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Canada Approves Teck's Coal Sale to Glencore

July 5, 2024 - The Canadian government has approved commodities major Glencore’s acquisition of Teck Resources’ metallurgical coal business, Elk Valley Resources (EVR).

The $6.9-billion transaction for a 77% interest in British Columbia-based EVR is expected to close on July 11.

Canada’s government expressed strong objections to the attempt last year by Glencore to exercise a hostile takeover of the country’s biggest diversified miner. Shareholders ultimately rejected the transaction.

On Thursday, government approved a much narrower deal whereby Glencore acquired only the metallurgical coal business of Teck.

To get the deal across the finishing line, Glencore made several commitments to ensure a “strong and well-capitalised Canadian operation of EVR”, said Innovation, Science and Economic Development Minister François-Philippe Champagne.

He stated that Glencore had committed to maintain, for at least ten years, a Canadian head office for EVR in Vancouver and regional offices in Calgary and Sparwood.

For the next ten years, the majority of EVR’s directors would also be Canadian and at least 66% of all executive and senior management roles must be filled by Canadians. Glencore also agreed to maintain significant employment levels at EVR for at least five years.

In addition, Glencore made binding environmental commitments that go beyond merely maintaining its obligations under the bond required by the British Columbia regulator. The group will have environmental stewardship of the assets, regardless of its future ownership, until 2050, said Champagne.

Glencore also agreed to engaging constructively and meaningfully with the Indigenous Nations in the Elk Valley.  

"Canada welcomes foreign investment and acknowledges its importance to the mining sector. The most significant of these transactions are reviewed on their merits based on the overall net benefit to Canada. The government will not hesitate to act when it is of the view that a transaction would be harmful to Canada’s economic interests or the environment," said Champagne.

Glencore CEO Gary Nagle said on Friday that the group was looking forward to completing the acquisition of EVR. "Glencore’s Canadian assets form a significant part of our global business, and some have a history that dates back more than 100 years. The investment in EVR will further support our position as one of the largest diversified miners and suppliers of critical minerals in Canada.

“The acquisition of EVR will further enhance the quality of our portfolio, broadening our ability to provide high quality steelmaking coal, an important transition-enabling commodity, to customers around the world as well as contributing significant expected cashflows to the Glencore group.”

Copper Growth

Meanwhile, Teck CEO Jonathan Price said that the complete separation of the metals and steelmaking coal business marked a new era for Teck.

“The company is now entirely focused on providing metals that are essential to global development and the energy transition,” he said.

Completing the transaction would provide Teck with substantial funding, providing a pathway to increase copper production by a further 30% as early as 2028.

With the ramp-up of the QB mine, in Chile, this year, Teck expects to double its copper production to about 600 000 t/y.

In parallel, Teck is continuing to advance its near-term copper projects, including the Highland Valley copper mine life extension, in Canada, the  Zafranal project, in Peru, San Nicolas project, in Mexico, and QB debottlenecking, with the first sanction decisions expected in 2025. The estimated capital cost attributable to Teck for these projects is between $3.3-billion and $3.6-billion.

Longer-term, Teck will progress brownfield and greenfield development options, including the Galore Creek project in Canada, and the potential expansion of Trail Operations to include an electric vehicle battery recycling facility. 

Teck shareholders will also benefit from the EVR sale, with $2.6-billion set to be returned. In addition, the group will reduce debt of up to $2-billion, including a cash tender offer to purchase a $1.25-billion aggregate principal amount of outstanding public notes.