Freight deal with Teck hits CP Rail's shares

* Teck, Canadian Pacific ink contract for coal shipments

* CPR shares fall on weaker than expected contract price

* Teck shares lower as metals prices weaken

(In U.S. dollars, unless noted)

TORONTO, July 6 (Reuters) - Canadian miner Teck Resources Ltd (TCKb.TO) and Canadian Pacific Railway Ltd (CP.TO) reached a new rate agreement for coal shipments, but pricing fell well short of expectations, sending the rail company's shares down 6.9 percent on Monday.

The arbitrated agreement, which affects westbound coal shipments from Teck's five mines in southeast British Columbia, will substantially reduce Teck's coal transportation costs, the diversified metals and mining company said in a statement.

Teck expects average transportation costs, including rail and port costs, to be in the range of $33 to $35 per tonne for the 2009 calendar year, compared with an earlier forecast of $35 to $37 per tonne.

The details of the contract with Canadian Pacific remain confidential, but analysts noted that the implied pricing is well below expectations.

"At the top of the volume range and at today's fuel prices, the company stated revenues would be approximately $360 million, which is considerably lower than the $460 million we had been forecasting," said Research Capital analyst John Chu, in a note to clients.

"At the bottom end of the range, we suspect coal revenue could be $320 million," said Chu, based on CPR's view of coal shipments of between 17.5 and 19.5 million tonnes.

The new contract covers the period between April 8, 2009 and April 7, 2010. The five-year rail agreement that previously governed westbound shipments expired at the end of March 2009.

Teck said it expects the new rail rates will save it about $70 million for the 2009 coal year, which started April 1, in comparison with previous estimates.

Canadian Pacific shares fell C$3.10, or 6.9 percent to C$42.15 in morning trade on the Toronto Stock Exchange, while Teck's shares fell 4.1 percent to C$19.17, as weak metals prices weighed on its shares.

($1=$1.16 Canadian)

(Reporting by Euan Rocha; editing by Peter Galloway)

((euan.rocha@thomsonreuters.com; +1 416 941 8185; Reuters Messaging: euan.rocha.reuters.com@reuters.net)) Keywords: TECK/CANADIANPACIFIC

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