One of the biggest pieces of news last week came from a well-known mining company that operates out of Canada. Teck Resources (NYSE: TECK) saw its shares plunge significantly on Friday after the company warned that there’s a big possibility its oil sands mine in northern Alberta could get rejected. Moreover, Teck stated that it could face up to $1.1 billion in losses should its project get denied by the government of Canada. As it turned out on Sunday, Teck released a separate short press release which confirmed that the government had rejected the project, news that will likely be poorly received by investors on Monday.
The government was initially expected to come to a decision sometime by the end of February, with Teck’s CEO warning to investors that its almost flipping a coin as to whether or not the company will receive approval. The facility in question is a proposed $20.6 billion mine that’s capable of producing as much as 260,000 barrels per day out of the Albertan oil sands. Additionally, Teck also stated that it would be writing down around 20 percent of the value of its Fort Hills facility, another Alberta-based oil sands mine, to the tune of $910 million.
What wasn’t expected, however, was that the Canadian federal government would respond so quickly with its statement. As such, Teck confirmed that it would be taking a $1.13 billion write-down, something which is a big blow for the company which has a market cap of just under $8 billion.
“We are disappointed to have arrived at this point. Teck put forward a socially and environmentally responsible project that was industry leading and had the potential to create significant economic benefits for Canadians,” wrote Teck President and CEO Don Lindsay in a direct letter to Canada’s Environment and Climate Change minister, Johnathan Wilkinson.
Just before the weekend, Teck had also announced its fourth-quarter financial results. Revenue came in at $4.3 billion, a significant decline from the $5.4 billion reported in 2018. Earnings also saw a significant downgrade, with the company reporting $1.6 billion in earnings compared to the $2.4 billion back in 2018.
Shares of Teck fell by as much as 15% on Friday when news first broke that the government might reject Teck’s oil sands project. Now that the worst-case scenario has indeed happened, it wouldn’t be surprising for Teck’s stock to plummet on Monday even further. Despite this big setback, the vast majority of analysts covering the stock remaining extremely optimistic about Teck’s long-term potential. Out of the 20 Wall Street analysts that have ratings on the company, 17 of them have some sort of a “buy” rating while two have a “hold” rating and just one has a “sell.”
Teck Resources Company Profile
Teck is a diversified miner with coal, copper, zinc, and oil sands operations in Canada, the United States, Chile, and Peru. Metallurgical coal is Teck’s primary commodity in terms of EBITDA contribution, followed by copper, zinc, and oil sands. Teck ranks as the world’s second-largest exporter of seaborne metallurgical coal and is a top-three zinc miner. – Warrior Trading News
