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Teck's Highland Valley mine, near Kamloops, B.C.
Teck's Highland Valley mine, near Kamloops, B.C.

Streetwise

Teck expected to restart dividend Add to ...

Dividends are expected to start flowing again at Teck Resources in coming months, as rising coal prices complete a financial turnaround at the mining company.

The latest round of coal price contracts has seen major buyers, such as Japan's steel mills, agree to pay $200 (U.S.) a tonne for the commodity. Going into to these negotiations, analysts at RBC Dominion Securities were forecasting coal prices in the $185 a tonne range.

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In response to the latest pricing news, the investment dealer bumped up its forecast earnings for Teck on Monday, moving projected profit in 2010 to $3.53 (Canadian) a share, up from the dealer's previous estimate of $3.22 a share.

"Teck is now in a relatively strong financial position, which should support the reinstatement of a dividend before the end of 2010," said RBC Dominion's mining analysts in a report.

Teck suspended its common stock dividend in November, 2008, as the credit crunch weighed heavily on a company that took on debt to buy full control of its coal operations, known as Fording Canadian Coal Trust. The move saved Teck an estimated $486-million a year in dividend payments, but contributed to a swoon in the stock price.

Over the past 18 months, Teck staged a remarkable comeback. A number of smaller holdings were sold and debt was either paid down or refinanced. After selling a hydroelectric project earlier in March and using the proceeds to further reduce its bank loans, Teck has $900-million of cash in its coffers.

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