Teck (TSX:TCK) has cancelled planned temporary coal production shutdowns at several operations in order to meet increased Chinese demand.
Based on the progress of Teck's coal contract settlements, the Vancouver-based miner updated its coal sales guidance to the upper end of the previously announced range of 18 million to 20 million tones.
Teck announced it has completed negotiations with more than 80% of its traditional customers, at pricing consistent with the previously announced settlements at US$128 per tonne for Teck's highest quality coal products.
Thus far, Teck coal customers have committed to take delivery of 2.3 million tonnes of carryover tonnage in the 2009 coal year at 2008 coal year prices.
In a news release, Teck attributed "significant increases in sales to China" to its "increased confidence in higher sales volumes." As a result, planned temporary production shutdowns at several mines have been cancelled in order to meet the increased demand.
The company forecast that site unit operating costs will be significantly reduced due to increased production and sales, as the per-tonne impact of fixed costs, which represent about 25% of the cost structure, is reduced. Meanwhile, strip ratios are expected to decline 25% in the second half of this year.
Costs of sales in the 2009 calendar year is expected to be in the range of Cdn$53 to Cdn$56 per tonne (US$47 to $49).
Teck also expects transportation cost to decline "due to the impact of coal price-linked terms in Teck Coal's transportation contracts." Transportation costs for the 2009 calendar year are currently anticipated to be in the range of Cdn$35 to Cdn$37 per tonne (US$31 to US$32).
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