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To: LoneClone who wrote (114450)	12/2/2008 10:56:03 PM
From: LoneClone	1 Recommendation Respond to of 206219

Teck Cominco sees darker coal demand picture Tue Dec 2, 2008 4:38pm EST reuters.com (In U.S. dollars, unless noted) By Cameron French TORONTO, Dec 2 (Reuters) - Canadian miner Teck Cominco (TCKb.TO: Quote, Profile, Research, Stock Buzz) acknowledged a gloomier outlook for metallurgical coal demand on Tuesday, further muddying the outlook for its ability to pay back a $5.8 billion bridge loan due next fall. At an investment presentation in New York, Teck officials said analysts' price forecasts have "declined significantly" in the past few weeks. Consensus estimates for metallurgical coal, which is used in the steelmaking process, are now for a 2009 price of $160 per tonne, down from $200 a tonne just a month ago, according to slides for the presentation posted on Teck's website. The company also sees weak base metals demand in 2009, and says steel demand may have turned negative. It said it sees difficult conditions for the next 12 to 18 months, and perhaps longer. The picture does not bode well for concerns about Teck's ability to pay down the $5.8 billion bridge loan and other debt incurred in its $13 billion acquisition of Fording Canadian Coal Trust, which closed in October. "It's become very apparent through cutbacks in North American, China, and European steel production anywhere from 10 to 20 percent that the demand side of the equation is continuing to slip," said John Hughes, an analyst at Desjardins Securities. Teck unveiled the Fording takeover deal in July, when copper prices were soaring and the outlook for metallurgical coal was strong. The company expected to pay down the debt quickly using a C$1 billion tax break and expected robust cash flows from Fording's Elk Valley Coal Partnership. Teck acquired full control of the Partnership by taking over Fording. However, base metals have since plunged, the outlook for metallurgical coal has darkened, and credit markets have seized up, which could make it tough to refinance what remains of the $5.8 billion bridge loan, which comes due next October. The company also took on $4 billion in longer-term debt. Teck said two weeks ago it will cut spending, suspend its dividend, and sell certain assets to pay down the loan as quickly as possible. The company also expects strong cash flows through March from the coal operations, as contracted prices of $275 a tonnes expire then. Worries about the debt have pulled Teck's shares down by 89 percent since the end of August. The stock fell 18 Canadian cents to C$4.78 on the Toronto Stock Exchange on Tuesday. Hughes said he expects Teck will have to refinance between $2 billion and $2-1/2 billion of the bridge loan next fall, and he expects the company to be successful. "We don't see the company seeking (creditor) protection," he said. ($1=$1.25 Canadian) (Reporting by Cameron French; editing by Peter Galloway)