Conservationist raises concerns about Glencore-Teck coal deal
, BNN Bloomberg
Glencore’s planned acquisition of Teck’s coal mining operations has raised environmental concerns for a Canadian conservation organization.
This week, Glencore announced it would acquire a 77 per cent stake in Vancouver-based Teck Resources’ coal business for US$6.93 billion.
Randal Macnair, Elk Valley conservation coordinator for the Kootenay-based conservation group Wildsight, said the deal “raises a number of concerns” for the region.
“I hope to see the federal regulatory bodies take a very serious look at this and determine what the benefits and downsides are from a Canadian perspective,” he told BNNBloomberg.ca in a television interview.
“We'll keep on top of that, and it's our intent to make sure that the federal government and by proxy, the provincial government, really does their homework as far as this is concerned.”
Macnair said his organization is still assessing the deal and what it means for the region.
“We will definitely be in touch with the province and the feds as far as our thoughts and position on it,” he said.
ENVIRONMENTAL HISTORY
Glencore has faced a series of environmental issues within its Canadian operations.
Glencore has tried to balance its highly profitable coal mining operation against its own climate goals. The company has promised to cut its coal output, cut emissions and shift its focus to mining the metals needed for the green energy transition, though shareholders have shown waning interest in the plan.
In 2022, the company faced pressure from Quebec’s public health department after a report found arsenic emissions from a copper smelter in Rouyn-Noranda were 55 times higher than the standard safe level.
Meanwhile, Glencore’s plan for an open pit mine in Tumbler Ridge, B.C. never got off the ground after the Impact Assessment Agency of Canada ruled the “significant adverse environmental effects” of the project could not be mitigated.
“Glencore doesn't have exactly a stellar human environmental rights track record throughout the globe,” Macnair said.
When asked about those environmental concerns, Glencore directed BNNBloomberg.ca to a statement from earlier this week announcing the Teck deal, in which Glencore said it was committed to mitigating “impacts on the environment,” and called itself “world-class Canadian steelmaking coal producer with a focus on social and environmental responsibility.”
The company also committed to conserving or rehabilitating “at least three hectares for every one hectare affected by its mining activities,” while providing a 50-per-cent boost to water treatment research and committing for net-zero emissions by 2050.
WATER QUALITY CONCERNS
Macnair has concerns over the future of the International Joint Commission, which is in charge of maintaining water quality among waterways that cross the U.S.-Canada border, among other initiatives.
Teck has faced its own criticisms surrounding international waterways. Pollution from one of its mines seeping into the waterways of Montana and Idaho have become a sore spot for Canada-U.S. relations. In March, Prime Minister Justin Trudeau and U.S. President Joe Biden both committed to “reduce and mitigate” water contamination in the area.
Despite the water issue, Macnair said he would still prefer Teck out of Glencore’s hands.
“Whereas we've got lots of concerns about Teck -- and we've certainly raised those concerns…-- Teck as a known entity, it's Canadian,” Macnair said. “We can walk down the streets and communicate with them. Glencore is obviously a large multinational corporation that we don't have experience with and its track record speaks for itself.”
In a statement, Teck Resources also pointed to Glencore’s commitment to water quality research, emissions and land conservation.
“This transaction ensures continued socially and environmentally responsible steelmaking coal operations, while creating significant enhanced benefits for Canada and B.C.,” the statement reads.
Earlier this week, Teck Resources CEO Jonathan Price touted Glencore’s commitment to “maintaining or enhancing” Teck’s social and environmental programs.
“We see this very much as the responsible separation that we've been looking for and we believe that the commitments that Glencore has put forward here are very good for the Elk Valley, for British Columbia and good for Canada,” he told BNN Bloomberg on Tuesday.
GOVERNMENT RESPONSE
The deal still requires federal approval and approval from 10 other jurisdictions, including the countries where Glencore ships its coal.
In a statement, the Ministry of Energy, Mines and Low Carbon Innovation said it does not have jurisdiction to block the takeover, but is “actively engaged” with all parties involved.
“Glencore has made commitments around a headquarters in Vancouver, a regional office in Sparwood, and to work with First Nations,” Josie Osborne, minister of Energy, Mines and Low Carbon Innovation, wrote in the statement.
“It is our expectation that Glencore would meet those commitments and retain existing commitments to environmental stewardship and water quality – working in alignment with our high standards on environmental regulations and collaboration with First Nations.”
In speaking to reporters in the aftermath of the news, Deputy Prime Minister Chrystia Freeland said the government would review the deal and consult with the province, while doing its due diligence on the takeover.
“Of course, environmental issues are very, very important for us, as are the rights of Indigenous people,” she said on Tuesday.
