CIC To Buy Equity Stake Teck Resources, China To Increase Investment In The Mining Sector
July 10th, 2009 | File Under : Mine Trade & Market - mining companies
Teck Resources is a mineral exploration mining activities have a very knowledgeable. Teck mining company that produces zinc, copper, coal and metallurgy. To maintain the existence of the company and support the mine operations company, Teck will sell some equity stake to the state-owned China Investment Corp. (CIC). Equity stake sale is expected to pay company debt.
Purchase some equity stake Teck, owned by China to increase the amount of Chinese investment overseas, particularly investment in the mining sector. China will continue to increase investment in the mining sector, because the Chinese want the supply of mines that can support the growth of industry in China. Investment in the mining sector is a strategic plan that is applied by China to gain bargaining power of the price of the purchase and sale of mines in the world.
Chief Executive following statement, Teck Resourse, the purchase of equity stake by CIC, “This transaction is an endorsement of Teck’s future and provides an immediate and very positive impact on Teck’s balance sheet. It puts Teck back on the growth track and allows us to deepen our relationship with the largest customer of our core products.”
Following information regarding the sale of equity stake Teck.
Vancouver, British Columbia-based Teck will sell 101.3 million shares at C$17.21 each, a 7 percent discount to Thursday’s closing price of C$18.50 on the Toronto Stock Exchange.
Despite the discount, Teck’s shares rose 13.5 percent, or C$2.50 to C$21 in afternoon trade, the biggest gain among base metals miners in Toronto.
The deal, which will give CIC a 6.7 percent voting stake in the company, comes as Chinese companies have been taking advantage of depressed resource prices to buy stakes in producers and lock in access to raw materials.
The Chinese Commerce Ministry recently said it would steadily push its “go abroad” investment policy, unperturbed by the collapse of a $19.5 billion tie-up between Rio Tinto ( RIO – news – people ) and Chinese metals conglomerate Chinalco.
The deal provides China with no guaranteed percentage of Teck’s production. Teck said that CIC has said it is acquiring the shares “for investment purposes as a long-term passive financial investor.” The fund has agreed to hold the stock for at least a year after the deal closes in mid-July, Teck said.
CIC was created in 2007 to manage part of China’s foreign exchange reserves for higher returns. The $200 billion fund became wary of overseas expansion after losing money from its investments in Morgan Stanley ( MS – news – people ) and Blackstone, but it has recently shown renewed interest in overseas markets as the global financial crisis eases.
DEBT PAYDOWN
Teck will use the proceeds of the deal to cut bank debt. The miner took on nearly $10 billion in debt last year to buy Fording Canadian Coal Trust, which made it a top producer of metallurgical coal, or coal used in making steel.
The company has sold some assets to pay down the debt, and has said it planned to sell a 20 percent stake in its coal business. Teck spokesman Greg Waller said the company still plans to sell the minority stake in the coal business.
David Davidson, an analyst at Paradigm Capital, noted there had been recent speculation that Teck would do some sort of equity sale to pay down debt.
He said he doubted the CIC deal would face Canadian regulatory or government obstacles, as it is for an equity stake in the company, rather than a piece of a particular asset.
“It doesn’t get them any closer to a pound of zinc or a tonne of coal,” he said.
However, he said the deal would make it easier for Teck to do future deals with Chinese companies.
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