Teck Resources is in the middle of a slimming campaign with the spinoff of its coking coal operations into a separate company, leaving it with a green metals future based on copper mining. It doesn’t want to be owned in any way by Glencore, the Swiss commodity trader, miner and world’s biggest thermal coal exporter.
The company owns four copper mines in South America and Canada, which together produced 270,000 tonnes in 2022.
That is what Glencore really wants, not the coal which will be flicked to a separate business, like Teck is planning to do.
Glencore has indicated it could make a complex all-share bid for Teck but Teck says the approach has been rejected by all its board.
The terms suggested are 7.78 Glencore shares for each Teck Class B subordinate voting share, and 12.73 Glencore shares for each Teck Class A common share.
The proposal represented a 20% premium as of March 26, according to Teck, and would be worth about $US23.5 billion at Friday’s closing prices.
The news saw Teck shares close up nearly 20% in New York at $US43.65.
In rejecting the unsolicited approach, Vancouver-based Teck company said a merger would increase geopolitical risk for its shareholders, given Glencore’s presence in regions such as the Democratic Republic of Congo, and the inclusion of oil trading in the metals unit would undermine its appeal to investors.
After the offer is completed, Glencore intends to create two units, which would expose Teck shareholders to a large thermal coal and oil trading business.
In other words, Glencore gets all the metals stuff of Teck and lumps the carbon heavy operations in coal and oil trading with
It would seem Glencore itself wants to shuffle off its thermal (and some coking) coal business in a manner similar to what Teck has been planning. Glencore’s coal business is heavily concentrated in Australia where it is the largest thermal coal miner and exporter.
“[All of this] would negatively impact the value potential of Teck’s business, is contrary to our ESG commitments and would transfer significant value to Glencore at the expense of Teck shareholders,” CEO Jonathan Price, said in an early morning statement on Monday.
Teck said in February that it was switching its name to Teck Metals Corp. and spinning off its multibillion-dollar coking coal unit into a new company — Elk Valley Resources Ltd.
Teck had been weighing options for its metallurgical coal division for over a year, as the commodity is used in steelmaking. Its major customers are in North Asia.
“The proposed separation into Teck Metals and Elk Valley Resources is in the best interest of Teck and all its stakeholders,” the company said on Monday.
“The board is not contemplating a sale of the company at this time,” Teck chair Sheila Murray said in a statement.
Teck’s controlling Keevil family said now was “not the time to explore a transaction of this nature.”
Teck is instead urging shareholders to approve the separation of Teck Metals and Elk Valley Resources at an April 26 meeting.
The two companies had discussed a potential merging in 2020, but those talks did not advance, according to documents both companies published Monday.