Feb 10, 2015 – Don Lindsay, President & CEO Teck Resources

Don LindsayDon Lindsay was appointed President of Teck in January 2005 and assumed the additional responsibility of Chief Executive Officer in April 2005. Before joining Teck, Don was President of CIBC World Markets and led the bank’s Investment and Corporate Banking Division as well as the Asia Pacific Region. Earlier in his career he was responsible for CIBC’s Global Mining Group. Don has a B.Sc., (Hons.) Mining Engineering from Queen’s University and an MBA from Harvard Business School.

Don is a member of the Board of Directors of Manulife Financial Corporation and the Board of Directors of the Canadian Council of Chief Executives. He is Chair of the Board of Governors for Mining and Metals for the World Economic Forum, a member of the Canadian Minister of Finance’s Economic Advisory Council, and serves on the Executive Committee for the Governor General’s Canadian Leadership Conference. Don is also a Director of B.C. Children’s Hospital Foundation in Vancouver and served as Chair of the successful $200-million capital campaign to build a new acute care hospital.

Don previously served for several years on the Board of the Canada China Business Council. He has also been a division chair for Natural Resources for the United Way of the Lower Mainland in British Columbia and is a past member of the Board of Directors of the Vancouver Aquarium. In Ontario, Don served on the Board of Governors of the Royal Ontario Museum, the Board of St. Michael’s Hospital Foundation, as Vice Chair of the Greater Toronto Scout Foundation, and as a member of the United Way’s Major Individual Giving Cabinet in Toronto.

As Chair of the International Zinc Association from 2007 to 2011, Don led the development and launch of the Zinc Saves Kids campaign, a program developed in partnership with UNICEF to address zinc deficiency, which claims the lives of approximately 450,000 children annually around the world. Under his leadership, Teck also launched a Zinc & Health program, which to date has helped improve the health of more than eight million children worldwide.

In 2002, Don was awarded the Queen Elizabeth II Golden Jubilee medal and was honoured again in 2013 with the Queen Elizabeth II Diamond Jubilee medal. He received the Kathleen Beaumont-Hill distinguished alumni award from Queen’s University in 2012, and in 2013 he was awarded an Honorary Doctorate of Technology from the British Columbia Institute of Technology. More recently, in 2014 he was a recipient of a British Columbia Community Achievement Award, the CIM Distinguished Service Medal, the Nature Trust of British Columbia Conservation Champion Award, and next year he was recently named to the Order of British Columbia.

Notes on Don Lindsay’s Presentation

By John Gunn

Past President Jon Collins introduced our guest speaker, Don Lindsay, CEO of Teck Corporation. Mr. Collins was formerly a senior employee at Teck.

Who would have expected that a 102 year old mining firm digging mainly for coal, zinc, copper and bitumen, could be so interesting, so philanthropic, so environmentally sensitive, and have such a fluent and loquacious CEO.  Mr.  Lindsay, with very few props, and with a delightful sprinkling of humour, gave us a first-rate understanding of the vagaries of the mining business, the astounding volatility of resource prices with which they have to contend, and the political, fiscal and social influences they have to anticipate and factor into their activities. In passing, it should be mentioned that Teck Corp, a Vancouver company, has been rated the most sustainable mining company in the world.

Teck Corp’s main product at the moment is coal.  But Mr. Lindsay was quick to point out that this is coking coal, or as he prefers to call it, “steel making coal” – not the dirty stuff used for heating and for generating electric power.  For this commodity, they and BHP in Australia, are the world’s major producers.  Spot price for this coal has dropped drastically and other Canadian companies, previously in the business, have closed. Only Teck remains a Canadian producer at the moment. It will be some time before the price re-balances to a sustainable figure.

Teck is also the third largest producer in the world of zinc.  Of special mention by Lindsay, as well as its industrial use for galvanizing, zinc is a small but vital dietary item and millions of people in the world suffer from a deficiency.  It is especially crucial in brain development in young children.  Teck is very active in correcting this problem in Africa and elsewhere and has worked with UNICEF.  They have had phenomenal results, with five million children now getting the required dose of zinc in their diet and the company is marching on to bring this up to ten million kids in the near future. Zinc has also been an outstanding success in China where it is being added to the typical Nitrogen, Phosphorous and Potassium fertilizer.  By adding relatively small amounts (1%) of zinc to this mix, the crops improve hugely and of course the zinc also ends up improving the health of those consuming these crops.

Like coal, the price of copper has dropped to a new low figure, but this is mainly due to manipulative trading by some Chinese hedge funds, who are circling the huge strategic government stockpile in that country and making massive short sales. There is not really a current over-supply of this commodity.

