Moody's downgrades Teck Resources credit rating amid commodity weakness

TORONTO – Moody’s Investors Service has downgraded the credit rating of Teck Resources Ltd. (TSX:TCK.B) to below investment grade as low commodity prices and high spending squeeze the Vancouver-based miner.

“We expect prolonged commodity price weakness and sizable investment spending will cause Teck’s financial leverage to remain well in excess of typical investment grade thresholds through at least 2017,” said Darren Kirk, Moody’s vice-president and senior credit officer.

The agency said Monday that Teck now has a senior unsecured rating of Ba1, compared with its previous rating of Baa3. Moody’s said the outlook remains negative.

Under its ratings categories, which run from Aaa to C, financial obligations assessed Ba are judged by Moody’s to have speculative credit quality and are seen as subject to substantial credit risk.

Teck has a 20 per cent stake in the $13.5-billion Fort Hills oilsands mine under construction north of Fort Murray, Alta. Suncor Energy Inc. (TSX:SU) is the operator with a 40.8 per cent interest. France’s Total owns the rest.

Moody’s said Teck’s “significant spending” on Fort Hills during a time of weak oil prices will cause the company to consume $1.5 billion in cash next year and another $1 billion in 2017.

Crude prices have been hovering at around US$45 a barrel — about half of what they were a year earlier.

Shares in Teck, which is focused on steelmaking coal, copper, zinc and energy, closed down 26 cents or 2.99 per cent at $8.43 Monday on the Toronto Stock Exchange.