Teck Cominco dips toe in oil sands

Vancouver — After months of investigating potential opportunities for growth, diversified miner Teck Cominco (TEK-T) has secured a toehold stake in the Fort Hills oil sands project under development near Fort McMurray, in business-friendly Alberta.

The Vancouver-based company agreed to pay $475 million for a 15% interest in the Fort Hills Energy Partnership owned by Petro-Canada and UTS Energy. Once the deal closes in October, UTS and Petro-Canada will retain 30% and 55% interests, respectively.

While Petro-Canada will continue as operator, Teck Cominco expects to contribute its open-pit mining expertise to the project, which will involve mining, extraction, and upgrading to a final petroleum product.

Fort Hills hosts 2.8 billion barrels of bitumen and approvals are in place for an operation capable of producing up to 190,000 barrels per day, with initial start-up by 2010.

Teck Cominco President Don Lindsay described Fort Hills as “the ideal opportunity to further diversify our production base in a commodity which will be increasingly important in a world concerned about security of energy supply, and in which Canadians can be expected to play a major role.”

Lindsay says the deal doesn’t mean the company plans to enter the oil-exploration business, or other aspects of the energy business. Fort Hills is viewed as “a mining project,” he added, describing it as “equivalent to the largest base-metal mines operating today,” with a potential life of four decades or more.

The company also views the project as “a foundation for potential fur- ther opportunities in the oil-sands business” and as a “natural hedge on energy” used at other operations.

In a separate deal, UTS tentatively granted Teck Cominco rights to acquire “at fair market value” a 50% working interest in an oil-sands property adjacent to Fort Hills. The property has potential to be developed as a satellite mine to Fort Hills, subject to the agreement of the partnership.