Unconventional Oil

[Tackler]

Teck Cominco Chief Says Nationalization Trend Makes Companies Hesitant

By Craig Wong
25 Apr 2007 at 06:38 PM GMT-04:00

VANCOUVER (CP) -- Teck Cominco [TSX:TCK-B; NYSE:TCK] chief executive Don Lindsay says a trend toward nationalization of resources in some countries around the world may make companies ''a little hesitant'' when deciding to invest.

Lindsay, who is sitting on a massive pile of cash at Teck Cominco and is looking to spend some of it, says while he would wouldn't rule out any country, there were some that he would look very closely at before deciding to invest.

''I think you'll see companies a little hesitant to make major investments even in areas where we have tax treaties and stability agreements,'' Lindsay said after the company's annual meeting.

Teck Cominco has been looking for ways to spend its growing cash hoard after failing in its hostile bid for Inco, which eventually was acquired by Brazilian miner CVRD [NYSE:RIO; TSX:N].

With billions in cash, the Vancouver-based company has made several smaller investments and spent C$200 million this week for a 50% stake in a new oilsands lease.

Lindsay said the company now has three possible oilsands projects it can pursue.

''It will take capital and a lot of it, but we have a lot of capital and it will take skills for large open-pit mining and we have a lot of that too,'' he said.

''But it is very doable and is in one of the best and safest places on earth to invest and that's Alberta, right next door. So over time we could in fact replicate the entire market value of Teck Cominco in this one growth division over a period of eight-to-10 years.''

Lindsay also pointed to the potential of a copper exploration project in Australia, Carrapateena, where the company has had positive drill results.

''If the mining industry is all about a license to dream, then boy is this terrific material to dream about,'' he said.

RBC Capital Markets analyst Fraser Phillips called the Australian drill result ''spectacular.''

''It is early days but this is a lot to work with, and could provide a near-term boost to the share price,'' he wrote in a note to clients.

Teck Cominco reported earlier this week earnings of C$360 million or C$1.67 per share on revenue of C$1.3 billion for the three months ended March 31. That compared with a profit of C$448 million or C$2.19 per share on revenue of C$1.27 billion in the first quarter of 2006.

Teck Cominco attributed the lower earnings to pricing adjustments and a one-time non-cash charge of C$30 million related to the sale of the Cajamarquilla zinc refinery in Lima, Peru, in 2004.

Phillips said Teck Cominco offers investors the potential for ''continued superior returns within the mining industry.''

Our positive outlook for zinc and copper and strong earnings from Red Dog, Highland Valley and Antamina have the potential to drive further share price appreciation.

''Elk Valley and Trail should also remain significant contributors. The strong balance sheet and free cash flow hold out the potential for growth through acquisition as well as the direct return of cash to shareholders.''

The company announced a plan earlier this year to buy back up to 20 million or roughly 10% of its class-B shares.

Shareholders of the company voted at their annual meeting on Wednesday to approve a plan to split its stock two for one.

Teck Cominco's class-B shares closed up C$1.10 to C$87.20 on the Toronto Stock Exchange Wednesday.