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Teck Resources has finally announced a dividend cut that a number of analysts and market watchers were expecting. The miner cut its half-year dividend to $0.15, down from $0.45, citing the current price environment as a driving factor. Teck’s share price dropped a little over 6 percent on Tuesday, losing $1.07 to trade at $15.85.
Certainly, while the copper price has picked up somewhat in recent months, the red metal is still down since the start of the year, and the coal price is faring even worse. As The Globe and Mail notes, Teck previously warned that it would cut its dividend if commodities prices failed to improve.
“This reduction brings our dividend payout and yield more in line with current commodity prices and outlook and ensures balance sheet strength and flexibility for future capital expenditures or other capital allocation opportunities,” Teck states in a separate release regarding its first quarter results.
The Financial Post reported that Teck’s Q1 results were weaker than expected by some analysts, with the miner reporting a 6-percent drop in earnings compared to the first quarter of last year. Still, the miner notes that the stronger US dollar and low oil price brought down its production costs and states that it managed to reach a record 6.8 million tons in coal sales for the quarter.
“Our ongoing focus on cost management and operational performance, aided by the strong U.S. dollar, is enabling our diversified business to withstand the generally weak commodity price environment, allowing all of our operations to generate positive operating cash flows after our sustaining capital spending,” said Teck President and CEO Don Lindsay.
Meanwhile, the company continues to move forward with investment in its $2.9-billion Fort Hills oil sands project. It stressed Tuesday that it is committed to taking advantage of the current economic environment and that all critical milestones are being achieved at the project.
Dundee Securities reiterates in a note put out Tuesday that it sees Teck’s cash position deteriorating over the next three years as it continues to spend at Fort Hills, especially with the met coal price at such a depressed level. The firm has lowered its price target for the company from $21 to $19, keeping its “neutral” rating.
To be sure, the dividend cut isn’t the best indicator for the market overall. However, Tom Meyer of CIBC World Markets has a bit more of a positive take on the situation — he points out in a note that the dividend cut will lead to about C$345 million per year in “savings” for the company. “We view the dividend cut as a positive and prudent move,” he states. CIBC is keeping its “buy” rating and 12- to 18-month target of C$22 per share for Teck.
Shares of Teck dropped a little over 6 percent on Tuesday, losing $1.07 to trade at $15.85. A significant producer of coking coal and copper, Teck also owns one of the top zinc mines in the world.
Company news
Last week, Copper Fox Metals (TSXV:CUU) released results from preliminary metallurgical testing at its Eaglehead copper-gold–molybdenum project in British Columbia. Potential copper recoveries to the first cleaner test range from 89.8 percent in composite — 1 to 95.5 percent in composite — 3 with 92.2 percent recovery in the master composite.
“The positive results from these tests indicate that a significant amount of the copper can be recovered from the mineralization into clean concentrates with good copper grades containing significant by-product credits,” said Copper Fox’s president, Elmer Stewart. “With these results in hand, we will work with Carmax to plan a program to be completed in 2015.”
Also last week, Foran Mining (TSXV:FOM) reported intersecting 2.03 percent copper over 105 meters at the Bigstone copper zone near its McIlvenna Bay deposit in Saskatchewan. That represents the best hole drilled to date at Bigstone. Four more holes that were drilled at the zone are currently being logged and sampled, with results to be released in coming weeks.
On Tuesday, Revelo Resources (TSXV:RVL) announced that it will acquire four early stage exploration properties in Chile from a BLC, a subsidiary of Altius Minerals (TSX:ALS). A letter of intent has been signed detailing details of the transaction, with a definitive agreement expected by May 25.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Related reading:
Dundee Increases Price Target for Teck on Higher Zinc Production
