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Teck profit boosted by rising commodity prices

Diversified Canadian miner Teck Resources (TCK.B-T) said late on Tuesday its third-quarter operating profit rose sharply, driven by a surge in commodity prices, but earnings fell short of market expectations partly due to higher costs.

The Vancouver-based miner, which produces coal, copper and zinc, said that its primary end-markets have strengthened in the current quarter and are moderately improved compared to the same time last year.

Teck -- which operates a string of coal mines in Canada, a number of copper mines in South America and the world's largest zinc mine in Alaska -- said its operating profit rose to $1 billion for the quarter ended Sept. 30, up from $694 million, a year earlier.

Excluding foreign-exchange adjustments, debt refinancing costs and other items, the company reported adjusted earnings of $467 million, or 79 cents a share, up from a profit of $337 million, or 59 cents a share, a year earlier.

However, earnings fell short of the Wall Street consensus of 88 cents a share, according to Thomson Reuters.

Operating expenses in the coal business, along with Teck's quarterly interest expenses were both a little higher than expected, said BMO Capital Markets analyst Meredith Bandy.

"It does look like it was a little bit of a miss, but not on any one big thing. Just a few pennies here and there and that added up," said Bandy.

The company's quarterly net income fell sharply, as its earnings were hit by a $340 million debt refinancing charge in the latest quarter, while its year-ago results included a $311 million foreign exchange gain that was related to its U.S. dollar-denominated debt.

Net income fell to $331 million, or 56 cents a share, down from $609 million, or $1.06 a share, in the year-ago period.

Teck said quarterly revenue rose 18 percent to $2.52 billion, on the back of higher commodity prices.

Shares of Teck have climbed close to 30 percent over the last three months, as the price of copper, zinc and other metals have booked sharp gains since the middle of this year.

SEGMENT RESULTS

Stellar results from the company's coal business helped boost both the company's revenue and operating profit, but a nearly 15 percent increase in coal production costs did weigh on the company's overall profit.

Quarterly revenue from the coal segment rose to $1.15 billion from $869 million, while operating profits rose to $491 million, from $236 million, a year earlier.

However, Teck said its unit cost of product sold was $62 per tonne, compared with $54 per tonne in the same quarter of 2009, due to higher strip ratios and higher diesel fuel costs.

Teck operates six metallurgical coal mines in British Columbia and Alberta and is the world's second-largest exporter of seaborne coking coal -- a key raw material used in the manufacture of steel.

Last month, Teck trimmed its third-quarter and full-year coal sales forecast, citing temporary capacity constraints at Westshore Terminals -- Canada's largest coal export facility, on the Pacific Coast.

At the time, Teck said it expected third-quarter coal sales to be in the range of 5.2 million to 5.5 million tonnes, down from an earlier forecast of 5.8 million to 6.2 million. It also cut full-year shipment volumes to a range of 23 million to 23.8 million tonnes, down from its earlier view of 23.5 million to 24.5 million tonnes.

The company's coal business has also recently been impacted by a strike at its Coal Mountain mine and an explosion at its Greenhills processing plant. Teck said neither issue has had a material impact on sales.

Sales from Teck's copper business fell slightly despite a higher realized copper price, due to lower production from its Highland Valley Copper mine in British Columbia and the timing of deliveries to customers.

Teck's zinc business reported an 18 percent revenue increase and a 28 percent rise in operating profit, due to higher zinc prices and improved shipment volumes.

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