(Reuters) – Teck Resources Ltd on Thursday reported a sharp drop in second-quarter earnings on lower copper and coal prices, and cut its capital spending plan through 2014, delaying new mining projects.
The company, Canada’s largest diversified miner, is slowing the restarting of its Quintette coal mine in British Columbia until the steelmaking coal market recovers, and it delayed development of its Quebrada Blanca Phase 2 copper expansion in Chile.
“I think it is the right move,” said Garrett Nelson, mining analyst at BB&T Capital Markets, on the Quebrada Blanca delay. “That was going to be a significant drain on free cash flow over the next few years.”
Shares rose 4 percent to C$24.64 on the Toronto Stock Exchange.
A feasibility study last year pegged the project’s capital cost at $5.6 billion, with Teck’s share at $4.8 billion. It had planned to complete a study on its social and environmental impact by the end of the second quarter, but now does not expect to finish before the fourth quarter of 2014.
Teck also warned that economic uncertainty in the United States and Europe, along with less robust growth in emerging markets, would probably continue to affect prices and demand for its products.
“While we believe that the longer term fundamentals for steelmaking coal, copper and zinc are favorable, the recent weakness in these markets may well persist for some time,” the company said in a statement.
Teck said it does not plan to approve any new mine development projects this year.
Teck said it was slowing the Quebrada Blanca expansion due to market conditions, but also because of permitting concerns as it moves to the second stage of the project.
“As previously announced, we have identified issues linked to permitting for existing facilities which need to be reviewed,” it said.
It plans separate regulatory filings on the matter before submitting its impact assessment for Phase 2.
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