Teck’s Sweeping Overhaul May Make It a Target for Larger Miners

Teck will separate into two independent, publicly-listed companies: Teck Metals Corp. — which will focus on metals needed for the shift to green energy — and Elk Valley Resources Ltd., that will operate the coal assets. It also plans to wind down the dual-class share structure through which Canada’s Keevil family controls the company.

The changes come against the backdrop of heightened interest in large acquisitions at some of the biggest mining companies. Giant producers including BHP Group and Rio Tinto Group are looking to grow in copper, and the spinoff will leave Teck with a suite of copper and zinc mines across the Americas. Its assets include the Quebrada Blanca 2 copper project in Chile, which has long been admired by some of its biggest rivals, and it also owns a stake in the Antamina copper and zinc operation with BHP and Glencore Plc.

It will still benefit from the coal business’s profits though: Teck Metals will own a royalty on revenue, as well as preferred shares in the new company, which will pay out about 90% of EVR’s quarterly free cash flow, it said. The structure is for a transitional period, which Teck said could last about 11 years.

The coal spinoff, which Bloomberg first reported last week, completes Teck’s long-awaited transition from fossil fuels to focus on metals key for global energy transition. Last year, the company sold its 21% stake in a Canadian oil sands project to Suncor Energy for about $743 million.

The world’s biggest miners have for years been withdrawing from fossil fuels — Rio Tinto has exited coal altogether, while Anglo American Plc has sold out of thermal coal. BHP divested some of its thermal coal and quit oil and gas, but still has large steelmaking coal operations.

Teck has been weighing options for its coal business for some time. The company is one of the world’s largest exporters of metallurgical coal, which is used in the heavily polluting steel industry.

“Cash flow from the transition capital structure is expected to provide Teck Metals with continued funding for prudent investment in its top-tier copper growth pipeline, while allowing for disciplined returns to its shareholders,” the company said.

Current Teck shareholders will receive 0.1 common share of EVR for each Teck share they hold, plus a cash consideration. Nippon Steel and Posco, two major steelmakers, will own minority stakes in EVR.

On the planned changes to its share structure, Teck has proposed a six-year sunset for the multiple voting rights attached to the Class A common shares, it said in a separate statement.

“The sunset on the multiple voting rights will modernize Teck’s governance and provide a simplified and competitive capital structure, following an appropriate continuity period, which we believe will benefit Teck and all of its shareholders,” said Chair Sheila Murray.