Teck Resources: The Copper Stock Hedge Funds Can't Resist

Teck Resources Limited (TECK) has emerged as a top choice among hedge funds for copper stocks, with 68 holders as of Q3 2024. The company's strategic focus on energy transition metals, particularly copper, has made it an attractive investment for funds seeking exposure to the growing demand for copper driven by renewable energy and electric vehicle (EV) adoption. Teck's recent divestments, such as the sale of its steelmaking coal business to Glencore for $7.3 billion, have further enhanced its appeal by positioning it as a key player in the low-carbon economy.

Teck's copper production growth strategy is robust, with an expected increase in Quebrada Blanca (QB) mine production to 240,000 to 280,000 tonnes by 2024. This compares favorably to Freeport-McMoRan's (FCX) 2024 guidance of 1.5 to 1.7 billion pounds (around 680,000 to 770,000 tonnes) and Southern Copper's (SCCO) 1.2 to 1.3 million tonnes. Teck's strategy, driven by the QB mine's optimization and debottlenecking, is expected to increase production at a lower capital cost than its peers.

The expected return on investment (ROI) for Teck's copper growth projects is attractive, with an estimated 4.7-9.4% per year. Assuming an average copper price of $4.50/lb, the low capital cost of US$100-200 million for the QB mine's optimization and debottlenecking could add $1.1-2.2 billion in annual revenue. With a current market cap of $23.4 billion, this represents an expected ROI of 4.7-9.4% per year. In comparison, Freeport-McMoRan (FCX) has a higher expected ROI of 12.5% from its Grasberg mine expansion, but Teck's lower risk and stable jurisdiction make it an attractive option for investors seeking a balance between growth and safety.



Teck's strong balance sheet, with a net cash position of $1.8 billion, enables it to fund growth while returning cash to shareholders. The company has returned $5.3 billion to shareholders since 2019, including more than $0.9 billion in share buybacks so far in 2024, with a further $2.3 billion of authorized buybacks ongoing. This financial strength, coupled with its copper growth strategy, makes TECK an appealing investment for hedge funds seeking exposure to the energy transition and the growing demand for copper.

In conclusion, Teck Resources Limited (TECK) is a top choice among hedge funds for copper stocks, with a strategic focus on energy transition metals and a robust copper production growth strategy. Its recent divestments, strong balance sheet, and attractive ROI make it an appealing investment for funds seeking exposure to the growing demand for copper driven by renewable energy and EV adoption. As the energy transition continues to drive demand for copper, Teck's position as a key player in the low-carbon economy makes it an attractive long-term investment.