The Vancouver-based company says the cuts will reducing its workforce by about 13 per cent, and will also help eliminate redundancies after its US$14-billion acquisition of Fording Canadian Coal Trust last year.
About 1,000 employee and 400 contractor positions will be eliminated worldwide by the end of 2009, most of the cuts coming in the first quarter.
A company spokesperson said about 550 of those job losses are in Canada, with about 400 coming in British Columbia, 105 in Alberta and 45 across the rest of the country.
Teck said it hopes the moves will save it about $85 million a year. It will take a one-time charge in the first quarter of about $35 million for severance and other related costs.
Teck also said it will reduce coal production in 2009, due to declining global steel demand. Grande Cache Coal Corp. (TSX:GCE) made a similar announcement Thursday, following the lead of Western Canadian Coal Corp. (TSX:WTN) on Monday.
"Given continued economic uncertainty, a significant reduction in our workforce is needed to further reduce costs and position Teck for both short and long-term competitiveness," Teck president and CEO Don Lindsay stated Thursday.
"Notwithstanding the substantial decline in commodity prices, this was a difficult decision and I want to thank the affected employees for their contributions to the company."
National Bank Financial analyst Ian Howat said in a note to clients Thursday that the reduction in coal production is "negative for the company and will lower earnings for the year."
Howat has maintained his $10 price target on Teck and "sector perform" rating.
A big concern surrounding Teck is its ability to pay off nearly $10 billion in debt it incurred with the purchase of Fording last fall. This includes a $4-billion term loan and a $5.8-billion bridge loan.
"It appears the company should also still pass the debt covenants related to the Fording acquisition, but this may change depending on any writedowns the company will incur as a result of lower commodity prices," Howat noted Thursday.
Teck shares were trading down 29 cents or about four per cent at $7.31 on the Toronto Stock Exchange on Thursday. The stock traded at $3.35 on Nov. 20, its lowest level since the late 1980s, which compares to a record of $52.90 in late May.
The stock had climbed more than 30 per cent earlier this week to above $8, lifted by rising prices for commodities such as copper, lead and zinc.
UBS downgraded its rating on Teck from "buy" to "neutral" Thursday, citing the shares more than 100 per cent appreciation in the past month.
UBS analyst Brian MacArthur said liquidity is a "concern," in particular the company's ability to refinance the bridge loan considering the recent drop in coal prices.
"We believe that Teck could be challenged to finance its debt obligations without changes to operations and/or potential asset sales," MacArthur said in a note.
Thursday's move is another wave of cost-cutting announced by Teck in recent weeks as it struggles to pay down its debt.
Teck said in November it would suspend dividends, slash capital spending and sell assets to save more than a billion dollars to pay down its debt load.
Teck said at the time that the dividend suspension will save $486 million in 2009.
In asset sales, Teck sold its 60 per cent interest in the Lobo-Marte gold property in northern Chile to Kinross Gold Corp. (TSX:K).
Teck also is terminating participation in the Petaquilla copper project in Panama, receiving US$30 million from Inmet Mining Corp. (TSX:IMN) for its 26 per cent stake.
Additionally, Teck said in November that it would cut zinc production by 20 per cent and increase electricity sales at its complex in Trail, B.C.
2009 capital spending was cut to $250 million, down from about $580 million in 2008, while development expenditures will fall to $250 million from $650 million.
In its coal operations, Teck disclosed in November that some customers plan to "defer some of their contracted volumes."
It said at the time that it expects coal sales for 2008 to be near the lower end of its guidance range of 23 to 25 million tonnes.
Also late last year, Teck and its partners in the Fort Hills oilsands project delayed an investment decision on the development, whose estimated costs have swollen to $24 billion.
Teck and UTS Energy Corp. (TSX:UTS) each own 20 per cent of Fort Hills, while Petro-Canada (TSX:PCA) has 60 per cent.
