Teck says it will focus on selling more gold assets to continue to pay off debt
Published Thursday June 18th, 2009
Teck Resources Ltd. (TSX:TCK.B) will renew efforts to divest more of its gold assets now that it has struck a deal to sell a one-third interest in a B.C. hydroelectric dam, a spokesman at the diversified mining company said Thursday.
Greg Waller, Teck's vice-president of investor relations and strategic analysis, said the Vancouver-based company doesn't want to get out of the gold business entirely, but wants to turn its focus back to exploration and development.
"We had decided a number of years ago the gold assets weren't core to our business. We didn't really need to sell them a few years ago, but it certainly makes sense now that the gold price is healthy," Waller said in an interview.
Teck, Canada's largest publicly traded mining company, has already divested many gold-producing assets, including its 40 per cent stake in Alaska's Pogo gold property that it has agreed to sell to Sumitomo Metal Mining for $245 million.
The company also sold about 5.6 million common shares of Kinross Gold Corp. (TSX:K) for $18 per share, or $101 million, and an interest in the gold production at its Andacollo mine in Chile to Royal Gold Inc. (TSX:RGL) for $300 million.
And earlier this year, Teck said it would sell its 50 per cent interest in the Hemlo operations in northern Ontario to Toronto-based Barrick Gold Corp. (TSX:ABX), the world's largest gold miner.
In total, Waller said Teck has made about US$700 million from its gold-asset sales, and expects it can make another US$200 million by selling the Morelos project in Mexico and exploration properties in Turkey that the company owns jointly with Fronteer Development Group Inc. (TSX:FRG).
Waller emphasized that Teck - which has copper, zinc, coal and energy assets as well as its gold properties - is still interested in buying other gold assets, but won't hold them for long.
"We can continue to create value by finding and developing gold assets and then selling them into the market at the right point in time and we'll continue to do that," he said.
"So we'll be in the gold business in the future. It just won't be with the model of owning and operating gold assets."
Teck announced Wednesday it has signed a deal to sell a one-third interest in its Waneta Dam in southeastern B.C. to BC Hydro for $825 million.
Waller said this was part of a broader strategy to sell the company's undervalued assets to help pay down debt.
"Our strategy is to continue with the diversified model, but for the assets that are not valued properly within the diversified model, get the value recognition for those assets," he said.
The company said it expects to book a pre-tax gain of $625 million on the sale. Waller said the company kept two-thirds of its stake in the dam to continue to power its zinc and lead smelting and refining operations in Trail, B.C.
The company earned an $8-million operating profit from surplus power sales in the first quarter of this year, slightly lower than a year ago.
As a result of zinc production curtailments, surplus power sales increased to 276 gigawatt hours from 189 gigawatt hours in the first quarter of 2008. However, power prices averaged US$37 per megawatt hour compared with US$75 a year ago.
Waller said the sale gives Teck the chance to "crystallize" the value of the dam.
"It's certainly a good way of converting an asset that doesn't get fully recognized in our valuation into something that does get instantly recognized," he said.
The company has been struggling to repay nearly $10 billion in debt as part of its purchase of Fording Canadian Coal Trust for $14 billion.
After the deal was struck in July, prices for most commodities tanked. The deal closed in October, after the company received its financing and just as Canada entered what has turned out to be a severe recession.
Waller said Teck is also still looking for a minority partner to take a stake in its coal business
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