Features
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.
Latest in Features
SMU Community Chat replay now available
The latest SMU Community Chat webinar reply featuring Timna Tanners, managing director of equity research for Wolfe Research, is now available on our website to all members. After logging in at steelmarketupdate.com, visit the community tab and look under the “previous webinars” section of the dropdown menu. All past Community Chat webinars are also available under that selection. If […]
SMU Community Chat: June 25 With AGC Chief Economist Ken Simonson
We’ll have a lot to talk about because construction is at the intersection of so many of today’s hot-button issues. The main question: Will construction thrive or dive in the rest of ’25? (Nothing wrong with a rhyme, even in serious times.)
Former Nucor CEO David ‘Dave’ Aycock passes at age 94
Steel industry veteran David ‘Dave’ Aycock died on Saturday at the age of 94.
Apparent steel supply edged lower in April, remains strong
The amount of finished steel that entered the US market in April declined 3% from March but remained at elevated levels, according to SMU’s analysis of Department of Commerce and American Iron and Steel Institute (AISI) data.
Final Thoughts
Even before the news about Mexico, I didn’t want to overstate the magnitude of the change in momentum. As far as we could tell, there hadn’t been a frenzy of new ordering following President Trump’s announcement of 50% Section 232 tariffs. But higher tariffs had unquestionably raised prices for imports, which typically provide the floor for domestic pricing. We’d heard, for example, that prices below $800 per short ton for hot-rolled (HR) coil were gone from the domestic market – even for larger buyers.