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The five year rail agreement that previously governed westbound shipments from Teck's mines in southeast British Columbia expired at the end of March 2009. Teck initiated final offer arbitration proceedings to establish rates and conditions of service thereafter. The new rate structure established by the arbitral decisions is not linked to the prices of Teck's coal products.
In a related development, Teck and Canadian National Railway ("CN") have entered into an agreement relating to the interchange of coal trains between CP and CN at Kamloops BC, for delivery by CN to the Vancouver area, primarily to Neptune Terminals, following a statutory arbitral proceeding between Teck and CP. This important development provides for choice of rail carriers for some coal exports from western Canadian mines for the first time that Teck is aware of. Teck may use the Kamloops interchange for up to 3.5 million tonnes through March 1, 2010.
The arbitral decisions provide a rate for the period of April 8, 2009 to April 7, 2010 for the movement of coal to Westshore and Neptune and from April 1, 2009 through March 1, 2010 for shipments to Kamloops. As a result, Teck expects average transportation costs, including rail and port costs, to be in the range of $33 to $35 per tonne for the 2009 calendar year, compared to previous guidance of $35 to $37 per tonne.
For the 2009 Coal Year commencing April 1, costs are expected to be in the range of $31 to $33 per tonne. The updated transportation cost range for Coal Year 2009 includes the effect of expected export coal pricing recently disclosed by Teck, which affects port throughput charges at Westshore, as well as updated fuel surcharge estimates.
The rail rates established by the arbitration proceedings are expected to result in savings of approximately $70 million for the 2009 Coal Year, commencing April 1, compared to prior estimates. Teck's sales guidance of 18 to 20 million tonnes for calendar year 2009 corresponds to an expected sales volume range of 20-22 million tonnes for the 2009 Coal Year. Similar to Teck's calendar year guidance (which remains as previously disclosed), Teck expects to achieve sales at the upper end of the 2009 Coal Year range. Of those sales, approximately 3.5 to 4.0 million tonnes per year are shipped under rail rates with CP and CN unaffected by the arbitration proceedings.
The commercial agreement between Teck and CN regarding the movement from Kamloops to Neptune is separate and confidential. CN continues to carry coal from Teck's Cardinal River mine under separate arrangements.
Forward-Looking Statements
This press release contains certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information as defined in the Securities Act (Ontario). Forward-looking statements and information can be identified by the use of words such as "expects", "is expected", "potential" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur, or be achieved. Forward-looking statements include statements regarding Teck's expectations regarding coal sales volumes, realized coal prices, production and transportation costs, as well as production and shipment volumes.
Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Teck to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that may cause actual results to vary include, but are not limited to, failure of Teck's customers to meet their contractual obligations, changes in conditions in the steel market, changes in foreign exchange rates, unplanned disruptions in production or transportation, changes in general economic conditions or conditions in the markets for metallurgical coal, and other risk factors as detailed from time to time in Teck's reports filed with Canadian securities administrators and the U.S. Securities and Exchange Commission.
Certain of these risks are described in more detail in the annual information form of Teck and in its public filings with Canadian securities administrators and the U.S. Securities and Exchange Commission. Teck does not assume the obligation to revise or update these forward-looking statements after the date of this document or to revise them to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws.
About Teck
Teck is a diversified resource company committed to responsible mining and mineral development with major business units focused on copper, metallurgical coal, zinc, gold and energy. Headquartered in Vancouver, Canada, its shares are listed on the Toronto Stock Exchange under the symbols TCK.A and TCK.B and the New York Stock Exchange under the symbol TCK. Further information about Teck can be found at www.teck.com.
SOURCE: Teck Resources Limited
Teck Resources Limited Greg Waller Vice President, Investor Relations & Strategic Analysis (604) 699-4014 www.teck.com
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