Glencore plc has reached an agreement with Teck Resources Ltd., to acquire a 77% interest in Teck’s metallurgical coal mining business, Elk Valley Resources (EVR), for $6.93 billion in cash.
“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,” said Gary Nagle, CEO of Glencore. “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.”
At the same time, Teck has agreed with Japanese steelmaker Nippon Steel Corp. (NSC) that its current 2.5% interest in Elkview Operations will be rolled up as equity in EVR, and that NSC will acquire additional equity in EVR from Teck, such that on closing NSC will hold a 20% equity interest in EVR.
South Korean steelmaker POSCO has advised Teck that it intends to exchange its current 2.5% interest in Elkview Operations and its 20% interest in the Greenhills joint venture, for a 3% interest in EVR.
At closing, Glencore will also acquire from Teck, NSC and POSCO’s attributable share of a shareholder loan from Teck to EVR which is repayable out of EVR’s cash flows. The amount payable for this portion of the loan is expected to be some $250-$300 million on closing.
“We have a longstanding relationship with NSC and POSCO and we look forward to working closely with them as our future partners in EVR,” Nagle said.
On close, assuming the POSCO roll-up proceeds, EVR will own 100% interests in the entities holding the Elkview, Fording River, Greenhills and Line Creek mines in southeast British Columbia, and 46% of Neptune Terminals in North Vancouver.
EVR produced 21.5 million metric tons (mt) of met coal in 2022 and 17.3 million mt through Q3 2023. It posted a pre-tax profit C$6 billion ($4.4 billion) in 2022 and C$3.1 billion ($2.3 billion) through Q3 2023.
Glencore said EVR will continue to operate in Canada through both a Vancouver head office and regional offices in Calgary, Alberta, and Sparwood, British Columbia, including completing the construction of a new Sparwood office. It will maintain significant employment levels in Canada with no net reduction in the number of employees in the business in Canada as a result of the transaction.
The transaction is subject to mandatory regulatory approvals, being Investment Canada Act (ICA) and competition approvals. The transaction is expected to close in Q3 2024.