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Dump trucks move waste rock around Teck's Highland Valley Copper Mine

JOHN LEHMANN/John Lehmann/The Globe and Mail

Teck is bringing back its dividend after nearly a two-year absence, a move that signals the end of the Vancouver-based miner's rockiest period.

The dividend reinstatement announcement came Thursday, the same day Teck said it repaid the last of the $9.8-billion debt it incurred from the purchase of Fording Canadian Coal Trust in 2008, on the eve of the global financial meltdown.

Teck will pay a dividend of 40 cents per share annually starting in June, which is 60-per-cent lower than when the payment was suspended in November 2008.

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"That was an unusual level," Teck chief executive officer Don Lindsay said of that previous payment, which was 50 cents twice a year, instead of what will now be 20 cents twice a year.

The dividend was hiked in 2006 when Teck had more excess cash on the books, Mr. Lindsay said.

He said the new dividend, which is a yield of about 1 per cent, is in line with what other diversified mining companies are paying today.

"I think it's a comfortable level," Mr. Lindsay said after the company's annual shareholder meeting in Vancouver.

Analysts say that while the new dividend is conservative, it leaves room for a special dividend.

"We believe Teck will consider the use of special dividends to introduce a variable component to its dividend structure," Scotia Capital said in a note.

Others suggested the dividend will be bumped up in the future, now that the company has reduced its overall debt to $5.4-billion, from more than $13-billion around the time the dividend payment was pulled.

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"As a result of this reduced leverage, along with strong cash flow generation at current commodity prices, the potential for the dividend to be increased in the future exists," UBS said in a note.

The timing of the dividend reinstatement was sooner than many expected, which helped boost Teck shares by more than 5 per cent Thursday.

The stock is now trading consistently above $40 on the Toronto Stock Exchange, which is a far cry from just above $3, where it sat in March last year when the company appeared to be on the brink.

Its financial problems stemmed from the billions of dollars in debt it took on when it paid $14-billion for Fording Canadian Coal Trust, just as credit markets seized and commodity prices tanked.

"The timing couldn't have been worse," Mr. Lindsay told shareholders at Thursday's meeting.

But he said the company has since paid back that debt even faster than originally planned. Teck did it by selling off assets and selling a 20-per-cent stake in the company to China Investment Corp. (CIC) for $1.7-billion.

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Teck chairman Norman B. Keevil said it was a rough 18 months for Teck.

"I said at last year's annual meeting that this company intends to be around for another 100 years … and last year that might have sounded a bit optimistic," he told shareholders.

"Recover we did, very well. We are now in great shape to continue on."

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About the Author
Contributor

Brenda Bouw is a freelance writer and editor based in Vancouver. She has more than 20 years of experience as a business reporter, including at The Globe and Mail, The Canadian Press, the Financial Post and was executive producer at BNN (formerly ROBTv). Brenda was also part of the Globe and Mail reporting team that won the 2010 National Newspaper Award for business journalism. More

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