Teck Resources (TECK 2.56%) and Vale SA (VALE 1.14%) are investing for the future. Although it's been costly for both, if you are looking to buy a miner, the investments they have made will be long-term positives despite the expense. However, there's a fly in the ointment as Vale looks to open a new, low cost iron ore mine... and that makes Teck and its Oil Sands investment a better option for most investors.

Image source: Teck Resources.

The commodity rebound

Last year was a good one for miners like Teck and Vale because commodity prices started to head higher again. That was welcome relief for this pair since it lifted some of the concern about the costs associated with key investments they've been making.

For Vale the investment is a new iron ore mine called S11D. It's huge, but should be among the lowest cost iron ore mines in the world once it's fully up and running. It will allow Vale to shift production from higher cost mines to S11D and reduce its costs even more than it already had during the commodity downturn. To give you an idea of the magnitude, the cash cost to produce iron ore from the new mine is roughly 40% lower than Vale's cash costs at its existing mines.

Vale's S11D is a valuable project for the company. Image source: Vale SA.

Teck, meanwhile, is investing in a Canadian Oil Sands project known as Fort Hills. It owns 20% of the project, which is being run by 50.8% owner Suncor Energy, an oil sands expert. France's Total owns the rest of the project. There are a number of benefits to the project, including a 50 year life expectancy and operating and sustaining costs that are projected to be in the $30 per barrel range. But the biggest plus is that it takes Teck from producing three commodities (steel making coal, copper, and zinc) to four. That vastly increases the miner's diversification.

Bad timing

The problem for both Vale and Teck, however, was timing. These projects were being built while commodity prices were weak, putting pressure on the pair's top and bottom lines at the same time that they were on the hook for building costs. Debt quickly became a big concern for investors.

Debt isn't exactly out of control for either miner. Vale's long-term debt made up about 40% of the capital structure at the end of the third quarter. That figure at Teck was around 33%. Both have been working hard to improve their balance sheets, including selling assets and extending maturities. Vale, for example, recently inked a deal to sell its fertilizer business for $1.5 billion in cash and 42.3 million shares of acquirer Mosaic's (MOS 1.07%) stock. Further debt reduction was the main goal.

Teck has made huge progress on the balance sheet. Image source: Teck Resources.

As it currently stands, after a tough spell, investors appear increasingly comfortable with Vale and Teck's abilities to pay for their growth plans. That said, it looks like Teck is in slightly better balance sheet shape. But it appears much better situated when you consider another big event at Vale: the Samarco mine disaster.

Here's the short version of the story: A containment system for mine waste at Samarco, which is owned 50/50 by Vale and BHP Billiton (BHP 1.79%), ruptured in late 2015. A roughly $6 billion legal settlement with Brazil has been reached, with costs stretched out over more than a decade. That will act as a damper on the company's bottom line for years into the future. However, there are additional claims (at least $42 billion worth) that could materially increase the cost of dealing with the issue if they hold up in court. At this point, Vale's financial exposure is still open ended. Teck doesn't have that kind of risk hanging over its head.

Safety first

Vale and Teck are both working to better their businesses by investing in large and expensive growth projects. Teck looks like it's in slightly better financial shape as its Fort Hills oil expansion nears completion. But that "slight" difference starts to look a lot larger when the lingering impact of the Samarco disaster is added into the equation at Vale. Most investors examining this pair of miners should err on the side of caution and go with Teck.