DBRS Assigns BBB (low) Rating with Positive Trend to Teck Resources New Debt Issues

DBRS has today assigned a provisional rating of BBB (low) with a Positive trend to Teck Resources Limited’s (Teck or the Company) US$750 million Senior Unsecured Guaranteed Notes due August 2017 and August 2040 (collectively, the New Senior Unsecured Notes) that the Company intends to issue via an underwritten public offering in the United States and Canada on a private placement basis. Teck is expected to use the net proceeds of the issuance to purchase existing senior unsecured long-term debt of the Company. In DBRS’s view, the issuance of the New Senior Unsecured Notes to refinance existing debt will lower the Company’s long-tern debt costs and improve its debt maturity profile by extending maturity dates and reducing the maximum expected maturity of long-term debt in any one year at the expense of modestly increasing near-term leverage. The debt issuance and purchase program is not expected to have an impact on Teck’s ratings if completed as expected.

The payment of principal of, and interest and premium, if any, on the New Senior Unsecured Notes will be fully and unconditionally guaranteed by Teck’s wholly-owned subsidiary, Teck Metals Ltd. (Teck Metals). Under certain conditions outlined in the supplemental prospectus of the New Senior Unsecured Notes, Teck Metal’s guarantee will be terminated upon Teck’s request (without the consent of the trustee). Teck Metals’ principal assets are its 100% interest in Teck’s Trail smelting and refining complex, a 59.3% indirect interest in Teck Coal Partnership, an 83.6% direct and indirect interest in the Highland Valley copper mine, and indirectly, the Company’s interest in the Red Dog zinc mine in Alaska.

The New Senior Unsecured Notes and the guarantee will be unsecured senior obligations and will rank equally with all of Teck’s other unsecured senior obligations and those of Teck Metals, respectively. The New Senior Unsecured Notes will be effectively subordinated to all indebtedness and other liabilities of Teck’s subsidiaries (other than Teck Metals, for so long as the guarantee remains in effect), and the New Senior Unsecured Notes and the guarantee will effectively be subordinated to all secured indebtedness and other secured liabilities of Teck and Teck Metals, respectively, in each case to the extent of the assets securing such indebtedness and other liabilities.

The New Senior Unsecured Notes will be redeemable in whole or in part, at the Company’s option, at any time and at specified prices. Upon a change of control (as defined), Teck will be required to make an offer to repurchase the notes at a price equal to 101% of their principal amount plus accrued and unpaid interest. The New Senior Unsecured Notes do not contain any specific financial covenants but will limit Teck’s ability to create certain security interests; they will restrict its ability to amalgamate or merge with a third party or transfer all or substantially all of its assets.

Net proceeds from the issuance of the New Senior Unsecured Notes is expected to be used by the Company to finance the repurchase of up to an aggregate US$600,000,000 principal amount of its 9.75% senior notes due 2014 and its 10.25% senior notes due 2016 by way of market tender. In addition, given that the issuance of the New Senior Unsecured Notes is not conditioned on the completion of the tender offer and there is no assurance that the tender offer will be completed as contemplated, any net proceeds from the issuance of New Senior Unsecured Notes that are not used to finance the tender offer are expected to be used for general corporate purposes.

The provisional rating is based on Teck’s prospectus dated June 7, 2010, filed with the United States Securities and Exchange Commission and the Company’s Preliminary Prospectus Supplement, dated August 3, 2010, as well as Teck’s public security document filings including its second quarter 2010 report and its 2009 annual report and plus other information provided by Teck to DBRS as of August 3, 2010. The assignment of final ratings is subject to receipt by DBRS of final documentation that is consistent with that which DBRS has already reviewed.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Mining, which can be found on our website under Methodologies.

This is a Corporate rating.