BMO: Teck Resources’ Shift To Focus On Copper Will Help Attract ESG Funds

Last week, BMO Capital Markets hosted Teck Resources’ (TSX: TECK.A, TECK.B) CEO Jonathan Price, CFO Crystal Prystai, Fraser Phillips, and Helen Kelly for investor meetings in Toronto. In their note on the meeting, BMO says that Teck continues to focus on growth, “but a different kind of growth,” as they reiterate their market perform rating and $46 12-month price target.

Teck Resources currently has 15 analysts covering the stock with an average 12-month price target of C$55. Out of the 15 analysts, two have strong buy ratings, ten have buy ratings, and the last three analysts have hold ratings on the stock. The street-high price target currently sits at C$63.92.

In BMO Capital Markets’ note, they provided their key takeaways. The first of the takeaways from the meeting was that Teck has now pivoted to making “smaller bets” on growth projects which will be less technically complex and smaller in nature. They say this as they admit that, though their QB2 project is “transformational,” this project could have a substantial strain on the company’s finances if commodity prices were lower.

The last takeaway from the meeting was that the company would continue re-investing its free cash flow from coal into copper production. As a result, BMO does not expect the company to sell Elk Valley, but rather see their contributions to the mine to be “deemphasized as copper grows.”

BMO believes this is the right way to continue operations as the re-investment into copper will help the company attract ESG-focused investors while maintaining cash flows. They believe that some ESG investors are warming up to investing in Teck after the announcement of their Fort Hill sale. They warn that the overarching macroeconomic outlook and potential recession “could provide further roadblocks to these funds’ investment decisions.”

Information for this briefing was found via Edgar and Refinitiv. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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