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

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.

(Market Call Minute.) She holds this in some of her clients’ portfolios. It has had a really nice bounce off the lows, but it is really playing in to a weaker US$. This is a long-term cycle play, so if your time horizon is 5 years+, she would hold it.

A huge beneficiary of the US$ getting weaker. The stock had a reaction off a very cheap price. There is probably going to be consolidation in the US$, which will lead to a consolidation in some of these commodity stocks. Zinc looks very good going forward. If you own, you can trade it on rallies, and then replace it on dips, because there is still going to be a fair amount of volatility in these commodity stocks.

The future for this company is going to be what it is for any resource company. They just happen to be one of the biggest, best and most liquid resource stocks in Canada. Buying this is really a bet on Canada. That is going to take something of a rebound in the developing markets. China has grown from an infrastructure perspective as much is it is going to for a while.

Doesn’t like the stock in here. Had owned it earlier in the year. Met coal still looks like a mess. Copper really hasn’t turned. All their excess cash flow over the next couple of years is going into Fort Hills, which they are not even the operator on. Oil sands is still the worst thing you want to be in. The balance sheet is stretched. They have enough cash to keep going right now. Dividend yield of 1.05%.

Had been shorting this because the whole commodity sector had been slowing and contracting dramatically. It has had a really good run off the bottom, so he thinks you Sell your position and wait for it to drift back down.

We have seen some settlements for Met coal prices that are a bit firmer than people expected. This has gone a long way to pushing TCK.B-T forward. He believes they will be a survivor. They are dependent on the outlook for coal. He prefers HBM-T. They have about 3 years of liquidity left so commodities would have to stay low for a long time for this company to run into trouble.

China is going to continue to slow and it is debatable to say whether the bottom is in in commodities. He has not seen enough to say the long term bottom is in in this stock price. He needs to see a base develop for maybe a year. He would take his money off the table. Maybe cut the position in half and maybe buy back at another low.