The Fourth Horseman of Mining
While Companhia Vale do Rio Doce, BHP Billiton and Rio Tinto have been the go-to stocks for Cramer in the mining bull market, now there’s a new name in the sector he likes: Teck Cominco.
Teck Cominco is one of the largest Canadian miners, with reserves in North and South America that hold zinc, copper, metallurgical coal and gold. The company even has a hydro-power business.
Teck Cominco is the second-largest zinc producer in the world. While zinc prices might be down 6% year-to-date, the lead found with it has seen its prices almost double. Almost three-quarters of the lead from TCK’s major Alaskan mine will be recognized in the second half of the year, which is great if those prices keep climbing, Cramer said.
Copper prices are up as well. TCK might be able to capitalize off this, too, provided its offer for Aur Resources goes through. The deal would boost Teck Cominco’s copper production by 43%, Cramer said, and its copper reserves by 139%. He doesn’t expect the stock to move too much before the merger is decided, one way or the other, so now is probably a good time to buy.
Investors looking for a safer play on China might want to consider buying some TCK stock. The company is benefiting from the demand for both zinc and copper there.
Lastly, Teck Cominco is sitting on $4.5 billion in cash. Cramer thinks that management is under pressure to buy zinc and copper mines, so a dividend increase or a share buyback isn’t probably in the cards. But since that strategy has been working for Companhia Vale do Rio Doce, BHP Billiton and Rio Tinto, he sees no reason why it shouldn’t work for TCK too.
Bottom Line: Teck Cominco has been unfairly left out of Cramer’s favorite minerals and mining picks, but if you’ve missed out on this action so far, this is a great name to get into.
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