If your computer starts acting strangely, you probably know whom to call. But when a promising miner takes an 8% nosedive, you come to The Motley Fool for Teck support.
Teck Resources (NYSE: TCK) delivered a solid 76% surge in adjusted net earnings for the fourth quarter of 2010. In Canadian dollars, it reached C$548 million on record revenue of C$2.8 billion. Cash flow from operations reached a staggering C$2.7 billion through the full year of 2010, which permitted the company to reduce its formerly troublesome debt burden by another C$3.1 billion.
Those pining for growth will find it here. Teck expanded met coal production by 22%, yielding 23.1 million tons during a year in which realized prices rose 15% to $181 per ton. As this Fool has reported, recent supply disruptions have exacerbated an already increasing tightness of physical supply in Pacific seaborne met-coal trade, and recent pricing of first-quarter production at more than $200 per ton suggests that coal operating margins are poised to expand handsomely from the 39% margin recorded for 2010.
An ongoing strike at Teck's Elkview mining complex could threaten a portion of the company's current 2011 guidance of 24.5 million to 25.5 million tons. That could conceivably permit eastern rival Alpha Natural Resources (NYSE: ANR) to surpass Teck's met-coal volume, if the former's integration of Massey Energy's (NYSE: MEE) assets proceeds smoothly. Alpha is targeting pro forma met production of 24 million to 26 million tons.
With Teck's coal fetching a cozy $63-per-ton premium over Alpha's product, however, Teck's outlook for met-coal profitability remains virtually peerless. With the Australian operations of BHP Billiton (NYSE: BHP) and others still digging themselves out of major flood-related disruptions, I believe Teck's competitive position in this market has never looked stronger.
Although Teck's copper production grew by only 1.6% in 2010, a 49% operating margin converted that unit's 28% share of consolidated revenue into a delectable 36% share of the miner's operating profit. As hot has the met-coal market has become, copper remains Teck's most efficient source of profit.
Fortunately, that's where the lion's share of Teck's future production capacity resides. Teck envisions a 12% increase to 350,000 tons for 2011, with a further expansion to 400,000 tons by 2012. Thereafter, a series of exciting development projects like Quebrada Blanca II and the Galore Creek joint venture with NovaGold Resources (AMEX: NG) typify the attractive state of Teck's long-term pipeline.
Considering Teck's 20% stake in the Fort Hills oil sands project -- which operator Suncor (NYSE: SU) intends to complete by 2016 -- and a feel-good 88MW wind farm project in Alberta that will deploy 55 General Electric turbines, I believe that any careful evaluation of Teck Resources will reveal a unique gem of immutable growth opportunities across a set of key commodities with bullish long-term fundamentals.
I have no interest in rationalizing the market's sell-off of Teck shares in the wake of fourth-quarter earnings. To the contrary, I welcome the opportunity to initiate a position without chasing this stock skyward. I'm once again adding the stock to my silverminer portfolio at Motley Fool CAPS. I invite you to join the free community of Foolish investors to cast your own vote for Teck Resources, and I welcome your comments below.
- Add Teck Resources to My Watchlist.
- Add Alpha Natural Resources to My Watchlist.
- Add NovaGold Resources to My Watchlist