Macnair also envisions taking the opportunity to push governments for stronger regulations when it comes to the Public Interest Bonding Strategy, which requires companies to pay for all environmental cleanup of industrial projects in the province.
“The bonding for cleanup of B.C. mines is woefully inadequate and this will certainly be an opportunity to press again for bonding,” he said.
In an emailed statement Thursday, a spokesperson for Innovation, Science and Economic Development Canada said Glencore’s acquisition “will be reviewed on its merits, based on an assessment of the overall economic benefit for Canada,” but could not comment further due to confidentiality restrictions.
With files from Bloomberg News
Nov 14, 2023
Teck CEO, experts, politicians speak after Glencore coal deal announced
, BNN Bloomberg
The CEO of Teck Resources believes his company will have no issue getting the necessary regulatory approvals for Glencore’s proposed purchase of the Canadian miner’s coal business.
On Tuesday, Swiss company Glencore announced it will buy a majority stake in Vancouver-based Teck’s coal business for US$6.93 billion, which paves the way for Teck to split its operations in to two companies: one focused on coal and the other on new metals.
“We heard very clearly from our shareholders over recent months that they wanted to see a simple and complete separation of the steelmaking, coal and base metals businesses that Teck currently holds and this transaction very much delivers on that,” Teck CEO Jonathan Price told BNN Bloomberg in a television interview.
“This is a significant step forward in unlocking the value of our base metals business and really establishing Teck as a Canadian based global critical minerals champion.”
The announcement marks the end of months of tense negotiations and comments from government officials concerned about protecting the country’s natural resources.
Price said new industry protections contained within the deal should ease those concerns and ultimately pave the way for the deal to pass regulatory inspection.
“We'll see Glencore committing to maintaining employment levels in Canada and in the coal business, committing to a Vancouver-based headquarters for the coal business, committing to additional investment in that business in the years ahead, particularly in the areas of research and development and community investments,” he said.
“We see this very much as the responsible separation that we've been looking for and we believe that the commitments that Glencore has put forward here are very good for the Elk Valley, for British Columbia and good for Canada.”
NO REASON FOR OTTAWA TO REFUSE DEAL: EXPERTS
Experts who spoke with BNN Bloomberg on Tuesday agreed that the sale shouldn’t face regulatory roadblocks from the federal government.
“There doesn’t seem to be any logical reason as to why Ottawa wouldn’t, it’s just that these things take time,” Bill Harris, partner and portfolio manager at Avenue Investment Management, told BNN Bloomberg in an interview on Tuesday.
He stressed that the sale makes sense for Teck as the coal market is overseas and Glencore is a global trader. He also pointed to the fact the Teck’s Canadian roots would continue to be present even after the sale.
“Half the press release is basically saying: ‘We’re going to keep this in Canada, we’re going to have offices in Canada, this is going to be a Canadian company, this is Glencore Canada,’” Harris said.
John Manley, senior advisor at Bennett Jones who served as Canada’s finance minister under Jean Chretien between 2002 and 2003, said he believes changes from Glencore's earlier offer will help it pass regulatory scrutiny.
“This is a much easier deal to sell to the Canadian government than the previous one was, partly because … it’s not for the whole company, it’s just for the coal assets, so you’ll continue to have a very important Canadian critical metals company in existence in the remainder of Teck,” he said.
Manley also pointed to the fact that this deal is no longer a hostile takeover, which should make it easier for the governments to accept.
In April, British Columbia Premier David Eby said he would lobby the federal government to prevent any takeover of Teck, due to his concerns Glencore would not be as committed to the province’s climate and jobs goals.
Manley said the tweaks to the deal should ease those concerns.
“I think you’ve got a very different transaction, oe that probably even Premier Eby in the end is going to say: ‘This is OK,’ once he’s got a chance to go through the undertakings that Glencore has made in the context of the transaction offer,” he said.
‘VERY DISAPPOINTED’
Meanwhile, veteran Canadian mining executive Pierre Lassonde, who had previously expressed interest in Teck’s coal business, was dismayed by the deal.
“I’m very disappointed, not for myself, but for Canada,” said Lassonde, who founded mining company Franco-Nevada and is currently president and CEO of Firelight Investments.
Lassonde is concerned that once a two-year commitment to stay in B.C. is up, the Canadian company will head elsewhere – a trend in the country’s business environment that he finds worrying.
“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.”
GOVERNMENT RESPONSE
In speaking at a media event on Tuesday in Toronto, Deputy Prime Minister Chystia Freeland said the regulatory process would be followed before approving the takeover.
