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

The problem is that they have lots of debt, and are not making any money on these coal and copper prices. When you have a heavily indebted company that is not making money that is not a good combination. You are really making a call on coal and the copper markets.

Has owned this in the past. Doesn’t particularly like base metals yet, until we know how much slowdown we are going to have in the global economy. Because of that, he has been shunning base metals. He would want to see copper prices start to rebound and to break above the 200 day moving average. His company has this with a $14 target. There are better areas to be in. 3.3% dividend yield.

Sold his holdings because of the supply/demand fundamentals on met coal. There is still a lot of supply. You need a rise in demand from China and you need less supply. There are US coal companies that have gone bankrupt, but are still running full out because the banker needs the cash flow. The company also has big commitments to the Fort Hills oil sands project, to the tune of about $800 million a year for the next 3 years, and that is really draining cash out of the company.

(A Top Pick Aug 8/14. Down 51.43%.) The difficulty with this is like the difficulty in energy stocks. There has to be a base on the commodities, and then there has to be money directed into them.

The name is very cheap. He just doesn’t see where the catalyst is for this. While it is cheap, coal is under a lot of pressure. Not a lot of upside under zinc. Copper has been weak lately. As some point in time, it will be a great “go to” stock, but doesn’t see this at anytime soon.

Short. Coal is definitely one of the key drivers on the valuation. This has a near perfect combination of negative headwinds. 1) Poor commodity pricing on zinc and coal and 2) a stressed balance sheet. Low return on equity at about 2.1X. Have missed multiple earnings reports and have negative cash flow. He has also started to see some stress in the credit market. Dividend yield of 2.58%.

This keeps falling and he keeps getting tempted to say there is going to be a trade because it has fallen so far. Doesn’t like where they are positioned right now. Coal looks awful. Copper, their other major asset, looks awful too. All their excess cash flow over the next couple of years is going into Fort Hills and he doesn’t think they can even sustain the dividend at current levels.

This is a coal conversation. He owns less in the commodity area. This is the only name. He is there just in case he is wrong. He is negative on commodities across the board. They trade in decade long cycles and we are half way through a negative cycle. There is no rush to be in commodity stocks. He has a little bit of this one in case he is dead wrong.

He owned it when the Chinese were major buyers of coal for steel production. TCK.B-T is a price taker. They can’t do much about the prices of what they sell. They are low now and they can’t do very much about it. He sees weakness in China. He is staying away from all the metals and minerals.

It is in a long term downtrend. It just makes lower lows and lower highs. We are back at the lows again and the question is whether it will hold and we build a base. Buying in here with a stop below the previous low will get you out if it is still going to keep making lower lows. The $20 area is a strong resistance. The stock has not bottomed yet. He does know if the copper and steel space is going to get strong for a few years.

His clients’ cost base is high. He probably should have sold, but did not. He is keen on copper because of the North American recovery. He is also keen on zinc. Met Coal has gone down. The hope is that eventually China will start using more coal, but they may not because of reasons of pollution. If you see a better alternative in the metals field, you may want to take a tax loss. But hold for now.

They have to take production off in the coal market.

The most notable news on this was the recent cut back. They are shutting down their coking coal production, a 6% reduction for the year. This is recognition of the fundamental weakness in coking coal prices. It is still a copper, coking coal producer. Copper still looks pretty decent at $2.75 which could be closer to $3 into 2016. Probably a good buy in the mid-$13 range, might bounce back up to the $16 range.

This is an ugly duckling. It has been an ugly story for a long time. Commodities are in a bear market that should last for another 5 years. He doesn’t see any hope for this particular stock.

This is the only mining stock that he owns. This is more in metallurgical coal, zinc and copper. Most of its mines are in friendly environments. It prudently cut its dividend recently, rather than borrowing. It will come back when profitability comes back.