Published: November 14, 2023 | Share This

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Glencore has entered into a binding agreement with Teck Resources for the acquisition of 77 percent interest of Teck’s steelmaking coal business, Elk Valley Resources (EVR), for $6.93 billion in cash.

Concurrently, Teck has agreed with Nippon Steel Corporation (NSC) that its current 2.5 percent interest in Elkview Operations will be rolled up to equity in EVR, and that NSC will acquire additional equity in EVR from Teck, on closing NSC will hold a 20 percent equity interest in EVR.

POSCO has advised Teck that it intends to exchange its current 2.5 percent interest in Elkview Operations and its 20 percent interest in the Greenhills joint venture, for a 3 percent interest in EVR.

At closing, Glencore will also acquire from Teck, NSC, and POSCO’s attributable share of a shareholder loan from Teck to EVR which is repayable out of EVR’s cash flows. The amount payable for this portion of the loan is expected to be some $250-$300 million on closing.

The transaction is subject to mandatory regulatory approvals, being Investment Canada Act and competition approvals. The transaction is expected to close in Q3 2024.

“We are pleased to have reached agreement to acquire Teck’s steelmaking coal operations in the Elk Valley. These world-class assets and the experienced people that operate them are expected to meaningfully complement our existing thermal and steelmaking coal production located in Australia, Colombia, and South Africa,” said Gary Nagle, CEO of Glencore.

“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,” added Nagle.

“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,” said Nagle.

“We have a longstanding relationship with NSC and POSCO and we look forward to working closely with them as our future partners in EVR,” concluded Nagle.

On close, assuming the POSCO roll-up proceeds, EVR will own 100 percent interests in the entities holding the Elkview, Fording River, Greenhills, and Line Creek mines in Southeast British Columbia, and 46 percent of Neptune Terminals in North Vancouver.

Global population growth, increased urbanization, and a growing middle class should continue to drive long-term demand for steel and the steelmaking coal required to produce it. The high-quality steelmaking coal mined in the Elk Valley is an essential input to steelmaking in its current form.

“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. 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 Jonathan Price, president and CEO, Teck.

“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,” added Price.

“The board undertook a comprehensive process to identify a separation transaction that is in the best interests of the company. 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,” said Sheila Murray, chair of the board, Teck.

“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,” added Keevil.

BENEFITS TO CANADA

Glencore has a proven history and track record of acquiring, developing, operating, and rehabilitating coal mines, for the benefit of stakeholders, including employees, local communities, and host governments.

Glencore’s Canadian assets form a significant part of its global business with 9,000 people in Canada including contractors and have a history that dates back more than 100 years. Glencore is one of the largest diversified miners and suppliers of critical minerals in Canada. Its current operations span seven industrial assets producing and recycling mainly nickel, copper, zinc, and cobalt.

Glencore has a strong track record of investment in the country and is committed to building on EVR’s continuing success as a world-class Canadian steelmaking coal producer with a focus on social and environmental responsibility. Under the terms of the agreement with Teck, Glencore will offer to enter into commitments with the Canadian government under the ICA that will ensure, among other things, that:

• EVR will continue to operate in Canada through both a Vancouver head office and regional offices in Calgary,
  Alberta, and Sparwood, British Columbia, including completing the construction of a new Sparwood office.
• EVR will maintain significant employment levels in Canada with no net reduction in the number of employees in
  the business in Canada as a result of the transaction. 
• EVR will increase capital expenditures in Canada such that they will amount to more than $1.5 billion (excluding
  deferred stripping) over three years.
• EVR will increase research and development activities in Canada to at least $108 million over three years,
  including on innovation in relation to water quality treatment technologies — a 50 percent increase over current
  levels.
• EVR will increase its contributions to Canadian sponsorship, community, and charitable programs.
• EVR will participate as a major funding partner with up to $11 million for the proposed renal/oncology addition to
  the East Kootenay Regional Hospital in Cranbrook.
• EVR will have a goal to become a nature positive business by conserving or rehabilitating at least three
  hectares for every one hectare affected by its mining activities going forward.
• EVR will develop and implement a climate transition strategy which will include medium term scope 1 and 2
  emissions reduction targets, a long-term goal of net zero in respect of scope 1 and 2 emissions by 2050 as
  well as a commitment to work with partners towards an ambition to achieve net-zero scope 3 emissions by
  2050.
• EVR will honor the existing agreements between EVR and Indigenous Nations and will work with local
  Indigenous Nations to identify opportunities to increase participation in benefits from the activities of EVR.

DEMERGER

Glencore intends to demerge the combined business, which is expected to occur within 24 months from close. Glencore will manage its post-demerger balance sheet, post servicing its formulaic base cash distribution, to a revised $5 billion net debt cap, down from the current level of $10 billion, alongside its continued commitment to minimum strong BBB/Baa ratings.

Glencore intends for the demerged company to continue to oversee the responsible decline of its thermal coal operations in line with Glencore’s current targets and ambition to achieve net zero by 2050, with a supportive policy environment, and to adopt the climate transition strategy for the EVR business that will be developed and implemented pursuant to Glencore’s ICA commitments.

Glencore is one of the world’s largest global diversified natural resource companies and a major producer and marketer of more than 60 responsibly-sourced commodities that advance everyday life. Through a network of assets, customers and suppliers that spans the globe, they produce, process, recycle, source, market and distribute the commodities that enable decarbonization while meeting the energy needs of today. Glencore companies employ around 135,000 people, including contractors. With a strong footprint in over 35 countries in both established and emerging regions for natural resources, its marketing and industrial activities are supported by a global network of more than 40 offices. Glencore’s customers are industrial consumers, such as those in the automotive, steel, power generation, battery manufacturing and oil sectors. They also provide financing, logistics, and other services to producers and consumers of commodities.

As one of Canada’s leading mining companies, Teck Resources is committed to responsible mining and mineral development with major business units focused on copper, zinc, and steelmaking coal. Copper, zinc and high-quality steelmaking coal are required for the transition to a low-carbon world. Teck is headquartered in Vancouver, Canada.

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