“For the government of Canada, our priorities will be as they always are: protecting Canadian jobs, good Canadian jobs (and) protecting Canadian headquarters,” she told reporters.
“Of course, environmental issues are very, very important for us, as are the rights of Indigenous people. We will also consult closely with the province of British Columbia.”
In an email, a spokesperson for Canada’s minister of innovation, science and industry told BNN Bloomberg that the deal is under review.
“The transaction involving a Canadian company and a foreign company would be subject to a review under the Investment Canada Act (ICA),” the statement reads. “Due to the confidentiality provisions of the Investment Canada Act, we cannot comment further.”
Tony Clement, who served as the federal minister of industry from 2008 to 2011, said in an interview with BNN Bloomberg Tuesday that a deal’s approval comes down to whether regulators believe it will create a “net benefit to Canada.” This can mean the impact on jobs and the environment, to name a few, Clement said.
Additionally, national security risks need to be evaluated for takeovers of this magnitude, though with a deal focused on coal, Clement doesn’t believe there’s much of a concern.
“If this was a critical mineral or metal, it might be a different story,” he said. “You would have to have that overlay of a national security test. I don’t think that’s applicable in this case.”
What investment experts are saying about the Teck-Glencore coal deal
, BNN Bloomberg
TECK RESOURCES LTD-CLS B (TECK/B:CT)
REAL-TIME QUOTE. Prices update every five seconds for TSX-listed stocks
Teck Resources Ltd. will sell its coal business to Glencore Plc. in a multibillion dollar deal which could offer great value to shareholders, according to an investment advisor.
Swiss miner Glencore will pay Vancouver-based Teck US$6.93 billion for a 77 per cent stake in its coal business while steelmakers Nippon Steel Corp. and Posco will hold the remainder of the company. The deal requires approval from Canada’s federal government to move forward.
“I think it’s a good deal for shareholders, perhaps shareholders might even get some of that money given back to them,” Allan Small, senior investment advisor at IA Private Wealth, told BNN Bloomberg in an interview on Tuesday.
Teck has considered selling its coal assets for some time and the news of Tuesday’s sale to Glencore could allow Teck to strengthen its business, Small added.
"They’re going to refocus, fix their balance sheet, improve their balance sheet, pay down some debt and … hopefully give some money back to shareholders,” Small said.
The deal will also allow Teck to focus its efforts on other commodities, such as copper, which is positioned to be in great demand amid the clean energy transition, he added.
The company's stock surged following the deal announcement, but Small noted that shares of Teck have been under pressure for some time due to a challenging economic environment.
"Strong dollar, higher interest rates (are) usually not good for commodities in general," Small explained.
Small sees this overall dip in Teck's stock performance as a buying opportunity, even more so now that company is set to receive an influx of proceeds from the sale of its coal business.
“I think the valuations are very reasonable,” he said.
‘IT ALL DEPENDS’
Another investment expert said he views the deal as a positive move for Teck depending on what the company does with the influx of cash.
“It’s probably not a bad move, of course it all depends on how they redeploy the cash they get,” Lorne Steinberg, president of Lorne Steinberg Wealth Management, told BNN Bloomberg in an interview on Tuesday.
He added that commodity stocks such as Teck should not be highly indebted, and he thinks it would be wise for the company to use the incoming funds to improve its balance sheet.
Steinberg expressed some caution over Teck’s future growth plans, which focus on producing copper as the next “big” mineral.
“I’m always a little wary when the next mineral is going to be the big mineral, like lithium and everything else, because we’ve seen that game play out before,” he said.
Glencore, an empire built on coal, prepares to say goodbye
, Bloomberg
, Bloomberg
Glencore Plc made its name — and minted a generation of billionaires — in large part by mining and trading coal. Its former chief and biggest shareholder Ivan Glasenberg once said the world was “horny as hell” for the fuel.
Now it’s getting ready to get out.
The commodity giant has come under growing pressure to stop producing the dirtiest fuel, even as profits from its mines hit eye-watering levels over the past two years. On Tuesday, the company laid out its solution: buying a suite of steelmaking coal mines from Canada’s Teck Resources Ltd., to create an even bigger coal company that Glencore will eventually hand over to its own shareholders.
The exit by one of coal’s biggest champions marks a watershed moment for both the company and the wider mining industry. After the split — which could take almost three years to complete — what’s left will be one of the world’s biggest miners and traders of copper, nickel and cobalt, all essential commodities for the energy transition.
The move reflects a conundrum facing the mining industry. For producers who still have exposure to coal, investor pressure, especially in Europe, is growing. And yet persistently strong demand — particularly as Russia’s invasion of Ukraine continues to disrupt energy markets — means the business remains a huge profit driver.
