Teck survives Fording takeover

Article Excerpt

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 coal mines in B.C. and Alberta. At current production rates, these mines have an average reserve life of 23 years. Teck also mines copper, zinc and gold. Credit crisis came at a bad time Teck used $9.8 billion U.S. in short-term loans to pay for Fording. It planned to convert these into more manageable long-term loans, but the credit crisis lowered demand for new corporate bonds. Then the recession drove down commodity prices. This hurt Teck’s ability to repay the new debt. Revenue rose from $3.4 billion in 2004 to $6.5 billion in 2006, but slipped to $6.4 billion in 2007. After Teck…