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Chinese firms may help check Teck debt

(China Daily)
Updated: 2009-05-29 09:38

Teck Resources Ltd, Canada's biggest base-metals company, is in talks to sell coking-coal assets to Chinese companies to help reduce debt.

"We are going through a process" of talks with Chinese companies, including steelmakers, to buy as much as a 20 percent stake in Teck's coking-coal business, Chief Executive Officer Donald Lindsay said in a television interview in Beijing yesterday.

He declined to name the companies.

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Lindsay, 50, is raising cash to help pay debt after the company added $9.8 billion of loans last year to buy Fording Canadian Coal Trust, a producer of coal used in steel making.

Teck completed the acquisition shortly before metals and energy prices slumped amid the global recession.

"We are in a very strong position to take our time to get a right partner and a right price," Lindsay said. "We'd like to see the steel industry recover a bit" before a sale.

The Vancouver-based company sold $4.2 billion of bonds on May 5 to refinance its short-term obligations. Teck may also consider selling a stake in coking-coal production assets to institutional investors, Lindsay said.

Teck last year sold more than half of its coking coal production to Japan and Korea. It recently started selling the product to China and sales are "encouraging", Lindsay said.

The company plans to increase sales to China, the world's biggest producer and consumer of steel, he said.

Almost 70 percent of its operating profit in the first-quarter came from coal, Lindsay said. The company's net income dropped 30 percent to C$241 million ($195 million), or 50 cents a share, in the quarter from a year ago, it said on April 21.

Teck agreed to sell its stake in gold output from a Chilean mine to Royal Gold Inc for $270 million on April 6 and two days later sold 5.6 million shares of Toronto-based Kinross Gold Corp for about $101 million.

Rio Tinto Group, the world's third-largest mining company, this week said it was hopeful of a "V-shape" recovery in China, the world's biggest metals buyer. The nation increased imports of copper, aluminum and iron ore to a record in April as buyers restocked for the country's 4 trillion yuan stimulus.

There are "early signs" of demand recovery in China, spurred by the stimulus package, Lindsay said. Metals demand growth will be sustained if the economy meets its growth target of 8 percent.

Teck shares gained 1 percent to close at C$15.95 on May 26. The stock has more than doubled this year.

Bloomberg News