Teck Resources Limited (USA) (NYSE:TCK)

Coal settling at $120 / ton isn't as positive for Teck as many people seem to think. I still have a real life position in Teck, but I think that the risk is now being underpriced -- If Teck can't refinance its debt, or doesn't find a buyer for a significant chunk of their assets at a reasonable price, they aren't likely to continue as a going concern. $120 / ton coking coal gives them a healthy profit margin, but Teck's cash flow projections are based on the sale of 20m Tons, when demand may only support 16-17m tons -- it remains to be seen. The constraint isn't necessarily "as much as Teck can mine". The recent boost in copper prices seems likely to continue, and give Teck a lift since the Fed is printing money like it's going out of style, but this also poses a challenge for Teck -- their costs are primarily Canadian dollar denominated, while they sell coal in US Dollars. If the dollar weakens considerably against the Canadian dollar, this could have a significant negative effect if they fail to hedge enough of their cash flows. (Historically, Teck has hedged about 50%).

This could still triple, or more, if the debt situation is fully resolved, but at the moment, I think the valuation is a little bit high in light of the risks, with no news on asset sales or debt re-structuring.