Reeling from a fourth-quarter 2008 loss of $607 million or negative $1.28 per share, an embattled, debt-ridden Teck is considering offers on its Pogo and Hemlo gold mines, exploration properties in Turkey and its 20% stake in the Morelos gold project in Mexico.
Having accumulated $9.8 billion in debt to purchase all of the Fording Canadian Coal Trust, Teck is now making a one-time offer to sell an interest in its coal mines to strategic partners in Brazil, China, India, Japan and Korea.
A US$5.3 billion bridge loan and $1.1 billion in term debt is due on or before October 29, 2009.
During a conference call to discuss financial results, Teck President and CEO Don Lindsay said, What we have on offer is a long-term resource of 100 years plus. It is available once and only once. So there's some scarcity value.
TD Newcrest Analyst Greg Barnes suggested that a 20% stake in Teck's Elk Valley coal assets could sell for between Cdn$1.2 billion and $1.8 billion. Other analysts have suggested that Barrick, Kinross, and AngloGold-Ashanti could be interested in Teck's gold assets. Kinross bought Teck's Lobo-Marte gold property for US$40 million and 5.6 million Kinross shares.
The company also reported receiving $950 million of an expected tax refund of $1.1 billion resulting from the acquisition of the Fording cold assets.
Meanwhile, Lindsay told analysts that Teck is in discussions with a syndicate of lenders that include Canada's five largest banks to amend its US$5.3 billion bridge facility. The real issue is the debt, he said. The key will be the discussions on how we spread out the payments over time.
Despite Teck's debt load, Lindsay insisted the company‘s operations are doing quite well, while Teck is quite cash positive.
However, Teck managers acknowledged that quarterly average prices dropped 32% for copper, declined 44% for zinc, were down 52% for zinc, but shot up 213% for coal during the fourth-quarter 2008. The decline in metals prices resulted in negative pricing adjustments of $474 million for the quarter.
For the year 2008, Teck reported $659 million in net earnings or $1.46/sh, down from $1.6 billion ($3.74/sh) in 2007.
During the conference call Teck issued a 2009 guidance of 20 million tonnes of coal production, 330,000 tonnes of copper, 8.5 million pounds of molybdenum, 690,000 tonnes of zinc in concentrate, 270,000 tonnes of refined zinc, 125,000 tonnes of lead in concentrate, 85,000 tonnes of refined lead, and 290,000 ounces of gold.
Analysts expressed some alarm when Teck announced that coal prices in the first quarter of 2009 are expected to decline from the fourth quarter average price of US$247 per tonne to US$190 per tonnes.
Teck plans a capital expenditure this year of $500 million with development expenditures of $250 million. The company also expects to spend $330 million on its share of costs for the Fort Hills oil sands project. We are reviewing our discretionary capital spending in light of current market conditions and our debt reduction targets.