Dec '08/Jan '09

Teck talk

A timely discussion with Teck’s president and CEO, Don Lindsay

By B. Sundararajan

With news of the recent rebranding of Teck Cominco to Teck, CIM Magazine spoke with Don Lindsay, the company’s president and CEO, about the reasoning behind the change, other company initiatives, as well as his views on the impact of recent world events on the minerals industry.

CIM: Our readers would like to know a little bit about your background and your role at Teck.

Lindsay: I’ve had a long-term interest and history with the mining industry. I visited my first mine while on a canoe trip when I was nine years old. It happened to be a Teck copper mine in Temagami that my current chairman’s father had discovered. That was over 40 years ago, but I have been a student of the industry ever since.

After I graduated with a degree in mining engineering from Queens University, I worked underground in Uranium City, in the old El Dorado nuclear operations, and later at the Iron Ore Company of Canada in Labrador City in mining operations, engineering, and as a general foreman for blasting. I then went back to get an MBA from Harvard University, after which I then ended up on the investment side of the industry in what was then Wood Gundy Ltd., that later became CIBC World Markets. While there, I started the global mining group and got to know the industry quite well. I finished there as president of CIBC World Markets and came here four years ago as president and became CEO soon after I arrived.

CIM: Can you tell us the reasoning behind the simplified brand and name?

Lindsay: Teck and Cominco merged back in 2001. The name Cominco had a strong reputation around the world as the biggest and best in all things zinc and also had a larger company status, as it was associated with the Canadian Pacific group that it had been a part of. Meanwhile, Teck had the reputation of being a very entrepreneurial, diversified company that knew how to take advantage of opportunities — whatever the commodity might be — to make money for shareholders. After Teck took over Cominco, over time we grew into more of a diversified business. Although we have one of the strongest and the best quality zinc businesses in the world, it became the third largest business for Teck Cominco because the copper business grew so substantially over the last four years and the coal business also became much bigger. Ultimately we decided to unify the brand under one name, which really wasn’t such a big change as we were generally referred to as Teck for short anyways.

CIM: Can you give us a broad outlook for the various sectors with respect to both the Canadian and the global situation?

Lindsay: The outlook in the short term is quite severe and how low it will go is, frankly, anyone’s guess. We’ve had a lot of discussion with key business leaders and government officials in China, and they have certainly reaffirmed their commitment to a long-term urbanization trend. They want to take their level of urbanization from where it is currently, approximate 35 per cent, to about 65 per cent in order to have an economy that, in the long term, will be structurally competitive with the United States. For them to do that it means transferring roughly 20 million people a year from rural to urban communities and that would require a lot of commodities. So, we believe that the long-term trend is still there and it underpins long-term growth and demand for copper, coal, zinc and energy.

However, this has always been and always will remain a cyclical industry and there will be downturns. In this case, what we’re facing is a combined downturn in all markets around the globe including in China. But the world always tends to fix itself somehow and there have certainly been quite dramatic actions taken by governments around the world. We already know of over $5 trillion in stimulus packages that have been announced and there will be more. But the problem with those packages is that there is a lag time — four-to-six months or longer — before they really kick in. Eventually, those stimulus packages will kick in and the fear will subside.

Meanwhile, the people in China, India and other emerging markets have had a taste of a better life and that won’t go away. That’s the fundamental driver of everything. A couple of years from now, if demand in these markets resumes, copper, zinc, nickel, coal and iron supplies will be very tight. We feel that copper and metallurgical coal will be the tightest of all. That’s why, over the last three or four years, we’ve been concentrating on building up those businesses. The zinc business is very good, and our product is very high-quality, but China is the largest producer and consumer of zinc and we need to see how their industry shapes up. We see them taking the right steps. The Chinese government seems to be quite committed to a minimum long-term growth rate of eight per cent and the leaders tell us that commodity consumption will be one-and-a-half to two times GDP growth. If that occurs, it will be very good for us, because of the sheer volume that they consume.

They produced almost half of the world’s steel last year — five times as much as the United States. And they consumed three times as much copper as the United States. So, if we have growth rates to top those volumes, it would really be something. But the problem is that we have to get from here to there. We have to go through a very rough period first before we get to the other side.

CIM: Does this mean that the BRIC countries continue to drive the industry in 2009 and beyond?

Lindsay: The BRIC countries should help, but one of the hazards in the industry is that these countries tend to be quite volatile as well. So we can count on the long term-trend but not on anything short-term. We just have to make sure that we get through this first.

