The largest employer in the East Kootenay has been sold to a Swiss corporation.

Teck Resources Limited (Teck) today announced it has agreed to sell its entire interest in its steelmaking coal business, Elk Valley Resources (EVR), through a sale of a majority stake to Glencore plc (Glencore) for an implied enterprise value of US$9.0 billion, and a sale of a minority stake to Nippon Steel Corporation (NSC).

“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,” said Jonathan Price, President and CEO, Teck.

“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. 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.”

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

“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, Chair 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.”

The sale of Teck’s steelmaking coal business at the implied enterprise value of US$9 billion on a 100% basis achieves a simple and complete separation of steelmaking coal from base metals, the company said in a press release.

Glencore has agreed to acquire 77% of EVR for US$6.9 billion in cash, payable to Teck at closing of the Glencore transaction, subject to customary closing adjustments.

NSC has agreed to acquire a 20% interest in EVR in exchange for its current 2.5% interest in Elkview Operations plus US$1.3 billion in cash payable to Teck at closing of the NSC transaction and $.4 billion US paid out of cash flows from EVR.

NSC will also enter into a long-term steelmaking coal offtake rights arrangement at market terms, continuing NSC’s long-standing commercial arrangement for the purchase of steelmaking coal from the Elk Valley.

POSCO has advised Teck it intends to exchange its current 2.5% interest in Elkview Operations and its 20% interest in the Greenhills joint venture, for a three per cent interest in EVR. At closing of the Glencore transaction, Glencore will acquire from Teck any remaining receivable payable to Teck by EVR.

Teck will continue to operate the steelmaking coal business and will retain all cash flows from EVR until closing of the Glencore transaction, estimated to be US$1 billion. Following the closing of that transaction, Teck will have no further financial interest in EVR.

Closing of the Glencore transaction is subject to customary conditions, including receipt of approvals under the Investment Canada Act and competition approvals in several jurisdictions, and is expected to occur in the third quarter of 2024. The NSC transaction is also subject to customary conditions, including receipt of certain competition approvals, and is expected to close in the first quarter of 2024. These transactions are not inter-conditional.

Teck noted to support enhanced benefits to the Elk Valley, B.C. and Canada, Glencore has made commitments 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 over CAD$2 billion (excluding deferred stripping) over three years.
• EVR will increase research and development activities in Canada to at least CAD$150 million over three years, including on innovation in relation to water quality treatment technologies – a 50% increase over current levels.
• EVR will increase its contributions to Canadian sponsorship, community and charitable programs.
• EVR will participate as a major funding partner up to CAD$15 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 honour 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.

Proceeds from these transactions will help ensure Teck is well-capitalized to maintain investment grade credit metrics and to unlock the full potential of its base metals business. Uses of proceeds are expected to include improving Teck’s net leverage through debt reduction, the retention of additional cash on the balance sheet, and payment of transaction-related taxes, which are estimated to be approximately US$750 million.

Teck’s Board will determine the appropriate amount and form of a significant cash return to shareholders following closing of these transactions, the company pointed out.

“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, Columbia and South Africa,” stated 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.

“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,” Nagle said.

“This transaction also deepens our longstanding commitment to Canada, supporting our position as one of the largest diversified miners and suppliers of critical minerals in Canada, in one of the world’s leading mining jurisdictions.”

Glencore describes itself as “one of the world’s largest global diversified natural resource companies and a major producer and marketer of more than 60 commodities that advance everyday life.

“Founded in the 1970s as a trading company, we have grown to become a major producer and marketer of commodities with around 140,000 employees and contractors and a strong footprint in over 35 countries in both established and emerging regions for natural resources.”

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