Small Investment Should Pay Off

Article Excerpt

TECK COMINCO LTD. $90 (Toronto symbol TCK.B; Conservative Growth Portfolio; Resources sector; SI Rating: Average) has agreed to acquire a 16% interest in Tahera Diamond Corp., which operates a diamond mine in Nunavut. Teck also received warrants, which, if exercised, would increase its stake to 24.9%. Teck paid $30 million for this investment, which is just 6% of the $504 million or $2.32 a share it earned in the three months ended September 30, 2006. Diamond mining is much riskier than Teck’s core zinc and copper businesses, but its mining expertise should help Tahera expand production and cut costs. The stock fell below $60 after it tried to buy Inco, but rebounded after it dropped its offer. It now trades at just 8.3 times its likely 2006 profit of $10.86 a share, and 7.3 times projected cash flow of $12.25 a share. That’s cheap, but these estimates reflect strong commodity prices that could weaken in 2007. Teck Cominco is a buy. …

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