CIM: Other than the market crisis, will the industry be facing any other challenges in 2009?

Lindsay: Another broader ongoing challenge is the education of the general public about the value of minerals in our day-to-day lives. To really catch people’s attention, I put it this way: everything that we use in our day-to-day lives comes from one of only two sources; if you can’t grow it, you have to mine it. And the more that we can get that message across to people and demonstrate that we are absolutely committed to providing those minerals in as sustainable a fashion as possible, the further we will go in supporting the viability of this industry.

CIM: Your 2006 Sustainability Report was entitled "This is our future." We just witnessed the demise in importance of sustainability in the political sector in light of the current fiscal crisis. In tough times, is this an area that faces cuts?

Lindsay: It would be very hard to live with something like that. We have a culture in this company. Every decision we make, small or large, no matter what community or country, the test is that we ask ourselves whether we are doing the right thing. At the end of the day, we all have to go home and live with ourselves. For all of the people that I hire and all the people that they in turn hire, the main thing we are looking for is that people really believe in those principles. Sure, we’re going to be making some cutbacks — we announced a bunch recently — but a number of things are sacrosanct, for example safety. Any capital that was going to any project or any site that had any connection to safety was not cut. That’s just who we are.

CIM: Your Sustainability Report outlined specific targeted goals in a number of areas. Can you give our readers an update on where things stand and the performance in these areas?

Lindsay: Probably one of the best indicators of our progress is that in 2008, Teck was named to the Dow Jones Sustainability Index for North America for the first time. We had worked towards that goal and we achieved it earlier than expected. To make it onto this highly competitive index, we had to demonstrate progress on a very comprehensive list of issues including GHG emissions, energy efficiency, stakeholder engagement, human rights and so on. I think that’s an important validation.

Our 2007 Sustainability report was released on December 12. It will contain a much more detailed update on our progress to date. We have championed within our company to reduce direct energy consumption. We continue to participate in the carbon disclosure project, which is a global recording mechanism that demonstrates our commitment to transparency. We’ve looked at a number of intermediate solutions and best practices across the company to try to develop new technologies and ideas including our water reduction goal and using recycling and mining storm water as an example. We also formally support the principles of the United Nations declaration of human rights. Right across the board, we have things moving forward.

CIM: Teck has also certainly "walked the talk" on issues of social investment. Can you tell us about some of your company initiatives in this regard?

Lindsay: In terms of community investment, in the last three or four years we’ve stepped that up enormously. To be fair, we were having good times, which enabled us to do that. Starting with the lead donation on the campaign for the BC Children’s Hospital where we committed $25 million. I am the chair of the campaign and I commit a lot of my time to it. That hospital has a mandate to provide care to a million children all across the province. We have 5,500 employees in BC and there are so many examples of employees and communities that have benefited from that hospital, so it’s an investment in our people as well.

Globally, we could also turn to Peru where our Antamina operation has donated $43 million to aid in health services and child malnutrition education in rural areas and to improve economic opportunities for the poorer communities. Dave Parker, our vice-president of sustainability, is consulted by people around the world, including members of the Clinton Sustainability Initiative, for his expertise on how to deploy resources to help different communities.

I also chair the International Zinc Association, and a lot of people don’t realize how important zinc is for the healthy growth and reproduction of plants. This past spring, an eight-member group called the Copenhagen Consensus — five of whom have won Nobel prizes — made a declaration that zinc and vitamin A can contribute to making the planet a better place. If we could get zinc and vitamin A to the children in sub-Saharan African countries and some Asian countries, that would have a major effect on brain development.

Also, zinc is one of the four major nutrients critical for crop production. If we could get one per cent of zinc in the fertilizer, that could increase crop production enormously in some Asian countries, as it helps to counteract iron contamination in the soil. It could increase rice production by as much as 30 per cent in some areas. A lot of people don’t know this. They think of zinc purely as a metal, but it’s also an important nutrient. Throughout the company, we are striving to ensure that people know that corporate social responsibility starts with understanding the impact of all our activities at every stage. We need to have a very clear understanding of both the negatives and the positives. Our goals, for the communities we are in, are to advance their social and economic aspirations, health and wellness and to address any concerns that they may have. Minimizing our environmental footprint is also a key imperative. Ensuring a safe and healthy workplace and building constructive relationships with First Nations communities are all critical to our ability to operate here. We have to be conscious about it and that is how we hire people.

If you wander through this company and talk to the employees about the kind of culture we are developing, you’ll discover that it starts with people’s core values.

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