The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
North of 60 Mining News - November 15, 2023
Glencore to pay Teck $6.9 billion in cash for 77% interest in Elk Valley Resources, which is partial owner of this coal loading facility in North Vancouver, British Columbia.
A drill at Galore Creek, a Northern BC mine project capable of producing 6.2 million pounds of copper over an 18-year span, which would rank as the largest copper operation in Canada.
In a deal that finds a middle ground between the ambitions and future visions of two mining companies, Teck Resources Ltd. has agreed to sell its steelmaking coal assets in Southern British Columbia to Glencore for around US$6.9 billion.
"This sale will ensure Teck is well-capitalized and able to realize value from our base metals business and deliver strong returns to our shareholders while maintaining a robust balance sheet," said Teck Resources President and CEO Jonathan Price.
Going into 2023, Teck was working toward splitting its coal and metals businesses into two publicly listed companies – Elk Valley Resources Ltd. and Teck Metals Corp.
Wanting both the steelmaking coal assets to be spun into EVR and the copper- and zinc-rich metal projects that would stay in the rebranded Teck Metals, Glencore made an aggressive US$22.5 billion bid to buyout Teck before shareholders voted on the proposed split in April.
Calling the proposed buyout a "non-starter," Teck's board and management rejected Glencore's offer, even after the commodities giant sweetened the deal with a US$8.2 billion cash offer for the coal assets.
While Teck was able to fend off the complete takeover, the Glencore offer stymied the Canadian miner's original business plan to split its assets.
On Nov. 14, Teck agreed to sell EVR, which includes steelmaking coal mines and partial ownership of a large coal loading terminal in Southern BC, to Glencore for an enterprise value of US$9 billion.
"Glencore has high regard for the business that has been developed over many decades in British Columbia and looks forward to maintaining and enhancing its operational performance, environmental stewardship and social contribution," said Glencore CEO Gary Nagle.
Teck will receive US$6.9 billion from Glencore for its 77% interest in EVR and another US$1.3 billion from Nippon Steel Corp. and South Korea-based Posco for a minority interest in EVR. Teck will also continue to bring in profits from the coal business until the deals close.
For Teck, this arrangement provides a significant cash infusion to grow the metals side of its business – especially copper and other metals needed for the clean energy transition.
"This sale sets the stage for Teck for continued growth as a major Canadian-based producer of copper and other future-oriented metals, while preserving the jobs and operations of the coal mines in the Elk Valley," said Teck Resources Chairman Emeritus Norman Keevil.
As a pure-play base metals company, Teck expects to drive new economic opportunities for its shareholders and stakeholders as it focuses on providing metals needed for the energy transition.
"This transaction is a catalyst to refocus Teck as a Canadian-based critical minerals champion and unlock potential value upside by ensuring Teck is well capitalized to realize value from our extensive portfolio of copper growth options," Price informed investors and analysts on Nov. 14.
The Teck CEO says its future growth will be built upon a solid foundation of "long-life producing assets that generate strong cash flow, including Antamina in Peru, Highland Valley Copper in British Columbia, and Red Dog in Alaska."
With these operations, Teck is on track to produce roughly 770 million pounds of copper, 1.5 billion lb of zinc, and 3.5 million lb of molybdenum during 2023.
While the more than US$8.2 billion cash infusion provides Teck with the option to expand its business through acquisitions, the company says it plans to focus primarily on growth from the pipeline of assets already within its portfolio.
This includes extending the life of Highland Valley Copper in Southern BC, the largest copper mine in Canada, and advancing Galore Creek, a project in Northern BC equally owned by Teck and Newmont Corp. that could displace Highland Valley from its throne.
Teck is also evaluating an expansion of its Trail Operations – a refinery in Southern BC that processes zinc concentrates from Red Dog and other mines – to include an electric vehicle battery recycling facility.
As a potential expansion into other energy metals, the Canadian mining company has also quietly been evaluating nickel projects, with a primary focus on North America.
"A key element of this program is the complete digitalization of Teck's historical exploration records – this digitization program will use advanced machine learning tools to drive and inform our evaluation of high-quality nickel prospects, plus copper and zinc prospects," the company penned in its 2022 annual report.
Teck says it will also continue to support junior Canadian mining and exploration companies, invest in research and innovation related to mining and processing, help advance the Canadian Critical Minerals Strategy, and support Canada's decarbonization and nature conservation goals.
"This company was built on a foundation of sound geoscience and engineering excellence, with a record of successful mine-building second to none. That is the same foundation we see for Teck's future," said Keevil. "It's time to get on with it."
Teck will be able to invest into getting on with its forward-leaning base metals strategy with the closing of its sale of a minority interest in EVR to Nippon Steel early in 2024 and the cash it receives from Glencore sometime after midyear – pending governmental and other approvals.
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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