Teck Resources to sell coal business for $8.9 billion

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Teck Resources to sell coal business for $8.9 billion
Credit: © Reuters.

Teck Resources (NYSE: TECK ) Ltd., a mining company based in Vancouver, is poised to divest the majority of its coal business in a multi-billion-dollar deal involving Swiss commodities giant Glencore (OTC: GLNCY ) PLC and Asian steelmakers Nippon Steel and POSCO (NYSE: PKX ). The transaction, valued at $8.9 billion, is expected to be announced as early as today.

  • The deal will see Glencore acquiring a 77% stake in Teck's coal operations for $6.9 billion. The remaining interest will be purchased by Nippon Steel and POSCO.
  • This strategic move comes after Teck abandoned a previous spin-off plan for its metallurgical coal business due to a lack of shareholder support.
  • Although the sale does not require shareholder approval, it is still subject to review by the federal government on national security or net benefit considerations.

Teck's decision to sell follows its earlier rejection of a complete takeover offer from Glencore worth $23.1 billion. The rejection of the full acquisition proposal has led to this targeted divestiture, which aligns with Teck’s strategy to pivot toward copper and zinc mining. The company aims to enhance its market valuation by distancing itself from the environmentally contentious coal sector.

The shift in focus comes on the heels of Teck commencing production at its sizable QB2 copper mine in Chile, an endeavor that has experienced cost overruns but signifies the company’s commitment to copper.

Glencore, upon finalizing the purchase of Teck's coal assets, intends to restructure by creating two separate entities—one for thermal coal assets and another combining metals mines with energy trading operations. This restructuring echoes Glencore's prior acquisition of Falconbridge Ltd., another Canadian mining heavyweight.

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