Teck is in the process of building a production facility in the Alberta Tar Sands, along with their major oil partner Suncorp. Surprisingly, as he points out, right now the company is happy with the low oil price since a lot of oil is consumed during the construction. As well, the supply of skilled labour has greatly improved due to the low oil price.  For Teck, it will be good if the price of oil returns to the higher level only when the construction is done and they are in production!  Since prices are always cyclical, he thinks that is a real possibility. He emphasized that in all commodity plays, you have to have a long term view and be patient enough to ride out the down cycles, knowing that invariably there will be a turn-around with ample rewards for having waited. For example, the Fort Hills operation has a 50 year projection – that’s what he means by long-term thinking.

This corporation is a remarkably good corporate citizen and among their “good works” one can list the Vancouver Aquarium, BC Children’s Hospital, the whole Olympic movement and the environment. One minor but interesting aspect on the environment was at one of their open pit mines. The recovery of the landscape resulted in a new cover of verdant grassland which was so successful that it attracted many big horn sheep – so many in fact that the numbers grew to be a problem, and they had to “Export” some of the sheep to the USA.  Big Horn Sheep – another Teck commodity! They even have fish in their tailing ponds.

Lindsay talked about the three “I”s, Income, Influence, Innovation. The increase in world-wide income is projected to create a world “middle class” of three billion people, mostly in Asia, with staggering demand for resources. He aptly pointed out that 100 years ago the focus of the world was on London and Frankfort, then it moved to New York and Washington; now it is moving again, to Beijing and Mumbai.  The influence of the internet and especially the social programs will be profound.  As they found in Chile, a rump group of people on Twitter or Facebook can create havoc without any legitimacy, and the influences can be very tangible.  What it means is that, for a company like Teck, operating in Alaska, Peru, Chile, Kazakhstan and many other jurisdictions, they have to be tuned in to all sorts of regional situations which can profoundly affect their various operations. Individuals now have tremendous clout through the internet. Today there is now no such a thing as a local issue – all issues can become world-wide overnight through social media. Towards avoiding these situations, among other things, Teck gives an amazing amount of attention to safety on the job and they have an enviable company-wide record in this respect.  Lindsay aims to have the safest mining operation in the world and every employee is empowered to enforce the safety rules.

The innovation aspect is particularly noticeable in the huge increase in power and versatility of computers and Lindsay sees huge strides being made in this area – even speculating that it would not be far off when their huge trucks will be remotely operated – a truck in a desolate location in Alaska being driven by an operator sitting in front of a console in Vancouver. This, and 3D printing, will change the way we carry out much of our daily work.

This was a remarkable talk and space does not allow us to do it justice.

Doug Horswill, also a former Teck employee, thanked the speaker and spoke glowingly about Mr.  Lindsay’s outstanding leadership qualities.

 QUESTIONS AND ANSWERS

As is often the case, the question and answer period brought out surprising responses from the speaker.

1. Has the company some involvement in the Olympics?

Yes, Teck is very supportive, starting as early as 2008; direct support included providing the metal for all the medals. I am also very proud of our program “award for excellence” for employees world-wide who were involved and went beyond the call of duty – the reward was sometimes a paid trip to the games and a seat at, for example, the final hockey game. We also sponsored these awards at the Beijing games, at the Shanghai expo and will be doing so at the games in Rio next year.

2. Innovation may be good but it doesn’t seem to help wages – in fact wages seem to suffer.

Well, in developing countries that is not generally so – wages in China and other emerging countries are actually going up. True, in North America innovations can put some people out of work.  We don’t have all the answers to this problem but one thing we could do here is change our outlook on retraining and put more emphasis on training in the trades rather than in the academics.  A good plumber might, in his lifetime, earn more than a doctor! In Germany a well-trained person in one of the trades is a much respected citizen – more so than here in North America.

3. Shouldn’t Teck be buying back shares when they are low?

It’s a tricky subject. Teck has been buying back shares over the past few years but with some restraint.  Among other things, records seem to show that when the market sees a firm doing a major buy-back, the share price actually drops!   A major buy-back program can also have a negative effect on the ratings given on your bonds.

4. Considering the current share price, how rewarding is the operation at Fording Coal including all the operations under that umbrella?

This is a complicated matter but Fording is actually still in positive territory in spite of the current price.  The drop in Canadian and Australian currency vs. the US dollar has forced the closure of most US competitors so there is less chance of oversupply.

5. Can you comment on the Imperial Mine tailing pond disaster at Mount Polley?

The BC government has done a very good job of reviewing standards and on inspections and it has certainly concentrated all mining operators to be vigilant. Yes, the incident may have some ill effect for a while on the raising of capital for such mines. It will also make it more arduous to obtain a permit for any new mines requiring a tailing pond, or even for an extension of an existing operation.

6. If the world population is 9 billion by 2035 as predicted, will there be enough mineral resources?

Probably new technologies, which seem to come along at the right time, will provide us with new ore body locations and new methods of extraction so that we can meet the need. Also, the nature of the demand may change with new techniques for manufacturing requiring less material.

7. What can you do where the rules of the game are changed in midstream?

There are some countries where we will simply not go. No matter how attractive the ore body, if the governing regime has a record of being perverse, changeable, or uncooperative, we will avoid it – in The Congo, for example.

 

 

 


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