While Teck Resources’ bombshell decision to walk away from its $20.6-billion Frontier tar sands/oil sands mine has received wall-to-wall coverage in the last seven days, the company’s broader financial picture is a bigger concern for investors, the Globe and Mail reports.
“While the outcome on Frontier has renewed the debate over responsible resource development in Canada, and raises questions about how open the country is to large-scale investment, it has little actual impact on Teck’s existing business,” the Globe wrote early last week. “Of much more import to investors is Teck’s current financial condition,” after a weak fourth-quarter financial report just a couple of days before the Frontier announcement.
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“The base metal miner’s shares have lost more than half of their value over the past year, as it grapples with cost overruns at two major projects, a weak outlook for its core metallurgical coal business, and the damaging impact of the coronavirus,” the paper adds. The mounting global health crisis “is hurting the share prices of many commodity sector companies,” but “the market is particularly concerned about a ratcheting up in capital costs at Quebrada Blanca Phase 2 (QB2), a new copper mine Teck is building in Chile. Originally budgeted at US$4.7-billion, Teck in recent months has made it clear that its original estimates were too low,” due to permitting problems and what it called “social unrest” that has delayed completion of the mine.
“All these factors created a perfect storm,” CEO Don Lindsay told a mining conference last Monday, while sidestepping analysts’ calls for more clarity on the cost overruns. He said Teck would release details in late March, ahead of its [auspiciously-timed?] investors’ day April 1.
The Globe cites a number of analysts expressing skepticism about the company’s prospects, with its share price falling 2.7% last Monday.