November 30, 2021

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Teck’s CEO Says the Miner Has Survived Downturns Before

(Bloomberg) — Under fire from investors who have called for his ouster, the chief executive of Teck Resources Ltd. said the miner has weathered downturns before.

On Monday, Impala Asset Management LLC revealed it sent a letter to Teck’s board in February, criticizing CEO Don Lindsay for decisions it says have hurt the share price and saying he is overpaid. Earlier this month, an Australian hedge fund, Tribeca Investment Partners, also called for Lindsay’s replacement and said the company should divest its energy and coal businesses.

Both investors are critical of Teck’s dual-class share structure, which allows the Keevil family — which has been involved with the firm for more than six decades — to control the company.

Most of Teck’s A-shares are held by Temagami Mining Co., which is owned by the Keevil family and Sumitomo Metal Mining Co. Speaking at a Bank of America conference on Tuesday, Lindsay said that only Temagami has the power to dismantle the dual-class structure, which he believes will stay in place “for the foreseeable future.”

Thus far, Lindsay has refrained from commenting directly on the shareholder activism, although the company has issued statements saying he has widespread shareholder support. The miner also says the stock’s decline — 59% in the past year in Toronto — is mostly due to falling commodity prices.

Lindsay reiterated that point at the virtual conference and also defended his strategy for the company.

“We know that investors tend to be cautious during these phases,” he said, referring to Teck’s “investment cycle” in which it’s ramping up its copper business and trying to boost its steelmaking-coal margins. “We’ve seen something very similar before during financing and construction of another high-altitude copper mine –- Antamina –- which also coincided with a significant downturn in the market.”

‘Penalty Box’

Lindsay was referring to construction of the Antamina mine in Peru which was completed in 2001, spokesman Chris Stannell said in an email following the speech.

Throughout that period, Teck’s share price was in the “penalty box,” Lindsay reminded analysts. “But our then-CEO and now chairman emeritus Dr. Keevil, he had the vision and the tenacity to see it through.”

Since then, Teck has weathered other commodity downturns. In 2015, the company was stripped of its investment grade rating amid the collapse of the commodities supercycle.

“By contrast with the last downcycle which ended in 2016 we are in a much stronger position with a reduced debt profile; strong liquidity; and secured QB2 funding,” Lindsay said Tuesday, referring to the Quebrada Blanca expansion project in Chile.

Bob Bishop, the CEO of Impala, said he began buying Teck shares in December 2015 with most of the fund’s position purchased in January 2016, the only saving grace for the investment.

“If you are smart enough to buy Teck once every seven years when people think Teck may go broke, then you can make a great return because the commodity markets usually bail them out,” he said by email Tuesday. “I was that buyer in 2016.”

Teck began that year at C$5.34 a share in Toronto and rose to nearly C$39 by early 2018. The stock was at C$12.12 at the end of trade in Toronto on Tuesday.

(Updates with CEO comment in fourth paragraph. A previous version corrected references to Lindsay weathering downturns, and removed a reference to the Antamina mine.)

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