Glencore’s solution is to list the new combined coal business, which will be the world’s biggest shipper of the fuel, in New York, with secondary listings in Toronto and Johannesburg. The “green” metals company will continue to trade in London.
For Glencore shareholders who will receive stock in the spinoff — chief among them Glasenberg himself who still owns nearly 10 per cent — it’s a big bet on the future appeal of coal in Western capital markets.
“There seems to be a very, very strong appetite in the market and particularly the U.S. for a business of this size, of this scale, of this cash generation,” said Chief Executive Officer Gary Nagle, who succeeded Glasenberg at the helm two years ago. “We believe we would get better valuation.”
DIRTIEST FUEL
Glencore has long been synonymous with coal. Glasenberg, who built Glencore in its current form over his two-decade tenure, made his bones in the company trading the dirtiest fuel and spearheaded its 2013 takeover of Xstrata in a US$90 billion deal that made it the world’s biggest coal shipper. Nagle, like his predecessor, also started his career in the coal business.
Glencore’s bet on coal has paid off handsomely. While it has traditionally vied with copper as the biggest earnings driver, last year soaring coal prices meant it made a record $17.9 billion, dwarfing profits at all its other divisions.
And as rival companies exited the business, Glencore stayed the course. Glasenberg, and then Nagle, insisted the world — and particularly developing countries — still needed Glencore’s coal, and that it was more responsible to run the mines itself than sell them.
The first sign that it might be thinking about an exit came earlier this year, when Teck said it had rejected a $23 billion takeover offer from Glencore, in which the Swiss company proposed combining the two businesses and then splitting them into specialized metals and coal companies.
However, coal was not the initial prize — Nagle was more interested in Teck’s copper business, and particularly the huge Quebrada Blanca project that borders its own Collahuasi mine in Chile. Copper has become a growing focus for the world’s biggest miners, with demand expected to surge as the world electrifies, while new supply is constrained.
Teck and its controlling shareholder — Canada’s Keevil family — came out strongly against Glencore’s offer. And as the takeover saga rumbled on, Glencore’s investors continued to sour on coal.
In late May, Glencore’s climate plan lost more support, with only about 70 per cent of investors backing it at the company’s annual meeting. Almost 30 per cent of shareholders also backed a resolution urging the company to explain how its thermal coal business aligns with efforts to limit the increase in global temperatures to 1.5C, forcing the company to engage with investors on both resolutions.
According to Nagle, shareholders were also receptive to the idea of putting Glencore’s thermal coal mines together with Teck’s longer life coking coal assets in western Canada, to create a more valuable company.
Eventually, with Teck and family patriarch Norman Keevil standing firm, Glencore switched to a bid for the coal business alone. Teck had been forced back to the drawing board on its strategy for the unit, after an earlier, more complicated spinoff plan failed to get enough shareholder support.
On Tuesday, Glencore announced it agreed to pay $6.93 billion for a 77 per cent stake in Teck’s coal business, while steelmakers Nippon Steel Corp. and Posco, which currently own minority stakes in Teck coal mines, will own the rest.
APPEALING TARGETS
Once the deal and spinoff are complete, both Glencore and Teck will be very different companies. While both will be smaller, their focus on metals such as copper and zinc is likely to make them more appealing to both investors and rival companies.
Glencore has one of the world’s biggest copper businesses and crucially is the dominant non-Chinese miner of crucial battery-making ingredient cobalt.
Its sprawling metals business has previously been on the radar of BHP Group — the world’s biggest miner — and could feasibly become a target once the coal business is gone.
It’s a similar story for Teck. And while the company has agreed a standstill with Glencore for two years after the close of the deal, the restriction would lapse if another miner decided to take a run at the Canadian company.
Nagle, who insists walking away with only Teck’s coal mines is not a second prize, now has just over two years to sell his giant new coal business to investors and create an appetite that will deliver the increased value he expects.
“This is not an exact science, you can get 10 experts in the room and get different opinions,” the CEO said, on the potential valuation of the new company once it is listed. “I think the general view is that there would be some material value creation and that’s why we’ve gone down this road.”
Glencore Plc made its name — and minted a generation of billionaires — in large part by mining and trading coal. Its former chief and biggest shareholder Ivan Glasenberg once said the world was “horny as hell” for the fuel.
Now it’s getting ready to get out.
The commodity giant has come under growing pressure to stop producing the dirtiest fuel, even as profits from its mines hit eye-watering levels over the past two years. On Tuesday, the company laid out its solution: buying a suite of steelmaking coal mines from Canada’s Teck Resources Ltd., to create an even bigger coal company that Glencore will eventually hand over to its own shareholders.
