Will Zinc Save the Day for Teck Resources?

In a report released today, Dundee Capital Markets posits that as coal margins currently aren’t great, “zinc may end up saving the day” for Teck Resources Ltd. (TSX:TCK.B,NYSE:TCK).

The firm’s reasons for thinking that include:

• Strong zinc profit for Teck in a seasonally weak quarter: Gross profit from coal hit a low of only $23M this quarter, while gross profit from zinc was $114M which was particularly high for Q2 results given seasonality. As shown in the chart below, we highlight that it is the first time in 10 years that zinc gross profit increase QoQ in Q2 for Teck (except when it was recovering from the Global Financial Crisis in 2Q09)
• Teck is ‘excited about zinc’: The very last thing that Don Lindsay (Teck’s CEO) said on conference call yesterday: ‘And last but not least, we remain excited about zinc as I’m sure a number of you on the phone are as well. Thanks very much’. Teck has a positive outlook on zinc market and zinc prices which currently have good momentum (same as we do).
• Zinc is surprisingly strong in what is a usually weak summer period (zinc prices always weak in the summer).
• Teck responds by increasing production: Teck increased its zinc production guidance by 6% for the year and highlighted they are focused on re-starting its Pend Oreille zinc mine by yearend, which could increase zinc production by another 5-7% next year.

Click here to go to Dundee Capital Markets’ website.