Canada’s biggest diversified mining company has made a major shift away from metals to coal.

Teck Cominco Ltd.’s $14-billion (U.S.) offer for Fording Canadian Coal Trust - the largest coal sector deal in history - amounts to a major bet by Teck on continued strength for the commodity, which is used to make steel and is fetching record prices.

If successful, the takeover will transform Teck’s asset mix, sharply increasing coal’s presence in its portfolio, which also includes copper, zinc and gold. The company is counting on a lot more cash flow from copper after mine expansions are completed in the next few years, and it will also see a fresh contribution from new oil sands production. But for now, the company’s financial health is largely about coal.

Last year, when coal prices were about $100 a tonne, coal accounted for just 15 per cent of the Vancouver miner’s revenue. Since then, coal prices have tripled to about $300 a tonne, spurring a flurry of offers and investments in coal assets by steel producers and mining firms.

If Teck’s bid is accepted by Fording unitholders, it will gain the 48-per-cent of the Elk Valley Coal assets in Western Canada it doesn’t already own, and coal will represent more than half of the company’s revenue and as much as 65 per cent of its operating profit in 2009.

Don Lindsay, Teck’s president and chief executive officer, said coal demand from steel makers is expected to remain strong for the next few years because of the booming economies of China and India.

“The outlook for the steel industry, in particular the steel industry that requires seaborne coal, is very positive. India’s steel industry is going to triple in size between now and 2015 and they don’t have their own sources of high quality [metallurgical] coal,” Mr. Lindsay said in an interview.

This is not the first time Mr. Lindsay has altered Teck’s asset mix in an attempt to balance the ebb and flow of various commodity prices. Last year, the company bought copper producer Aur Resources for $4.1-billion (Canadian), in a deal that is expected to help Teck increase its copper production by 75 per cent over the next three years.

The Aur acquisition greatly increased Teck’s exposure to copper, which soon rallied to a record $4 (U.S.) a pound. At the same time, it reduced the company’s reliance on zinc prices, which have declined sharply.

Andrew Martyn, a vice-president at Toronto-based investment adviser Davis-Rea Ltd., said Teck is “the last Canadian mining giant we’ve got - and now they’re getting bigger, more scale. It’s great news.”

Teck’s shares rose 6 per cent yesterday, even though the company will issue about $1.6-billion worth of stock or about 37 million shares, diluting the company’s class B shares by roughly 8 per cent. It will also pay $12.4-billion in cash to Fording unitholders.

Mr. Martyn, a Teck shareholder, said Teck is taking a bit of a gamble that coal prices will remain above average historical levels. “The only question is, does coal roll against them now? Because zinc certainly has. But it’s definitely given them more diversification.”

With its cash-and-stock bid for the 80 per cent of Fording it doesn’t already own, Teck is counting on coal to generate the bulk of its cash flow for now.

“For the next two years here, they are going to have something like 65 per cent of earnings before interest, taxes, depreciation and amortization from coal. That’s a lot,” Orest Wowkodaw, an analyst with Canaccord Adams, said in an interview.

Mr. Lindsay conceded that coal will dominate as the company’s main profit and revenue source in the near future, but said that, over time, coal should be reduced to about a third of company revenue.

“The pie chart changes from year to year based on commodity prices. That’s the strength of having a diversified portfolio strategy,” Mr. Lindsay said.

According to Thomson Financial, analysts are forecasting an average price of $287 a tonne in 2009, $244 a tonne in 2010, and $192 a tonne in 2011.

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