Teck to pay fixed rate for coal port shipments

Teck Resources (TCK.A-T, TCK.B-T, TCK-N) has come to an agreement with Westshore Terminals to ship coal from some of its British Columbia operations at a fixed rate for the next two years.

Westshore has agreed to ship 3 million tonnes of coal per year from Teck’s Elkview, Cheviot and Line Creek mines at the new rate from its Vancouver-area port. Under the last agreement, which expires on March 31, the rate varied with the price of coal.

Teck and Westshore have also agreed to a fixed rate for its Fording, Greenhills and Coal Mountain mines where shipments have also been linked to the price of coal. However, this new rate won’t start until next year. Westshore agreed to ship coal at a fixed rate from April 1, 2011 until the end of 2012.

Teck says it plans to ship additional coal through Neptune Terminals, a company in which it has a 48% interest.

The company, which also mines copper and zinc, reported operating profit of $1.3 billion for its coal business in 2009 – about 47% of the company’s total profit. Coal prices averaged $177 per tonne in 2009, down from an average price of $220 in 2008, and reaching as high as $247 per tonne.

Teck anticipates producing 23.5-25 million tonnes of coal in 2010, a 25% increase from 2009.

The deal with Westshore wasn’t Teck’s first issue with shipping rates. After federal arbitration last summer, the company reached a five-year agreement with Canadian Pacific Railway for a new rate structure also not linked to the coal price. It also secured the choice to use an alternative link – on the Canadian National Railway — to ship some of its coal for part of the rote to the BC coast.