When you're down on your luck, sometimes all you need is a helping hand.
Since that time, Teck shares have promptly doubled, and at least one helping hand believes that a broader recovery looms. An analyst at UBS Investment Research upgraded Teck this week after projections for 2009 coking coal prices improved substantially from $85 to $129 per tonne. Benchmark coking coal prices, as with iron ore, are negotiated each spring between major miners like BHP Billiton
With global steel production off by about 30%, and U.S. contingents like Nucor
One might say Ben Bernanke has also extended a helping hand to Teck, since the Federal Reserve's foray into quantitative easing this week brings the potential tally of the financial crisis beyond $13 trillion, and seems to have brought the inflation-hedging commodities sector back into the focus of dollar-weary investors.
A parting word of caution
While the added cash flow implied by these prices will permit Teck Cominco to pay down some debt, the scale of remaining indebtedness ($9.4 billion as of early March) leaves me entirely unwilling to suggest that this miner is out of the woods. To the contrary, I believe that major asset sales will still be required, including the possible disposition of a minority stake in the Elk Valley Coal project.
Finally, I urge Fools to carefully differentiate between the potential influx of inflation-anticipating interest in commodity equities and true demand recovery. The same analyst who raised the outlook for Teck also cited "optimism for an economic recovery". On the latter point, I urge extreme skepticism.