Buying Teck Resources stock offers a route to diversified exposure to the mining sector. The Vancouver, Canada-based miner has, over its 100 years of operations, become a market leader in the extraction and processing of copper, coal, zinc and gold. It’s a well-run and large-scale miner that has got fully on board with the shift towards ‘sustainable’ mining, but it still has enough of a pipeline of resources to benefit from a possible surge in mineral prices.
If a commodity super-cycle, or anything even half resembling one, comes about, then TECK shareholders will be well positioned to benefit. Is Teck Resources a good stock to buy? This stock forecast will apply technical analysis and fundamental analysis to outline the short-term and long-term prospects for the firm.
Where Will Teck Resources’ Stock Price Be in 12 Months?
Short-term price moves in mineral markets are driven by demand more than supply, which is relatively inelastic regardless of how high metal prices go. Miners such as Teck Resources need years to find, evaluate, and then finally start extracting mineral resources. No matter how extreme a change in demand is, there is little capacity for miners to adjust their processes to take advantage of a shift in demand.
The main fundamental driver of the Teck Resources share price is the global economy. The products that Teck mines and sells support a wide range of manufacturing sectors, and any pickup in production levels means more demand for Teck stocks.
In 2021, President Joe Biden hailed the passage of his landmark $1tn infrastructure spending package as a “monumental step forward” (source: BBC). The once-in-a-generation public works bill will last eight years and focus on upgrading highways, roads, and bridges and modernising city transit systems and passenger rail networks. This should generate demand for metals and minerals.
Furthermore, the US Federal Reserve has seemingly halted its interest rate hike cycle, and economists expect a cut this year – more good news for businesses considering taking on loans to finance infrastructure projects.
Over a 12-month time horizon, there is more opportunity for mining companies to have a direct say over their share price. Dividends and buybacks provide base-level support to share prices, and a Teck Resources stock prediction needs to factor in these aspects.
Being one of the most well-diversified mining stocks in the North American stock markets means that the firm is followed by a collection of analysts, all of which weigh up whether Teck Resources is a good stock to buy.
Data from TradingView reports that of the 19 analysts it studied, 16 have a Buy rating on Teck, with one assigning it a Hold rating and two giving the stock a Sell rating. The median target price over the next 12-month period is $55.86, representing a potential 18% upside from current levels (as of June 21, 2024). The estimate at the top of the range is $67.18, and the low estimate is $32.86.
Teck Resources News
In early June, Jefferies analysts reiterated a Buy rating on Teck Resources. The investment firm said that with the closing of the sale of its 77% interest in EVR to Glencore expected to be imminent, Teck’s change into a pure-play base metals miner with “a strong balance sheet, large capital return potential, and a significant organic growth pipeline is nearly complete.” However, they note that its shares still trade at a discount to major comparable copper miners.
In May, UBS said global investors had reduced net positions in Teck Resources, among other copper stocks.
In April, Teck Resources reported first-quarter earnings of CAD$0.75 per share, above the analyst consensus estimate of CAD$0.90. Revenue also topped expectations, coming in at CAD$3.99 billion compared to the consensus estimate of CAD$4.1 billion.
Who are Teck Resources?
Teck Resources has share listings on the Toronto Exchange and the New York Stock Exchange. The tickers for the Canadian stocks are TECK.A and TECK.B, and the NYSE-listed stock has ticker TECK.
In mining terms, it’s mid-range in size, with over 11,000 employees. A modest dividend yield is paid out to investors, and share buyback programmes are also in operation.
The potential for growth identified by some investors comes down to the firm’s diversified portfolio of income streams. Teck Resources stock predictions need to factor in the regular markets such as copper, gold, lead, molybdenum, and zinc, but Teck also has divisions operating in the Energy (oil sands) and Industrial Products & Fertilisers sectors. The copper market has received a lot of investor attention recently, and Teck has a pipeline of copper projects in various stages of development. Copper mining accounts for over 20% of Teck’s gross profit.
