Beleagured Teck Posts $607M Net Loss In Q4

VANCOUVER — Don Lindsay, the president and CEO of Teck (TCK. B-T, TCK-N), addressed the company’s heavy debt load and burgeoning fourth-quarter net loss in a conference call with investors on Feb 17.

Teck saw a $424-million net profit in the third quarter of 2008 melt away into a $607-million net loss in the fourth. Non-cash writedowns and pricing adjustments sucked Teck into the red.

About half of the $844 million in asset and goodwill impairment charges hitting the company’s books in the fourth quarter stemmed from its acquisition of Aur Resources in 2007. Through that purchase it received several copper assets, including the Quebrada Blanca and Andacollo mines in Chile and the Duck Pond mine in Newfoundland.

On top of the writedowns, Teck suffered a $270-million negative pricing adjustment after tax. The price of copper was down 45% during the quarter and zinc, 55%.

Coal continued to drive Teck’s operating profit: of $808 million, 64% was from its coal division while 25% came from copper. A year ago, copper was Teck’s premier asset.

Commodity sale prices in the company’s 2008 and 2007 fourth quarters underscored the changing importance of its coal and copper divisions. For copper, Teck received an average of US$1.79 per lb. in the final quarter of 2008 compared with US$3.26 per lb. in 2007’s last quarter. For coal, it was US$247 per tonne in the more recent quarter compared with US$93 per tonne in the same period of 2007.

In large part, however, Teck’s coal earnings have come at the cost of a more than eightfold increase in its debt load. The miner started the quarter with $1.5 billion in debt but ended it with $12.9 billion.

Teck took on nearly $10 billion in loans to buy Fording Canadian Coal Trust and its share of the Elk Valley Coal assets in Alberta and B. C. Prior to the takeover, Teck held 40% of Elk Valley.

About $5.8 billion of $9.8 billion in loans came in the form of a 364- day bridge loan that matures Oct. 29, 2009. The rest was a three-year loan facility.

Addressing concerns over the bridge loan, Lindsay said Teck is in discussions with its lender about the possibility of an extension. He said he could not yet provide details of those discussions.

“We have a large refinancing requirement,” he said. “But our large asset base is strong and we have a great deal of flexibility to address our short-term refinancing requirements.”

He noted that Teck paid down $1.1 billion in debt during the fourth quarter and has a cash balance of $1.4 billion.

Lindsay said Teck has sold some assets such as Lobo Marte($160 million) and that it is in advanced discussions to sell others. These include its Pogo gold mine in Alaska, its Morelos gold joint-venture project in Mexico, and its copper-gold exploration properties in Turkey.

Shortly after the conference call, Teck announced the sale of its 50% stake in the Hemlo gold operations in northwestern Ontario to joint-venture partner Barrick Gold (ABX-T, ABX-N) for US$65 million, and the sale of its indirect interest in Sociedad Minera El Brocal to Peru’s Minas Buenaventura (BVN-N), for US$35 million.