(Zurich) Commodity trading giant Glencore has finally won a stake in Teck Resources coal after a fierce standoff with the Canadian group, paying US$6.93 billion (CAD9.58 billion) for to take hold of.
The Swiss group will obtain a 77% stake in Elk Valley Resource (EVR), which brings together the coal of Teck Resources, alongside the Japanese steelmaker Nippon Steel Corporation which will take 20% of the shares, it announced Tuesday in a press release .
“We are pleased to have reached an agreement,” said Gary Nagle, its managing director, quoted in the press release, assuring that Glencore intends to ensure that “the transaction is beneficial for Canada”.
Glencore’s plans for Teck Resources had caused a stir in political circles in Canada. Glencore has therefore endeavored to tout the merits of the transaction: it will not result in net job losses and EVR’s headquarters will remain in Vancouver. In addition, the company will continue to incur capital expenditures in Canada.
Glencore expects the transaction, subject to regulatory approval, to be completed in the third quarter of 2024.
Around 7:20 a.m. ET, the stock was up 3.18% at 444.15 pence while the FTSE100, the index of the London Stock Exchange where Glencore is listed, lost 0.38%.
With this sale, Teck Resources will be able to focus on critical minerals such as copper, explains Jonathan Price, CEO of the Canadian group in a separate press release. The deal values its coal operations at $9 billion.
Teck Resources, one of the largest mining groups in Canada, had launched a project to split its coal and metals activities. But in April, Glencore unveiled a complex and controversial offer, first proposing to pool their coal and metals activities, then splitting them in a second step.
Teck Resources had firmly rejected its offer, despite an attempt by Glencore to improve it. The Canadian group was supported by its two largest shareholders, including Norman Keevil, the patriarch of the family who owns a large part of the shares with more voting rights.
But Glencore’s offer had attracted other shareholders of Teck Resources, to the point that its split plan had failed. A few hours before a general meeting, he ended up giving it up.
In the press release published Tuesday, Norman Keevil supported this agreement, believing that it allows Teck Resources to continue its growth while “while preserving jobs” in coal mines.
Unlike several competitors who are withdrawing from coal, Glencore continues to defend this raw material, saying it wants to manage its mines responsibly until they run out, which has earned it strong criticism, including from of its shareholders.
During the general meeting in May, investors – including British asset management companies Legal
Glencore is acquiring coal activities “while maintaining its climate promises. Predators have their own logic,” reacted on X (ex-Twitter) Adrià Budry Carbó, member of Public Eye, a Swiss NGO very critical of Glencore.
In a market commentary, Russ Mould, investment director at AJ Bell, points out that at a time “when most mining companies are turning away from coal”, “Glencore appears to be doubling down on this fossil fuel”.
However, the transaction makes sense, according to him, the objective being to separately IPO the steelmaking coal activities of Teck Resources and the thermal coal activities of Glencore within two years of their integration.
If Glencore succeeds in implementing this project, the rest of its activities “will be rid of the bad smell of coal”, he argues, opening the door to new investors.
Since 2020, the Norwegian sovereign wealth fund, the largest investor in the world, has placed Glencore on its exclusion list.
