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Teck weighs job cuts at Canadian coal operations as analysts lower price targets

Teck Resources Ltd. has yet to nail down plans for possible cost controls such as job cuts amid "challenging conditions," a company spokesperson told S&P Global Market Intelligence in response to inquiries about a media report that said Teck plans to cut jobs at Canadian metallurgical coal operations.

In late September, Robin Sheremeta, senior vice president of coal at Teck, sent a letter to employees at four mines in British Columbia's Elk Valley region outlining plans to freeze salaries and hiring, cut back on training and slash jobs, the CBC News reported Oct. 8. S&P Global Market Intelligence has not seen the letter.

In response to emailed questions about the letter, Teck spokesperson Chris Stannell said the diversified miner is considering ways to cut costs, as disclosed in the second quarter, "to ensure we continue to remain well-positioned." Stannell, who did not directly address the letter, said the company's metallurgical coal operations remain cash flow positive.

"No decisions have been made around specific cost reduction initiatives," the spokesperson said.

Teck's assets in British Columbia include the Elkview coal operations.

Analysts expect lower metal and coal prices to pinch Teck's profits in the third quarter, with some lowering their share price targets.

Seaport Global's Mark Levin cut his price target to US$23 per share from US$27 per share while maintaining a "buy" rating, and B. Riley FBR analyst Lucas Pipes lowered his price target on the stock to C$39 per share from C$40 per share.

The analysts cited falling metallurgical coal prices, among other factors, in their price target adjustments. Levin adjusted his 2020 low-volatility metallurgical coal price assumption to US$155 per tonne from US$165/t, while Pipes noted that the price of metallurgical coal ended the third quarter at US$141.25/t, down 27% from the end of the second quarter.

Stannell said Teck is closely monitoring markets "and taking steps to manage our costs in response to challenging conditions."