A dramatic rebound in coal prices is giving Teck Resources Ltd. extra breathing room, reducing concerns about its cumbersome debt.
Over six months, the price of premium hard coking coal – one of the key ingredients for steel-making – has more than doubled, and Teck’s share price has jumped a stunning 350 per cent since the start of the year. The miner is one of the commodity’s top producers, along with global giants such as Anglo American PLC and BHP Billiton Ltd.
The recovery hasn’t received much attention. For much of 2016, gold miners have been in focus, with behemoths such as Barrick Gold Corp. dominating headlines because rising bullion prices have made fears about their leverage seem much less pressing.
But the same is true for coking coal producers – especially Teck, which was one of the worst-hit companies when coal prices plunged in the commodity crash. It shares peaked at $62 apiece in early 2011 and fell all the way to $3.65 in January – lower even than during the Great Recession. The miner lost $2.5-billion last year, driven largely by impairment charges.
Debt woes have long troubled the company, dating back to an ill-timed blockbuster acquisition. In July, 2008, right before the financial crisis brought down Lehman Brothers, Teck bought Fording Canadian Coal Trust for $14-billion. The company needed a lifeline from a Chinese firm to survive the crisis, in the form of a $1.74-billion investment.
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