Teck Resources Ltd. (TSX:TCK.A) has signed a 10-year deal with Canadian Pacific Railway Ltd. (TSX:CP) to transport coal from its five mines in southeast B.C. to Vancouver area ports.
Teck president and CEO Don Lindsay said in a release Wednesday that the deal provides the company with the certainty needed to realize its coal growth strategy and deliver its boosted production to key markets on time. CP is increasing its coal-handling capacity to provide for Teck’s volume growth as part of the deal. Rates and other financial terms of the deal, which starts April 2011, are not being made public.
Teck plans to increase its coal shipments to 30 million tones by 2013 from 20 million tonnes in 2009.
Roughly 60% of its coal ends up primarily in China, while the remainder is divided between the U.S., Canada, South America and Europe.
“China is undertaking the biggest mass industrialization that we’ve seen,” said Teck spokesperson Marcia Smith. “It’s everything from building cities, buildings rail, building transportation infrastructure – all of that industrialization requires steel.”
Smith said Teck's coal mines in southeastern B.C. are one the world’s largest suppliers of steelmaking coal.
The 10-year deal provides Teck much more certainty than the one-year terms the companies usually agree to.
“One of the hallmarks of this new agreement is really the collaborative approach that the two companies have agreed to use in terms of sharing more information about our respective businesses,” Smith said. “That includes helping CP understand our growth objectives so that they can better plan around supporting us in achieving our goals.”
Teck reduced its coal guidance in September, citing, among other things, the affect of temporary capacity constraints at Westshore Terminals in Delta.
BIV reported this week on Teck’s entrance into the wind energy sector and its oil sands play (See “Teck Resources jumps into renewable power game with Suncor Energy but stays quiet about oilsands projects”– October 5-11; issue 1093).
Teck’s share price range during the last week: $42.65 to $45; 52-week high: $47.60; 52-week low: $29.99.