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Last year I said Teck Resources (NYSE: TCK, TSX) would get a lot bigger or a lot smaller owing to the spectacular debt it was carrying. It did neither.
Teck shed its non-core holdings alright, including its gold business, paying down $6.7 billion in debt. But the divestiture accounted for only 5% of its total assets.
It did, however, clock record revenues for 2009: EBITDA was $4.1 billion Cdn for the year and $1 billion for the fourth quarter. So in that sense, it did indeed get bigger.
Not a whole lot bigger, admittedly. But I think the best is yet to come, coming soon…
But first let’s finish reviewing the year that was: The company snapped back to report positive net earnings of $411 million Cdn in the last quarter of '09 from a $607 million dollar loss the year before. And the B shares rose from $3.35 to $42.78 in the past 52 weeks, or better than 1,200 per cent. That’s quite a spread! I suppose from the investor’s point of view, last year Teck comprised the lowest of the low hanging fruit during the big sell off. But who knew the rally from the bottom would grow legs? You pays your money and you takes your chances…
I guess it helps to be a diversified mining company in this market. Imagine if they were a pure coal producer in ‘09!
Of course it’s easier to look profitable when you’re writing down all those one time asset sales. But I have more tangible reasons to believe in Teck going forward.
For one, I’ve been smoking what one of my readers calls hopium – that’s the stubborn refusal to look reality in the face and just keep on wishin’ and hopin’.
For another, I keep reading rosy forecasts for base metals prices like the one from Standard&Poor’s just last week…
Commenting on what it called the ‘mining sub industry’ (predominately copper producers), S&P said both sales and earnings will rebound from ‘depressed conditions’ last year and that prices for aluminum, copper, zinc, iron ore, and coking coal (nickel is conspicuously absent in that list) will rise in 2010 due to increased demand and reduced inventories.
I suppose that figures, after a year of asset sales and closures and mothballing of marginal and high cash cost mining operations. But is that forecast right up Teck’s alley or what? Selling their gold assets at a peak, or at least the top of a leg in the current bull market, may have made them less profitable last year. But they can always buy them back in the next downturn, and probably will.
The picture gets a bit fuzzy beyond 2010, and I suppose the persistent worry is that China will float its currency and stop producing and stockpiling goods the world doesn’t need or can’t afford. But that’s next year. And Teck’s debt is still 0.32% of capital, well over the industry average of 0.20 per cent…
On the plus side, the company doesn’t offer dividends on the common shares, which means we can hope for a split. I’ll take shares over cash in this market.

Disclosure: no position
Source: Teck Is Positioned for Growth in 2010