Teck Resources Limited (NYSE: TECK)
Canadian Copper mining company repositioning itself to be a pureplay for the next leg of the megatrend
Teck Resources Limited (NYSE: TECK)
Teck Resources Limited is a Canada-based mining company with global operations and a focus on copper, zinc, and steelmaking coal. The firm is currently in the process of repositioning operations to focus nearly solely on copper production as they sell off their steelmaking coal assets throughout eFY24. The firm will raise nearly $10b in cash as a result, which will provide significant flexibility to deleverage their already-strong balance sheet and return cash to shareholders in the form of buybacks and dividends.
TECK Investment Thesis
Copper is one of the megatrends that I have briefly highlighted throughout ThePeachPit over the last year but haven’t given individual names the time and attention. The demand for copper is expected to increase in years to come, beginning with the renaissance of electric vehicle demand that began in 2020 and has since dwindled down, the electrification and hardening of the grid and infrastructure, and now the explosion of hyperscaler data centers that is driven by the GenAI adoption. Reuters reported that the adoption of GenAI can add 1mm tons of copper demand by 2030, which may push the supply/demand into imbalance and drive up copper prices. Switzerland-based Trafigura estimates that the 1mm tons of additional demand will exacerbate the deficit that was previously estimated to be in the range of 4-5mm tons through 2030 as a result of renewable energy infrastructure. In the near-term, the deficit for CY25 is expected to reach 100,000 tons, up from 35,000 tons in 2024. S&P Global estimates total copper demand to reach 30mm mt/year by 2035 driven by these factors.
Spot copper has consistently trended above its historical pricing since the run-up in 2020 and is anticipated to expand from these levels. CME Group prices copper futures at $4.36/ton by January 2025 and above $4.40/ton beyond 2027. Though futures remain far out of reach, prices could potentially far surpass these figures given the severity of the expected deficit, especially when taking into consideration geopolitical risks.
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