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With major bank stocks striking new lows, it takes a special kind of pain to be outperformed by the likes of Bank of America (NYSE: BAC ) . With a larger percentage decline over the past year, welcome to the agony of Teck Cominco (NYSE: TCK ) .
Several readers inquired about the company recently, wondering whether opportunity is concealed by lingering debt concerns. Teck's massive restructuring continues, but a $607 million net loss for the fourth quarter and a credit rating demotion from Moody's to junk grade at Ba3 present challenges that may require more drastic measures to come.
Teck has moved quickly to sell its portfolio of gold assets, but the company's tenuous position has provided little leverage in the pricing of those sales. Kinross Gold (NYSE: KGC ) walked away with the Lobo-Marte project in Chile, acquiring both Teck Cominco's and Anglo American’s (Nasdaq: AAUK ) stakes for a mere $42 per ounce of gold in reserves. Barrick Gold (NYSE: ABX ) scored a sweeter deal yet, acquiring full ownership of the Hemlo Mines joint venture with Teck Cominco for a mere $65 million. Particularly in the context of gold's favorable outlook, acquiring a working gold mine for just over $100 per ounce of gold in the ground is truly remarkable for Barrick. Buenaventura (NYSE: BVN ) picked up Teck's stake in the El Brocal base-metal venture for an easy $35 million.
Unlike some of the more questionable deals within the banking sector, Teck could scarcely have imagined the events that turned an exciting acquisition into a recurring nightmare. Unfortunately, as alternatives fade, Teck may be forced to sell a stake in the very same asset which the company sacrificed its fiscal health to acquire: the Elk Valley Coal project. Although painful to consider, such a move could be Teck's only means of survival.
So far, asset sales have offered little progress against the $9.4 billion in remaining debt. Highlighting the degree of pessimism built into the present share price, though, Teck's cash stash of $1.4 billion amounts to more than 92% of the company's entire market capitalization. Like the ravaged bank stocks, Teck Cominco is being priced for failure. As long as the credit markets remain impaired, this Fool is in no position to second-guess that prevailing sentiment, and views any move into Teck Cominco at this juncture as extremely speculative.