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A truck hauls a load at Teck Resources Coal Mountain operation near Sparwood, B.C. in a handout photo.The Canadian Press

Teck Resources Ltd. is forecasting an increase in coal output this year, but cautions that higher mining costs will hurt the company.

Canada's largest diversified miner said Thursday it expects this year's production will be between 26 million and 27 million tonnes of metallurgical (or coking) coal, which goes into making steel. Last year, Vancouver-based Teck produced 25.6 million tonnes of metallurgical coal.

"Our actual production rate, however, will be a function of market conditions. And at this point, we are planning to run somewhat under capacity, Teck chief executive officer Don Lindsay said during a conference call with industry analysts.

He made the comments after Teck announced that its adjusted fourth-quarter profit declined amid lower prices for coal, copper and zinc. The company posted an adjusted profit of $227-million or 40 cents a share, compared to $409-million or 70 cents a year earlier. The latest quarterly results fell short of analysts' expectations.

For the full 12 months of 2013, Teck posted an adjusted profit of $1-billion or $1.74 a share, down from $1.78-billion or $3.03 a share in 2012.

TD Securities Inc. analyst Greg Barnes said Teck's guidance for coal production is largely in line with expectations, but costs are shifting higher.

"The company is warning that its mine plan for the coal operations includes an increase in the average waste haul distance that will have a significant impact on unit costs and that this will continue into 2015," he said in a research note. Mr. Barnes added that Teck's guidance for 2014 production of copper and zinc has weakened.

Teck chief financial officer Ron Millos said coal site costs could be between $55 and $60 a tonne this year, up from $51 in 2013. "This is based on our current production plans, reflecting longer-haul distances and higher fuel prices, which are offsetting our cost reduction initiatives," he said.

Teck shares dropped $1.86 or 6.7 per cent to close at $26 on Thursday in heavy trading on the Toronto Stock Exchange.

Mr. Lindsay said Teck is still reviewing whether to restart its Quintette coal project in northeastern British Columbia.

"We also have the option to grow capacity by further three million or four million tonnes by restarting our Quintette mine," he said. "We are continuing detailed engineering work at Quintette so that if market conditions turn favourable, we would be in a position to be able to move quickly. Production could commence within 14 months of a construction decision. And at this point, we don't contemplate making a decision until closer to midyear."

Teck noted that its realized prices for metallurgical coal exported to Asian markets fell 11 per cent to $142 (U.S.) a tonne in 2013.

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Teck Resources Ltd
+4.23%45.78

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