Moody's downgrades Teck Resources debt to junk status
Teck Resources Ltd., a Vancouver-based diversified mining company, has seen its credit rating downgraded to junk status by Moody's Investors Service because of falling commodity prices.
Moody's notes the decline in prices of everything from copper to coal and zinc in reducing Teck's rating to Ba1, the highest junk classification, from Baa3.
Standard & Poor's and Fitch Ratings still have Teck on the lowest investment grade.
"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," Moody's said in a statement Monday.
Moody's outlook for the company is negative, as it believes commodity prices will stay low into 2017.
Teck owns a 20 per cent share of Suncor Energy Inc.'s $13 billion ($9.8 billion) Fort Hills oilsands project in Alberta, currently under construction. Teck forecast in February it would spend $850 million on Fort Hills this year.
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.
With files from the Canadian Press