commodity

TECK RESOURCES LTD. $35 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 586.0 million; Market cap: $20.5 billion; Price-to-sales ratio: 1.8; Dividend yield: 2.3%; TSINetwork Rating: Average; www.teck.com) is a leading producer of metallurgical coal, a key ingredient in steelmaking. Coal accounted for 49% of Teck’s 2011 revenue and 57% of its earnings. The company also produces copper (27%, 28%) and zinc (24%, 15%). Teck continues to benefit as the recovering global economy pushes up commodity prices. As well, in 2008, the company bought the 80.05% of Fording Canadian Coal that it didn’t already own. This purchase has further spurred Teck’s growth.

Quick rebound from downturn

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Pat McKeough responds to many personal questions on specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. Last week, an Inner Circle member had a particularly intriguing question about commodity stocks. Specifically, he wanted Pat’s opinion on a company that is using a revolutionary technology in an area in which traditional methods don’t work....

VITERRA $15.95 (Toronto symbol VT; TSINetwork Rating: Average) (1-866-569-4411; www.viterra.ca; Shares outstanding: 371.7 million; Market cap: $5.9 billion; Dividend yield: 1.0%) has agreed to a friendly takeover offer from Glencore International plc, a Switzerland-based commodity trader. The purchase price is $6.1 billion, or $16.25 per Viterra share.

Viterra was our Pick of the Month in the March 2012 issue of Stock Pickers Digest. At the time, it was trading at $10.09. That’s a 58.1% gain since that recommendation. Our view was that the company is well positioned to benefit from an expected rise in Canadian and Australian crop yields in 2012, as well as the end of the Canadian Wheat Board’s monopoly on western Canadian wheat and barley sales. In addition, its Australian operations’ sales to Asia continue to rise.

We also said that Viterra might be an attractive takeover target.

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PLEASE NOTE: Our next Hotline will go out on Friday, April 13, 2012. MOLSON COORS CANADA INC., Toronto symbols TPX.A $45.24 and TPX.B $41.10, is buying StarBev L.P., which owns nine breweries in central and eastern Europe. StarBev brews over 20 local beers, as well as major international brands, such as Stella Artois, Beck’s and Lowenbrau, under license. Molson Coors aims to close the deal by June 30, 2012....

VITERRA INC., $15.91, symbol VT on Toronto, has agreed to a friendly takeover offer from Switzerland-based commodity trader Glencore International plc. The purchase price is $6.1 billion, or $16.25 per Viterra share. As part of the deal, Glencore will sell a number of Viterra’s assets, including about 90% of its Canadian fertilizer retail stores and all of its Australian outlets, along with Viterra’s 34% stake in a fertilizer plant in Medicine Hat, Alberta. Agrium (symbol AGU on Toronto) has agreed to buy all of these assets. Agrium is a recommendation of our Successful Investor newsletter....

Pat McKeough responds to many personal questions on specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. Last week, one member asked about one of Canada’s more intriguing commodity investments—a high-yielding stock that supplies chemicals to the pulp and paper industry and shipping services to the oil and gas industry....

CHEMTRADE LOGISTICS INCOME FUND $16.73 (Toronto symbol CHE.UN; TSINetwork Rating: Speculative) (416-496-5856; www.chemtradelogistics.com; Units outstanding: 41.7 million; Market cap: $697.6 million; Dividend yield: 7.1%) is one of North America’s largest providers of removal services for resource firms, such as oil refineries and base-metal processors. These companies create sulphur, acid and other byproducts as part of their processing activities. Chemtrade converts these substances into useful chemicals, like sulphuric acid. The trust also makes other chemicals. In the three months ended December 31, 2011, Chemtrade’s cash flow per unit jumped 52.5%, to $0.61 from $0.40 a year earlier. Revenue rose 63.4%, to $247.2 million from $151.3 million. That mostly reflects the contribution of Marsulex Inc., which Chemtrade bought for $419.5 million in June 2011. Marsulex provides a range of environmental services, including improving air quality and treating and handling industrial by-products and hazardous waste. Revenue also rose due to rising industrial demand and higher market prices for sulphuric acid....

SHERRITT INTERNATIONAL $5.58 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com; Shares outstanding: 296.7 million; Market cap: $1.7 billion; Dividend yield: 2.7%) reports that its revenue rose 10.6% in the three months ended December 31, 2011, to $536.8 million from $485.2 million a year earlier. Despite the higher revenue, earnings fell 34.2%, to $28.1 million, or $0.10 a share, from $42.7 million, or $0.15 a share. However, without one-time items, such as a charge for the early redemption of debentures, Sherritt would have earned $0.19 in the latest quarter....

SHERRITT INTERNATIONAL $5.58 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704-6698; www.sherritt.com;
Shares outstanding: 296.7 million; Market cap: $1.7 billion; Dividend yield: 2.7%) reports that its revenue rose 10.6% in the three months ended December 31, 2011, to $536.8 million from $485.2 million a year earlier.

Despite the higher revenue, earnings fell 34.2%, to $28.1 million, or $0.10 a share, from $42.7 million, or $0.15 a share. However, without one-time items, such as a charge for the early redemption of debentures, Sherritt would have earned $0.19 in the latest quarter.

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CHEMTRADE LOGISTICS INCOME FUND $16.73 (Toronto symbol CHE.UN; TSINetwork Rating: Speculative) (416-496-5856; www.chemtradelogistics.com; Units outstanding: 41.7 million; Market cap: $697.6 million; Dividend yield: 7.1%) is one of North America’s largest providers of removal services for resource firms, such as oil refineries and base-metal processors. These companies create sulphur, acid and other byproducts as part of their processing activities. Chemtrade converts these substances into useful chemicals, like sulphuric acid. The trust also makes other chemicals.

In the three months ended December 31, 2011, Chemtrade’s cash flow per unit jumped 52.5%, to $0.61 from $0.40 a year earlier. Revenue rose 63.4%, to $247.2 million from $151.3 million. That mostly reflects the contribution of Marsulex Inc., which Chemtrade bought for $419.5 million in June 2011.

Marsulex provides a range of environmental services, including improving air quality and treating and handling industrial by-products and hazardous waste. Revenue also rose due to rising industrial demand and higher market prices for sulphuric acid.

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