Teck reaffirms rationale for B.C. coal spin-out

Teck Resources Ltd. (TECK.B-TSX, TECK.A-TSX, TECK-NYSE) on Monday reaffirmed the strong rationale for the pending separation of its coal and metal mining assets as the optimal pathway to maximize shareholder value with the greatest certainty.

The moves come after the Vancouver-based mining company rejected an unsolicited $23 billion takeover bid from Swiss metals trading giant Glencore Plc.

In a press release Monday’ Teck said it s pending separation provides shareholders with a greater set of options to maximize value, while minimizing execution risk.

The company is referring to a plan that would see Teck reorganizing its business into two independent, publicly-listed companies. Teck Metals Corp. will contain the metal operations while Elk Valley Resources Ltd. (EVR) focuses on steelmaking coal production.

The separation is structured as a spin-off of Teck’s steelmaking coal business by way of a distribution of EVR common shares to Teck shareholders. As part of the separation, Teck will change its name to Teck Metals Corp.

Teck shareholders are set to vote on the planned spin off of the British Columbia coal operations in April 26, 2023. The deal requires the support of two thirds of both the Class A and Class B shares. The Class As carry 100 votes per share while the Class B common shares carry a single vote.

On Monday, the Class B shares eased 3.1% or $1.82 to $57.45. The shares trade in a 52-week range of $62.38 and $32.68.

The unsolicited Glencore proposal contemplates an all-share acquisition of Teck by the Swiss company offering 7.78 Glencore shares for each Teck Class B subordinate voting share and 12.73 Glencore shares for each Teck Class A common share, which represents a 20% premium for both on the date of the offer.

Under the proposal, Glencore would demerge the combined thermal and metallurgical coal business (along with ferro-alloys) into a new company. The remaining company could include Glencore and Teck’s base metals operations as well as Glencore’s commodity trading business.

On Monday, Teck said Glencore’s proposal is not actionable and has been unanimously rejected by Teck’s board of directors.

The Globe and Mail reported in its April 8, 2023 edition that gold financier Pierre Lassonde is planning to join forces with Teck’s controlling shareholder Norman Keevil and is planning to buy a blocking stake in Teck’s spin-out coal company to ensure that it remains in Canadian hands.

Lassonde is a co-founder of gold royalty company Franco Nevada Mining Corp. [FNV-TSX, NYSE].

The Globe and Mail report said Lassonde is trying to put together a group of investors who buy up roughly $300 million worth of Elk Valley shares, potentially giving them a 10% to 20% stake in the company.

“I believe Elk Valley is fantastic long term value, and I want this world class asset to stay in Canada,’’ he said.

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