Mining giant Teck Resources Ltd. has struck a $1.74 billion private placement designed to lighten its debt load, and its CEO says he hopes the deal will also boost the Vancouver-based company's relationship with China.
Teck said yesterday that China Investment Corp. will buy 101.3 million class B voting shares for $17.21 each, 17.5 per cent of the company's B shares, and will hold onto the stock for at least a year. The sale, which is still subject to regulatory approval, is slated to close July 14.
Teck says proceeds will go toward paying down some $10 billion (U.S.) in bank debt.
"This transaction provides an excellent opportunity to significantly strengthen our balance sheet," chief executive Don Lindsay said in a conference call. "We will have a financial relationship with a very deep-pocketed investor."
The announcement also reverses plans to implement rolling shutdowns at its six coal mines, which will now be needed to run at full production just to meet the demands of its customers for the rest of the year, Lindsay said.
Teck now predicts coal sales will be on the higher end of estimates, between 18 and 29 million tonnes.
Teck shares closed up 8.05 per cent at $19.99 (Canadian) in Toronto yesterday, with a 52-week high of $49.24 and low of $3.35.
Teck has been selling assets and cutting costs to pay down the debt acquired after the $14 billion purchase of Fording Canadian Coal Trust last July.
After the deal was struck, prices for most commodities fell. The deal closed in October, after Teck received its financing and just as Canada entered what has turned out to be a severe recession.
Last month, Teck struck a deal to sell a one-third interest in its Waneta Dam in southeastern British Columbia to BC Hydro for $825 million. It has also made about $700 million (U.S.) from the recent sale of many of its gold assets.
The miner had been hunting for a minority partner to take a 20 per cent stake of its coal business, but that plan has been sidelined. "We already have the money" from the deal with CIC, Lindsay said.
Source: Toronto Star
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