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Don Lindsay didn’t have much time to eat when he sat down for dinner last month with investors in a wood-panelled private dining room at Hy’s, the popular Bay Street steakhouse.
Oil prices were falling faster than the temperature on the December night and fund managers at the table wanted Mr. Lindsay, chief executive officer of Teck Resources Ltd., to explain why the company wasn’t changing course to adjust.
The Vancouver-based mining giant was already reeling from a jarring price collapse in the company’s core metallurgical coal and copper commodity markets. Why, some investors wanted to know, was Teck persisting with its $2.9-billion minority investment in the sprawling Fort Hills oil sands project after spot oil prices had fallen precipitously by more than 60 per cent.
“Can you afford this project at these prices?” one investor asked, according to people familiar with the session. Mr. Lindsay’s response was difficult for some investors to swallow.
“I love low oil prices,” Teck’s CEO enthused. Cheaper, he explained, meant lower construction costs for an oil mining complex that is still nearly two years away from production.
Since the dinner, oil, coal and copper prices have continued their descent, dramatically shrinking profits and placing more pressure on Mr. Lindsay to defend Teck’s strategy. Teck’s stock has fallen 74 per cent since its 2011 peak to $15.97 as of yesterday’s close on the Toronto Stock Exchange, its lowest level since 2009.
To be sure, Teck’s weakened condition is largely a byproduct of one of the deepest and most sustained resource commodity crashes in more than a decade. Mining and energy companies across the board have been hit hard.
Teck’s current woes mark the second time the company has struggled under the leadership of Mr. Lindsay, a former investment banker hired as president in 2005. The last time was 2009 when the company nearly succumbed to heavy debts from a takeover. Mr. Lindsay has continued to consider mining acquisitions, including Glencore’s Las Bambas copper project in 2013, at a time that some investors believe the company should be more focused on cutting costs.
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