Yahoo Finance Teck CEO 'very aligned' with Ottawa's mining security goals as Swiss giant Glencore circles
Teck Resources Ltd. chief executive Jonathan Price said the company is “very aligned” with Canada’s goal of building a critical minerals industry, introducing a hint of patriotism to his efforts to dissuade shareholders from entertaining a takeover offer from Swiss commodities giant Glencore Plc.
“We at Teck Resources and future Teck Metals will be very aligned with the strategy of the Canadian government to promote the critical minerals industry,” Price said when asked if Glencore’s bid for one of Canada’s largest miners might raise concerns in Ottawa, where Prime Minister Justin Trudeau’s government has made it clear that it intends to shield the minerals needed for the world’s energy transition from certain foreign companies.
Price’s comments came as his counterpart at Glencore, Gary Nagle, was meeting Teck shareholders in Toronto in a bid to round up support for an offer that was unanimously rejected by Teck’s board of directors.
Trudeau’s government has taken a number of steps in the past year to ensure Canadian mining projects that contain critical minerals such as copper and lithium remain under Canadian control — or at least the control of allies. Ottawa and some provinces, including Ontario, are keen to capitalize on the green transition by developing new mining projects that would secure Canada’s place in the supply chain for electric vehicles and other clean technology.
Price said Teck is attempting to do exactly that, as it works on nearly doubling its production of copper, a key component of electrification.
It’s unclear how Ottawa would react to a Swiss giant stealing away one of the last Canadian miners with significant global reach. The Natural Resources Department declined to comment on the back-and-forth of two private companies.
In October, the federal government said that going forward any attempt by a state-owned enterprise to purchase critical mineral assets in Canada could be subject to extended reviews. Weeks later, the government ordered three Chinese companies to exit the three Canadian lithium miners in which they had invested.
Glencore doesn’t fall into that category. It already runs nickel, copper, coal and zinc mining operations in Canada, and as of 2021 it employed more than 7,900 people.
Still, all foreign investments, regardless of size or level of control, are subject to a national security review. In 2010, former prime minister Stephen Harper blocked BHP Group Ltd.’s attempt to purchase Potash Corp. of Saskatchewan (now Nutrien Ltd.) on the grounds that it was in Canada’s interests to retain domestic ownership of a vital food nutrient.
“Teck is a big producer of copper in Canada and we have some exciting copper projects ahead of us in Canada,” Price said in an interview on April 13.
Benefit to Canada
Nagle in a press conference on April 3 said Canada would benefit from Glencore’s takeover of Teck, as the combination would create one of the world’s largest copper companies.
Glencore has now made two bids for Teck in the past two weeks, both rejected outright by the Vancouver-based company’s board. The takeover attempts came soon after the Canadian miner produced its first copper concentrate from its Quebrada Blanca 2 (QB2) project in Chile, a project that is expected to double the company’s copper production in the near future.
But Glencore isn’t giving up and likely will improve on its US$23.2 billion merger offer, analysts say. Price suggested he’s unconcerned, reiterating that his proposal to turn Teck into two new companies — Teck Metals, that would focus on copper, and a second company that would take control of Teck’s coal business — is a superior opportunity for shareholders than anything Glencore will offer.
“Look I understand Gary is meeting with investors, I am also in Toronto and meeting with investors, answering their questions, but also talking to them about the value of the separation that we propose,” Price said. “This is very consistent to what I have been doing for the last six to seven weeks and will continue to do right through the vote.”
Price’s move was announced in February and shareholders are set to vote on the separation proposal on April 26.
Glencore aims to follow a similar structure after merging with Teck, and Nagle said he believes his offer is “materially better” than Price’s plan, since it would create the world’s third-largest copper company alongside a big publicly traded coal company. In the case of Glencore’s proposal, the two companies would act as stand-alone firms right from the start. Teck, however, would use cash-flow from EVR to fund Teck Metals for the initial years.
Bloomberg News reported April 14 that China Investment Corp., a massive sovereign wealth fund that owns 10 per cent of Teck’s Class B shares, currently favours Glencore’s bid. Glencore’s goal also received a boost on April 13 when a major advisory firm, Institutional Shareholder Services (ISS), urged shareholders to reject Teck’s separation move.
In response, Price said that ISS had “fundamentally misunderstood” the value that Teck’s separation can bring. “That is driven by a lack of appreciation of how value can be created,” he said.
Ben Clearly, a portfolio manager at Sydney-based Tribeca Global Natural Resources Ltd., another significant shareholder, also said Teck should engage with Glencore. However, Norman Keevil, Teck’s chair emeritus and patriarch of the family that controls the largest block of Class A voting shares, has said repeatedly that he wants Teck to remain a Canadian company.
Making Teck greener
Canaccord Genuity Group Inc. analyst Dalton Baretto in a note to clients on April 12, said that the separation vote was at risk. Other analysts, including Bank of Nova Scotia’s Orest Wowkodaw, have said they expect the vote to go in Teck’s favour.
A key issue in the struggle over Teck is which bid would make the company greener. Many institutional investors now want nothing to do with fossil fuels, depressing demand — and therefore, the value — of stocks linked to producers of coal and oil and natural gas.
In a bid to encourage shareholders to vote for the separation, Teck, on April 13, offered shareholders an earlier exit from exposure to the company’s steelmaking coal business by reducing the number of years that Teck Metals would depend on cashflow from the coal company.
The announcement came a day after Glencore sweetened its US$23.2-billion takeover bid for Teck by stating that it was ready to spend about US$8.2 billion to shield any Teck shareholders wary of exposure to fossil fuels by buying out any shares that could be linked to coal.
Price said that the move was “absolutely not” in response to Glencore, but a result of “extensive engagement” with Teck’s shareholders. “We, of course, listen to their feedback,” he said.
But when compared to Glencore’s move, Teck’s announcement seems to fall behind, since there would still be a link between Teck’s coal and metals companies for at least three years. This link, for some shareholders, undermines the separation’s key selling point, which is to give shareholders and future investors an opportunity to make a clean break from fossil fuels.
Price said he disagrees. He stressed that there’s a difference between the steelmaking coal that Teck produces and the thermal coal that’s in Glencore’s portfolio of businesses. He said the outlook for steelmaking coal was very good.
“The key difference here is that we are giving our shareholders the opportunity to choose and in the case of a vehicle that Glencore is proposing, where steelmaking coal is combined with thermal coal, it will create forced sellers of Teck shareholders and will deprive them of the potential upside that they would otherwise have had through steelmaking coal,” Price said.
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