Vancouver — Teck Resources Ltd. is paying off its once massive debt load more quickly than planned and expects that trend to continue if commodity prices keep climbing.
Teck president and chief executive officer Don Lindsay also said Thursday the company plans to achieve future growth from within its own asset base, but won't rule out another acquisition down the road.
“We will continue to look at opportunities, but for right now our focus remains on paying that term loan and getting back to investment grade,” Mr. Lindsay told investors during a conference call.
The Vancouver-based diversified mining company took on $9.8-billion (U.S.) in debt a year ago when it bought Fording Canadian Coal Trust.
The acquisition was initially cheered by investors when announced in the summer of 2008, but looked like a near-fatal mistake for Teck in the fall when the deal closed as the global recession set in, commodity markets crashed and credit availability seized.
Teck addressed the problem, which included downgrades from credit agencies and a sinking stock price, by selling off assets and renegotiating the terms of its loans with various lenders.
The company said Thursday it will have raised more than $1.6-billion from the sale of what it saw as “non-core assets,” including most of its gold assets and a one-third interest in its Waneta Dam in southeastern B.C. to British Columbia Hydro and Power Authority.
It has now paid off the $5.81-billion bridge debt associated with the Fording purchase, and reduced the $4-billion of term debt to $2.7-billion.
Teck said it recently amended the term loan again to allow for non-scheduled payments. As a result, it expects proceeds from asset sales to reduce its scheduled term-loan payments in each of 2010 and 2011 from about $1.1-billion to about $600-million.
Mr. Lindsay said the debt could be repaid more quickly “if commodity prices continue anywhere near where they are today.”
He also told investors the company isn't planning to announce any more asset sales, but didn't rule out a sale of a minority stake in the coal business in the future.
“We still think it is something that ... could make sense if the right party and the right price were available,” Mr. Lindsay said, adding that the company is waiting for better market conditions to make that move.
“We haven't taken it right off the table .. but we will go slow on this one.”
Mr. Lindsay added that the company doesn't need to sell a minority stake in the coal business to pay off its debt. He said Teck would only sell an interest if the buyer were “a good partner to have, and offering a really good price.”
Teck said its debt to net-debt-plus-equity ratio as of Sept. 30 was 34 per cent, a significant improvement from the 52 per cent ratio at Dec. 31.
Late Wednesday, Teck reported a third-quarter profit of $609-million (Canadian) as revenue climbed, boosted by the Fording coal assets.
The earnings amounted to $1.07 per share for the period ended Sept. 30 compared with a profit of $424-million or 95 cents per diluted share a year ago.
Excluding one-time items, including discontinued operations and foreign exchange gains on debt, Teck said it earned $270-million for the quarter compared with $529-million a year ago.
Revenue totalled $2.13-billion, up from $1.74-billion, a quarterly record.
The average analyst estimate, which usually excludes one-time items, was for earnings of 50 cents per share on $2.22-billion in revenue, according to Thomson Reuters.
Teck said the revenues are despite lower coal and zinc prices compared to the year before.
Coal prices averaged $137 (U.S.) per tonne in the third quarter, compared to $245 last year. Copper prices were $2.65 per pound, down from $3.48 last year.
Zinc prices were flat at 80 cents per pound, and lead prices also even at 87 cents per pound.
© Canadian Press
