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