Mid-tier benefits

At a time when major money managers are telling BHP Billiton they are not big enough, Teck Cominco is positioning itself as a mid-tier company that practises capital and production supply discipline.

That is the message Teck Cominco president Steven Dean brought to the annual convention of the Prospectors & Developers Association of Canada in March.

“We believe it is no longer acceptable simply to abdicate our responsibilities as managers of capital on the basis that we’re not in control of our product price,” he said. “If prices are low, it means there is oversupply, and as individual producers, we have to do something about reducing that supply.”

Outlining the changes that have taken place in the industry, Dean said the theme of capital discipline has dominated industry presentations and analysts’ commentaries.

“We chant the mantra with almost remorseful weight, like little boys who have been caught doing something wrong, and now, as big boys, we say we’ll never do it again,” he said.

“What will differentiate us going forward is how well each of us performs under this mantra, and what our assumptions are in applying this newly embraced level of capital discipline.”

In an age when bigger is supposed to be better, Teck Cominco believes it will be more successful as a mid-tier company — nimble and less bureaucratic, but retaining its entrepreneurial roots and remaining committed to exploration and innovation.

“Teck Cominco will not lose its appetite for mutually beneficial deals with juniors,” Dean pledged.

Dean said that in this century, successful mining and refining companies will be far more customer-oriented than has traditionally been the case, and Teck Cominco will focus on the laws of supply and demand.

Rather than rushing a new deposit into production, the company will determine whether there is a market for the product.

“The concept of supply discipline is a major factor in realizing the promise of our industry,” he said.

He added that if the industry can continue to apply concepts of capital and production supply discipline, new technology and social accountability, the sector will become a long-term mainstream competitor for low-cost investor capital.

— The preceding is from PDAC In Brief, a quarterly publication of the Prospectors & Developers Association of Canada.