Teck Resources shares down after company pulls Frontier oilsands project
VANCOUVER -- Shares in Teck Resources Ltd. are trading down almost five per cent after the company said it has withdrawn its application for a massive oilsands mining project, citing uncertainty over climate change policies.
The Vancouver-based company said Sunday it would take a $1.13-billion writedown on the Frontier project in Alberta, which was expected to create thousands of jobs but would also produce about four million tonnes of greenhouse gas emissions per year over 40 years.
The company's share were down 75 cents, or 5.1 per cent at $13.98 in mid-morning trading Monday on the Toronto Stock Exchange after dropping almost eight per cent in early trading.
Teck's decision comes just days ahead of an expected government decision on whether or not to approve the project.
In a letter to the federal environment minister, Teck CEO and President Don Lindsay said investors and customers increasingly want jurisdictions to have a framework in place that reconciles resource development and climate change.
"This does not yet exist here today and, unfortunately, the growing debate around this issue has placed Frontier and our company squarely at the nexus of much broader issues that need to be resolved," Lindsay wrote. "In that context, it is now evident that there is no constructive path forward for the project."
He said Teck was disappointed at arriving at this point, but hopes withdrawing the project will help shift discussions to the larger question of how Canada wants to move forward on climate change, development, and Indigenous rights.
"Ultimately, that should take place without a looming regulatory deadline," said Lindsay.
Alberta Premier Jason Kenney said in a statement that the decision shows what happens when governments lack the courage to defend the interests of Canadians, pointing to the blockades in opposition to RCMP presence on Wet'suwet'en territory, where hereditary chiefs oppose a natural-gas pipeline project.
"Teck's predicament shows that even when a company spends more than $1 billion over a decade to satisfy every regulatory requirement, a regulatory process that values politics over evidence and the erosion of the rule of law will be fatal to investor confidence," he said.
Industry Minister Navdeep Bains said Monday that the decision underscores the importance of all levels of government to work together on ambitious climate targets, including net zero emissions by 2050.
"Canadians don't want finger pointing, they want us to work together, they want us to collaborate, they want us to have a concrete plan to address climate change, and I think we have a responsibility because it's important of course for the well being of Canadians, it's also important for businesses and investors as well."
Federal cabinet ministers confirmed Sunday that since Teck had withdrawn the they would no longer be making a decision on the project.
The impact of the decision on Teck's stock was tempered because several analysts did not include Frontier in their valuation of the company because of its $20-billion capital cost and uncertain timing.
National Bank analyst Shane Nagle said the decision was neutral, but that the decision should remove some uncertainty for the company and ultimately reduces its exposure to oilsands.
"Like all companies in the resource sector, an increased focus from funds on reducing the impact of operations on climate change is becoming increasingly important," said Nagle in a note.
"As Frontier requires increased pipeline capacity, higher oil prices and a significant partner to advance development, Teck was not likely to advance development at the present time."
BMO analyst Jackie Przybylowski, however, said the decision was negative as it removes a potential boost to the stock.
"The long list of initiatives that could provide positive catalysts has been cut, and we now ascribe a higher likelihood for negative headlines in the near term."
News of the cancellation shocked Athabasca Chipewyan Chief Allan Adam, whose community was one of the 14 to sign agreements with Teck. The First Nation had also just struck a deal with the province to ensure the development would protect the environment and Indigenous culture.
"That's very astonishing news because we worked hard to get to what we wanted to get," he said. "I don't even feel like eating after that news."
But Frontier was not without its detractors.
On Friday, Canadian author Alice Munro, biologist Jack W. Szostak and 40 other Nobel Prize winners from around the world wrote an open letter to Trudeau and Deputy Prime Minister Chrystia Freeland urging them to deny the plan and all expansions of the fossil-fuel sector.
"The mere fact that they warrant debate in Canada should be seen as a disgrace," reads the letter, which appeared on the Guardian's website. "They are wholly incompatible with your government's recent commitment to net-zero greenhouse-gas emissions by 2050."
With a file from Mike Blanchfield in Ottawa