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CRU: Ottawa OKs Glencore’s buy of Teck’s coal business, issues critical minerals warning

Written by CRU

July 8, 2024

Canada’s industry minister Francois-Philippe Champagne has conditionally allowed a Glencore-led consortium to acquire Teck’s Elk Valley Resources (EVR) metallurgical coal business for $6.9 billion. He also raised the bar for foreign companies wanting to buy into the country’s critical mineral resources.

His approval follows a net benefit review lasting months during which Glencore made legally binding commitments and other pledges to ensure what Champagne described as a strong and well-funded operation. He expects the Switzerland-based miner and commodity trader to meet them.

They include adhering to environmental preservation and stewardship of liabilities, maintaining EVR offices in Canada, keeping EVR’s employment levels significantly high for at least five years, ensuring at least two-thirds of executive and senior management roles at EVR are filled by Canadians for a minimum of 10 years, and giving First Nations’ people greater employment, procurement, and other opportunities.

Glencore will own 77% of EVR, Nippon Steel of Japan 20%, and South Korea’s Posco 3%.

The ministry also said it has secured Teck’s commitment to reinvest much of the transaction’s proceeds into its copper portfolio. “[This] will result in a well-capitalized Teck that is better able to pursue its ambitions as a major Canadian mining player in critical minerals,” the ministry added.

President and CEO Jonathan Price echoed those goals saying: “Moving forward as a pure-play energy transition metals company, we will build on our core portfolio of strong, cash-generating assets through development of our near-term copper growth projects.”

After allocating $4.6 billion in payments to shareholders and debt reduction, Vancouver, British Columbia-headquartered Teck says it will spend the rest after tax and transaction costs on meeting expected capex of $3.3 billion to $3.6 billion to expand its copper operations. The target is to increase production of the red metal by 30% by 2028.

In approving the consortium’s acquisition of EVR, Champagne said that transactions involving Canada’s critical raw materials will in the future only be found of net benefit in the most exceptional of circumstances. “This high bar is reflective of the strategic importance of Canada’s critical minerals sector and how important it is that we take decisive action to protect it,” he added.

Separately, Teck announced metallurgical coal sales of 6.4 million metric tons (mt) in Q2, at the top end of its 6.0-million-mt to 6.4-million-mt guidance. The realized price averaged $237/mt. But Teck Resources cautioned it expects to record a negative provisional pricing adjustment of CAD$50 million (USD$36.7) for the quarter.

This article was first published by CRU. To learn more about CRU’s services, visit www.crugroup.com.

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CRU offers unrivaled business intelligence on the global metals, mining, and fertilizer industries through market analysis, price assessments, consultancy, and events.