Teck Resources (TSX:TECK.A | TECK.B) (NYSE:TCK), Canada’s largest diversified miner, could see its Quebrada Blanca Phase 2 (QB2) expansion project in Chile delayed by up to six month due to covid-19 disruptions.
Delivering results for the second-quarter, in which Teck recorded a $149 million-loss, the Vancouver-based miner said all its mines across Canada, 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, affected about 15,000 workers.
Completion of the second phase expansion at Quebrada Blanca copper mine may take between five and six months beyond the expected Q4-2021 deadline.
While the company is gradually ramping up work at QB2, it noted completion of the project could take between five and six months beyond the expected Q4-2021 deadline.
Such delay would come at a cost of $260 to $290 million (excluding interest), assuming the ramp up activities in the third quarter of the year go according to plan, Teck said.
The miner had suspended construction activities in March to help limit the transmission of covid-19. Field workforce was reduced to 500 people, following demobilization activities and 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 of copper a 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 of copper a 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, one of four business units at Teck besides steelmaking, coal, oil and zinc, is considered a company priority.
Revised guidance
Teck’s loss in the three months ended June 30 amounted to 28 cents per share, compared with a 41 cents 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 cents per share, down from $498 million or 88 cents per share a year earlier.
Revenues decreased to $1.72 billion from $3.1 billion in the second quarter of 2019.
Teck had suspended in April its 2020 outlook, citing the impact from the coronavirus outbreak.
It now expects to produce 11 million tonnes to 12 million tonnes of steelmaking coal, and 145,000 tonnes to 160,000 tonnes of copper during the second half of the year.
It also forecast zinc production between 315,000 tonnes and 345,000 tonnes.