Nov. 12 (Bloomberg) -- Teck Cominco Ltd. dropped the most in 20 years in Toronto on concern the miner won't be able to repay $9.8 billion in debt used to finance last month's acquisition of Fording Canadian Coal Trust.

Teck plunged C$2.12, or 24 percent, to C$6.63 at 4:17 p.m. in Toronto Stock Exchange trading, the biggest one-day drop since at least 1988. The shares have lost 85 percent since July 29, the day Teck agreed to buy Fording to boost sales of metallurgical coal.

``The market's saying, `They're bleeding, let's take advantage of them,''' Charl Malan, a New York-based fund manager at Van Eck Associates, said in an interview. ``There's a lot of talk about whether they'll be able to repay their debt. It's going to be tricky for them, the jury's still out.''

Chief Executive Officer Don Lindsay completed the Fording purchase to bolster production of coal used in steelmaking as the global credit freeze led to a slump in metal demand. Lindsay's plan to repay the debt, now more than triple the company's market value of about C$3.29 billion ($2.66 billion), is based on sales of assets as well as contracts to sell coal at record prices.

To pay for Fording, Teck used a $5.8 billion one-year bridge loan and a $4 billion three-year loan provided by JPMorgan Chase & Co., Citigroup Inc., Merrill Lynch & Co., Canadian Imperial Bank of Commerce, Royal Bank of Canada and Bank of Montreal, according to a regulatory filing in July.

Debt Repayments

Debt repayments will come from a $1 billion tax refund, asset sales and cash flow from existing operations, Ron Vance, vice president of corporate development for the Vancouver-based company, told investors today in New York. Teck will also cut back on capital spending, he said.

``We remain confident we can effectively and efficiently deal with challenges of servicing acquisition debt,'' Vance said. ``Debt should steadily decline over the next six to nine months.''

The company has already held talks with several companies interested in acquiring its gold portfolio, which includes stakes in the Hemlo mine in Ontario and the Pogo mine in Alaska, Vance said, without identifying potential buyers.

``Selling the gold assets won't yield a meaningful number'' in the context of debt reduction, Kerry Smith, a Toronto-based mining analyst at Haywood Securities Inc., said in an interview. The pricing of next year's coal contract ``won't be nearly as good as what people are expecting. That's why the stock is getting pounded.''

Coal Price Forecasts

The price for semi-soft metallurgical, or coking, coal more than tripled in 2008 mainly because of flooding in Australia, according to today's edition of the Tex Report, a Japanese steel- industry publication. The increase was ``opportunistic'' and lower prices for the coal in 2009 are ``quite certain,'' according to the report.

``Taking into consideration the extraordinary price hike in the fiscal year 2008, it is no wonder that the price of semi-soft coking coal would become below half of the previous year price,'' Tex said, referring to next year's likely price settlement.

Contract prices for Teck's coal output expire at the end of March, Teck said in a presentation on its Web site.

Teck's commitment to develop an oil project in Alberta will complicate the company's effort to reduce debts, Smith said.

Cost Estimates

In September, Teck, Petro-Canada and UTS Energy Corp. increased their estimate for the costs of the first stage of their Fort Hills oil-sands project to C$23.8 billion, up from C$14.1 billion. The development in Alberta, owned 60 percent by Petro-Canada and 20 percent each by Teck and UTS, is forecast to produce 140,000 barrels of refinery-ready crude by 2012.

An investment decision will be made in the fourth quarter after an engineering and design plan is completed, Petro-Canada said in September.

``If Petro-Canada has to proceed because they've made commitments to the Alberta government, that would be the biggest problem for Teck,'' Smith said. ``Teck cannot do that project in the face of this debt.''

To contact the reporters on this story: Rob Delaney in Toronto at robdelaney@bloomberg.net; Stewart Bailey in New York at sbailey7@bloomberg.net.

Last Updated: November 12, 2008 16:35 EST