A slump in commodity prices and dramatic shifts in exchange rates that put Canada’s dollar neck and neck with the U.S. currency for much of last year made for extraordinary circumstances in the mining sector, which has otherwise been enjoying booming demand for its products. “It was quite an unusual year,” says Donald Lindsay, who as president and CEO of the province’s largest miner takes a contrarian view of the company’s performance in 2007.
Vancouver-based Teck Cominco Ltd. (TCK.B-T) saw revenues slip marginally to $6.4 billion, while income plummeted nearly 34 per cent to $1.6 billion. But when exchange rates and low prices for zinc and coal are factored out, the activity generating those figures suggests there’s something amiss. “We don’t think the income dropped – we think it’s up,” Lindsay says matter-of-factly. “But if you compare it to the usual year, it looks like it’s down.”
Having been introduced to the mining industry 40 years ago at the age of nine (during a canoe trip with his father to the Temagami Copper property in Quebec, now part of Teck’s holdings), Lindsay now has his sights fixed squarely on the future. Chile is one particularly bright prospect, with Teck Cominco holding the largest land position of any foreign miner in the country. It is actively ramping up production at existing sites as well as properties gained through the acquisition of Aur Resources Inc. and Global Copper Corp. (GLQ-T) One of Teck Cominco’s Chilean properties is expanding production fourfold and will reopen at the end of 2009, while another, according to Lindsay, will more than double its production capacity. A new resource of a billion tonnes has also been announced.
It all adds up to happy days ahead for Teck Cominco, which considers itself insulated from a U.S. recession. Lindsay, who spent 19 years heading the mining group at CIBC World Markets, gained a broad perspective on the mining industry and is now quite bullish on the China market. “People are worried about a U.S. recession, but in our core commodities, the U.S. economy has become a much smaller influence,” he says. The U.S. represents a mere nine per cent of the copper market, for example, whereas China is a sizeable 26 per cent. Any growth in China – seven per cent is not an unreasonable estimate – would more than make up for a drop in U.S. demand, Lindsay argues. “Most people in North America read U.S.-centric media, and they don’t realize that the rest of the world has moved ahead quite a ways.”
In fact, Lindsay seems more concerned with having the infrastructure in place to meet demand than with the risk of a recession. The company faces a tight market for skilled labour, while locations for future mines are limited to the Americas and Australia. The political climate – and support – available in other jurisdictions simply makes them not worth Teck’s consideration. “Sometimes the toughest decisions to make are often just, are you comfortable with a country or not. Or a state or a province, frankly,” Lindsay says. “Any province – B.C. included – has to be cognizant that their jurisdictions are competing for investment.”