The diversification across products is matched by diversification in terms of the geographical locations of its copper mines. It has mines operating in the Highland Valley region of British Columbia, Canada, the Quebrada Blanca copper mine in northern Chile, and the Carmen de Andacollo copper mine in central Chile. It also has an interest in one of the world’s largest mines, the Antamina copper/zinc mine in Peru.
Teck’s proven and probable copper reserves total 33.0 million tonnes, and in 2022, the firm extracted and sold 270,000 tonnes of that supply. The firm is therefore well positioned to increase capacity if the price of the metal goes on a bull run.
Teck Resources Long-Term Forecast
Any long-term Teck Resources stock forecast will still be heavily reliant on the state of the global economy. Economic downturns would be bad for the TECK share price, but if commodity prices do surge, the firm, like other miners, will be in a good position to benefit from the move.
Mining companies benefit from a neat calculating procedure that means that price rises in underlying assets can result in exponential price rises in mining stock prices. A lot of TECK’s cost base is made up of fixed rather than variable costs, and those exploration and infrastructure set-up costs are also front-loaded.
Taking one of the markets in which Teck Resources operates as an example, if the gold mining breakeven operating costs of Teck are at $1,200 and the market price of gold is $1,800, then a 10% increase in the price of gold would result in TECK’s profit margin increasing by 30%, not 10%. [(19800-12000) / (18000-12000)].
A longer timeframe does allow the firm to have more say over its own destiny. The decision to mine a diverse range of minerals and energy resources is unlikely to change because it strikes a chord with investors. It allows shareholders to gain exposure to commodities and spread the risk of one market tanking.
Teck Resources (TECK) Share Price 2021
Source: IG
Institutional investors pulling the trigger on ‘buy TECK’ trades is a good sign in terms of one of the industry’s buzzwords, ‘sustainability’. Green investing and are hot topics that are driving investment decisions, and although the mining sector runs the risk of being on many blacklists, TECK at least appears to be targeting being the least bad option for big fund managers.
One potential banana skin for investors is the subject of sustainability. Investor and public opinion are giving higher priority to social and environmental issues. While mining stocks are unlikely to ever be targeted by green investors, they do need to demonstrate sufficient awareness of the trend to not be blacklisted from any investment programmes.
The good news for TECK investors is that the firm is ahead of the curve and ticking a lot of boxes in terms of corporate social responsibility (CSR). The 2020 Teck Resources Sustainability Report includes highlights, which suggest that the firm is doing enough to avoid any negative attention from the majority of ethically-minded investors.
In 2020, Teck Resources won the Dow Jones Sustainability World Index for the 11th straight year and was the Top-Ranked Mining Company in the World, and the only Metals & Mining company awarded the S&P Gold Class Award.
Is Teck Resources a Good Buy?
Investing in the mining sector is a high-risk-return proposition. The challenges faced by firms such as Teck Resources are many and varied, and a lot of them are completely out of a firm’s control. Those looking to pursue a buy trade in miners might be drawn to TECK due to the firm’s size, the diversity of income streams and its sustainability programme, which are the company’s stand-out features.
The risks are still there, but having operations that include energy, fertilisers, gold and copper offers some degree of insurance compared to other firms that can be out-and-out specialists in one area. The firm is large enough to offer a degree of security, but small enough to suggest that further growth could be on the cards, particularly if its extensive copper reserves benefit from a price rise in that market.
Market analysts have the stock tipped as a buy. They see the bull run continuing, which suggests that the downside risk and chances to buy dips could be limited.
Investors would do well to follow Teck Resources’ lead and follow the fundamental principles of risk management and diversify their position. Trading in small size is also an option for those looking to take the emotion out of investing in miners, which can be something of a roller-coaster ride. If analysis points to holding a position through any downturns, not being all in can help Teck Resources investors to stay in positions.
