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China fund takes stake in Canadian miner

(Agencies)
Updated: 2009-07-04 08:44

Canadian mining company Teck Resources Ltd said Friday it is selling a 17 percent stake to China Investment Corp for C$1.74 billion ($1.5 billion) in a bid to reduce its debt.

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The Vancouver-based company said CIC, the world's largest commodity buyer, will buy 101.3 million class B voting shares for C$17.21 each. CIC will hold onto the stock for at least a year, said the mining company.

The proceeds from the private placement will go towards paying down nearly $10 billion in bank debt and will also give the company a chance to forge a partnership with a major foreign investor, said Teck's chief executive in a conference call.

"We will have a financial relationship with a very deep-pocketed investor who would potentially participate in future development projects," said CEO Don Lindsay.

The sale, which is still subject to regulatory approval, is slated to close on July 14.

Teck has been selling assets and cutting costs to pay down the debt acquired after the $9.8 billion purchase of Fording Canadian Coal Trust last year.

After the deal was struck in July, prices for most commodities tanked. The deal closed in October, after the company received its financing and just as Canada entered what has turned out to be a severe recession.

Last month, Teck struck a deal to sell a one-third interest in its Waneta Dam in southeastern British Columbia to BC Hydro for $710 million.

Teck has also made about $700 million from the recent sale of many of its gold-assets.

Earlier this year, Teck was granted reprieve from its lenders on a portion of its debt, which included a $4 billion senior term loan facility and $5.81 billion senior bridge loan facility.

The deal reduced payments due this October to about $1.9 billion from $6.3 billion.

Teck also remains on the lookout for a minority partner to take about a 20 percent stake of its coal business.