TORONTO (miningweekly.com) – Diversified miner Teck Resources has entered into a nonbinding memorandum of understanding with BC Hydro regarding a proposed sale of a one-third interest in Teck's Waneta Dam and generating facility, in south-eastern British Columbia, for C$825-million.

Tax pools available will shelter the proceeds from cash taxes, and Teck will use the full proceeds of the transaction to pay down debt, the group said on Wednesday.

The Vancouver-based company expects to record a pretax gain of approximately C$625-million on the transaction.

The Waneta hydro-electric power plant supplies power to Teck's Trail metallurgical operation.

"This transaction with BC Hydro is the latest step in Teck's plan to significantly reduce our debt and position the company for long-term success," CEO Don Lindsay said in a statement.

"Our Trail operation is a world-class integrated zinc/lead smelting and refining complex and this transaction will preserve its existing supply of low-cost power, one of Trail's key competitive advantages."

Completion of the transaction is subject to the completion of due diligence and definitive documentation, and the receipt of certain third-party consents and necessary regulatory approvals. Teck expects the transaction to close by year-end.

Last year, Teck took on $9,8-billion in debt – a $5,8-billion bridging loan and a $4-billion term facility – to acquire Fording Canadian Coal Trust.

The heavy debt load, which the company struggled to shift after credit availability froze in the second half of 2008, worried investors, particularly as the bridging loan was to have matured in October this year.

However, after rescheduling payments due this year, and a successful bond issue last month, Teck said earlier this month it had just $603-million remaining on its bridge loan, and expected that the proceeds of asset sales that had yet to close, plus the last small proceeds of a tax refund, would allow it to reduce the bridging debt to $140-million.

Thereafter, the focus will be on paying down the term loan, so that the company can return to investment grade as quickly as possible.

The Waneta dam is located on the Pend Oreille river. Its four generating units total 490 MW of capacity and produce an average of 2 800 gigawatt hours of energy per year.

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