By Canadian Press

Teck Resources agrees to sell steelmaking coal business

Nov 14, 2023 | 5:07 AM

VANCOUVER — Teck Resources Ltd. has agreed to sell its steelmaking coal business in a series of deals that value the operations at US$9 billion that will see Swiss commodities giant Glencore acquire a majority ownership.

The company said Tuesday that Glencore has agreed to pay US$6.9 billion for a 77 per cent stake in the coal business, known as Elk Valley Resources.

Meanwhile, Japanese company Nippon Steel Corp. will acquire a 20 per cent stake in exchange for its interest in one of Teck’s coal operations and US$1.7 billion in cash, including US$1.3 billion at closing and US$400 million to be paid out of cash flow from the coal business.

South Korean steelmaker POSCO will swap its interest in a pair of Teck’s coal operations for a three per cent stake in the overall steelmaking coal operations.

“This transaction unlocks significant value for Teck and its shareholders while also supporting continued responsible operation of the steelmaking coal assets for the long term,” Teck board chair Sheila Murray said in a statement.

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Teck has been weighing the future of its steelmaking coal business since it became apparent its plan to spin off the operations into a separate company did not have the required shareholder support.

The company said the sale is subject to several conditions, including approvals under the Investment Canada Act and competition approvals in several jurisdictions.

“Glencore has made strong commitments that will create new benefits for Canada and the Elk Valley and ensure responsible stewardship of the steelmaking coal operations for the long term,” Teck chief executive Jonathan Price said in a statement.

The deal follows an unsuccessful hostile takeover bid by Glencore for all of Teck earlier this year. The Vancouver-based miner’s board rejected Glencore’s original offer, but the company continued its pursuit of the coal business.

Glencore’s initial pursuit for the entirety of Teck sparked sentiments of economic nationalism. B.C. Premier David Eby spoke out against the proposed deal and federal Conservative Leader Pierre Poilievre urged the government to block any acquisition of Teck by Glencore.

Ottawa said at the time that it was watching the situation closely, and that any takeover bid for Teck would go through a rigorous approvals process.

Glencore chief executive Gary Nagle said Teck’s steelmaking coal business is expected to meaningfully complement the company’s existing thermal and steelmaking coal production in Australia, Colombia and South Africa.

“We are dedicated to working with all governing bodies and stakeholders to ensure that the transaction is of benefit to Canada, which includes a commitment from Glencore regarding employment, engaging in further reclamation efforts and to engage constructively and meaningfully with the Indigenous Nations in the Elk Valley,” Nagle said in a statement.

Teck expects the proceeds from the sale of the steelmaking coal business will improve its net leverage through debt reduction, the retention of additional cash on the balance sheet and payment of transaction-related taxes, which are estimated to be about US$750 million.

The company also said its Board will determine an appropriate amount and form of a “significant cash return” to shareholders following closing of the transactions.

This report by The Canadian Press was first published Nov. 14, 2023.

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

The Canadian Press