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

For years analysts, including him, have been negative on this. A long-term chart shows lower lows and lower highs. Now something is changing. Is this because of demand coming back for copper, etc., or a simply short-covering on a relief trade? He is more on the side of short-covering on a relief trade than new demand. For the next few years it probably bounces back and forth between $6-$10 on the low end and the recent highs. He doesn’t like it here, and would be a seller, and buy it back on a dip.

(Market Call Minute.) This is discounting a very strong improvement in copper and in coal prices. Thinks it has run a little further than it should have, so he would wait for a pullback.

This went from $3.85 to the current price of $16+. He had been waiting for them to do some write offs. They did a very small one. The stocks are high volatile situations that people seem to be betting on, as opposed to fundamentals. If something should happen to China, this signals all the way back to $3 again.

Sold his holdings at about $14. The company is going to survive. They’ve cut costs, cut CapX and are in the midst of redoing their balance sheet, pushing the term of their debt portfolio out. They are doing all the right things, but all we need is a synchronized global recovery. If you own, he would continue to Hold, but wouldn’t be chasing it.

If you believe in commodities this is the one to be in. But the balance sheet is lousy.

(A Top Pick July 7/15. Down 14.19%.) Short. Had been Short this from around Nov/14. It subsequently went quite a bit lower. He covered his Short at around $9-$10 in the fall.

Likes this and has been talking it up a little. Believes it has quite a bit of upside, and just has to get through a couple of little areas and it will be on its way. He would continue to Hold, if not Buy more.

Fairly underweight base metals in general. His issue with this company is that most of its leverage comes from metallurgical or coking coal. Steel markets might be depressed for another year. About 80% of its EBITDA might still be met coal, copper and even zinc. China is going to play the lion’s share of the move in respect to those commodities. His only positive near term view is on zinc, which could go from its current price of $0.85 to north of $1 probably by year end.

Hold or Sell? You are taking a lot of balance sheet risk with this company. Very high quality company and very high quality assets. In the copper and coal businesses, and neither of them will be looking good for 2 years. He owns some of the debt.

(Market Call Minute.) The valuation on the stock given bulk commodities, it is still at risk given China’s future.

Feels the current run is over for the time being. There are 3 key issues that people are worried about. The balance sheet, how they are going to get enough money to finish off the Fort Hills oil sands plant. Thinks they’re okay for this year and if they get tight for next year expects they will be looking at asset sales. There are no major debt repayments until out to 2019-2020. However, everything is on hold in terms of the mining of the Fort Hills is up and running.

Everybody is buying this because of its metal exposure, and the potential for a metals recovery. It has $9 billion in net debt. The last quarter was interesting, because they actually made a profit and their costs went down 10%-15%. They are doing the right things. If there is a recovery in metals, their margins are going to expand dramatically because of lower costs. He would use caution.

This has gone from $4 to $15 in 4 months. Financially they are okay. There has been a huge amount of Short covering. He doesn’t understand why people are in a hurry to buy the stock. There hasn’t been a rebound in copper prices in any meaningful way. Coal prices are not that great. Have huge capital commitments they have to make to finish off their share of a large oil project out west, which doesn’t make any economic sense at these prices. If you own, he would Sell. He is actually Shorting this.

It will go up and down in line with copper and other commodities. It went down too far too fast. It has come back up now too fast. Sell it and wait for an opportunity lower.

They were talking about how great it was that they got their costs on coal down to $85-$87, and spot has moved up to just about $100, but there is a junior US company that have their costs down to $60. Teck is probably ahead of itself. If you are a short term investor, he would sell this and try to buy it back cheaper.