A truck hauls a load at a Teck Resources operation in B.C. in this handout photo.The Canadian Press
It appears Teck Resources Ltd. is getting punished for a deal it hasn't even struck.
With rumours swirling that the major miner may bid on Rio Tinto's stake in Iron Ore Co. of Canada, it looks like investors are already punishing Teck for exposure to the commodity even though coal and copper remain its bread and butter.
On Tuesday Teck's shares sunk 5 per cent, coinciding with a rough report from Goldman Sachs on the prospects for iron ore prices this year. Venerable producers of this commodity such as Cliffs Natural Resources and Rio Tinto also dropped, falling 6.6 per cent and 4.9 per cent, respectively.
Teck is widely expected to be exploring a bid for the Iron Ore stake after chief executive officer Don Lindsay spoke up on the company's last quarterly conference call in February, noting that "I enjoyed a good holiday from iron ore for quite a few weeks there, but values have come down. He added: "There's a few new assets that have come available, so we still think that's a good fit in our portfolio."
Yet the miner's shares got trapped in a tumble before the rumours started to swirl. The slide started at the end of January and the stock has since collapsed 25 per cent in roughly two months. Short sellers have made big money, with many of them ramping up their bets as the stock soared closed to $38. On Tuesday it closed at $28.45.
The sudden drop follows a solid run during the second half of 2012. From their lowest point last year, Teck's shares climbed 43 per cent to their peak in January. By contrast, the broader S&P/TSX materials sub-index added 27 per cent and it climbed from its 2012 trough to its most recent high.
Aside from the iron ore speculation, Teck's been hit by sudden uncertainties about the global macroeconomic picture, as well as weaker underlying commodity prices. In the past month the price of copper has dropped 10 per cent alone.
(Tim Kiladze is a Globe and Mail Reporter.)
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