.

"It is pretty clear that their expectations for price are very rich, so we've made the decision to move on," he said.

Teck reported a profit of $180 million or 31 cents per diluted share in the three months ended Sept. 30, down from with $814 million or $1.37 in the same 2011 period. Revenue for the three months ended Sept. 30 was $2.5 billion, down from $3.38 billion.

Adjusted profit was $349 million, or 60 cents per share, down from $742 million, or $1.26 per share.

Analyst estimates compiled by Thomson Reuters had on average called for revenue of $2.56 billion, with adjusted earnings of 61 cents per share.

The deferred capital spending plans included lower spending on the Quebrada Blanca Phase 2 copper project and the Quintette coal project due to permitting delays and a delay in the Relincho copper project.

Teck also said it will not spend as much as planned due to a delay in the development of the Fort Hills oilsands project and would defer construction of a slag fuming furnace at its operations in Trail, B.C.

"We're just being careful with our spending," Lindsay said.

The cuts to capital spending came as Teck said the cost of an expansion at its Highland Valley copper mine in B.C. will be $550 million, up from an earlier estimate of $475 million.

The deferrals will amount to about $300 million for 2012 and $1.2 billion in 2013. As a result, Teck said it expects to spend $1.8 billion on capital expenditures for 2012, down from an earlier estimate of $2.1 billion and its original guidance of $2.3 billion.

RBC Capital Markets analyst Fraser Phillips said the results for the quarter were a little below expectations, but highlighted solid operating results at the company.

"Results were slightly below expectations due to lower copper sales volumes and slightly lower zinc sales volumes than we were expecting," Phillips wrote in a note to clients.

"Teck remains one of our preferred mining investment vehicles and looks attractive at near trough of cycle valuations."

For the most recent quarter, Teck reported copper revenue of $763 million, down from $808 million a year ago, while coal revenue fell to $1.08 billion, down from $1.72 billion. Zinc revenue slipped to $644 million from $855 million.

The average price for copper fell 14 per cent compared with a year ago, while the company's realized coal price was down by a third. Zinc prices were down 15 per cent.

Copper production totalled 99,000 tonnes, up from 77,000 tonnes in the third quarter of 2011, while coal production increased to 6.3 million tonnes, up from roughly six million tonnes a year ago.

Zinc contained in concentrate totalled 145,000 tonnes, down from 164,000 tonnes, while refined zinc production amounted to 74,000 tonnes, up from 73,000 tonnes.

During its most recent quarter, the company said it reduced coal production due to market demand, but said it expected annual production would meet the lower end of its guidance of 24.5 million tonnes for 2012.

Teck shares closed up 85 cents at $31.39 on the Toronto Stock Exchange.