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Quarterly profit at Teck Resources (TCK.B-T) more than doubled due to a strong performance at its coal and copper businesses, the diversified miner said Thursday, but it showed caution about global economic conditions and lowered some forecasts.
Investments in new equipment, plant upgrades and employees resulted in substantial increases in coal output, the Vancouver-based company said, while investments in Chile and Peru helped boost copper output.
Even so, Teck lowered its 2011 coal sales forecast because of economic conditions and trimmed its 2011 copper production forecast due to weather-related problems.
Despite the more cautious outlook, Teck's shares rose on Thursday morning in New York and Toronto, helped in part by the 33 percent dividend increase it announced late on Wednesday.
"Near-term economic concerns have pressured all the coal stocks, including Teck, so Teck's more cautious outlook may be priced into the stock," wrote BMO Capital Markets analyst Meredith Bandy, in a research note.
The gain in Teck's share price reflected similar gains in the shares of larger rivals BHP Billiton, Rio Tinto and Xstrata. Stocks of diversified miners surged Thursday after euro zone leaders struck a last-minute deal to contain the currency bloc's debt crisis.
"If anything the revised guidance that Teck issued, in concert with its third-quarter numbers, was fairly negative," said Morningstar analyst Dan Rohr. "You've got the strong macro development and the decidedly negative fundamental outlook, and the macro won this time."
Net income rose to $814 million, or $1.37 a share, from $316 million, or 54 cents, a year earlier.
Excluding gains from asset sales, foreign exchange losses and other one-time items, earnings rose to $1.26 a share, slightly above the average forecast of $1.25, according to Thomson Reuters I/B/E/S.
Teck said the results reflected higher copper and coal sales volumes and favorable prices for all our major products, especially copper and coal.
Negative factors included a stronger Canadian dollar, higher operating costs and a $113 million after-tax pricing adjustment arising from the decline of copper prices late in the quarter.
Gross profit rose by more than 50 percent to $362 million in the copper business and increased by more than 90 percent to $954 million in the coal business. Earnings from the zinc business rose 35 percent to $255 million, the company said.
Quarterly revenue rose 40 percent to $3.38 billion.
Teck said it was making progress in advancing late-stage copper developments, particularly its Quebrada Blanca and Relincho projects in Chile.
"Despite strong growth from emerging economies, especially China, we continue to experience volatile market prices for our products," the company said.
Given weakening steel markets, Teck said it expects its 2011 coal sales volumes to be in the range of 22.2 million and 23 million tonnes. In July, Teck had forecast that coal sales volumes would be at the low end of a range of 23.5 million to 24.5 million tonnes.
Teck, one of the world's top exporters of metallurgical coal, an important ingredient for steelmaking, said its new coal sales volume forecast depended on full delivery of its contractual commitments for the fourth quarter.
The company also cut its 2011 copper sales forecast to about 320,000 tonnes, from a previous forecast range of 330,000 to 340,000 tonnes, mainly due to lower than expected production from its Quebrada Blanca operation in Chile.
The company also said it had reached an agreement to sell 5.6 million tonnes of coal to its customers in the fourth quarter at an average price of about $255 US per tonne.