Teck Resources Ltd. (B) (TECK.B.TO)

Life is as good as it is going to get for metallurgical coal producers, trading at about $200 a ton. Restart of mines is going on around the world and in North America. Looks cheap, but given the cyclicality of the business, it is pricing in maximum earnings.

Chart shows a very good base formation coming up from the beginning of 2016, but if the stock wants to go higher, we should not be hanging around below $30. The fact that this failed to get higher, means this will just continue to go sideways, maybe even trade a little lower.

Zinc prices have done well in the last couple of months. It is a commodity to watch. He owns a smaller operator in the north. ZINC-T (Pinepoint mining) is his preferred way to play it.

The biggest Canadian mining company and is pretty easy to analyse. 50% coking coal is exported mainly to Japan and Korea to the higher end steel mills. 25% is zinc, which is doing very, very well. The remaining part is copper, the metal of the electronic age. He’s heard that if we go to electric cars, we need to double world copper production. Positioned reasonably well, but he isn’t excited about commodities in this environment. Not a stock you buy and put away, it’s a stock you trade.

Firing on all cylinders. Coal prices up and they are doing well in coal, zinc and copper. They’ve managed the debt. Cash going through the company has surprised all the analysts, and he suspects the company itself.

This got a bonus when metallurgical coal prices in early 2016 popped to almost $300 a ton from $100 a ton. All their debt problems basically disappeared. They've managed to pay down some debt, and could probably boost the dividend now. There are a lot of positives, which is why the stock basically went from $3 to $35. Metallurgical coal is now heading south again. They still have copper operations and have Fort Hills starting up in oil to help support it. Doesn't see a lot of upside, but is not Short any more. The dividend should grow. You might be better with pure copper names than going with this one.

Guidance on coal sales is weak. They did a great job of de-levering the balance sheet and reducing costs. Today’s slide is based on coal pricing. It is a pretty well run business but he does not like the inherent volatility in commodity prices.

They have done very well in the last year or two. They used to be really a Zinc / Copper company but now they are more dependent on Coal which he doesn’t like. In terms of P/E it doesn’t look bad, but you have to think that the time to buy these resources stocks is often when the P/E is very high hoping for a cyclical recovery, and sell when the P/E is getting low. If he wanted exposure to metals he would be looking at other companies. Activity coming from China has been moving prices up recently but he doesn’t see this as being a continuing trend. China usually builds large inventories then lets prices drop and come in again at lower prices. Sold their holdings some months ago.

Chart shows a very nice recovery in 2016, but now it is showing lower highs and lower lows. Going forward, he expects we’ll have periods of weakness going back to about $10 levels. You can’t talk commodities without talking about China. China is just going through a big party Congress. Historically, they dress up before the Congress, but after that they might go back to deleveraging. China is very highly leveraged. Doesn’t expect any hard landing, but just slower growth. Expects there may be some weakness at hand, but is looking at support of around $20.

Canada’s largest miner of base metals and bulk commodities like coal, zinc and copper. It has lagged some of the more pure plays on base metals. He would prefer LUN-T. He is indifferent on this one.

This one is tough. (Sold his position.) He can’t say it is a strong Buy or that it is a strong Sell. His model price of $69.73 is 140% above the current price, but what is happening is that the model price is decreasing over time because earnings estimates have been grinding lower. If it went to $34.50, he would hit the Sell button. If it got down to $20, he would be a buyer.

Your senior of the somewhat reduced metal space. It has its good mines, and is somewhat exposed to the oil sands, which worries him a little. Has a great history of going up and down, but basically it is a big copper producer. Copper is looking pretty strong.

Zinc is unloved and nobody talks about mining, it’s all Google and Facebook. At some point these things will sell off and the money is going to go into unloved and forgotten spaces. This is trading at 7X earnings and 90% of BV. They are buying back stock. Generating a lot of free cash flow.

The stock has been doing quite nicely and has a nice FMV, potentially huge upside based on the earnings forecast. However, at the top, mining companies always have massive earnings and massive FMV’s. The market doesn’t pay for them. Thinks it has decent potential to about $34.

It has a period of seasonal strength from the second week in January until May of each year. This last year it did not work so well. It is in a trading range with the trend to the downside. Wait until we get closer to the second week of January.