Teck to make big BC investments

Looking to boost internal growth, Teck Resources (TCK.B-T, TCK-N) plans to ramp-up production at its western Canadian coal operations and make significant upgrades to two processing facilities in B.C.

In its coal operations, which accounted for 59% of Teck’s profits last quarter, the company plans to boost output by 20% to 30 million tonnes a year by 2013. Working to achieve that, the company expects to spend $365 million this year in development at its five producing mines, which last year produced a combined 23.1 million tonnes of coal. The company is also working to permit its Quintette coal mine in northern B.C., with some long-lead items already ordered.

Along with coal production increases, Teck is adding to its shipping capacity with more port allocation. The company has signed a 10-year term starting in 2015 to ship 2.5 million tonnes a year through the Ridley Terminal in northern B.C. 

Teck can ship up to 1.2 million tonnes, with provisions for increased capacity in 2013 and 2014. 

The crown-owned terminal is doubling its capacity to 24 million tonnes per year.

Teck is spending $210 million at its Trail metallurgical facility in B.C. to increase its capacity to recycle electronic waste. Last year the company processed 13,000 tonnes of e-waste at the site.

And at the 40-year-old Highland Valley copper mine, Teck is injecting $475 million to modernize the mill and extend its life to match the expected mine life, currently projected to go until 2025. The company expects the improvements, which should be completed by 2013, to boost throughput by 10% and recoveries by 2%.

The investments come at a difficult time for global commodities, as signs point to a potential decrease in coal and copper demand. Alpha Natural Resources (ANR-N) cut its coal shipment outlook by a few million tonnes, citing curtailed customer activity in Asia as a primary reason, while Codelco, the world’s largest copper producer, said some Western buyers have asked to cancel their orders. The price of copper, meanwhile, has plunged to a 52-week low of US$3.30 per lb.

Teck is in much better financial shape than when the 2008 financial crisis hit, though. The company had $3.4 billion in cash and short-term investments and $3.2 billion in net debt at the end of the last quarter. The company has also benefitted significantly from high commodity prices, with profits up nearly 90% compared with last year to $756 million, owing largely to higher coal and copper prices.

Teck’s stock, however, has suffered in recent months as economic uncertainty drags on. The company’s share price has dropped by more than half since its $64.62 high reached in January, including losses of almost $10 over a six-day period to close at $30.73 on Sept. 23.