Teck Cominco basks in record earnings

Vancouver Diversified miner Teck Cominco (TEK-T) reported record earnings of $405 million, or $2 per share, in the third quarter ended Sept. 30, compared with net earnings of $120 million in the third quarter of 2004. Revenues for the latest quarter reached $1.2 billion, compared with $925 million a year earlier.

The increased earnings were attributed to “a favorable commodity price environment,” notably for copper, zinc and coal. Copper and zinc prices were up 34% and 36% respectively, while higher coal prices boosted earnings to $182 million in the quarter, up from $39 million a year earlier. The latest results include a $19-million gain from the sale of a 5% interest in the Elkview coal mine (by Elk Valley Coal) and favorable tax adjustments totaling $42 million.

Teck Cominco’s 9-month net earnings reached $835 million, 2.5 times net earnings of $332 million a year earlier, with the boost again coming from higher commodity prices. The Vancouver-based company ended its latest quarter with a cash balance of $2.5 billion, and a long-term debt to debt-plus-equity ratio of 28%. On a net basis, cash in excess of debt stood at $800 million.

Earlier this month, unionized workers at the company’s Trail smelting complex settled a strike by ratifying a new three-year collective agreement. In late September, workers at the large Highland Valley copper mine learned that the mine life would be extended by five years to 2013. The Trail complex and Highland Valley are both located in south-central British Columbia.

In neighboring Alberta, Teck Cominco agreed to pay $475 million to secure a 15% stake in a partnership developing the Fort Hills oil-sands project near Fort McMcMurray. The company sees the project as “a foundation for potential further opportunities in the oil-sands business,” and as a natural hedge on energy used at its various operations. Fort Hills hosts 2.8 billion barrels of bitumen. Approvals are in place for an operation capable of producing up to 190,000 barrels per day of bitumen, with initial start-up by 2010.

In a separate deal, the company acquired rights to acquire “at fair market value” a 50% interest in an oil-sands property adjacent to Fort Hills that has potential to be developed as a satellite mine.

The cash-rich company is evaluating numerous opportunities in the minerals and energy-related sectors, but the oil-sands investments are the only major acquisitions announced to date.