VANCOUVER (CP) -- Teck Cominco Ltd. [NYSE:TCK; TSX:TCK.B] says it is shopping to expand its asset base, but hasn't been able to cut a deal since its offer for Aur Resources Inc. [TSX:AUR] because it wants to stay ''disciplined'' in its spending.
''We're committed to diversification. There are a number of opportunities we've been looking at but are unable to conclude a deal to this point,'' CEO Don Lindsay told analysts in a conference call Tuesday.
''Price is very important to us so we're trying to remain disciplined, but from time to time when we see a collection of assets or a key asset where there's something we can do to add value, create value, that may not have been recognized before, than we'll make the move at that time,'' Lindsay said.
The company announced late Monday that its second-quarter profit fell 21% due to lower coal prices and lower sales volumes at its Highland Valley and Antamina copper mines.
The company, currently making a C$4.1 billion cash-and-stock bid to acquire copper-rich Aur Resources Inc., reported earnings of C$485 million or $1.14 per share compared with C$613 million or $1.48 per share in the second quarter of 2006.
However, Teck's president and CEO said if adjustments for changing metals prices and one-time items were excluded from the comparison, the earnings would have been C$434 million in the second quarter of this year, compared to C$500 million last year.
''The significant change quarter to quarter is the result of lower coal prices and lower copper sales which were partially offset by higher zinc sales,'' Lindsay said.
Coal prices averaged US$101 per tonne, down 13% from US$116 per tonne in the second quarter of 2006.
Lindsay said the earnings for the three months ended June 30 were in line with expectations.
Cash flow from operations was C$579 million compared with $669 million in the second quarter of 2006.
The company said less copper ore was processed at Highland Valley, near Kamloops, B.C., as a result of the push-back to extend the mine life. The mine is also a significant producer of molybdenum.
Meanwhile, sales volumes at the company's copper-zinc Antamina mine, in Peru's Andes mountain range, were lower in part due to the mix of ore types being mine and processed, as well as shipment timing.
Copper production was 81,000 tonnes in the quarter, and sales were 64,000 tonnes; down from 89,000 tonnes and 88,000 tonnes respectively in the same quarter of 2006.
Teck and Fording Canadian Coal Trust [TSX:FDG.UN], its partner in the Elk Valley Coal Partnership, said earlier this year they expected coal prices from the project to be 15% lower than a year ago.
Fording and Teck jointly own Elk Valley, the world's second largest exporter of metallurgical coal, on a 60-40 basis.
While copper prices averaged US$3.47 per pound, an increase from US$3.27 per pound in the second quarter of 2006, Teck said the increase was offset by a lower Canadian dollar exchange rate of 1.10 in the second quarter compared with 1.12 a year ago.
The company's copper assets would be greatly improved if Teck's offer to buy Aur Resources succeeds.
Aur's significant copper holdings include a 76.5% interest in the Quebrada Blanca mine in Chile, a 90% stake in the Andacollo copper mine and the Andacollo hypogene copper-gold deposit under development in Chile.
In Canada, it owns 100% of the Duck Pond copper-zinc mine in Newfoundland and Labrador.
Teck also pointed to the 50-50 partnership it made with NovaGold Resources Inc. [AMEX:NG; TSX:NG] to develop the Galore Creek copper-gold mine in northwestern British Columbia. Teck will invest an initial US$478 million toward its US$2 billion construction cost and split all subsequent costs with Nova Gold.
Galore Creek is expected to produce in excess of 430 million pounds of copper, 340,000 ounces of gold and four million ounces of silver annually during the first five years of operations.
As for zinc, Teck said zinc prices in the second quarter averaged US$1.66 per pound, up from US$1.49 in the second quarter of 2006.
The company sold 105,000 tonnes of zinc in the second quarter, on production of 97,000, up from zinc sales of 27,000 tonnes in the same quarter in 2006, on production of 44,000 tonnes.
Despite the increase in zinc prices and sales, Teck said second quarter earnings are typically weaker than other quarters due to seasonally lower sales from its Red Dog mine in Alaska.
''Sales volumes of zinc concentrates from Red Dog in the second quarter represented approximately 12% of its expected annual sales and there were no lead sales from the mine in the quarter, as market inventories had been depleted in the previous quarter,'' the company said in a release.
Teck shares were trading up 84 cents C$47.54 on the Toronto Stock Market Tuesday afternoon.
(c) The Canadian Press 2007