24/11/09

By Randall Palmer

OTTAWA (Reuters) - Teck Resources , which has spent the past year digging itself out from a mountain of debt taken on to purchase Fording Canadian Coal Trust, expects to have debt levels back within target ranges soon, the company's chief executive said on Tuesday.

Speaking in Ottawa, Teck CEO Don Lindsay also said a ten-fold increase in Chinese imports of metallurgical coal was underpinning demand. The coal is used in steelmaking.

The company borrowed nearly $10 billion to buy Fording just before last year's resource sell-off, forcing Teck to chop costs, divest non-core items, and sell a 17-percent stake in the company to China Investment Corp to pay down the debt.

Now, improving resource prices and expectations of Chinese metallurgical coal imports of about 30 million tons this year -- versus 3.2 million tons last year -- have cast the takeover in a new light, Lindsay said.

"Many in the market place believe we called it right," he told the Economic Club of Canada.

Teck aims to get its debt to debt-plus-equity ratio into a 25-30 percent range, at which point it expects rating agencies to restore investment grade ratings that the company lost after it bought Fording.

"We're highly confident that we will meet our targets... in the next reasonably short length of time," he told reporters after the speech.

Teck shares have risen ten-fold since bottoming in March, but are still shy of last summer's peaks. The stock fell 2.9 percent to C$36.29 on the Toronto Stock Exchange on Tuesday.

KEEPING OILSANDS ASSETS

Lower debt levels have allowed Teck to cancel its planned sale of its 20-percent stake in the Fort Hills oilsands project and delay a possible sale of a stake in its coal business.

Lindsay said Teck is comfortable with Fort Hills majority stakeholder Suncor Energy's decision not to fast track development of the project, and said he considered the stake a core holding for Teck, meaning it's no longer on the table.

Fort Hills, which will cost billions of dollars to develop, was delayed a year ago due to skyrocketing costs.

Suncor said earlier this month that it did not yet know when it would resume work at the site, opting to complete work on other projects during the economic crisis. UTS Energy Corp also owns a minority stake.

Teck and UTS have also teamed up to acquire other leases in Alberta's oil sands region, which contains more than 170 billion barrels of oil, the biggest reserves outside the Middle East.

Earlier this month, UTS sold its half share in what it calls the Lease 421 area to Imperial Oil Ltd and Exxon Mobil Corp for C$250 million.

Lindsay said Teck does not plan to follow suit.

"We think it's an excellent lease and we'll be hanging onto it," he said.