Fording Canadian Coal Trust

TECK RESOURCES LTD. $28 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 588.5 million; Market cap: $16.5 billion; Price-to-sales ratio: 1.6; SI Rating: Extra Risk) now gets about half of its revenue from metallurgical coal, which is used for making steel. That’s because Teck bought Fording Canadian Coal Trust for $13.6 billion last October. Fording owns six open-pit …read more »

Right now, Canadian income trusts pay out a high percentage of their cash flows to their unitholders. This lets them avoid paying corporate taxes. It also gives many of them significantly higher yields than a lot of dividend-paying common stocks.

Canadian income trusts face tax changes in 2011

In 2011, the Canadian government will begin taxing income trusts (with the exception of …read more »

TECK COMINCO LTD. $5.73 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 449.4 million; Market cap: $2.6 billion; Price-to-sales ratio: 0.4; SI Rating: Extra risk) currently sells its coal to steelmakers for about $300 U.S. a tonne. However, the company must re-negotiate these contracts each year, and prices in 2009 could drop by 50% or more. That could …read more »

TECK COMINCO LTD. $6.65 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 449.4 million; Market cap: $3.0 billion; SI Rating: Extra risk) has completed its purchase of Fording Canadian Coal Trust. Teck is now one of the world’s largest producers of metallurgical coal, a key ingredient in steelmaking.

Teck paid roughly $15 billion U.S. in cash and class B …read more »

FORDING CANADIAN COAL TRUST $85 (Toronto symbol FDG.UN) continues to trade below Teck Cominco Ltd.’s takeover offer of $82.00 U.S. in cash plus 0.245 of a Teck class B subordinate voting share. The offer is now worth $97.27 per Fording unit. The deal should close on October 30, 2008. As we recommended in August, 2008, you should sell your Fording …read more »

FORDING CANADIAN COAL TRUST $92.55 (Toronto symbol FDG.UN; SI Rating: Average) — recently accepted a cash-and- stock offer from Teck Cominco worth about $96 a unit. The deal should close in October, 2008.

Note though that unlike most takeovers, Revenue Canada will treat the entire proceeds as ordinary income. If you hold Fording units in an RRSP or RRIF, you should …read more »

Is it a good time to bargain hunt for Canadian income trusts? According to one school of thought, Ottawa’s planned 2011 removal of income trusts’ tax advantages has unduly rattled investors and spurred unwarranted selling.

That’s the kind of assumption that makes sense, but it’s unlikely to make you any money.

Tax-law changes are a drawback for some investors in Canadian …read more »

Two of our long-time recommendations —

Transalta Corp. $37 (Toronto symbol TA; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 199.0 million; Market cap: $7.4 billion; SI Rating: Average)

and

Fording Canadian Coal Trust $90 (Toronto symbol FDG.UN; Aggressive Growth Portfolio, Resources sector; Units outstanding: 150.0 million; Market cap: $13.5 billion; SI Rating: Average) — have attracted unusual takeover bids.

The private …read more »

FORDING CANADIAN COAL TRUST $89.55 (Toronto symbol FDG.UN; SI Rating: Average) has agreed to a takeover offer from Teck Cominco for the 80.1% of Fording that it doesn’t already own.

Fording unitholders will receive $82.00 in cash and 0.245 of a Teck class B subordinate voting share per unit. Fording’s units are trading about 6% below the implied value of the …read more »

FORDING CANADIAN COAL TRUST $76 (Toronto symbol FDG.UN; Aggressive Growth
Portfolio, Resources sector; Units outstanding:148.7 million; Market cap: $11.3 billion; SI Rating:
Average) is a major producer of metallurgical coal, a key ingredient in steelmaking.

Coal prices have shot up in the past year, due to strong demand from steelmakers in Asia and flooding at coal mines in Australia. That helped push up …read more »