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VANCOUVER — The head of Teck Resources Ltd. says he will only accept a bid for the company’s steelmaking coal business if he feels confident Canadian regulators will approve the transaction.
Jonathan Price, CEO of Canada’s largest diversified mining company, made the comments as part of an update on Teck’s ongoing efforts to separate its base metals business from its steelmaking coal unit.
Price said the Vancouver-based company continues to evaluate offers put forward by prospective buyers of its coal business with the hope of making a decision before the end of the year.
While he said he is pleased with the level of outside competition the process has generated, Price said regulatory clearance will be a crucial factor.
“An important consideration will be the certainty of achieving separation, including receipt of the required regulatory approval,” Price told analysts on a conference call to discuss the company’s third-quarter results.
“We have to consider the certainty of execution and the risks associated with any transaction…And ultimately, we will do what we believe is in the best interest of our shareholders having regard for those regulatory and approval requirements.”
Teck has been working to hive off its coal assets in the hope of expanding its copper and zinc production to meet growing global demand for these metals, both of which are used in the production of electric vehicles and are considered to be key resources for the coming energy transition.
But a wrinkle was thrown into that plan earlier this year when Swiss commodities giant Glencore launched a $25-billion hostile takeover bid for Teck.
Teck’s board rejected Glencore’s original offer, but Glencore notched a victory of its own when Teck called off a shareholder vote on its plan to spin off its steelmaking coal operations into a separate company. It had become apparent Teck did not have the required support for its proposal, which Glencore lobbied against.
Glencore has since presented a new offer to Teck’s board, proposing to acquire the steelmaking portion of the company’s business for an undisclosed amount of cash and has also said it remains willing to pursue its offer for all of Teck.
A number of other international companies are also believed to be interested.
But Glencore’s initial pursuit earlier this year ignited sentiments of economic nationalism, with B.C. Premier David Eby speaking out against the proposed deal and federal Conservative Leader Pierre Poilievre urging the government to block any acquisition of Teck by Glencore.
The federal government itself said at the time it was watching the situation closely, and that any takeover bid for Teck would go through a rigorous approvals process.
There is precedent for the federal government to intervene in a foreign takeover of a major Canadian mining company. In 2010, then-Prime Minister Stephen Harper’s Conservative government blocked the takeover of Potash Corp. of Saskatchewan by global giant BHP, on the grounds that the transaction would not provide a “net benefit” for Canada.
Teck’s negotiations with prospective buyers are taking place at the same time the company celebrates the official opening of its QB2 copper mine in Chile. The project, which is expected to double Teck’s overall copper production, is ramping up now and expected to be operating at full production rates by the end of the year.
But Teck raised the cost estimates for the project, saying that due to unforeseen construction issues, it now expects the QB2 project to cost between US$8.6 billion and $8.8 billion, up from earlier guidance for between US$8.0 billion and US$8.2 billion.
The update came as Teck said it earned a profit attributable to shareholders of C$276 million or 52 cents per diluted share for the quarter end Sept. 30 compared with a loss of C$195 million or 37 cents per share a year earlier.
The drop came as Teck faced lower prices for steelmaking coal and zinc, as well as reduced sales volumes from steelmaking coal and from Highland Valley Copper, partially offset by higher copper prices and a weaker Canadian dollar compared with a year ago.
Revenue totalled C$3.60 billion, down from C$4.26 billion in the same quarter last year.
In its guidance, Teck lowered its annual copper production forecast to 320,000 to 365,000 tonnes from 330,000 to 375,000 tonnes for this year and cut its annual molybdenum production guidance to 3.0 million to 3.8 million pounds from 4.5 million to 6.8 million pounds.
It also said it expects steelmaking coal production this year to be between 23.0 million and 23.5 million tonnes, down from earlier expectations for 24.0 million to 26.0 million tonnes.
© 2023 The Canadian Press
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