Based on its outlook for coking coal and copper, Scotia Capital has placed a “Sector Outperform” rating and a one-year target of C$25 on shares of Teck Resources Ltd. (TSX: T.TCK.B, Stock Forum).

“With limited near-term balance sheet and project development concerns, and likely bottom of the cycle for coking coal and copper, in our view the current share price represents an attractive risk/reward trade-off,” writes Scotia Capital analyst Dalton Baretto in a research report.

The report was published after BHP Billiton Ltd. (NYSE: BHP, Stock Forum) settled its 2015 first quarter benchmark price for hard coking coal with Japanese steel mills at US$117 per tonne, a price that is neutral to Teck’s shares, Baretto said.

However, the Scotia analyst has expressed the view that reducing the dividend in mid-2015 would be a prudent financial move for Teck, given the current commodity price environment.

Baretto goes on to explain that based on Scotia’s commodity price assumptions, Teck’s balance sheet should be able to maintain the current dividend of $518 million annually for some time.

But, if the current prices for coal, copper, zinc, and the existing Canadian/U.S. dollar exchange rate were to hold indefinitely, he said Teck’s balance sheet would likely be in a position to support the current dividend for only another six to 12 months.

Without a dividend cut, the company’s investment grade rating would be in jeopardy, the analyst said.

Baretto notes that in Teck’s Q3/14 call with analysts, management suggested that the company would not aggressively try to protect its current mid-BBB rating, and that a one-notch downgrade to BBB-Low could be possible.

BBB-Low is still an investment grade.

Teck Resources shares were off 6% to $12.82 on Friday, leaving a market cap of $7.3 billion, based on 566.8 million shares outstanding. The 52-week range is $29.10 and $13.54.