The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
North of 60 Mining News - April 3, 2023
Swiss mining giant Glencore has made a $22.5 billion all-shares offer to merge with Canada-based Teck Resources Ltd.
If the merger were approved, Teck shareholders would benefit from the wider range of energy metals produced by Glencore, including nickel from the company's Raglan Mine in Quebec.
Merger and acquisition activity continues in the North of 60 Mining News area with Glencore's unsolicited US$22.5 billion (C$30.3 billion) all shares offer to merge with Teck Resources Ltd., which owns the Red Dog zinc mine in Alaska and interest in several advanced copper exploration projects in Northern British Columbia.
On April 3, Teck announced that the world's largest mining company offered 7.78 Glencore shares for each Teck Class B subordinate voting share and 12.73 Glencore shares for each Teck Class A common share. As proposed, the offer would result in Glencore shareholders owning 76% of the merged company, with Teck shareholders owning the remaining 24%.
While this offer represents a 20% premium for Teck shareholders, the Canada-based mining company's board of directors determined that the proposal from the Swiss mining giant was opportunistic and unanimously voted to reject it.
Glencore's proposal comes at a time when Teck is making headway on doubling its copper production with the ramp-up to commercial production at the Quebrada Blanca Phase 2 (QB2) project in Chile and is in the midst of reorganizing its business into two publicly-listed companies – Teck Metals Corp. and Elk Valley Resources Ltd.
"I remain fully committed to Teck's proposed transaction to create two world-class, well-focused, independent companies and I unequivocally support the board's decision to reject Glencore's unsolicited offer to acquire Teck," Norman Keevil, chairman emeritus of Teck Resources, said in an independent statement.
Glencore, which plans to carry forward Teck's asset separation plan by adding its own assets into the separated companies, contends that the merger would create significant value for Teck shareholders by further diversifying and expanding the portfolios of the metals-focused and coal-focused companies that would result of the merger and then demerger proposal.
Teck first announced a strategy in February to move its steelmaking coal unit into Elk Valley Resources, which would be a world-leading steelmaking coal mining company that would export premium coal mined from Teck's current portfolio in Southern British Columbia.
Nippon Steel Corp., a Japan-based company that already owns a minority interest in Teck's BC coal assets, has agreed to pay Teck C$1 billion in cash for a 10% stake in Elk Valley. South Korea-based POSCO also owns a minority interest in the coal operations, which will be converted into a 2.5% stake in Elk Valley.
"This significant participation by two of the world's largest steelmakers highlights the long-term, critical importance of high-quality steelmaking coal in order to reduce emissions and build essential infrastructure globally," said Teck Resources CEO Jonathan Price.
Teck's portfolio of copper- and zinc-forward metals mining operations would be advanced by Teck Metals, a name that better reflects the new focus of the envisioned growth-oriented and low-cost base metals mining company.
Teck says both companies that emerge from the proposed decoupling of the company's current metals and coal assets would remain committed to strong environmental and social performance.
"We are confident that pursuing this plan will position both businesses for even greater success, allow shareholders to optimize their exposure to the different underlying commodities, and support a sustainable future for the benefit of employees, local communities, and Indigenous peoples," said Teck Resources Chair Sheila Murray.
In an April 3 statement confirming that it has put in a bid to buy out Teck, Glencore said it plans to carry forward the demerging strategy put in motion by Teck. The demerged metals and coal businesses proposed by the world's largest mining company would look much different than Teck originally had in mind.
Glencore proposes the formation of MetalsCo, the placeholder name for a world-class business that would be primarily focused on the metals needed for the energy transition. This company would hold a diversified portfolio comprising Glencore's and Teck's metals and minerals assets, Glencore's metals and non-coal energy marketing division, recycling businesses, as well as Glencore's investment in Canadian grain handling business Viterra.
Glencore and Teck's steelmaking and thermal coal business would be moved into CoalCo, which would also be the landing place for Glencore's ferroalloys assets – which includes chrome, vanadium, and silica mines, along with two smelters – along with the Swiss mining giant's coal and ferroalloys marketing businesses.
Glencore believes that the proposed merger with Teck and then demerger of metals and coal assets is a compelling proposition that would create significant value for both Teck and Glencore shareholders.
Teck's board, however, strongly believes that its independent metals and coal decoupling plan offers the superior opportunity to maximize value for all Teck shareholders.
"Now is not the time to explore a transaction of this nature, and I have the utmost confidence in the board's and our management teams' strategy to maximize value for each of Teck Metals' and EVR's shareholders after the separation," Keevil said of Glencore's proposal.
In addition to the opportunistic timing of the buyout bid, Teck's board says the Glencore offer interjects a very high level of complexity and execution risk based on the number of jurisdictions, commodities and multifaceted approvals required from various regulatory bodies, which could take up to two years to resolve.
On the other hand, the Canadian miner's own metals and steelmaking coal business demerger already has the requisite regulatory approvals and is expected to close at the end of May, pending the approval of shareholders later this month.
Teck's board also said it does not want to expose its shareholder base to Glencore's oil and thermal coal businesses, carbon dioxide emitting assets that the Canadian miner has steered away from.
"The Glencore proposal would expose Teck shareholders to a large thermal coal business, an oil trading business and significant jurisdictional risk, all of which would negatively impact the value potential of Teck's business, is contrary to our ESG commitments and would transfer significant value to Glencore at the expense of Teck shareholders," said Price.
Glencore says that if the merger were to take place, it intends for CoalCo to ramp down its thermal coal portfolio production in line with the net-zero CO2 emissions by 2050 strategy already set in motion by the global mining company.
Despite receiving a letter from Teck's board declining the proposed buyout, Glencore remains committed to the buyout and held a shareholder webcast Monday afternoon in Europe (early morning in North America) to make its case for a merger that would result in a world-leading energy metals mining company and world-leading coal company.
"This is a win-win for all shareholders," Glencore CEO Gary Nagle said during the webcast to outline how the merger is a unique and compelling opportunity to unlock value for both Teck and Glencore.
He said the issues detailed in Teck's rejection letter can be addressed and handled.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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