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

DBRS has today assigned a provisional rating of BBB (low) with a Positive trend to the senior unsecured guaranteed notes (the New Senior Unsecured Notes) to be issued by Teck Resources Limited (Teck or the Company). Up to $700 million of New Senior Unsecured Notes will be issued, with maturity dates in 2021 and 2040. The Company intends to issue the New Senior Unsecured Notes via an underwritten public offering in the United States and in Canada on a private placement basis. Teck is expected to use the net proceeds of the issuance, along with short-term bank borrowings or cash, to purchase up to approximately $1.0 billion principal amount of existing outstanding senior unsecured long-term debt of the Company to restructure its debt maturities (see DBRS’s press releases dated August 3 and August 5, 2010, for a description of a similar August debt issuance and purchase program by the Company). In DBRS’s view, the issuance of the New Senior Unsecured Notes to refinance existing debt will lower the Company’s long-term 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 aggregate debt issuance and debt purchases under the current program and the August program are not expected to have an impact on Teck’s ratings if the current program is completed as expected.

The New Senior Unsecured Notes due in 2021 are being offered by way of a supplemental indenture to the Company’s August 17, 2010, indenture, which has been filed with the U.S. Securities and Exchange Commission (SEC). The New Senior Unsecured Notes due in 2040 are being offered as additional notes under the supplemental indenture dated August 17, 2010, to Teck’s August 17, 2010, indenture under which the Company issued $450 million aggregate principal amount of 6.0% notes in August 2010. The new 2040 notes will be consolidated and form a single series with the existing 2040 notes, with the same terms as to status, redemption and otherwise.

The payment of principal, interest and premium, if any, on the New Senior Unsecured Notes will be fully and unconditionally guaranteed on an unsecured, senior basis by Teck’s wholly owned subsidiary, Teck Metals Ltd. (Teck Metals). Under certain conditions outlined in the respective supplemental prospectuses of the New Senior Unsecured Notes, the guarantee of Teck Metals 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, British Columbia, 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 in British Columbia; 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. 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, 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 New Senior Unsecured 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 also 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, after deducting expenses, plus additional cash and short-term bank borrowings are expected to be used by the Company to finance the repurchase of up to an aggregate $1.0 billion principal amount of the Company’s existing outstanding 10.75% senior unsecured debentures due in 2019 by way of market tender. In addition, given that the issuance of the New Senior Unsecured Notes is not conditional 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 the 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 indenture dated August 17, 2010, and first supplemental indenture dated August 17, 2010, both filed with the SEC, and the Company’s draft Preliminary Prospectus Supplement, dated September 2, 2010, as well as Teck’s public security document filings, including its Q2 2010 report and its 2009 annual report, and other information provided by Teck to DBRS as of September 2, 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 U.S. dollars unless otherwise noted.

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