UPDATE 2-Teck to sell 17 pct stake to China for C$1.7 bln

* To sell 17.2 percent stake to China Investment Corp

* To raise proceeds of C$1.74 bln

* Shares rise 3.2 percent (Adds details. In U.S. dollars unless noted)

By Cameron French

TORONTO, July 3 (Reuters) - Canada's Teck Resources will sell a 17.2 percent equity stake to state-owned China Investment Corp through a private placement that will raise C$1.74 billion ($1.5 billion) and help the miner pay down debt, it said on Friday.

Teck, a top producer of zinc, copper, and metallurgical coal, will sell 101.3 million shares at C$17.21 each, a 7 percent discount to Thursday's closing price of C$18.50 on the Toronto Stock Exchange.

Despite the discount, Teck's shares rose 3.2 percent, or 60 Canadian cents to C$19.10 just after markets opened, the biggest gain among base metals miners in Toronto.

The deal, which will give CIC a 6.7 percent voting stake in the company, comes as Chinese companies have been taking advantage of depressed resource prices buy stakes in producers and lock in access to commodities, particularly oil.

However, the deal does not involve an offtake agreement, and Teck said that CIC, a sovereign wealth fund, has said it is acquiring the shares "for investment purposes as a long-term passive financial investor" and has agreed to hold the stock for at least a year after the deal closes in mid-July.

In a statement, Teck Chief Executive Don Lindsay said the transaction was "an attractive opportunity for Teck to establish a relationship with a major Chinese financial investor, with a deep understanding of China, the world's largest consumer of our principal products."

Lindsay said recently the company had talks with Chinese officials last year over a possible deal to supply coal to China's growing steel industry.

DEBT PAYDOWN

Vancouver, British Columbia-based Teck will use the proceeds of the deal to cut bank debt. The miner took on nearly $10 billion in debt last year to buy Fording Canadian Coal Trust, which made it a top producer of metallurgical coal, or coal used in the steelmaking process.

The company has sold some assets to pay down the debt, and has said it planned to sell a 20 percent stake in its coal business. Teck spokesman Greg Waller said the company still plans to sell the minority stake in the coal business.

David Davidson, an analyst at Paradigm Capital, noted there had been recent speculation that Teck would do some sort of equity sale to pay down debt.

He said he doubted the deal would face Canadian regulatory or government obstacles, as it is for an equity stake in the company, rather than a piece of a particular asset.

"It doesn't get them any closer to a pound of zinc or a tonne of coal," he said.

However, he said the deal would make it easier for Teck to do future deals with Chinese companies.

"Any deal that does come along for a ... stake in Fording or anything else Teck decides to sell, that approval process (in China) has basically been taken care of," he said.

CIC was created in 2007 to manage part of China's foreign exchange reserves for higher returns. The $200 billion fund has invested $7.8 billion in Morgan Stanley and has also invested in private equity fund Blackstone .

($1=$1.16 Canadian) (Reporting by Cameron French; editing by Peter Galloway)