February 17, 2009 / 7:57 PM / 9 years ago

UPDATE 3-Teck sees broad interest for Elk Valley stake

* Sees interest from buyers in several countries

* Mulling options on Fort Hills oil sands project

* Outlook gloomy for first-quarter coal prices

* Stock falls 10 percent to C$4.44 (Updates shares to close. In U.S. dollars unless noted)

By Cameron French

TORONTO, Feb 17 (Reuters) - Teck Cominco TCKb.TO is in advanced discussions to sell the remainder of its gold assets, and has also fielded interest from buyers in several countries for a stake in its Elk Valley coal operation, its chief executive said on Tuesday.

Teck, which reported a steep fourth-quarter loss on Monday due to writedowns, has also begun talks with bankers to try to renegotiate a $5.8 billion bridge loan that is due in October, the company said.

The company’s shares fell 10 percent, which analysts attributed to a gloomier than expected outlook for first-quarter coal prices.

Teck took control of Elk Valley by purchasing Fording Canadian Coal Trust for $13 billion last year, taking on nearly $10 billion in debt — the bridge loan plus $4 billion in term debt — to do so.

The company has acknowledged consulting with bankers on selling an Elk Valley stake, and Lindsay said on Tuesday the company is seeing interest from buyers in several countries — including key customers — eager to lock in access to Elk Valley’s resources of coal used in the steelmaking process.

“In our discussions, we see that there’s sort of interest between Brazil, China, Korea, Japan and ... India,” he said.

“What we have on offer is a long-term resource, 100 years plus, and it’s available once and only once, so there’s scarcity value.”

Also up for grabs is Teck’s 20 percent stake in the Fort Hills oil sands project, for which the company is considering its “strategic options”, said Lindsay.

Teck has already sold its Lobo-Marte gold project in Chile and Lindsay said the company was in advanced talks to dispose of its other gold operations.

In its earnings statement, the company said it had begun discussions with lenders to try to extend the terms of its bridge loan.

It also warned that a default is possible, depending on factors such as metal prices, market conditions, the possibility of credit ratings downgrades, or the success of the loan negotiations.

Lindsay said the company was considering all options in terms of financing, but added he did not want to issue equity.


Teck lost C$607 million, or C$1.28 a share, in the latest quarter, as plunging metal prices forced it to take C$844 million in writedowns and C$270 million of negative adjustments to sales made in the third quarter, but then finalized in the fourth quarter at lower prices.

Teck’s shares fell 48 Canadian cents to C$4.44, and touched a two-month low during the session.

The company said it expected to sell coal at $190 a tonne in the first quarter, about $60 lower than expected, due to a carry-over of sales at lower 2007 prices as well as a high percentage of lower-price thermal coal sales.

“The coal assets are one of the key generators for debt repayment,” said John Hughes, analyst at Desjardins Securities.

Teck has contracted to sell metallurgical coal at $275 a tonne through March, and has not yet begun discussions for the 2009 contract year, Lindsay said.

Analysts expect sales in the new year will be at much lower prices, but Lindsay said concerns that the new contract price could be below $100 a tonne were unfounded.

$1=$1.26 Canadian Reporting by Cameron French; editing by Rob Wilson

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