TORONTO—Teck Resources Ltd. is slashing its dividend by two-thirds in response to current low commodity prices and the diversified mining company’s outlook.
Teck said the lower payout to its shareholders announced Tuesday, which drops to 15 cents per share from 45 cents starting in June, will ensure that the Vancouver-based company maintains its financial strength and flexibility.
“We continue to experience challenging markets for our products and prices for some of our products have declined significantly in the last year,” Teck said in a statement Tuesday.
“While we believe that the longer term fundamentals for steelmaking coal, copper and zinc are favourable, the weakness in some of these markets may persist for some time.”
Teck also said it’s continuing to invest in the Fort Hills oilsands project, which is on track to produce oil as early as the fourth quarter of 2017. The company sees Fort Hills as a source of future cash flow and a way to further diversify its product mix.
As of April 20, Teck had $1.4 billion of cash and has access to up to US$3.0 billion under a credit agreement that matures in 2019.
“Our ongoing focus on cost management and operational performance, aided by the strong U.S. dollar, is enabling our diversified business to withstand the generally weak commodity price environment, allowing all of our operations to generate positive operating cash flows after our sustaining capital spending,” Teck president and CEO Don Lindsay said in a statement.
The company said it’s in the midst of labour negotiations for the Coal Mountain and Line Creek operations, which expired in 2014, and contracts for its Elkview coal operation and three copper operations expire in the third and fourth quarters.
Teck’s revenue and profit in the first quarter were relatively unchanged from last year but adjusted earnings dropped by 40 per cent to $64 million or 11 cents per share.
That’s down from $105 million or 18 cents per share a year earlier and three cents below the average analyst estimate from Thomson Reuters.
Before adjustments, Teck had $68 million or 12 cents per share of net income, compared with $69 million or 12 cents last year. Revenue was down $60 million or nearly three per cent to $2.024 billion.
Sales of Teck’s products are in U.S. dollars while a significant part of its expenses are in other currencies, including the Canadian dollar, which has fallen against its American counterpart in the past year.
There have been published reports that Teck has been in talks about a possible merger with Chilean copper miner Antofagasta, but Teck denied in a March 30 statement that it had held discussions “in relation to any form of transaction.”