http://seekingalpha.com/article/1306...
Teck Cominco: Elk Valley Cash Flow Still Short Despite Better Coal Prices
by: FP Trading Desk April 13, 2009 | about stocks:
TCK
Teck Cominco Ltd.'s (
TCK) new settlement price to sell hard coking coal into the Asia-Pacific market looks to be a profit booster for the diversified miner, but cash flow from its Elk Valley property still falls short when it comes to repayment of the US$5.3-billion bridge loan due in October.
According to BMO Capital Markets analyst Tony Robson, Teck has reportedly settled at US$125-126 per metric tonne for hard coking coal, which reflects a slight discount to US$129/mt that BHP Billiton recently settled at for its premium brands.
Based on his US$120/t estimate, Mr. Robson said the settlement price should result in a very slight increase in protected profits for this year, not depending on any new guidance of sales volumes. However, he added in his note to clients, that Teck still has insufficient cash flow coming out of Elk Valley pay in full its October debt maturity.
"BMO Research expects Teck to repay part of it with asset sales and a potential equity issue, then rollover the remainder of the bridge into a new loan negotiated with the banks," he wrote.
"There can be no guarantee that this will occur but in BMO Research's opinion is more likely than not; without this occurring investors should note that Teck's financial position is precarious."
