(Recasts with background, analyst comment)
By Nicole Mordant
VANCOUVER Dec 12 Teck Resources Ltd
said on Monday it has agreed with major customers a benchmark
price of $285 a tonne for the first quarter of 2017 for its top
quality steel-making coal, the highest quarterly price in more
than five years.
The price is 43 percent up on the fourth-quarter industry
benchmark of $200 a tonne, and helped to boost Teck's share
price by nearly 3 percent to close at C$22.96 on the Toronto
Earlier on Monday, Japanese steel mill Nippon Steel &
Sumitomo Metal Corp and mining company Glencore Plc
settled the January-March premium hard coking coal
price at $285 a tonne, Platts reported quoting unnamed parties
familiar with the negotiations.
If other international steelmakers follow this price, it
would be the highest industry quarterly benchmark since the
fourth quarter of 2011.
Prices for steel-making or metallurgical coal have
quadrupled this year on the back of Chinese government curbs on
domestic production and supply disruptions, reviving the
fortunes of producers like Teck, which just a year ago was
struggling to reduce debt and lost its investment-grade rating
amid weak commodity prices.
Vancouver-based Teck, also said it has ratified new
five-year collective agreements with unionized employees at its
Fording River and Elkview coal mines in British Columbia.
Teck's first-quarter realized prices will reflect a
combination of sales at the quarterly contract price and spot
sales, the Vancouver-based company said in a statement.
As a result of the higher prices, Teck should be able to
reduce its net debt to C$6.2 billion ($4.73 billion) by the end
of the first quarter of 2017 from C$7.6 billion at the end of
September, said RBC Capital Markets analyst Fraser Phillips.
The de-leveraging of Teck's balance sheet "will continue to
drive outperformance of Teck's share price over the next three
to six months," Phillips said in a note to clients.
Teck's shares have surged nearly 500 percent this year, on
the back of the coal price rally and helped by stronger zinc and
copper prices as well.
The Fording River agreement would expire on April 30, 2021
and the Elkview contract on Oct. 31, 2020, Teck said. As a
result of the new collective agreements, Teck expects to incur a
one-time, after-tax charge to profit in the fourth quarter of
approximately C$35 million ($26.65 million).
($1 = 1.3118 Canadian dollars)
(Reporting by Nicole Mordant in Vancouver; Editing by Chizu
Nomiyama and Lisa Shumaker)