Industry honours a mine builder
Teck is the house that the Keevils built. Dr. Norm Keevil Sr. was an academic pioneer, becoming one of Canada’s first geophysics professors shortly before the Second World War. He recognized the potential for the airborne magnetometer to help locate petroleum and mineral deposits. His research led to the discovery of the high-grade Temagami copper sulphide deposit in northern Ontario. He staked the land and developed the mine, which began production in 1955.
By 1959 Keevil Sr. had purchased control of the long-established, Kirkland Lake, Ont.-based gold miner, Teck-Hughes Gold Mines Ltd. with its properties and subsidiaries. He merged Teck-Hughes with two other companies–Lamaque Mining Co. and Canadian Devonian Petroleums–to form Teck Corporation, based in Toronto.
In 1960, Keevil Sr.’s son, also named Norm Keevil, was studying for his doctorate in geology when he began to work for Placer Development Ltd., a dynamic Vancouver-based mining company. The father convinced the son to come to work for Teck in 1962 as vice-president of exploration, and together they set about building it into a major mining company.
Teck started with three small underground mines, which each had two years of reserves, and an asset value of about $20 million. Early on they put together a management team, including the late Bob Hallbauer from Placer Development. Two modest deposits were acquired and developed into mines: Newfoundland Zinc and Niobec (niobium), the latter as a joint venture. The younger Keevil honed his skills as a win/win deal-maker as the company grew by joint-venturing on larger projects, which they then developed into mines: the Afton (copper), Highmont (copper, molybdenum), David Bell (gold), Quebrada Blanca (copper), Louvicourt (copper, zinc) and Bullmoose (coal) mines.
The Keevils and Teck moved in 1972 to Vancouver, which was becoming Canada’s venture capital home for mineral exploration, and home to the juniors who were discovering the big deposits. Keevil took over as CEO of the company in 1981. His father died in October 1989.
In 1986, Teck took a giant step, acquiring controlling interest in the much larger zinc miner and refiner, Cominco Ltd. (see “The Teck-Cominco Story”, CMJ special issue, June 1989). Through Cominco it developed the giant Red Dog zinc mine in Alaska. Teck is a 22.5% owner in the Antamina mine that opened last year in Peru. In mid-2001, Teck increased its interest in Cominco and then merged the two companies into Teck Cominco Limited. That company today has a market capitalization of $3 billion, with interest in nine mines in Canada, the United States and Peru and two smelters, one in Canada and the other in Peru, most of which are joint ventures.
Since 1990, Keevil has received numerous awards and tributes from mining and business associations. The latest was a gala dinner in Vancouver in his honour on May 1, sponsored by the Mining Association of British Columbia. Eight friends and associates made speeches extolling his abilities, and telling tales of his exploits. The poem written and read by Peter Brown, chairman and CEO of Canaccord Capital, very well summed up the history of the Keevils and Teck Corp.; we will post it for you on our web site.
The dinner smacked of a retirement party, but it wasn’t really. Last year, at age 63, after being Teck’s CEO for 20 years, Keevil shifted gears to become non-executive chairman, a month after the merger of Teck and Cominco. Long-time Teck and Cominco executive David Thompson took over as CEO and relative-newcomer Steven Dean became president of the merged company. (In early June, Dean announced that he would be resigning his position in early July.) CMJ interviewed Keevil the morning before the dinner, as he reflected on his career.
“One of the best decisions I’ve ever made was in conjunction with Bob Hallbauer, and that was to change the company from a small underground miner with three mines with an average reserve of about two years. Hallbauer said, ‘How are you going to make a major company out of that?’ So we turned it into a mine development company. We picked up some small things, which was all we could afford, but they were all important at the time.
“Another good decision was the Diamond Fields deal.” In 1995, Robert Friedland of Diamond Fields Resources Inc. reluctantly sold 10% interest in his company to Teck for $36 per share; Diamond Fields owned the Voisey’s Bay nickel property in Labrador. Teck had a tentative deal allowing it to build and run a mine and mill; Inco Ltd. would handle the smelting, refining, and marketing. But a bidding war drove Diamond Fields shares 2 1/2 times higher than Teck’s $60/share valuation, so Teck dropped out of the race and sold its interest. “We got second prize,” says Keevil. “First prize would have been to get to develop the mine.”
The $350 million profit that it made on the deal in only 18 months was quickly redeployed into purchasing more of Cominco plus funding its interest in the Antamina development. “The jury’s out on Antamina,” Keevil admits. “In a few years we’ll know if that was one of our best decisions or one of our worst.
“If you’re lucky the big deals are two years apart. Good opportunities are rare by definition. They tend to come in bunches, as often as not at the down times where it’s tough to screw up the courage to take them on. Antamina was like that. We took it on in 1998, in the middle of the Asian crisis. [The day traders] thought we were nuts. We were crucified by the shareholders. There were lots of risks, but it ended up being built ahead of schedule.”
