DBRS Releases Report on Teck Resources Limited

DBRS has today released a report on Teck Resources Limited (Teck or the Company) that provides support to the recent confirmation of the Company’s Issuer Rating at BBB and the rating of its Senior Unsecured Notes at BBB, both with a Stable trend.

The confirmation of Teck’s ratings and their Stable trend reflects the Company’s solid business profile as a leading producer of coal used in steelmaking (metallurgical or coking coal) and its diversification as a significant copper and zinc producer.

Teck remained net free cash flow positive 2009–2012, despite an increasing level of capital expenditures and dividend outflows allowing it to reduce is net indebtedness by $6.8 billion since the end of 2008 and to strengthen its liquidity profile. Cash and unutilized credit capacity totalled $4.3 billion at September 30, 2013. That said, Teck’s operating earnings and cash flow have declined significantly in 2012 and to date in 2013 from record levels achieved in 2011. With the Company’s recent decision to begin construction of its 20% owned Fort Hills oil sands project, the Company is entering into an extended period of high capital expenditures, which are expected to add an important, long-life business to its existing operations in 2017.

In response to lower commodity prices, the Company has already begun to initiate cost-savings programs and has announced delays to some key large-scale developments such as its Quintette coal mine reopening and its Quebrada Blanca Phase 2 copper mine project to better match expenditures to market demands and its funding plans. With the Fort Hills project expected to require $2.9 billion in cash outflows before mid-2017, DBRS expects that Teck will have to be prudent in its cash outlays if it wishes to retain its financial strength.

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

Today’s report and the November 18, 2013, press release are available at www.dbrs.com or by contacting us at info@dbrs.com.