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“If you are building a great country, there are certain things that anchor, that form a base, that you should not give away, and no other country does. Unfortunately, we did give it away in 2006-2007 [Inco and Falconbridge] and we’ve seen what happened.”
(Teck CEO Don Lindsay-April 16, 2011)
Commodities are booming and Teck Resources Ltd. is flush with cash. But the company isn’t in a rush to spend it – and neither, apparently, is Don Lindsay. Today, he’s lunching on a soup-and-sandwich combo from Tim Hortons – a meal he regularly eats at his desk on the 34th floor of the company’s Vancouver headquarters.
“How much growth do we need?” the 52-year-old chief executive officer asks. “Because we have a lot.”
A focused approach is the product of a tough lesson for the diversified miner, which only two years ago was on the brink of disaster after a debt-heavy acquisition on the eve of the global economic meltdown.
Mr. Lindsay was in his third year as the company’s CEO when he orchestrated the ill-timed $14-billion purchase of Fording Canadian Coal Trust. The deal, which Teck financed with $9.8-billion (U.S.) in debt, pushed the company close to ruin. Fearing the worst, investors drove Teck stock to a multiyear low of just above $3, and some were calling for his resignation.
But an aggressive response to the crisis, a rebound in commodity markets, and a lifeline in the form of a $1.5-billion investment from China Investment Corp. helped to silence Mr. Lindsay’s harshest critics.
Today, Teck stock has been trading at historic highs amid a surge in prices of its key commodities: coal, copper and zinc. And the company is enjoying a new “special relationship” with China, the world’s largest consumer of the resources it produces.
While many miners are using their excess funds to pay rich premiums for future production growth, Teck has been noticeably quiet. Mr. Lindsay says the company isn’t afraid to make a deal, despite the Fording experience – he’s just waiting for the right time and opportunity. Instead, the company is focused on getting more value out of the mines it already owns across North and South America.
HE’S NO BANKER
In fact, the reserved Mr. Lindsay becomes most riled up during this 75-minute lunch with the notion that he’s yet another banker-turned-mining CEO on the constant hunt for deals.
He points to a cheap iron ring placed on his right pinky finger in 1979, shortly before graduating as a mining engineer from Queen’s University in Kingston, Ont.
The Engineer’s Ring is a symbol, he says, of his true profession. “I am a mining engineer. I keep getting labelled as a banker,” he says, twisting the plain band as he speaks. “This is the most valuable thing I have.”
That ring also helped keep him grounded when the recession was at its worst.
“It was a very tough period, both personally and professionally,” Mr. Lindsay says, looking back. “Part of my job was to keep everyone else up. They had to see that the boss had confidence we were going to make it.”
Teck’s response to the crisis was a 12-step plan that included selling off assets, alongside paying down and refinancing its debt. The resurgence of commodity prices was also a big help. They have kept climbing since, helping Teck’s stock hit an all-time high of $64.62 on the Toronto Stock Exchange in January. It closed at $49.83 on Friday, still within range of that historic high.
BEST FRIENDS
While it seems obvious today, Mr. Lindsay claims that even during the worst of the financial crisis, he had faith that China’s ravenous appetite for resources would lead the industry into recovery.
China did come to rescue, for both the mining industry as a whole and Teck in particular. In July, 2009, Teck announced a deal that saw CIC, the nation’s sovereign wealth fund, make a $1.5-billion investment in the company in exchange for a 17-per-cent equity stake.
Today, Mr. Lindsay says that relationship with CIC not only gives it a strong investment partner, but valuable insight into what drives China’s red-hot economy. Teck and CIC are “best friends,” Mr. Lindsay says proudly, while other, larger mining companies are often at odds with the Asian superpower. “Why wouldn’t you be best friends with your largest customer?”
Still, for the relationship to last, the two companies have to find new, profitable investments in the not-too-distant future.
“We have to leverage it and do something to get to the next level with them,” Mr. Lindsay says.
“It’s hard because there are not that many opportunities around that we actually like. We’ll find something, but we are in no rush. … We have to make sure it’s the right thing, but we certainly exchange ideas a lot.”
STRATEGIC LESSONS
While Mr. Lindsay has strong ties to China, he remains patriotic when it comes to foreigners investing in Canadian resources. There is still regret that Teck failed to buy Inco in 2006, a move meant to create a Canadian base-metals behemoth. Brazil’s Vale SA bought Inco instead. Falconbridge, which had proposed a merger with Inco around that time, was sold to Anglo-Swiss miner Xstrata PLC. Many in the mining industry, and beyond, feel the result of selling those firms to foreigners has been lost jobs and investment in Canada.
For the rest of this article, please go to the Globe and Mail website: http://www.theglobeandmail.com/report-on-business/managing/the-lunch/don-lindsay-learns-to-keep-his-appetite-in-check/article1987642/page2/