Is Teck Resources a Good Investment?

Is Teck Resources a Good Investment? When most people think of mining, fine jewelry comes to mind. Gold, silver, diamonds, and other gems all come from deep below the earth’s surface. However, jewelry makes up a small fraction of the goods manufactured from mined materials. Among other uses, precious metals are a core component of consumer electronics and automobiles.

Computer processors rely on precious metals, as do memory (RAM) and circuit board fingers, connectors, and pins. Circuit boards, cables, wires, and hard drives don’t work without the unique contributions of copper, gold, palladium, platinum, silver, and zinc (among others).

More importantly, precious metals like palladium are a must-have for the semiconductor chips that give digital technology processing and memory power.

Supply Chain Disruptions Hurting Manufacturers

Chips are core components of mobile devices, and they are found in every object connected to the world wide web, i.e., the Internet of Things (IoT).

Demand for chips is going up at the same time manufacturers are struggling with supply chain disruptions, and that has created a widespread shortage of these critical computing parts.

Meanwhile, the auto industry is in shambles as crucial materials are impossible to secure for the manufacture of new vehicles.

For example, palladium is essential to the catalytic conversion process, and nearly every car and truck relies on computer chips to provide customers with the features they have come to expect.

Could Russia’s Invasion Could Help Teck Resources?

Certain precious metals were already in short supply long before February of 2022. However, the Russian invasion magnified the crisis dramatically, as Russia is the world’s top producer of palladium. Russian mines are responsible for 37 percent of the global palladium supply, as well as nearly half of the world’s nickel, a quarter of the world’s aluminum, and 13 percent of the world’s platinum.

Sanctions and supply chain disruptions related to the Russian invasion of Ukraine have already impacted industries that rely on the country’s precious metal exports. Mining companies that operate outside of Russia are stepping in to fill the gap, and that means big opportunities for investors.

Canada-based Teck Resources (NYSE:TECK) has seen its stock climb more than 140 percent in the past five years, and it has gone up nearly 60 percent since the beginning of December 2021.

That has piqued investor interest, and many are asking what does Teck Resources do? Will Teck stock go up further? And, of course, the big question – is Teck stock a buy?

What Metals Does Teck Produce?

Teck Resources is a Canadian mining company that specializes in metallurgical (met) coal and copper, as well as zinc and oil sands.

It is second on the list of the world’s largest seaborne metallurgical coal exporters and in the global top three when it comes to zinc.

Teck Resources is in the process of increasing its copper mining production by 80 percent through a new mine in Chile, and its lead mining operation is expanding. However, given the current demand for palladium, one of Teck’s most interesting projects is an emerging opportunity in Mesaba, Minnesota.

This piece of property is located about an hour north of Duluth, and it appears to be rich in copper, nickel, and palladium. Teck owns 100 percent of the mineral rights, which puts the company in an optimal position to bring these precious metals out of the ground and into the marketplace.

What Is The Difference Between Teck A and B Shares?

Publicly-traded companies are under constant pressure from shareholders, which often prevents business leaders from taking the long view. Often, they avoid projects that might impact short-term results, even if they could achieve long-term gains by making the investment now.

Teck Resources has two classes of shares – A and B – and the A shares have one very significant advantage. Each Teck A share has 100 votes for every one Teck B share vote.

But there’s a catch.

Teck A shares aren’t available to most retail investors. The Keevil family, descendants of founder Norman Keevil, control most of those shares – and those votes.

The good news is that this structure gives the family some flexibility when it comes to making decisions with long-term results in mind. Norman B. Keevil is the company’s Chairman Emeritus, and Norman B. Keevil III serves as Vice-Chair of the Board.

Why Did Teck Stock Go Up?

Teck stock has gone up steadily since the March 2020 market crash, and it had a particularly good run after announcing its Q1 2022 financial results before the market opened on April 27th. Highlights of the report include total Q1 2022 revenues exceeding CA$5 billion as compared to just below CA$2.6 billion for the prior-year period.

This came in above analyst expectations and is primarily attributed to increasing commodity prices. For example, copper prices have gone up 17 percent year-over-year, zinc prices have risen 36 percent year-over-year, and metallurgical coal prices increased by an astonishing 173 percent.

Teck’s adjusted earnings per share totaled CA$2.96, which marked a substantial improvement from Q1 2021’s CA$0.61 per share.

Suffice it to say that investors were pleased with these results, and Teck stock price rose as much as 12 percent at some points throughout the day on April 27th.

Is Teck Stock A Buy?

Despite a strong first quarter, Teck’s leadership did not update the 2022 guidance shared during the Q4 2021 earnings call. Chances are that they have determined it is unwise to rely on continued windfall profits from suddenly high commodities prices as these could decline again as market conditions change.

It is also worth noting that Teck has significant exposure when it comes to inflation, and Canada’s rate of inflation is going through the same unchecked rise that has impacted the US economy.

Teck leadership pointed out that operating costs are up 13 percent year-over-year due to inflation – and that almost seems like a bargain considering diesel prices have increased a whopping 52 percent year-over-year.

Whether or not the palladium project pans out, Teck is in an excellent position to grow its copper production. That promises to be profitable, as copper demand is expected to increase 26 percent by the end of the decade. Teck is well-prepared to make an important contribution to filling the rising demand for certain commodities. That fact, coupled with a reasonable valuation, makes Teck stock a buy.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.