JOHANNESBURG/VANCOUVER (miningweekly.com) – Canadian diversified miner Teck Resources on Tuesday posted adjusted first-quarter profit of C$671-million, or C$1.16 a share, a significant increase on the C$18-million, or C$0.03 a share reported a year earlier, but falling short of analyst forecasts calling for earnings a share of C$1.29.

The Vancouver-based miner said in a pre-market press release that the increase was largely driven by higher realised steelmaking coal prices and, to a lesser extent, higher copper and zinc prices. The price of steelmaking coal nearly tripled from a year ago, while copper and zinc prices increased by 25% and 66%, respectively.

"Substantially higher commodity prices had a significant positive effect on our financial results compared with the first quarter of 2016. We set a monthly sales record in steelmaking coal in March, as we saw an increase in demand following a slow start to the quarter. We are now through the difficult winter weather and are seeing improvements in service levels from our logistics providers putting us in a strong position for the remainder of the year,” stated president and CEO Don Lindsay on an analyst conference call Tuesday.

Steelmaking coal prices exceeded $300/t in November, but Teck reported that it had stabilised in the $150/t to $160/t range in the first quarter.

Gross profit from the zinc business unit was C$164-million in the first quarter compared with C$90-million a year ago. Gross profit before depreciation and amortisation increased by C$80-million owing mainly to higher zinc prices, partially offset by higher unit operating costs and royalty expense at the Red Dog mine, in Alaska.

Refined zinc output from the Trail Operations, in British Columbia in the first quarter was on par with a year ago. At Red Dog, zinc output was 23% lower than a year ago, mainly on the back of lower zinc grade, as well as reduced mill throughput and lower recovery.

For this reason, Teck lowered its 2017 zinc guidance to a range between 590 000 t and 615 000 t, down from 660 000 t to 680 000 t previously.

In its copper business unit, sales volumes were about 20% lower than in the first quarter of 2016, mainly to lower production from Highland Valley Copper, in British Columbia, as the mine is currently in a phase of lower-grade ore, as anticipated in the mine plan.

Construction of the C$13.5-billion Fort Hills oil sands project, in Alberta’s Athabasca basin, has passed 83% completion, with three of the six major project areas (mining, ore preparation plant and infrastructure) turned over to operations. The remaining construction focus is on utilities and secondary extraction. Shovels, trucks and support mining equipment are mobilising for operations. At the end of the first quarter, over 60% of operations personnel have been hired, Teck advised.

In the first quarter, Teck’s share of capital expenditures for the project in which Suncor Energy holds a 50.8% stake, Total 29.2% and Teck 20%, was C$203-million. Its share of Fort Hills 2017 cash expenditures is estimated at C$640-million.

Profit attributable to shareholders was C$572-million, or C$0.99 a share, in the first quarter, compared with $94-million, or C$0.16 a share, in the same period a year ago.

Revenue rose by 70% year-on-year to C$2.89-million, also missing analyst estimates calling for first-quarter revenues of C$3.04-billion.

With the additional profits and cash flow generated from higher commodity prices, Teck took the opportunity to further strengthen the balance sheet by repurchasing $1-billion principal amount of its outstanding notes in March. In the last eighteen months, the diversified miner has reduced the principal amount of outstanding notes by $2.1-billion and $5.1-billion of notes remain outstanding at March 31.