Canada’s largest diversified miner, Teck Resources Ltd., is planning a road trip – to India.
Eager to understand the Asian nation’s growth potential more quickly and more completely than it did the explosive demand out of China over the past decade, Teck wants to judge for itself whether forecasts for massive growth in India are realistic.
“What Don has done is put together a case study group of 15 of us, and we’re going to travel to India for a few days later this month,” Teck spokeswoman Marcia Smith said of a trip being planned by chief executive officer Don Lindsay.
The task force has already spent months reading and studying and listening to guest speakers ahead of the five-day trip later this month. Entire weekends have been spent in the classroom.
India has forecast infrastructure spending to the tune of $1-trillion (U.S.) over the next five years, about double what was forecast for the past five years, as it targets improvements to railways, ports, roads and highways.
An infrastructure boom in India would bode well for the global mining industry as demand for the industrial metals slipped in Asian nations in recent years amid slowing economic growth.
Teck is a global exporter of coal, zinc and copper. Sales to India are a very small portion of its total revenue, but Teck would expect the figures to rise if India begins to meet needs for massive infrastructure spending.
“It’s about building broad knowledge across the company and across our various departments and business units so that we can get a peek into the country,” Ms. Smith said.
Other Canadian companies have adopted similar strategies, increasingly determined to have first-hand knowledge of the countries where they are doing business.
For example, the massive Ontario Teachers’ Pension Plan started what would become a multibillion-dollar investment strategy in Brazil after a two-week tour of the nation by top executives in 2005.
Teck is one of the world’s top exporters of coking coal used for steel production and is a major exporter of commodities to Asia, but only a fraction of that goes to India. The Vancouver-based company derives over 15 per cent of its revenue from China, where the company has had an office in Beijing for years and is opening another soon in Shanghai.
Mr. Lindsay wants a cross-section of his staff, and not just senior officers at Teck, to understand India empirically, to be able to inform investment decisions with touch, sense and smell experiences that can put forecasts for massive growth into perspective.
Infrastructure spending has at times proven lopsided in India. An Ernst & Young report out of India in August said physical achievements have not always matched the targets set out in previous five-year plans.
Projects, the report explained, can be delayed for multiple factors and achieving growth targets in the next five years could be challenging. From 2006 to 2011, India added 1,750 kilometres of new railway lines, compared to 14,000 km in China.
India’s growth story was reinforced as recently as October when the World Steel Association heard at its annual conference in New Delhi that Indian imports of coking coal, the kind Teck specializes in producing, are set to triple from now to 2017.
“They are talking about a ‘catch-up’ in terms of their infrastructure ... and that just puts it all into context in terms of our interest around commodities like copper and steel,” Ms. Smith said.
“We know that that’s an economy that has people rising out of poverty, and when you do that you build more electricity, you use more copper, you use more steel, so we want to get in there relatively early,” she said.