Keevil says that Teck has been driven by taking advantage of opportunities where it could put its expertise to work. As a result it has ended up with a very balanced company with different commodities–gold/silver, base metals and coal–that have different price cycles. “More than three years ago, the thing in vogue to the institutions was pure plays,” says Keevil. “They could put together their own mix. That’s kind of gone by the board. The mantra now is companies with large market caps, because institutions want to be able to trade in and out without perturbing the market. So the companies that they want now are like Anglo American, BHP Billiton and Rio Tinto with their huge market caps. All of them are very diversified and probably successful because of it.”
If you are trying to build a mining company, it helps to have a model. “My ideal model started out as Placer Development under John Simpson, because it was the best mining company in the world. If we have a model now it’s probably Rio Tinto. They have very consistently managed to achieve 12% compounded annual return for shareholders for about 25 years, and that is by quite a bit the best in the business.
“For 15 years Teck had exactly the same growth trend as Rio Tinto on a per share basis, albeit at a smaller scale. It’s fallen off, ever since we got into Cominco. It did, I think, because we became preoccupied with fixing a lot of things like the Red Dog mine and the Trail smelter, and put a couple of our best people on these projects. It has been sort of two steps forward and one back. But the problems are fixed now.
“Cominco has been a good investment for us because it has added to our base platform of reserves on which to build. But in establishing that platform, I think we lost a little of the edge that we might have had. We’ve got to re-establish that.
“Teck Cominco is a much stronger company than either one alone. It’s a nice size too. We’re big enough that there’s not an opportunity in the business that we can’t get involved in, but we’re small enough that a few good opportunities can make a real difference to the company.”
Is opening large zinc and copper mines helping to depress the prices of these metals? Keevil answers, “In a way, we’re our own worst enemies. The zinc market would be very strong now if we had not built Red Dog and Antamina, and if Pasminco had not built Century. Without them there would be a deficit. The problem with mining zinc is that you’ve got a flat cost curve and a terminal market. Every time ther
e’s a surplus we say, ‘The guy at the high end of the cost curve should go out of business.’ The reality is that guys with the high costs tend to be small operators, and there is a community dependent on the mine that will find some way to keep it going.
“People say that the last pound of zinc to go through the refinery is the cheapest pound, so even the bigger operators keep the refineries operating flat out, as long as the concentrate’s available. What really should happen in the new world of mining is that the strong people should take the initiative and cut back production. That’s happening with BHP Billiton and Codelco in copper. We cut 120,000 tonnes of zinc out of the market last year, not out of the goodness of our heart but because we were able to sell our surplus power [from Trail]. It’s frightening to think where the zinc inventories would be now if we hadn’t done that. We’re cutting back another 55,000 tonnes out of Trail and Peru this year. The industry at large is still not doing the sensible thing.”
Tecks Tales or
The Second Norman Invasion
By Peter M. Brown, Chairman and CEO of Canaccord
Nine hundred years ago in our past
The Normans conquered the Empire fast
And here again today
In much the very same way
The new Normans, and the die was cast.
From the east came the king of the clan.
Norman Sr., a hell of a man.
With a handful of wives
And spirit that thrives
This professor founded their plan.
Norman II was the doctorate prince
Who made his competitors wince
With a manner quite quiet
He ate mines as a diet
And expanded at will ever since.
These Norman’s owned the 100 vote share
So they’re very secure in their lair
They raised the much-needed loot
With their control non-dilute
So no rival could dislodge this pair.
Placer had been king of the hill
Bending the west to its will
They saw in Kneevil
An upstart quite evil
So they remained inactive and still.
First came the Brameda boys
With planes and all sorts of toys
They played fast and loose
So you stole bull moose
With no fuss, no bother, no noise.
Next came the Applegath lad
With the view that old Ches could be had.
You went into the market
With Afton the target
And paid a price that left nobody sad
($14 bucks a share, belated thank you for that Norm)
Pezim’s finances again went to hell
So you looked at the old David Bell
Between Ned Goodman and you
You picked up gold mines – a few
Which Teck kept when Ned had to sell.
Now Friedland, a boy with panache
Diamondfields needed your cash
Half a billion you made
But the mine was delayed
Inco’s board thought they’d been in a crash.
Cominco had assets to reap
So you began the classical creep
Now you’ve taken the rest
And Teck Cominco’s the best
But the price was exceptionally cheap.
From Antimina, Red Dog and more
15 mines, in all, in Teck’s store
A million tons a day
Of rock that gets in the way
Is moved – a gargantuan chore.
Coal, Copper, Zinc and Gold
Acquired in a manner so bold
These riches from earth
Made Teck its net worth
Plus refineries from where power is sold.
In truth, an empire’s been made
Forged with a drill and a spade
It is from Norm’s visions
That Teck made its decisions
And employees and shareholders are paid.
Norman, the builder, citizen and friend
Who a hand to all causes does lend.
He’s now stepped aside
After one hell of a ride
And earned our respect without end.