Teck Receives Regulatory Approval for Sale of Steelmaking Coal Business
By Teck Trail Operations
Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK) (“Teck”) today announced that the sale of its remaining 77% interest in the steelmaking coal business, Elk Valley Resources (“EVR”), to Glencore plc (“Glencore”) has now received all necessary regulatory approvals.
The transaction is now expected to close on July 11. Teck expects to receive total cash proceeds of US$6.9 billion (CAD $9.5 billion)1 from the sale of the 77% interest in EVR, excluding closing adjustments.
“We are pleased that we will achieve a complete separation of the metals and steelmaking coal businesses to position Teck for its next phase of growth and responsible value creation,” said Sheila Murray, Chair of the Board. “We are confident that our leadership team is executing the right strategy to maximize long-term value for shareholders and all stakeholders.”
“This transaction marks a new era for Teck as a company focused entirely on providing metals that are essential to global development and the energy transition,” said Jonathan Price, President and CEO. “Moving forward as a pure-play energy transition metals company, we will build on our core portfolio of strong, cash-generating assets through development of our near-term copper growth projects. Completion of this transaction will provide substantial funding for our projects, giving Teck a pathway to increase copper production by a further 30% as early as 2028.”
“This transaction will enable us to reduce debt and retain significant cash to fund our near-term metals growth and maintain a resilient balance sheet, while also providing a significant return of cash to our shareholders,” said Price.
Transaction Use of Proceeds
Subject to closing of the transaction and consistent with Teck’s Capital Allocation Framework, Teck intends to allocate proceeds from the sale of the steelmaking coal business as follows:
- Cash Return to Shareholders
- Repurchase of up to US$2.0 billion (CAD$2.75 billion) of Class B subordinate voting shares.
- Distribution of approximately US$182 million (CAD$250 million) through the declaration of an eligible dividend of CAD$0.50, to be declared by Teck’s Board of Directors on both the Class A common and Class B subordinate shares. The supplemental dividend is expected be paid on September 27, 2024,
to shareholders of record at the close of business on September 13, 2024. This one-time supplemental dividend is in addition to the regular base quarterly dividend of $0.125 per share, for an expected total eligible dividend payable of $0.625 per share.
- Total announced cash return to shareholders from the 100% sale of EVR of US$2.6 billion (CAD$3.5 billion).
Note:
- 1. All USD to CAD figures calculated at an exchange rate of 1.37.
- Debt Reduction
- Execute a debt reduction program of up to US$2.0 billion (CAD$2.75 billion), including the cash tender offer separately announced today to purchase US$1.25 billion aggregate principal amount of Teck’s outstanding public notes.
- Well-Funded, Value-Accretive Copper Growth
- Remaining proceeds, net of taxes and transaction costs, will be retained to fund near-term copper growth. Teck will continue to advance its near-term copper projects, including the Highland Valley Copper Mine Life Extension, Zafranal Project, San Nicolas Project and QB debottlenecking, with the first sanction decisions expected in 2025. The current estimated capital cost attributable to Teck for these projects is US$3.3 –$3.6 billion (CAD $4.5–$4.9 billion).
- Taxes and Transaction Costs
- Estimated US$750 million (CAD$1.0 billion) to pay taxes and transaction costs.
Value Creation: Executing on Copper Growth
The completion of the sale of EVR positions Teck as an industry-leading energy transition metals producer, poised to unlock the value of its unrivalled copper growth portfolio.
Teck operates a premium portfolio of long-life, high-quality producing assets in stable and well- understood jurisdictions in the Americas. With the ramp up of QB in 2024, Teck expects to double its copper production to approximately 600,000 tonnes/year
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