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Teck Resources is Canada’s largest diversified mining, mineral processing and metallurgical company. The company produces significant quantities of copper, metallurgical coal and zinc, and is a significant producer of gold, molybdenum and specialty metals, with interests in several oil sands development assets.
Teck Cominco to suspend dividend and sell Lobo-Marte interest
Teck Cominco Ltd announced the first steps of its plan to reduce debt, including reducing budgeted capital expenditure by CDN$730 million and selling its stake in the Lobo-Marte gold project in Chile to Kinross Gold Corp for more than US$110 million.
The plan also includes suspending the dividend for 2009 on its Class A common shares and Class B subordinate voting shares, which will provide an estimated annual saving of approximately CDN $486 million.
"Current global economic and financial market conditions dictate that we take all prudent steps available to us to significantly reduce spending," said Don Lindsay, President and CEO. "The measures announced today, combined with previously announced tax savings, amount to CDN$2.4 billion and should significantly enhance our ability to address our near-term debt obligations and better position Teck to refinance the bridge loan when conditions improve."
In order to sustain capital: spending will be reduced to approximately CDN$250 million for 2009, down from a forecast of CDN$580 million for 2008, on a comparable combined company basis. Excluding the Fort Hills Project, project capital spending will be reduced to approximately CDN$250 million for 2009, down from CDN$650 million forecast for 2008.
The budget for 2009 will allow the company to complete projects key to Teck's long-term strategy, including the Andacollo concentrate project in Chile. Capital costs at Andacollo for 2009 are estimated at CDN$160 million and, when completed in late 2009 or early 2010, the mine is expected to quadruple its current copper production and add significant gold by-product credits.
The announcement earlier this week by the Fort Hills Partnership to defer a decision on the mine-only project and put the planned Sturgeon upgrader on hold will significantly reduce Teck's capital spending for 2009.
As a result of the Fording Canadian Coal Trust acquisition, Teck expects to recover approximately CDN$1.1 billion of cash taxes previously paid. Of this total, CDN$165 million has been recovered to date and the balance is expected by the end of the second quarter of 2009.
Teck has reached an agreement to sell its 60 percent interest in the Lobo-Marte gold project in Chile to Kinross Gold Corporation for US$40 million in cash and US$70 million in Kinross common shares. Teck will also receive a 1.75% net smelter return royalty in respect of 60 percent of production from Lobo-Marte, payable at gold prices over US$760 per ounce.
Beyond these first steps, the company continues to actively pursue several other aspects of its comprehensive debt reduction plan, including other asset sales.
