The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
North of 60 Mining News - April 11, 2023
Glencore offers to pay $8.1 billion in cash for Teck Resources' steelmaking coal assets that are shipped out of this terminal in North Vancouver, British Columbia.
Glencore believes that its merger proposal offers a compelling value proposition to Teck shareholders.
Teck Resources Ltd. continues to rebuff an increasingly aggressive buyout bid by Glencore, which hopes to merge with the Canadian mining company and then create two new companies that would advance the coal and metals assets resulting from the combined portfolio.
This plan to create separate coal and metal mining companies is a continuation of a demerger strategy set in motion by Teck, except on a much grander scale.
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 operations in Southern British Columbia.
Under this plan, 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.
"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 decoupled metals and coal businesses proposed by the world's largest mining company, however, would look much different than Teck originally had in mind.
"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 Teck Resources CEO Jonathan Price.
Due to the ESG implications and other risks involved, Teck has strongly encouraged its shareholders to reject the Glencore offer in favor of its own demerger plans.
During an April 10 presentation, Teck said the "fundamental flaws of Glencore's proposal make it a non-starter and Glencore's track record makes it an unsuitable acquirer."
To address concerns regarding Teck shareholder exposure to thermal coal, Glencore has put an alternative offer on the table that would pay Teck shareholders US$8.2 billion in cash for the company's coal assets.
Glencore says this is a fair offer for Teck's steelmaking coal assets in BC when you consider Teck shareholder ownership and Nippon Steel Corp.'s proposal to pay C$1 billion (US$740 million) in cash for a 10% stake in Elk Valley Resources Ltd., the name of Teck's proposed new coal company.
Under Glencore's newest proposal, Teck shareholders would also own a 24% stake in the MetalCo, the placeholder name for a company that would hold Glencore and Teck's combined portfolio of world-class metals and minerals assets, as well as Glencore's metals and non-coal energy marketing division, recycling businesses, and investment in Canadian grain handling business Viterra.
"We continue to believe that the proposed transaction, being a merger and not a takeover, provides a compelling value proposition to Teck shareholders who will fully/disproportionately participate in the value creation, synergies and upside, and is a superior transaction to the proposed Teck separation." Glencore CEO Gary Nagle penned in a proposal letter to Teck's board.
Immediately following receipt of the letter, Teck said the revised proposal put forward by Glencore appears to be largely unchanged from the original unsolicited offer and "does not provide an increase in the overall value to be received by Teck shareholders or appear to address material risks previously raised by Teck."
The Teck board, however, said it will carefully and expeditiously evaluate the new proposal with consultation from its financial and legal advisors.
Glencore is pushing Teck to postpone a meeting slated for April 26 that would have shareholders vote on the Canadian mining company's planned reorganization that decouples its coal and metals assets.
"We believe that it is in your shareholders' interests to engage with Glencore and we see no valid reason not to delay your shareholders meeting in respect of the proposed Teck separation in order to allow for discussions and due consideration of our proposed transaction for the benefit of all of your shareholders," Nagle's letter concluded.
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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