The exit by one of coal’s biggest champions marks a watershed moment for both the company and the wider mining industry. After the split — which could take almost three years to complete — what’s left will be one of the world’s biggest miners and traders of copper, nickel and cobalt, all essential commodities for the energy transition.
The move reflects a conundrum facing the mining industry. For producers who still have exposure to coal, investor pressure, especially in Europe, is growing. And yet persistently strong demand — particularly as Russia’s invasion of Ukraine continues to disrupt energy markets — means the business remains a huge profit driver.
Glencore’s solution is to list the new combined coal business, which will be the world’s biggest shipper of the fuel, in New York, with secondary listings in Toronto and Johannesburg. The “green” metals company will continue to trade in London.
For Glencore shareholders who will receive stock in the spinoff — chief among them Glasenberg himself who still owns nearly 10 per cent — it’s a big bet on the future appeal of coal in Western capital markets.
“There seems to be a very, very strong appetite in the market and particularly the U.S. for a business of this size, of this scale, of this cash generation,” said Chief Executive Officer Gary Nagle, who succeeded Glasenberg at the helm two years ago. “We believe we would get better valuation.”
DIRTIEST FUEL
Glencore has long been synonymous with coal. Glasenberg, who built Glencore in its current form over his two-decade tenure, made his bones in the company trading the dirtiest fuel and spearheaded its 2013 takeover of Xstrata in a US$90 billion deal that made it the world’s biggest coal shipper. Nagle, like his predecessor, also started his career in the coal business.
Glencore’s bet on coal has paid off handsomely. While it has traditionally vied with copper as the biggest earnings driver, last year soaring coal prices meant it made a record $17.9 billion, dwarfing profits at all its other divisions.
And as rival companies exited the business, Glencore stayed the course. Glasenberg, and then Nagle, insisted the world — and particularly developing countries — still needed Glencore’s coal, and that it was more responsible to run the mines itself than sell them.
The first sign that it might be thinking about an exit came earlier this year, when Teck said it had rejected a $23 billion takeover offer from Glencore, in which the Swiss company proposed combining the two businesses and then splitting them into specialized metals and coal companies.
However, coal was not the initial prize — Nagle was more interested in Teck’s copper business, and particularly the huge Quebrada Blanca project that borders its own Collahuasi mine in Chile. Copper has become a growing focus for the world’s biggest miners, with demand expected to surge as the world electrifies, while new supply is constrained.
Teck and its controlling shareholder — Canada’s Keevil family — came out strongly against Glencore’s offer. And as the takeover saga rumbled on, Glencore’s investors continued to sour on coal.
In late May, Glencore’s climate plan lost more support, with only about 70 per cent of investors backing it at the company’s annual meeting. Almost 30 per cent of shareholders also backed a resolution urging the company to explain how its thermal coal business aligns with efforts to limit the increase in global temperatures to 1.5C, forcing the company to engage with investors on both resolutions.
According to Nagle, shareholders were also receptive to the idea of putting Glencore’s thermal coal mines together with Teck’s longer life coking coal assets in western Canada, to create a more valuable company.
Eventually, with Teck and family patriarch Norman Keevil standing firm, Glencore switched to a bid for the coal business alone. Teck had been forced back to the drawing board on its strategy for the unit, after an earlier, more complicated spinoff plan failed to get enough shareholder support.
On Tuesday, Glencore announced it agreed to pay $6.93 billion for a 77 per cent stake in Teck’s coal business, while steelmakers Nippon Steel Corp. and Posco, which currently own minority stakes in Teck coal mines, will own the rest.
APPEALING TARGETS
Once the deal and spinoff are complete, both Glencore and Teck will be very different companies. While both will be smaller, their focus on metals such as copper and zinc is likely to make them more appealing to both investors and rival companies.
Glencore has one of the world’s biggest copper businesses and crucially is the dominant non-Chinese miner of crucial battery-making ingredient cobalt.
Its sprawling metals business has previously been on the radar of BHP Group — the world’s biggest miner — and could feasibly become a target once the coal business is gone.
It’s a similar story for Teck. And while the company has agreed a standstill with Glencore for two years after the close of the deal, the restriction would lapse if another miner decided to take a run at the Canadian company.
Nagle, who insists walking away with only Teck’s coal mines is not a second prize, now has just over two years to sell his giant new coal business to investors and create an appetite that will deliver the increased value he expects.
“This is not an exact science, you can get 10 experts in the room and get different opinions,” the CEO said, on the potential valuation of the new company once it is listed. “I think the general view is that there would be some material value creation and that’s why we’ve gone down this road.”
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