Teck Propelled to Record Gain by Silver Stream as Metals Rebound

  • Stream on Teck share in Antamina includes $610 million payment
  • Teck climbs as much as 21% in Toronto after announcing deal

Teck Resources Ltd.’s stock had its best four-day run since at least 1988 as metal prices rebounded and the Vancouver-based miner sold future silver production to bolster its finances.

Canada’s largest diversified miner surged as much as 21 percent and ended up 14 percent at C$8.89 in Toronto after agreeing to sell silver from the Antamina mine in Peru to Franco-Nevada Corp. in a deal that includes a $610 million upfront payment.

The stock extended its gain in the past four days to 46 percent as commodity prices climbed amid speculation the U.S. Federal Reserve will delay raising interest rates. The commodity recovery and the funding arrangement with Franco-Nevada are boosting Teck’s prospects after it was stripped of its investment-grade rating by Moody’s Investors Service as the price rout overshadowed cost-cutting efforts.

The so-called stream on Teck’s share of silver at Antamina also includes an agreement for Franco-Nevada to pay 5 percent of the spot price for each ounce at the time of delivery, the Toronto-based company said in a statement Wednesday. Franco expects to receive average annual contributions of 2.8 million to 3.2 million ounces.

Favored Option

Streaming, which provides financing in exchange for a portion of discounted metal from a mine, was once considered primarily of use for high-risk, early-stage projects. But as large miners have come under pressure to shore up their balance sheets amid declining metal prices, it has become a favored option for them as well. Barrick Gold Corp. and Vale SA are among majors to have sought the sales.

Silver has held up better than most commodities in the past year, losing about 7 percent compared with a decline of about 22 percent for copper. Antamina will increase Franco-Nevada’s operating cash flow by an estimated 18 percent, it said.

Teck owns 22.5 percent of Antamina, which last year produced 344,900 metric tons of copper, 211,000 tons of zinc, 3.1 million pounds of molybdenum and 12 million ounces of silver, according to Teck. The other shareholders are BHP Billiton Ltd. and Glencore Plc, with 33.75 percent each, and Mitsubishi Corp. with 10 percent.

Bank of Nova Scotia is acting as financial adviser to Teck.

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