A sharp global economic contraction from COVID-19 containment measures that has reduced the demand for key commodities is starting to have an impact on B.C. mining companies operating in B.C. and abroad, including B.C.’s biggest mining company.
Teck Resources (TSX:TECK.B) is temporarily cutting staff and production at its B.C. operations and has been forced to adjust its first quarter guidance.
“Notwithstanding the challenges in the month of March related to COVID-19, all of our operations remain in production and our steelmaking coal results significantly exceeded guidance,” Teck CEO Don Lindsay said in a news release.
Teck’s first quarter sales of metallurgical coal actually exceeded expectations, the company says in an update, with sales exceeding its first quarter expectations of 4.8 million tonnes by 400,00 tonnes.
A new processing plant being built at its Elkview mine, which is shut down for the expansion, is still on schedule for completion this month, the company said.
But a major expansion at its Quebrada Blanca copper mine in Chile has been suspended, and the company is cutting production and temporarily reducing staff at some of its B.C. operations.
It reduced staff by half at its Highland Valley copper mine for a two-week period, starting March 25, and it has reduced staff at its Trail zinc smelter by one-third.
Teck expects met coal production to decline 80% to 85% over a two-week period.
Not surprisingly, Teck and it partner, Suncor Energy Inc. (TSX:SU), are also cutting production at its Fort Hills oil sands operation in Alberta. Western Canadian Select has lately traded at $US$5 per barrel, although oil prices are currently rallying somewhat today.
The demand for all commodities, from oil to copper, is expected to drop sharply in 2020, as countries around the world lock down their economies.
“All told, we expect pronounced—and in some cases historic—weakness in commodity prices and considerable volatility to persist in the interim,” Scotiabank Global Economics predicts.
Copper, nickel and zinc prices have dropped 20% to 30%. Scotiabank projects metallurgical coal – B.C.’s most valuable export after lumber – to falls from $177 per tonne in 2019 to $145 per tonne in 2020.
Even gold, typically buoyed in recessions, has been subject to volatility, bouncing to highs of US$1,700 per ounce to below US$1,500 in March.
