Teck Resources sells steelmaking coal business for US$9B

Key Takeaways:

• The majority of Teck’s steelmaking coal business, Elk Valley Resources, will be sold to Glencore PLC for US$6.9 billion in cash.
• The rest will go to Nippon Steel Corporation and South Korean steelmaker POSCO.
• Glencore says it plans continue to operate in Canada through both a Vancouver head office and regional offices in Calgary and Sparwood, B.C.
• The company noted that they will maintain significant employment levels in Canada with no net reduction in the number of employees.  

The Whole Story:

Teck Resources has agreed to sell its entire interest in its steelmaking coal business, Elk Valley Resources (EVR), through a sale of a majority stake to Glencore PLC and two other overseas steelmakers for US$9 billion.

Founded more than 100 years ago in Ontario, Teck is one Canada’s largest mining companies. Glencore is a Swiss multinational commodity trading and mining company.

Teck says Glencore plans to establish Canadian head office for the steelmaking coal business in Vancouver, maintain jobs and increase investment in the business and local communities.

“This transaction will be a catalyst to re-focus Teck as a Canadian-based critical minerals champion with an extensive portfolio of copper growth projects, unlocking the full value potential of the company,” said Jonathan Price, president and CEO of Teck. “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. 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.”

The deal includes a minority sale to two other companes. Glencore has agreed to acquire 77% of EVR for US$6.9 billion in cash. Nippon Steel Corporation (NSC) has agreed to acquire a 20% interest in EVR in exchange for its current 2.5% interest in Elkview Operations plus US$1.3 billion in cash payable to Teck at closing of the NSC transaction and US$0.4 billion paid out of cash flows from EVR. South Korean steelmaker POSCO will trade its interest in a pair of Teck’s coal operations for a three per cent stake in the overall steelmaking coal operations.

“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 Dr. Norman B. Keevil, chairman emeritus, Teck. “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. It’s time to get on with it.”

The sale comes at a time of increased government scrutiny of major foreign transactions with the Investment Canada Act. 

“All regulatory processes will be followed regarding review of the proposal,” said Finance Minister Chrystia Freeland said during a conference. “The government concern remains to protect Canadian jobs, environmental issues, rights of indigenous people; Teck is important for Canada and they are a champion for Canada.”