Teck Resources Ltd. is on the lookout for acquisitions, but stresses that it won’t overextend itself because it is determined to stay in the good books of credit rating agencies.
Teck chief executive officer Don Lindsay said Thursday that Canada’s largest diversified miner sees signs that commodity prices have bottomed. While that has led to speculation that Teck could be positioning itself to go on the acquisition trail to snap up bargains, Mr. Lindsay said the company is taking a cautious approach to mergers and acquisitions.
“People do speculate from time to time on what we might or might not do,” Mr. Lindsay said during a conference call, after Teck announced adjusted share profit of 44 cents for the third quarter, exceeding analysts’ expectations. “We do review M&A opportunities, as you would expect us to, and we look at pretty much everything that is out there. Some of them, we look at for a couple of hours, some of them for a couple of days and others we could spend weeks on them.”
Teck is a major exporter of metallurgical (coking) coal for steel making, and it also produces copper and zinc. The Vancouver-based company has mining operations in Canada, the United States, Chile and Peru.
“As most of you know who have been in the markets for some time, rating agencies tend to be lagging indicators,” Mr. Lindsay said. “You know the rating agencies would take much longer before they had comfort that markets were on a very firm footing.”
A subsidiary of China Investment Corp. has held a stake of more than 17 per cent in Teck since July of 2009. CIC, China’s sovereign wealth fund, became a crucial investor as it provided a lifeline of $1.7-billion in cash, months after Teck faced severe financial pressures in the spring of 2009.
Mr. Lindsay, who recalled how Teck had to go to the high-yield debt market in May of 2009, emphasized that Teck values its investment grade ratings.
He made the comments after Teck reported that it posted an adjusted profit of $252-million, down from $425-million in the same period of 2012.
While adjusted share profit fell to 44 cents from 73 cents, the showing surpassed profit estimates of 38 cents. Quarterly revenue rose 0.75 per cent to $2.52-billion.
TD Securities Inc. analyst Greg Barnes said Teck had an impressive third quarter, fuelled by better-than-expected performance from its coal, copper and zinc operations. Coal sales tallied a record 7.6 million tonnes, up 36 per cent from the same period last year. While average third-quarter coal prices slumped 28 per cent, coal operating costs were $50 a tonne, compared with $58 a tonne a year earlier. Teck expects to make a decision by next May on whether to pour more money into reviving its Quintette coal project in northeastern British Columbia. “Even though we know that Quintette will be much more competitive as an operation than some of the coal operations that are still running, we don’t want to contribute to the oversupply that’s in the market, and thereby hurt the other six operating mines that we have,” Mr. Lindsay said.