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Teck Restarts Antamina Mine Operations With Lower Workforce

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Zacks Equity Research
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Teck Resources Limited TECK has resumed operations at the Antamina mine after being shut due to the coronavirus pandemic. The Antamina mine is among the world’s largest Zinc and Copper mines. Teck owns 22.5% interest in this mine, along with BHP Group BHP and Glencore’s share of 33.7% each, while Mitsubishi Corporation holds 10%.

Antamina has mobilized a reduced workforce and plans to commence operations at roughly 80% of full capacity, while the ramp-up of full production is anticipated in the third quarter. The company is committed to stick to protocols related to COVID-19 to safeguard the health of its workers and local communities.

Teck had temporarily suspended operations and demobilized majority of its workforce at the Antamina mine in April, following the restrictions imposed by the Peruvian Government amid the virus outbreak. Peru is a global mining powerhouse, ranking third in global copper production, second for silver and sixth for gold, and also owns significant reserves of zinc, lead, iron ore and tin. Following the declaration of a national state of emergency, several miners like Newmont Corporation NEM, Freeport-McMoRan Inc. FCX and others have halted their operations in the country.

The company recently reported first-quarter 2020 results. Adjusted earnings per share came in at 13 cents, missing the Zacks Consensus Estimate of 15 cents. The figure also tanked 83% year over year. The COVID-19 pandemic caused significant reductions in the commodity prices, which hurt the quarterly earnings. Further, the underperformance resulted from the dismal performance of the energy business unit due to the massive decline in global benchmark crude oil prices.

Teck has revoked the current-year annual guidance on uncertainties related to the adverse impact of the coronavirus pandemic on demand and commodity prices, suppliers and global financial markets. Copper and zinc prices have plunged following the virus outbreak. Further, disruptions at mine sites will likely hurt mine production growth in the second quarter.

The company expects second-quarter sales volume at the Steelmaking Coal segment to decrease due to the unfavorable impact of the coronavirus pandemic on global economic activity, as well as steelmaking coal demand and supply. Its Energy business is also bearing the brunt of the volatility in the global crude oil prices.

Construction of the Quebrada Blanca Phase 2 (QB2) copper project will transform the company’s copper business, making it a major global copper producer. Though the company has temporarily suspended construction activities on the QB2 project amid coronavirus fears, there are solid opportunities to increase production and mine life in the upcoming period. Moreover, it has implemented a company-wide cost-reduction program to lower operating costs and deferred some of planned capital projects in bid to counter uncertain economic conditions.

Teck currently carries a Zacks Rank #3 (Hold). The company’s shares have plunged 51.1% over the past year compared with the industry’s decline of 6.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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