Teck May Consider Copper Acquisitions as Output Declines
Teck Resources Ltd., Canada’s largest diversified miner, may consider acquisitions in copper mining to help offset an expected decline in the company’s output of the metal, Chief Executive Officer Don Lindsay said.
“Copper is a priority for us with declining production for the next couple of years,” Lindsay said today on a conference call to discuss the Vancouver-based company’s fourth-quarter results. “Something that might fill the gap would be of interest to us.”
Teck, which is seeing a drop in output from its 77 percent owned Quebrada Blanca mine in northern Chile, joins HudBay Minerals Inc., Lundin Mining Corp. and other Canadian miners evaluating an increasing number of potential acquisition targets as the world’s largest mining companies, including London-based Rio Tinto Group, grapple with rising costs and writedowns. Rio Chief Executive Officer Tom Albanese said last month he would step down after acquisitions in aluminum and coal led to about $14 billion in writedowns.
“With change in leadership at some of the large companies -- the major ones in the industry -- there may be some reviews of their portfolios and some assets may shake out,” Lindsay said on the call. “We’re already aware of some things that will now be for sale or where they are looking for partners.”
Fourth-quarter copper production at Teck’s Quebrada Blanca mine declined by 19 percent from a year earlier to 14,300 metric tons, Teck said today in a statement. Overall, the company had record copper output of 103,000 tons in the fourth quarter, operating at an annual run rate of about 400,000 tons, Lindsay said on the call.
“We do face declining grade issues, as do most mining companies these days, and production will tail off from this level until our next significant growth project comes online,” Lindsay said.
While Teck is actively evaluating potential deals, the company doesn’t want to jeopardize its credit rating by taking on too much debt for acquisitions, Teck Chief Financial Officer Ron Millos said.
“We want to maintain the debt at a level that allows us to maintain our mid-triple B investment-grade credit rating,” Millos said on the conference call.
The latest acquisition opportunities come about four years after Teck, the world’s second-largest exporter of seaborne metallurgical coal, temporarily lost its investment-grade credit ratings following its purchase of Fording Canadian Coal Trust.
HudBay, based in Toronto, plans to capitalize on a “buyers’ market” for mining assets as small companies struggle to raise funds and larger competitors consider sales, Chief Executive Officer David Garofalo said in an interview this week.
“I’d like to do something significant this year,” he said in an interview on Jan. 25.
Teck fell the most in six months after forecasting weakness in coal markets until at least the middle of the year.
Teck dropped 6 percent to C$34.45 at the close in Toronto, the most since July 25. The shares have tumbled 17 percent in the past 12 months.
Net income fell to C$145 million, or 25 cents a share, from C$637 million, or C$1.08, a year earlier, the company said today. Excluding one-time items, profit was 61 cents a share, more than the 48-cent average of 22 analysts’ estimates compiled by Bloomberg.
BHP Billiton-Mitsubishi Alliance, a joint venture between Australia’s BHP Billiton Ltd. and Japan’s Mitsubishi Corp., is the biggest exporter of seaborne metallurgical coal.
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