Teck Cominco chief sees continued high commodities prices
Financial Times
The chief executive of Teck Cominco, the world's largest zinc producer, on Thursday dismissed the notion of a commodities "bubble", saying raw material prices would remain high for the foreseeable future.
Donald Lindsay told the Financial Times there should be no analogies with the dotcom craze.
"We are producing metal every day and the cash is coming in the door," he said in his first interview since Teck, which is based in Vancouver, launched an unsolicited cash-and-stock offer worth C$17.8bn (US$16bn) for Inco, the nickel producer, on May 8.
The move raised the temperature in the Canadian mining industry, where four companies – including Falconbridge and Xstrata – are now battling for dominance of the base metals industry.
"Commodity prices have had one hell of a run and there will be a correction. But will they be going back to long-term levels? I doubt it," Mr Lindsay said.
He cited strong demand from China and expectations that supply sources would remain tight, partly because of political risk in some of the countries with the largest deposits.
Mr Lindsay and other senior executives at Teck this week embarked on an international roadshow designed to gain the support of Inco and Teck Cominco shareholders – both institutional investors and hedge funds – for their company's offer.
Teck Cominco's bid for Inco is conditional on Inco abandoning its pursuit of rival Falconbridge, a possibility that became more likely last week when Xstrata, the UK-listed Swiss mining group, made its own bid for Falconbridge.
"It is a lot clearer [for Teck] now than when we launched the bid," said Mr Lindsay.
"We were taking a calculated risk that Xstrata would come in – we didn't know for sure," he added.
He insisted there had been no co-ordination with Xstrata, or any communication between the companies since last November.
However, he believed Xstrata would emerge victorious in the tussle over Falconbridge, on the grounds that the Swiss mining group was likely to outbid Inco.
"Inco would have to raise their bid substantially ?.?.?.?and Xstrata has a lot more firepower," Mr Lindsay said, adding: "[Xstrata] sound like they are pretty determined."
Teck operates the Red Dog mine in Alaska, the largest zinc mine in the world.
It also has a 22.5 per cent stake in the Antamina mine in Peru, which produces zinc and copper. Teck also jointly owns gold mines in Ontario.
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