Will Teck Resources stock hit $ 60 again?
Teak Resources (TSX: TECK.B) (NYSE: TECK) has already seen its share price triple from 2020 lows and more big gains could be on their way for Canada’s largest diversified mining company.
Prospects for coal, copper and zinc
Teck Resources produces iron and steel coal, copper and zinc. She is also a co-owner of the Fort Hills oil sands facility.
A trade dispute between China and Australia is helping Teck Resources sell more metallurgical coal to China at higher prices than those received by major Australian competitors who are currently forced to find other buyers.
Talks between China and Australia collapsed in May and there appears to be little hope of a near-term resolution. As a result, Teck Resources could benefit from it until the end of 2021 and until next year.
Even if Australia and China resolve their differences, the metallurgical coal market is expected to remain robust over the next few years. Steel prices are skyrocketing as demand exceeds supply. Billions of dollars in stimulus spending in the United States and other countries will see a lot of it going to infrastructure projects like new bridges.
Copper prices recently gave up some gains after falling from a low of around US $ 2 to US $ 4.75 in 2020. The market may have gotten a bit ahead and China has announced that it would release stocks into the market to oust speculators and try to normalize prices.
While copper has fallen back to US $ 4.10, it is already rising higher and is currently trading around US $ 4.30 per pound.
Copper producers have put aside new projects in recent years due to low prices. The result could be a shortage of copper before supply accelerates to meet growing demand. An expansion of the global electric vehicle market and targeted stimulus investments in solar and wind power projects will all lead to increased demand for copper.
In short, copper may only be in the early stages of a multi-year bullish rally, even as China tries to keep prices low.
Is Teck Resources’ share a buy?
Teak’s fortunes go up and down with the commodity price cycle. The last three times the market has bottomed, Teck’s stock has made impressive gains. The stock price fell from $ 5 after the financial crisis to $ 60, before giving up most of those gains when demand weakened just as new supply hit the market.
In the current rebound, Teck has gone from less than $ 10 last year to a high of $ 31 in 2021. The recent pullback took the stock below $ 26, but it is again rising and falling. is trading at nearly $ 27.50 at the time of writing.
A $ 60 run wouldn’t be a surprise over the next two or three years. The stimulus money invested around the world is unprecedented, and consumers in rich countries are spending pandemic savings on products high in copper, including home appliances and vehicles.
Teck Resources has a large copper expansion project underway in Chile which is now 50% complete. Once the project goes into production, the added production should drive income growth.
Teak is a cash flow machine when the prices of coal, copper and zinc recover. Although the stock has enjoyed some nice gains thanks to the stock market crash, the stock price still looks cheap.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .
The Motley Fool has no position in any of the stocks mentioned. Foolish contributor Andrew Walker owns shares in Teck Resources.