Somewhere within the machinations of Canada’s largest mining corporation the goal of increasing shareholder gains must still exist in some form, although the latest developments around Teck Resources does make one wonder. The news Tuesday that the mining giant has agreed to sell its steelmaking coal operations to Swiss mining giant Glencore and companies in Japan and Korea for an “implied value” of $9 billion popped Teck shares to $52, a gain of eight per cent on the day. But the pop didn’t last long.
Teck shares were back down to $48 a day later, leaving shareholders looking back to last spring after Glencore’s $23-billion offer to buy the whole company drove Teck’s market value to $65 a share. That was before it ran up against a firestorm of political, shareholder and “Canada is not for sale” nationalist opposition. The takeover plan died. By my rough calculation, at current market values, killing the full Glencore takeover has cost Teck shareholders $4 billion (see graph).
Oh well, what’s $4 billion? Just money, which these days ranks behind a long list of non-financial political and environmental drivers of corporate activity. Even the watered-down Glencore plan announced Tuesday — which will relieve Teck of its dirty coal operations but leave it with its “critical” copper and other mineral projects — will be reviewed by the federal government through a long list of non-market concerns. According to Finance Minister Chrystia Freeland, Ottawa will be scrutinizing Glencore’s “foreign” investment to make sure government “priorities” are protected: Canadian jobs, Canadian headquarters, environmental issues and the rights of Indigenous people.
Even Teck and Glencore executives are up to their necks in non-profit issues. CEOs of both companies argue the coal deal promises to unlock massive potential value, but the agreement is filled with environmental, social and governance (ESG) provisions and commitments.
In its proposal to Ottawa under the Investment Canada Act, Glencore lists 28 commitments, many of which are logical and sensible but others pander to the ESG movement. Glencore will “continue to use Canadian and Indigenous suppliers of goods and services,” and will spend “at least $30 million” on community and charitable programs, plus up to $15 million as a “major funding partner” for a proposed renal/oncology addition to the East Kootenay Regional Hospital in Cranbrook, B.C.”
The real driver of the Teck coal sell-off deal is corporate manoeuvring to fall in line with the global green economy transition. Teck Resources CEO Jonathan Price said he was responding to ESG pressure. “Shareholders have told us very clearly that they would like to see a separation of steelmaking coal from base metals.” He told BNN that there was no loss of shareholder value by striking the new Glencore deal. The objective, he said, is to turn Teck into a “Canadian-based global critical minerals champion.”
A view of this deal from Canadian mining veteran Pierre Lassonde paints a different picture. He sees the Glencore coal move as a national loss that in the long run will lead to a continuing decline in the Canadian mining industry. “That trend is absolutely murderous for the Canadian dollar and Canadians,” he said. “This is going to keep on accelerating that trend, which I find terrible.”
The appeal of getting Canada out of coal and established as a critical minerals champion is a function of green new deal ideology based on projections about economic development that assume a global move toward net zero carbon emissions. Officially, that means shutting down coal and going all out on critical minerals to feed the green electricity model. But that green promise may not play out as imagined.
Coal shows no real signs of disappearing from the world market. Forecasts show global coal production is set to increase by 40 per cent over the next five years. This week India announced new coal mining auctions and has plans to increase annual coal production to 1.4 billion tonnes by 2027 and 1.58 billion by 2030.
A closing note: Glencore shares are up 10 per cent since it announced the Teck coal purchase on Tuesday.
• Email: firstname.lastname@example.org