For Canadian investors, a mining stock which has a solid financial foundation, involves in commodities that are in tight supply, with strong management and a clear growth strategy is a perfect investment. The good news is that Teck Resources (TSX:TECK.B) just happens to check all these boxes.
Teck Resources is a heavyweight in the mining industry, specializing in base metals like copper and zinc, and has just strategically pulled out of the steelmaking coal business. Earlier this year, Teck sold its Elk Valley Resources coal business to Glencore for a massive $7.3 billion cash gain, while shifting its focus entirely to energy transition metals like copper. These metals are in high demand due to the rapid spread of electric vehicles (EVs) and renewable energy systems.
The company’s recent financial results highlight its resilience and ability to adapt in volatile markets. In the third quarter of 2024, Teck delivered strong earnings, including $1.7 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). The Quebrada Blanca (QB2) copper mine in Chile, one of Teck’s flagship assets, has significantly increased production. The mine is expected to help Teck consolidate its position as a global leader in copper production.
Over the past 12 months, Teck’s revenues grew 43.7% year-on-year, totaling $16.66 billion. This growth was driven by its strategic focus on high-margin assets and strict cost management. This mining stock currently has an operating margin of 13.86%, implying an ability to generate lucrative returns even in a highly competitive industry.
Teck has a healthy balance sheet, with cash totaling $7.23 billion as of the most recent quarter and a current ratio of 2.92, demonstrating the ability to easily meet short-term debt obligations as well as having the flexibility to invest in growth projects and withstand a potential downturn in commodity prices. While the company’s total debt of $9.4 billion may seem large, a manageable debt-to-equity ratio of 36.29% ensures that leverage is not excessive.
Consider the critical role copper plays in the electrification of transportation, the renewable energy grid, and countless other applications of the green economy. Teck’s goal is to increase annual copper production to 800,000 tons by the end of this decade from the current 450,000 tons per year.
For dividend investors, while the current dividend yield of 0.80% isn’t great, this mining stock’s payout ratio of 17.18% suggests that there’s plenty of room for future dividend growth as earnings increase. This means Teck is not only a potential growth stock, but also a dividend stock to look forward to.
The company’s stock price has pulled back recently. However, from the beginning of the year until now, the stock has sparked a rally almost every time it dropped below $60 . Teck Resources shares closed on Friday (Dec. 20) at C$58.84, up 2.26%. Investors could watch for buying opportunities in the near future.
