Glencore will acquire a stake of 77% in Elk Valley Resources for $6.9bn while Nippon Steel and POSCO will acquire stakes of 20% and 3%, respectively in the steelmaking coal business which operates the Elkview, Fording River, Greenhills, and Line Creek mines in British Columbia
Teck Resources signs deals to divest its Canadian steelmaking coal business, Elk Valley Resources. (Credit: Paul Arky on Unsplash)
Teck Resources has agreed to sell its entire stake in its Canadian steelmaking coal business, Elk Valley Resources (EVR), through a sale of a majority stake to Glencore for an implied enterprise value of $9bn, and a sale of a minority stake to Nippon Steel (NSC).
Glencore will acquire a stake of 77% in Elk Valley Resources for $6.9bn.
Nippon Steel, which is based in Japan, will acquire a 20% interest in the steelmaking coal unit. This will be in exchange of its current stake of 2.5% in Elkview Operations, a cash payment of $1.3bn to Teck Resources at closing, and $400m paid from cash flows generated by Elk Valley Resources.
Elkview Operations is among the four steelmaking coal operations of Glencore in the Elk Valley.
POSCO currently holds the remaining 2.5% stake in Elkview Operations. The South Korea-based steelmaking company is planning to exchange the stake along with its 20% interest in the Greenhills joint venture for a 3% interest in Elk Valley Resources.
Through the deals, Teck Resources will accomplish a simple and full separation of steelmaking coal operations from its base metals business.
Teck Resources president and CEO Jonathan Price said: “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.
“This sale will ensure Teck is well-capitalised and able to realise value from our base metals business and deliver strong returns to our shareholders while maintaining a robust balance sheet.”
Upon the conclusion of the transactions, Elk Valley Resources will have full ownership in the entities that control the Elkview, Fording River, Greenhills, and Line Creek mines located in Southeast British Columbia. Additionally, Elk Valley Resources will hold a 46% interest in Neptune Terminals situated in North Vancouver.
Glencore CEO Gary Nagle said: “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, Colombia and South Africa.
“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.”
Glencore revealed plans to demerge its combined coal and carbon steel materials business, including its stake in Elk Valley Resources within 24 months of the closing of the deal.
Upon finalisation, Glencore will also obtain the share of a shareholder loan from Teck Resources to Elk Valley Resources attributable to Nippon Steel and POSCO. This loan is repayable from Elk Valley Resources’ cash flows, and the anticipated amount due at closing is approximately $250m-$300m.
The deal between Glencore and Teck Resources, which is subject to approvals under the Investment Canada Act, competition approvals across various jurisdictions, and other conditions, is anticipated to close in Q3 2024.
Teck Resources’ deal with Nippon Steel is also subject to conditions such as certain competition approvals and is expected to close in Q1 2024.
The Canadian miner said that the deals are not inter-conditional. The company’s financial advisors for the transactions are Barclays Capital Canada, Ardea Partners, TD Securities, and CIBC World Markets.
Its legal advisors are Stikeman Elliott and Paul, Weiss, Rifkind, Wharton & Garrison.