Glencore to buy 77% of Teck coal business for US$6.93 billion

The deal will pave the way for Glencore to hive off its profitable but polluting thermal coal business and focus on mining metals such as copper, nickel and zinc. PHOTO: REUTERS

Published Tue, Nov 14, 2023 · 04:49 PM

GLENCORE agreed to buy a majority stake in Teck Resources’ coal business for US$6.93 billion, ending a months-long saga and setting the stage for the commodity giant to spin off its own coal unit.

Glencore will own 77 per cent, and steelmakers Nippon Steel and Posco will hold the remainder of the business, the companies said in statements on Tuesday (Nov 14). The deal implies an enterprise value of US$9 billion for Teck’s coal business.

The agreement will mark the end of a more than seven-month wrangle over the future of Teck. Glencore originally sought to buy the whole company in an unsolicited US$23 billion bid, but was ultimately forced to scale back its ambitions to target the Canadian miner’s coal unit instead.

The deal will pave the way for Glencore to hive off its profitable but polluting thermal coal business and focus on mining metals such as copper, nickel and zinc. The company reiterated plans to split out the combined coal operations within about two years after the deal closes.

It will also finally end Teck’s struggle to find a solution for its mines that produce coking coal – used to make steel – after years of studying various options to separate it. The company had initially planned a complicated spin off that left it paying royalties to the remaining metals business, before Glencore disrupted the plan.

Teck, which will now have no exposure to the coal business, said it will use the proceeds to pay off debts, build new metal mines and return some to shareholders.

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Glencore reports first-half core earnings of US$9.4 billion, half the record number it posted a year ago, though still one of its best-ever performances.

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The asset going to Glencore has proven and probable mineral reserves of 5.4 million tonnes of copper and 7.4 million ounces of gold, with an initial mine life of 28 years.

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Glencore’s latest forecast falls short of the record US$6.4 billion in core profit from the trading unit in 2022, but it is still well above its longstanding guidance range of US$2.2 billion to US$3.2 billion.

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Nippon Steel, which currently owns 2.5 per cent in some of Teck’s coal assets, will convert the ownership and put in additional cash to take a 20 per cent stake in the business, while Posco will convert its ownership stake in Teck mines to a 3 per cent holding in the business. BLOOMBERG

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