Teck’s chairman emeritus, who first joined Canada’s biggest base metals company in the 1960s, says Teck has always evolved with the times, dipping into one commodity, then moving on to another, based on market demand.
“You should read my book. It’s called Never Rest on Your Ores,” Mr. Keevil said in an interview. “Teck started as a gold company, and then it became a copper company. Then it went into silver and niobium. On the way, it got into coal as a minor part of what we were doing. And it’s only since 2003 that coal has been a big position when we put the various Western producers together into a single partnership.”
Investors are waiting for more details from Teck on the fate of that coal division. On Tuesday, the company’s chief executive officer, Don Lindsay, will hold an investor and analyst day, and the coal business will likely take centre stage. Last week, Bloomberg and The Globe and Mail reported that Vancouver-based Teck is actively looking at either selling or spinning off the coal unit into a separate publicly traded entity.
While generating ample amounts of free cash flow from record-high metallurgical coal prices, the division has fallen out of favour. Concerns over the damaging environmental footprint mean investors don’t ascribe nearly as much value to coal companies as they do to copper or nickel producers. Those metals are viewed more favourably because of their growing use in wind and solar power and as a key component in electric car batteries.
John Zechner, chairman of Toronto-based wealth management firm J. Zechner Associates Inc., which owns shares in Teck, says getting rid of the coal unit would likely be a good move. “People have really loved the copper plays,” he said. “You’d get a higher valuation for Teck today as a pure copper play.”
Teck, he added, would likely command a higher market price than copper producers such as Hudbay Minerals Inc. and First Quantum Minerals Ltd. because of its size. The company would also attract more interest from U.S. investors, since there are so few pure copper plays, Mr. Zechner said.
But even without selling its coal business, Teck’s exposure to copper is set to grow in a big way. The company is building a new copper mine in Chile called QB2, which is set to start production in the second half of next year. “Whether management is actually going to [sell the coal unit] is anybody’s guess, Mr. Zechner said. “They’re not going to sell it cheap. They’ve always been very disciplined about their asset sales and purchases, and I wouldn’t expect that to change.”
The bulk of Teck’s current coal operations date from its top-of-the-market $14-billion acquisition of Fording Canadian Coal Trust in 2008. Not long after acquiring the asset, which was funded mainly through debt, commodity prices crashed, and investors dumped shares in Teck.
Teck, like many other big mining companies, hasn’t always gotten it right in its long-term calls. In the early 2000s, the accepted paradigm was that China and India would power economic growth for decades. And while the good times lasted for the better part of the 2000s, Mr. Keevil acknowledges that the original thesis was dangerously flawed.
“We are all like lemmings,” he said. “We tend to go in one direction, all together. In 2005, it was ‘stronger for longer,’ because it was the super cycle coming up. Of course, a lot of people didn’t recognize that super cycles have a down half as well.”
The Keevil family has been centre stage at Teck for decades. Mr. Keevil’s father, Norman Bell Keevil, ran the company through much of the 1960s and 1970s. The junior Keevil, a geologist by training, joined Teck as vice-president of exploration in 1962 and in 1981 took over as CEO. He ran it for two decades, then served as chairman until 2018. His son, Norman B. Keevil III, has been a director with Teck since 1997.
The Keevils also have a stranglehold over the company’s super voting shares. The family’s holding company, Temagami Mining, owns 55 per cent of Teck’s Class A stock. Each Class A share has 100 votes, while the more broadly held Class B shares have just one. Teck says dual-class shares give it added flexibility to make long-term strategic decisions – though they remain unpopular among many institutional investors. The dual-class share structure also means the company is virtually immune to hostile takeovers, and activist investors stand little chance of forcing change through a shareholder vote.
Mr. Keevil said having two classes of shares helped the company grow rapidly in its first few decades. “For the 30 years prior to 2005, it was the fastest-growing mining company in the world, and the people that did it were the people that created the dual-class share structure,” he said.
Since then, the company’s share-price performance has been subpar for the most part. Teck shares are trading 60 per cent below their 2011 peak. When asked if the dual-class share structure is still needed today, Mr. Keevil replied, “I wouldn’t say there’s any reason it’s needed. It is what it is. It’s been there for decades.”
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