Vancouver-Based Teck Resources Plans to Sell Coal Assets for $9 Billion

The CEO of Teck Resources, Jonathan Price, is gratified by the strategic decision to divest a 77% stake in Elk Valley Resources, the company's steelmaking coal business, to Swiss commodities giant Glencore for a noteworthy $6.9 billion. This transformative transaction also involves Japanese company Nippon Steel Corp. acquiring a substantial 20% stake, and South Korean steelmaker Posco securing a three percent stake. The comprehensive deal meticulously values Teck's steelmaking coal operations at an impressive $9 billion, concluding a protracted series of negotiations initiated by Glencore's ambitious yet unsuccessful $25 billion hostile takeover bid for the entirety of Teck earlier in the year.

Price underscores the company's unwavering commitment to securing the best possible outcome for both shareholders and stakeholders, elucidating the positive implications not only for Teck but also for its shareholders and the broader Canadian community. The sale of Elk Valley Resources marks a significant pivot for Teck, signifying its departure from the coal sector. This strategic move allows the company to redirect its focus towards expanding copper and zinc production, strategically positioning itself to meet the surging global demand for these metals. This demand is particularly crucial in the manufacturing of electric vehicles and aligns with the ongoing energy transition.

Federal Finance Minister Chrystia Freeland recognizes the magnitude of the proposed transaction and pledges meticulous adherence to regulatory processes. Her emphasis extends to the multifaceted considerations of the government, encompassing job protection, environmental impact, and the rights of Indigenous communities. Glencore CEO Gary Nagle perceives the acquisition as a strategic move to obtain a superior, long-lasting, and cost-efficient asset. Nagle unequivocally underscores Glencore's dedication to Canada, providing assurances of employment retention and a substantial increase in capital expenditures.

The anticipated completion of this monumental deal in Q3 2024 is contingent on securing approvals under the Investment Canada Act and obtaining competition approvals. Glencore's prior pursuit faced sentiments of economic nationalism, with B.C. Premier David Eby and Conservative Leader Pierre Poilievre expressing reservations. In a strategic effort to address these concerns and foster trust among stakeholders, Glencore commits to preserving employment levels, maintaining a Vancouver head office, and retaining regional offices in Sparwood, B.C., and Calgary.

Teck, planning judicious use of the sale proceeds, envisions fortifying its financial position through strategic debt reduction, retaining additional cash, and covering transaction-related taxes. In a forward-looking gesture, the Board contemplates a substantial cash return to shareholders post-transaction, thereby reaffirming its commitment to delivering tangible value. The expressed confidence from both CEOs in the deal's approval indicates a positive trajectory for Teck beyond its coal endeavors. This strategic shift aligns seamlessly with the evolving landscape of energy and environmental considerations, positioning Teck as a proactive player in the pursuit of a sustainable future.