|Full Text: 4Q Report for the Three Months Ended December 31, 2006 (pdf, 137 KB)
Excerpt . . .
Teck Cominco Reports Record Net Earnings Of $866 Million In The Fourth Quarter Of 2006 And $2.4 Billion For The Year
Don Lindsay, President and CEO said, “Our fourth quarter earnings were a record $866 million, up substantially from $510 million a year ago. The increase was driven by significantly higher commodity prices and higher sales volumes of Red Dog concentrates as poor weather conditions in the third quarter shifted some sales into the fourth quarter. Net earnings for the full year were $2.4 billion compared with $1.3 billion in 2005.”
“We are very pleased that our core operations achieved outstanding operating performance in 2006 allowing them to take advantage of the high commodity prices and generate record operating profits.”
Financial Highlights and Significant Items
Unaudited net earnings were $866 million or $4.02 per share in the fourth quarter, up from $510 million or $2.50 per share in the fourth quarter of 2005 primarily due to higher metal prices and an after-tax gain of $115 million on disposition of Inco shares.
Net earnings for 2006 were $2.4 billion, almost double the net earnings of $1.3 billion in 2005.
Cash flow from operations, before changes to non-cash working capital items, was $829 million in the fourth quarter compared with $555 million in the same period of 2005. Cash flow for the year was $2.6 billion compared with $1.6 billion for 2005. Cash flow from operations after scheduled debt repayments, dividends and sustaining capital expenditures was $2.1 billion in 2006.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $1.3 billion in the fourth quarter compared with $734 million a year ago. For the full year, EBITDA was $3.8 billion compared with $2.2 billion in 2005.
Antamina reached a three-year collective agreement with workers and also an agreement with the government regarding social contributions.
The company made strategic investments in Tahera Diamond Corporation, Nautilus Minerals Inc. and ZincOx Resources plc totalling $71 million.
On January 15, 2007, the company and UTS Energy Corporation announced that the two companies jointly acquired additional oil sands leases in the fourth quarter and in January 2007, bringing total acquisitions outside the Fort Hills project to 277,000 acres in the Athabasca oils sands region of Alberta.
Cash and temporary investments increased by $1.5 billion in the fourth quarter and totalled $5.3 billion at the end of December.
Other News Releases
Earlier today we announced our intention to proceed with a further six-year extension of the life of the Highland Valley Copper mine from 2013 to 2019 that is expected to produce an additional 1.5 billion pounds of copper and 21 million pounds of molybdenum in concentrate. The extension will cost approximately $300 million, consisting of $167 million in incremental waste stripping and the balance for mobile equipment.
We also announced our intention, subject to regulatory approval, to purchase up to 20 million of our outstanding Class B subordinate voting shares by way of a normal course issuer bid and, subject to shareholders’ approval, implement a two for one share split of our Class A common shares and Class B subordinate voting shares.
More information on these announcements is provided in two separate news releases issued earlier today.
This news release is prepared as at February 12, 2007, and should be read in conjunction with the unaudited consolidated financial statements of Teck Cominco Limited and the notes thereto for the three months and year ended December 31, 2006 and with the audited consolidated financial statements of Teck Cominco Limited and the notes thereto for the year ended December 31, 2005. In this press release, unless the context otherwise dictates, a reference to the company or us, we or our refers to Teck Cominco Limited and its subsidiaries including Teck Cominco Metals Ltd. and a reference to Metals refers to Teck Cominco Metals Ltd. and its subsidiaries. Additional information relating to the company, including the company’s annual information form, is available on SEDAR at www.sedar.com.
This news release contains forward-looking statements. Please refer to the cautionary language on page 18.
Unaudited net earnings in the fourth quarter were $866 million or $4.02 per share, up from net earnings of $510 million or $2.50 per share in the fourth quarter of 2005. Fourth quarter earnings in 2006 included an after-tax gain of $115 million related to the disposition of our investment in Inco shares.
Excluding the gain related to Inco, net earnings in the fourth quarter increased from a year ago, due mainly to significantly higher copper and zinc prices and higher sales volumes from Red Dog. Average LME cash prices for copper and zinc were US$3.21 and US$1.91 per pound respectively in the quarter, up from US$1.95 and US$0.74 per pound respectively in the fourth quarter of 2005. Realized coal prices averaged US$106 per tonne in the fourth quarter, which was lower than US$122 per tonne in the same period last year.
