Ottawa approves sale of Teck’s steelmaking coal business to Glencore

VANCOUVER — The latest hurdle in Teck Resources Ltd.’s years-long effort to offload its coal mining business and become just a metals producer has disappeared after the federal government approved the sale of the operation to Swiss commodities giant Glencore .

In a statement posted on Thursday, Industry Minister François-Philippe Champagne said the green light comes with “strict” conditions and is a “much narrower” deal than Glencore’s hostile takeover bid for Teck last year.

Teck said the latest development means the sale of its remaining 77 percent stake in coal-to-steel business Elk Valley Resources has now received all necessary regulatory approvals and is expected to close next Thursday.

The Vancouver miner said it expects to receive $9.5 billion from the sale, excluding closing adjustments.

“This transaction marks a new era for Teck as a company focused entirely on providing metals critical to global development and the energy transition,” company president and CEO Jonathan Price said in a statement.

“The completion of this transaction will provide substantial funding for our projects, giving Teck a path to increase copper production by a further 30% as early as 2028.”

Teck plans to use up to $2.75 billion of the proceeds for share buybacks, $2.75 billion for debt reduction, $250 million for a special dividend, $1 billion for transaction-related fees and costs, and the rest for the plan its copper growth.

The company has four near-term copper projects that it estimates would together cost about $4.7 billion to complete, while it is also working to ramp up production at its Quebrada Blanca Phase 2 project, from about 8.7 billion dollars, from Chile.

Champagne said the approval of the deal comes as the energy sector is rapidly evolving to become more sustainable.

“Following the Glencore and Teck transaction, we support a Canadian champion to lead the transition from coal to critical minerals.”

As part of the deal, Champagne said Glencore has committed to establishing and maintaining a headquarters in Vancouver for Elk Valley Resources for at least 10 years, along with regional offices in Calgary and Sparwood, BC.

The conditions also include ensuring that a majority of Elk Valley Resources’ directors and two-thirds of its directors or managers are Canadian for the same period.

Ottawa said Glencore also agreed to “maintain significant employment levels” at Elk Valley Resources for at least five years.

“We have made significant commitments to the Canadian government to ensure that the transaction is of lasting benefit to Canada and British Columbia,” Glencore Chief Executive Gary Nagle said in a statement.

Glencore’s $25 billion hostile takeover attempt “raised very serious concerns and was rejected by shareholders,” Champagne said.

The approved deal for steel production, originally announced last November, represented the best possible outcome after nearly a year of fighting over the company’s future, Price said at the time.

The announced deal also included the Japanese company Nippon Steel Corp. acquiring a 20% stake in exchange for its interest in one of Teck’s coal operations and $1.7 billion in cash, while South Korean steelmaker Posco will swap its interest in a pair of coal Teak. operations for a share of three percent in the total steel coal production operations.

News first emerged in 2021 that Teck was exploring a sale of its coal division, sparking speculation about buyers and concerns about another major foreign takeover of Canadian mining assets.

Teck rejected offers it did not consider generous enough in favor of an effort to spin off the steelmaking coal business into a separate company. He withdrew the plan shortly before putting it to a vote in April 2023 when it became clear that there was not enough shareholder support.

With the deal nearly complete, Teck will be free to focus on sustainable metals production, Sheila Murray, chairman of the board, said in a statement.

“We are pleased to achieve a complete separation of the Steelmaking Metals and Coal businesses to position Teck for its next phase of growth and responsible value creation.”

This report by The Canadian Press was first published on July 5, 2024.

Companies in this story: (TSX:TECK.B)

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