Globeandmail.com
MININGDigging metal or extracting oil -- it's all the same game to TeckAn open-pit mining expert, the company has skills that can be transferredBy WENDY STUECK
Wednesday, September 7, 2005 Page B7
MINING REPORTER
VANCOUVER -- It's not a stretch for Teck Cominco Ltd. to go from digging metal out of the ground to wringing oil from Alberta's oil sands, chief executive officer Don Lindsay said yesterday.
And the $475-million deal that will see Teck acquire a 15-per-cent stake in the Fort Hills project is likely to be the first of several aimed at making oil as important to the company as copper, zinc or coal is today, he added.
"We are looking at this investment as the first of hopefully others, and as the core for us of building an oil sands division, as opposed to investing in one project," Mr. Lindsay said yesterday on a conference call.
Teck has been talking to big and small players in the oil sands sector, and those talks will continue, he said. The list of other partners, however, is very short. Total SA, which is buying Deer Creek Energy Ltd., is one of the possibilities.
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The Vancouver-based miner produces coal, copper, gold and zinc, and owns or has interests in projects around the world. With decades of experience in building and operating big, open-pit mines, the company has skills that can be transferred to the oil sands, where projects will involve some of the same techniques.
Mr. Lindsay said Teck's investment in the oil sands is consistent with the company's established strategy of investing in top-quality, long-life projects.
Fort Hills is expected to be in production for at least 40 years. The project also provides a hedge against rising fuel costs for Teck, which, like other miners, is struggling to limit the impact of skyrocketing fuel prices on its operations.
In addition, oil and gas projects typically have higher margins than base metal projects, Mr. Lindsay said.
Teck had said several times over the past few months that it would be interested in an oil sands project. But Mr. Lindsay -- a former investment banker who became Teck president in January and was named CEO in April -- had said that the company was not interested in a minority investment and would prefer to be an operator, not a contractor, in any oil sands play.
Under the terms of yesterday's deal, which is subject to due diligence and regulatory approvals, Petro-Canada is to be the operator and Teck will hold a 15-per-cent stake.
Mr. Lindsay said Teck wanted to get a bigger piece, but was unable to come to terms with joint venture partners Petro-Canada and UTS Energy Corp.
A "long series of discussions" led to the current agreement, he said.
In a separate deal, UTS has agreed in principle to give Teck the right to acquire a 50-per-cent working interest in "Lease 14," an oil sands property close to the Fort Hills project.
In assessing its oil sands investment, Teck took into account factors such as regional infrastructure and political risk, Mr. Lindsay said. On that front, Fort Hills does not present the challenges -- such as cultural and language barriers and unfamiliar regulatory regimes -- that can come with international projects, Mr. Lindsay said.
"This one on a risk-rewards basis looks pretty good." |
