Published: February 21, 2023 |

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Teck Resources Ltd. said it is evaluating options for its steelmaking coal business, including a possible spinoff, confirming an earlier report.

The company said no decision has been reached to proceed and there can be no assurances the transaction will happen.

Teck has been weighing options for its coal division for over a year in a strategic shift toward mining more of the metals such as copper that are crucial to the global energy transition. Metallurgical coal is used in steelmaking, which is among the most polluting industries and faces significant pressure from policymakers.

Teck, which is scheduled to report earnings next week, is one of the world’s largest exporters of metallurgical coal. The company produced more than 24 million metric tons in 2021 from four different operations in western Canada, according to its filings. The business accounted for 55 percent of the company’s gross profit.

Teck has been exploring options for the business since at least September 2021, when people familiar with the matter said the business could be worth about US$8 billion.

A coal spinoff would leave Teck with a suite of copper and zinc mines across the Americas, including its Quebrada Blanca 2 copper project in Chile which has long been admired by some of its biggest rivals. It also owns a stake in the Antamina copper and zinc operation with BHP Group and Glencore.

The world’s biggest miners are increasingly looking to exit fossil fuels. Rio Tinto Group has exited coal altogether, while Anglo American has sold out of thermal coal. BHP divested some of its thermal coal and quit oil and gas altogether. BHP and Anglo still have large met coal operations, the sort of coal Teck is looking to hive off.

ATTRACTIVE TARGET

Separating the coal business would likely make Teck an attractive target for large mining companies such as BHP and Rio Tinto that have been hunting for takeovers to expand in industrial metals — providing the family that controls the shares would be willing to sell.

Teck’s standalone base metals business would make a very attractive M&A target should the controllers ever decide to sell, Citibank analyst Alexander Hacking said in a note Thursday.

“The question going forward is whether additional value can be surfaced by splitting the company, at the expense of the diversification and scale benefits. We don’t see an obvious buyer for the met coal business so this would largely be a standalone met coal business,” RBC Capital Markets analyst Sam Crittenden said in a Thursday note.

Bloomberg reported last month that the world’s biggest producers have rediscovered an appetite for mega deals, after years of staying on the sidelines.

Source: Financial Post

About Teck
As one of Canada’s leading mining companies, Teck 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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