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Ottawa approves sale of Teck's steelmaking coal business to Glencore

VANCOUVER — The last hurdle in Teck Resources Ltd.
Ottawa says it has approved Teck Resources Ltd.'s sale of a majority stake in its steelmaking coal business to Swiss commodities giant Glencore. The Teck Resources logo is seen on a podium before the company's special meeting of shareholders, in Vancouver, B.C., Wednesday, April 26, 2023. THE CANADIAN PRESS/Darryl Dyck

VANCOUVER — The last hurdle in Teck Resources Ltd.'s years-long effort to off-load its coal-mining business and become purely a metals producer is gone after the federal government approved the sale of the operation to Swiss commodities giant Glencore.

In a statement posted Thursday, Industry Minister François-Philippe Champagne said the green light comes with "strict" conditions and represents a "much narrower" transaction than Glencore's hostile takeover attempt of Teck last year.

Teck said the latest development means the sale of its remaining 77 per cent interest in the steelmaking coal business, Elk Valley Resources, has now received all necessary regulatory approvals and is expected to close next Thursday.

The Vancouver-based miner said it expects to receive $9.5 billion from the sale, excluding closing adjustments.

"This transaction marks a new era for Teck as a company focused entirely on providing metals that are essential to global development and the energy transition," said the company's president and CEO Jonathan Price in a statement.

"Completion of this transaction will provide substantial funding for our projects, giving Teck a pathway to increase copper production by a further 30 per cent as early as 2028."

Teck plans to use up to $2.75 billion of the proceeds for share buybacks, $2.75 billion for debt reduction, $250 million for a special dividend, $1 billion for taxes and transaction-related costs, and the rest towards its copper growth plan.

The company has four near-term copper projects that it estimates would together cost about $4.7 billion to complete, while it's also working to ramp up production at its roughly US$8.7 billion Quebrada Blanca Phase 2 project in Chile.

Champagne said approval of the deal comes as the energy sector rapidly evolves to become more sustainable.

"As a result of the Glencore and Teck transaction, we are supporting a Canadian champion to lead the transition from coal to critical minerals."

As part of the deal, Champagne said Glencore has committed to establishing and maintaining a Vancouver head office for Elk Valley Resources for at least 10 years, along with regional offices in Calgary and Sparwood, B.C.

The conditions also include ensuring the majority of Elk Valley Resources' directors, and two-thirds of its executives or senior managers, are Canadian for the same duration.

Ottawa said Glencore has also agreed to "maintain significant employment levels" at Elk Valley Resources for at least five years.

"We have made significant commitments to the Canadian government aimed at ensuring the transaction is of lasting benefit to Canada and British Columbia," said Glencore chief executive Gary Nagle in a statement.

Glencore's $25-billion hostile takeover attempt had "raised very serious concerns and was rejected by shareholders," Champagne said.

The approved steelmaking coal deal, originally announced last November, represented the best possible outcome after nearly a year of battling over the future of the company, Price said at the time.

The announced deal also included Japanese company Nippon Steel Corp. acquiring a 20 per cent stake in exchange for its interest in one of Teck’s coal operations and US$1.7 billion in cash, while South Korean steelmaker Posco would swap its interest in a pair of Teck’s coal operations for a three per cent stake in the overall steelmaking coal operations.

News first broke in 2021 that Teck was exploring a sale of its coal division, launching speculation about buyers and concerns about another big foreign takeover of Canadian mining assets.

Teck rebuffed offers it didn't see as generous enough in favour of an effort to spin off the steelmaking coal business into a separate company. It pulled the plan shortly before putting it to a vote in April 2023 when it was clear there wasn't enough shareholder support.

With the deal now all but closed, Teck will be free to focus on sustainable metals production, said Sheila Murray, chair of the board, in a statement.

“We are pleased that we will achieve a complete separation of the metals and steelmaking coal businesses to position Teck for its next phase of growth and responsible value creation.”

This report by The Canadian Press was first published July 5, 2024.

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

The Canadian Press