Teck shares fall on debt-cutting plan - Action News
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Teck shares fall on debt-cutting plan

Shares in Teck Cominco Ltd. dropped more than 15 per cent in afternoon Thursday after the debt-laden mining company unveiled its first steps to reduce its debtload.

Shares in Teck Cominco Ltd. were crunched in trading Thursday after thedebt-laden mining company suspended its dividend and unveiled its first steps to reduce its borrowings.

Teck shares plunged more than 21 per cent, or $1.12, to close the trading day on the TSX at $4.10.

The Vancouver-based mining giant announced a number of steps it would take to generate cash and reduce spending as Teck Cominco deals with a huge debtload.

"Current global economic and financial market conditions dictate that we take all prudent steps available to us to significantly reduce spending," said Don Lindsay, Teck's president and chief executive officer.

Teck said it will stop payingdividends on its A and B shares, saving $486 million, but hurting the short-term return for existing investors.

The mining giant also slashed capital budget for 2009 by $730 million. Teck said it will now spend $250 million on capital expenditures next year.

Teck also sold its stake in the Lobo-Marte property in Chile to Kinross Gold Corp. for $40 million in cash and another $70 million in Kinross stock.

Finally, the company said it was exiting from the Petaquilla cooper project in Panama, only retaining a small royalty interest in the property.

Three month stock chart for Teck Cominco Ltd.

Teck's problem is indicative of the current global economic crisis.

Lastsummer, Teck bought the Fording Canadian Coal Trust for $12.4 billion.To pay for the transaction, the company borrowed almost $10 billion, $5.4 billion in a short-term bridge loan and $4 billion in another term loan.

Both financings needed to be repaid, but with commodity prices diving, Fordingwas now only worth a fraction of the pricethat Teck Cominco paid for the coal company.

As a result, Teck started looking for places to save large amounts of cash.

Besides the asset sale, Teck also will reduce zinc production and not go ahead with plans for a new upgrader at the Fort Hills oilsands project in Alberta.

In its latest quarter, Teck posted earnings of $424 million, down from $490 million for the third quarter of 2007.