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A truck hauls a load at Teck Resources Coal Mountain operation near Sparwood, B.C. in this file photo.The Canadian Press

A standoff is brewing between Teck Resources Ltd. and the people who rate its debt, with the miner stressing it has ample liquidity and the rating agencies buying little of that argument.

Because debt has become arguably the hottest topic for mining investors, Teck has taken pains to prove its burden is manageable. At a March investor day, the company stressed it didn't have any coming due until 2017; that its borrowings had a weighted average maturity of 14 years; and that its weighted average coupon is 4.8 per cent – not great, but also not exorbitant.

And while the miner admitted its debt-to-total capitalization was much higher than it liked – 35 per cent, above its 30-per-cent target – the company also noted its balance sheet has ample cash after selling two royalty streams last year. Teck's total debt outstanding amounts to $9.5-billion.

Moody's Investor Service isn't buying the rosy messaging. On Monday the rating agency downgraded Teck's existing subordinated debt to Caa1 from B3, and slapped a B1 rating on its $1-billion (U.S.) of new debt, which will be used to refinance some existing notes. (Teck has also re-worked one of its credit facilities.)

Teck argued the re-financing "significantly reduces debt and bank credit maturing over the next few years, enhancing our near-term liquidity and clearing the runway until the completion and ramp up of Fort Hills [an oil sands project]," in an e-mailed statement.

"We believe that over the long term, our diversified commodity portfolio; our high-quality, long-life assets; along with our strong position on the cost curve are all characteristics of a company that warrants an investment grade rating," the company added.

But the Moody's action comes on the heels of similar moves from S&P and Fitch in recent months. Its downgrade on existing notes partly stems from them now becoming subordinate to the new debt, but there's also something fundamental to the new rating: Moody's noted the new level is "driven primarily by expected high leverage and continuing material free cash flow consumption due to sizable capital expenditure requirements and exposure to weak commodity prices."

The prospect of additional debt is also an issue. "Absent improvement in commodity prices beyond Moody's expectations, asset sales, equity issuance (which management has ruled out) or other inorganic actions taken by management, leverage will increase," the rating agency noted.

These concerns are at odds with some equity analysts. "Given the recent move in coal pricing, we believe pressure has been alleviated to quickly divest infrastructure assets and time can be taken to reach the right deal," CIBC World Markets analyst Alec Kodatsky wrote in a note to clients earlier this year, adding "Teck's liquidity remains strong."

Mr. Kodatsky also believes the miner's liquidity concerns for 2017, which partly stem from spending on assets such as the Fort Hills oil sands mine, should "diminish substantially" if coal prices stay around current levels.

Teck has also slashed expenses over the past few years in moves which included laying off roughly 2,000 employees.

Yet there is some common ground between Teck and the rating agencies when it comes to the outlook for the sector. At the March investor day chief executive officer Don Lindsay made it very clear the mining world is in rough shape. He was particularly down on copper. "The bottoming-out process has clearly been happening but it's still probably a couple of years away before there's significant increases," he said.

In this environment, Teck has stressed two key strategies. Unlike many miners, it's commodity base is diversified across copper, coal and zinc production – and will add oil sands when Fort Hills comes on stream in 2018. Mr. Lindsay also stresses a long-term approach.

"That may frustrate some of you who have to deal with short-term trading flows and shareholder demands and that sort of stuff. But in the end we're building what we believe to be a strong company based on long-life assets in good geopolitical jurisdictions," he told investors in the audience.

Teck has also enforced two steadfast rules: no equity issuance, and no core asset sales. "Every share you have out there – it is so tough to get more production per share, more resources per share, and more cash flow per share," Mr. Lindsay said of equity issues.