Teck Resources (TSX:TECK.B)(NYSE:TECK) is set to benefit from the recent surge in commodity prices. Teck continued to improve the company’s low-carbon-intensity steel-making coal business in 2020, strengthening the company’s logistics through rail and terminal agreements and upgrades at Neptune bulk terminals. When completed this year, the Neptune upgrades will increase terminal-loading capacity, improve Teck’s capability to meet delivery commitments, and lower the company’s overall transportation costs.
Reduced operating costs
In addition, Teck structurally reduced the company’s mine operating costs with the closure of the company’s higher-cost Cardinal river operations, replacing this production through the expansion of Teck’s lower-cost Elkview operations. Collectively, these improvements position Teck well to meet steel-making coal demand growth, as the rollout of vaccines and fiscal stimulus drive the global economic recovery.
Using machine learning to analyze data
Further, RACE21 is Teck’s business transformation program, which focuses on harnessing innovation and technology to strengthen productivity, health and safety, and sustainability. In 2020, Teck advanced a broad range of initiatives, including using machine learning to analyze data and provide real-time recommendations to Teck’s front-line operators to maximize throughput at the company’s processing plants and automation.
This should improve safety and maximize the efficiency of Teck’s mobile mining fleets. Moving forward, Teck plans to continue to implement and scale up technologies to optimize the company’s operations.
Implementing cost reductions
Recently, Teck implemented a company-wide program beginning in 2020 to reduce operating costs and planned capital spending for the third quarter of 2021 and all of 2022, targeting total reductions of approximately $500 million. As of the end of 2020, Teck had exceeded this target, achieving a total of approximately $1.0 billion of reductions from previously planned spending in 2020.
In 2020, Teck maintained a strong financial position, despite challenging market conditions in the wake of COVID-19. Revenues were $8.9 billion, and gross profit before depreciation and amortization was $2.8 billion. Teck ended the year well with $450 million of cash and $6.5 billion of liquidity, and the company’s balance sheet remains strong. Overall, Teck also returned $106 million in cash to shareholders through dividends and completed $207 million of share buybacks.
Focused on sustainability
Further, 2020 was a milestone year for Teck’s sustainability efforts, marking the 20th year of Teck’s annual sustainability report as well as the 10th anniversary of Teck’s sustainability strategy. In 2020, Teck updated the company’s sustainability strategy to meet changing global expectations and to position it very well for the future.
New long-term priorities
This included setting ambitious, new long-term priorities, and goals under eight strategic themes, including a goal to become a carbon-neutral operator by 2050. Teck also took major steps toward achieving this goal, entering renewable energy agreements to supply 50% of the power for the company’s QB2 project and 100% of the power for Teck’s Carmen de Andacollo operations.
Together, these agreements are expected to eliminate one million tonnes of greenhouse gas emissions annually and demonstrate Teck’s commitment to making real progress on the company’s path to de-carbonization. Teck was recognized for the company’s sustainability efforts in the year, being named the top-ranked mining company on the Dow Jones sustainability world index.
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The Motley Fool owns shares of and recommends Teck Resources. Fool contributor Nikhil Kumar has no position in any of the stocks mentioned.