Teck Cominco files US$1b prospectus (June 20, 2005)

Vancouver — The filing of a shelf prospectus by Teck Cominco (TEK-V) is fueling speculation that the company is adding to its cash-rich coffers in order to acquire additional projects.

The prospectus will qualify for sale in the U.S. of up to US$1 billion of debt securities or Class B subordinate voting shares over a period of 25 months from the date of the final filing. The company says this duration will allow it to gain access to capital markets over that period, “as required.”

Teck Cominco has assets valued at about $6 billion. At the end of the latest quarter ended March 31, the company had a cash balance of $1.15 billion against total long-term debt of $623 million.

The company is raking in profits at a rate of almost $1 billion annually, based on earnings after tax in the latest 6-month period ended March 31. The company’s profits of $205 million for the recent first quarter were double those of the same quarter a year earlier.

The strong earnings reflect strong demand and prices for the commodities produced, including precious and base metals, and coal.

While lining up cash for a potential acquisition may be easier than ever, given the company’s strong cash position, finding and acquiring valuable assets may prove difficult, given strong prices for many commodities and competition from other majors.

Even so, several Canadian majors without strong control blocks are possible candidates. Potential targets could include Placer Dome (PDG-T), which, like Teck Cominco, is Vancouver-based, and Inco (N-T), which, like Placer Dome, is widely held.

Or Teck Cominco could increase its exposure to far-flung regions that are under-explored and under-valued, relative to North and South American assets, as many major companies are now doing.