Red Dog’s sales and operating profit were significantly higher than the fourth quarter of 2005, as poor weather conditions in the third quarter of 2006 delayed some shipments into the fourth quarter.
Operating profit of $1.2 billion in the fourth quarter increased from $686 million in the same period last year due mainly to the Red Dog mine which contributed $456 million of the increase. In addition, Trail posted a strong performance and recorded an operating profit of $111 million compared with $44 million in the fourth quarter of 2005. Operating profit at the company’s copper operations also increased from the fourth quarter of 2005 mainly as a result of higher prices. Partially offsetting these strong performances were lower realized coal prices and a weaker U.S. dollar. Positive zinc price adjustments of $32 million were recorded in the fourth quarter, however, negative copper pricing adjustments offset this amount resulting in no final pricing adjustments in the fourth quarter. This compared with $61 million of positive final pricing revenue adjustments in the fourth quarter of 2005.
Net earnings in 2006 were $2.4 billion, almost double the net earnings of $1.3 billion in 2005. The higher earnings were due to significantly higher commodity prices, partially offset by a weaker U.S. dollar. Copper prices averaged US$3.05 per pound in 2006, up significantly from US$1.67 per pound in 2005, and zinc prices averaged US$1.49 per pound which was a 137% increase from the previous year’s average of US$0.63 per pound. Sales volumes at the mining operations in 2006 were similar to the previous year, while refined zinc and lead volumes were significantly higher than 2005 due to the three-month strike at Trail in 2005.
Cash Flow from Operations
Cash flow from operations, before changes to non-cash working capital items, were $829 million in the quarter compared with $555 million in the same period of 2005 due mainly to higher profits from zinc operations.
Cash flow from operations, after non-cash working capital changes, was $1.2 billion compared with $627 million in the fourth quarter of 2005. The net decrease in non-cash working capital items was $341 million, due mainly to the seasonal reduction of concentrate inventories at Red Dog as sales exceeded production by 112,000 tonnes.
Cash flow before changes to non-cash working capital items was $2.6 billion for the year compared with $1.6 billion in 2005.
Cautionary Statement on Forward-Looking Information
This news release contains certain forward-looking information. This forward-looking information, principally under the heading “Outlook”, but also elsewhere in this news release, includes estimates, forecasts, and statements as to management’s expectations with respect to, among other things, the size and quality of the company’s mineral reserves and mineral resources, future trends for the company, progress in development of mineral properties, future production and sales volumes, capital and mine production costs, demand and market outlook for commodities, future commodity prices and treatment and refining charges, the outcome of legal proceedings involving the company, and the financial results of the company. This forward-looking information involves numerous assumptions, risks and uncertainties and actual results may vary materially.
Factors that may cause actual results to vary materially include, but are not limited to, changes in commodity and power prices, changes in interest and currency exchange rates, acts of foreign governments and the outcome of legal proceedings, inaccurate geological and metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources), unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications or expectations, cost escalation, unavailability of materials and equipment, government action or delays in the receipt of government approvals, industrial disturbances or other job action, adverse weather conditions and unanticipated events related to health, safety and environmental matters), political risk, social unrest, and changes in general economic conditions or conditions in the financial markets.
Statements concerning future production costs or volumes, and the sensitivity of the company’s earnings to changes in commodity prices and exchange rates are based on numerous assumptions of management regarding operating matters, including that new collective bargaining agreements are entered into at certain operations without labour disruption, that demand for products develops as anticipated, that operating and capital plans will not be disrupted by issues such as mechanical failure, unavailability of parts and supplies, labour disturbances, interruption in transportation or utilities, adverse weather conditions and that there are no material unanticipated variations in the cost of energy or supplies.
Full Text: 4Q Report for the Three Months Ended December 31, 2006 (pdf, 137 KB)
Teck Cominco will host an Investor Conference Call to discuss its Q4/2006 financial results on Tuesday, February 13, 2007 at 11 AM Eastern/8 AM Pacific time. A live audio webcast of the conference call, together with supporting presentation slides, will be available at the company’s website at www.teckcominco.com. The webcast is also available at www.vcall.com and www.investorcalendar.com. The webcast will be archived at www.teckcominco.com.