Teck Resources Limited (USA) (NYSE:TCK)

CAPS Rating: 4 out of 5

Mining and mineral development company Teck Resources focuses on copper, metallurgical coal, zinc, and energy.

Recs

3
Player Avatar EggplantWizard (99.32) Submitted: 3/20/2009 10:43:05 AM : Underperform Start Price: $5.10 TCK Score: -81.20

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.

Report this Post 7 Replies
Member Avatar EggplantWizard (99.32) Submitted: 3/20/2009 2:00:33 PM
Recs: 1

I should disclose that I wrote some August $2.50 and $5 calls against my real life position today and yesterday, and intend to buy to close later for a small expenditure. Brings down my cost basis.

Member Avatar Bays (29.97) Submitted: 4/2/2009 2:50:57 PM
Recs: 0

Good pitchI own in real life as well.

Member Avatar Bays (29.97) Submitted: 4/2/2009 2:50:57 PM
Recs: 0

Good pitchI own in real life as well.

Member Avatar EggplantWizard (99.32) Submitted: 4/21/2009 12:07:32 PM
Recs: 0

OK, I was *way* wrong here since they announced refinancing. Covering my calls at a painful amount and hanging on to this now likely solid company.

Member Avatar warrenrial (< 20) Submitted: 4/22/2009 1:47:35 AM
Recs: 0

I own Teck and I am confident it will do well. Lets face it investing in stock is nothing more than a crap shoot. We all hope for a winner. The market can do without Obama's foolishness

Member Avatar Bays (29.97) Submitted: 5/31/2009 11:08:41 PM
Recs: 1

This stock was priced for bankruptcy. They've successfully refinanced their debt and it has taken off. Even after a 400% run, I still consider them undervalued and will continue to hold onto them.

Member Avatar EggplantWizard (99.32) Submitted: 6/2/2009 9:20:38 AM
Recs: 0

Oh, I agree, but the upside from here is more like 100%, not 400%. I'm still glad I covered those calls around $8-9 / sh

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