There are several I’ve been eyeing. But after it increased its dividend last month, Teck (TECK) has moved to the front of the list, asserts resource sector expert Nick Hodge, editor of Wall Street's Underground Profits.
Teck is a diversified mining powerhouse. It is the #1 producer of steelmaking coal in North America, and the second-largest exporter of seaborne steelmaking coal in the world.
It is the world’s third-largest producer of zinc, and owns one of the world’s largest fully-integrated zinc and lead smelting and refining facilities. It has several oil sands projects in the Athabasca region.
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And it is, increasingly, a top producer of copper. There is a very strong case to be bullish on copper. Already a top 10 producer of copper in the Americas, Teck announced this month it is moving forward with construction of Quebrada Blanca Phase 2 (QB2) in Chile.
Teck said that Sumitomo will come in for 30% of the project for US$1.2 billion. That sum will go toward the US$4.7 billion construction cost, which it hopes to have producing in three years. Sumitomo will fund one third of the project after those funds are exhausted.
Teck says QB2 should produce about 316,000 tonnes of copper equivalent a year for the first five years, which would put it in the top 20 worldwide. It could expand enough to make Teck a top 10 copper producer globally.
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The deal also allows Teck to use more of its existing capital toward paying down debt, increasing dividends, or making share buybacks. It announced a dividend increase to C$0.15 per share in November, and I expect it to increase it further.
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