Resource stocks: Teck Resources’ earnings surge on higher coal and metal demand

Teck Resources Ltd., Toronto symbol TCK.B, is a leading producer of metallurgical coal, a key ingredient in steelmaking. It also produces other metals, including lead, copper and zinc. In the three months ended June 30, 2011, the resource stock’s earnings jumped 89.8%, to $1.12 a share from $0.59 a year earlier. Revenue rose 27.2%, to $2.8 billion from $2.2 billion. Teck saw higher prices for silver (up 111%), coal (up 49%), lead (up 32%), copper (up 30%), zinc (up 11%) and molybdenum (up 6%). However, higher operating costs and the strong Canadian dollar slightly offset these gains. The resource stock’s coal operations at Fording River and Elkview reached a five-year agreement with their workers early in the second quarter following a two-month strike. The agreement should help Teck keep its labour costs under control until 2016. Due to the strike, as well as delays in coal shipments to earthquake-damaged Japan, the resource stock’s coal volumes fell 13% from a year earlier. Teck negotiates coal prices with its major customers, mainly steelmakers in Asia, every three months. The company expects coal prices will average $280 U.S. to $290 U.S. per tonne in the third quarter of 2011, up about 5% from the second quarter. The company recently sold its 34% stake in the Carrapateena copper/gold project in South Australia for $134 million U.S. It now holds cash of $3.4 billion, or $5.75 a share. Its long-term debt of $4.7 billion is only 17% of its $28.0-billion market cap. You can get our latest analysis, including our clear buy/sell/hold advice, on Teck and dozens of other stocks in The Successful Investor. What’s more, you can get one month free when you subscribe today. Click here to learn how.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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