ck Resources Ltd. TECK-B-T +11.53%increase has agreed to be acquired by British mining giant Anglo American PLC NGLOY +10.87%increase in a deal that could result in one of the last remaining Canadian major critical minerals miners being swallowed up by a foreign buyer.
Vancouver-based Teck on Tuesday said it had reached a friendly deal to be acquired by London-based Anglo in an all-stock transaction.
Under the deal, Teck’s shareholders will receive 1.3301 shares of Anglo in exchange for their securities, which equates to an “at the market” deal, meaning no premium is being paid by Anglo.
The new company will be renamed Anglo Teck, will be worth about $50-billion and will become the world’s fifth-largest copper producer. Anglo shareholders will end up owning 62.4 per cent of the company and Teck shareholders will own 37.6 per cent.
What Anglo American brings is further world class copper assets, as well as some very high quality iron ore, in combination with the zinc that we have in the portfolio,” said Jonathan Price, CEO of Teck, in an interview.
“What we’re creating here is a very large and very high quality copper-focused mining company.”
For the deal to close it must first be approved by the federal government. Ottawa will scrutinize the transaction to make sure there are no national-security concerns, and it must make economic sense for Canada under the net benefit test.
With Teck potentially falling into foreign hands, Canada’s influence and power in the global critical minerals industry appear to be fading ata time when politicians of all stripes have called for this country to build up its homegrown industries to fight a vicious trade war with the U.S.
Critical minerals are used in a wide range of technologies, including electric vehicles, fighter jets, wind turbines and consumer electronics.
Over the past few decades, many of Canada’s biggest mining champions have been acquired by foreign buyers, including Alcan Inc., Falconbridge Ltd., Noranda Inc. and Inco Ltd.
Pierre Lassonde, co-founder of Franco-Nevada Corp. FNV-T -0.26%decrease, the world’s biggest mining royalty company, said in an interview thatthe sale of Teck is a tragedy for the Canadian mining industry, but one that is largely of Teck’s making, owing to its poor execution over many years.
“I think that Jonathan Price should be nominated to the Canadian Mining Hall of Shame, and the entire board of Teck should join him,” he said.
Teck is selling the company during a period of significant operational weakness and share price underperformance, driven by the poor execution at its giant Quebrada Blanca copper mine in Chile, also known as QB2.
Teck put the high-altitude mine in the mountains of northern Chile into production in 2023. But the US$8.7-billion project went 85 per cent over budget, and it has struggled with grade shortfalls, production misses, cuts to guidance and persistent drainage issues at its tailings dam.
Anglo on paper has a better shot of making QB2 work than Teck on its own. The British company owns 44 per cent of the nearby Collahuasi mine, and it will attempt to combine the two operations. That is expected to add US$1.4-billion a year to earnings,the companies said on Tuesday, including the ability to process high-grade ore from Collahuassi at QB2’s newly constructed plant.
Teck undertaking major overhaul at QB2 mine in Chile after years of struggles
This isn’t the first time a foreign buyer has targeted Teck, but the Canadian miner has much less ability to defend itself this time.
Teck’s history goes back to 1913, when Hughes Gold Mines Ltd. started a gold mine in Teck Township on the shores of Kirkland Lake, Ont. TheKeevil familyhas been involved in the company since the 1950s. Norman B. Keevil, now in his late 80s, is one of Teck’s controlling shareholders.
Two years ago, when another foreign mining company, Glencore PLC GLCNF +5.58%increase of Switzerland, tried to buy Teck, Mr. Keevil refused to sell, famously telling The Globe and Mail that “Canada is not for sale.”
But he has no such objections this time around. He told The Globe on Tuesday that he will usehis super voting A shares in support of the takeover, and that Anglo’s scale will help Teck enormously.
“It makes us both better companies,” he said. “Teck’s future is secured. It will become more resilient.”
If Anglo succeeds in buying Teck, Anglo’s CEO, Duncan Wanblad, who was born in South Africa, will become the CEO of Anglo Teck. Mr. Price, a Briton who became Teck’s CEO in 2022, will become the deputy CEO. The operational headquarters of the company will be in Vancouver, where both executives, along with the senior management teams, will be based.
If Ottawa allows the deal to proceed, it will be making an exception to its own policies around foreign ownership of Canadian critical minerals assets. Ottawa in 2023 tightened its already stringent rules, saying it would allow acquisitions of large Canadian critical minerals companies only under the most exceptional circumstances.
In a statement on X on Tuesday, Industry Minister Mélanie Joly said that “any new investments must support our core mission of building one economy in the best interests of Canadians.”
Teck does not appear to have shopped the company widely before agreeing to the takeover by Anglo, which opens the company up to competing bids from other suitors.
When asked in the interview whether Teck ran an auction for the company, Mr. Price signalled that the company focused its efforts on getting a deal done with Anglo.
Exchangeable Anglo Teck shares mean Canadian investors could defer capital gains tax
Tyler Tebbs, founder of event-driven research firm Tebbs Capital, said in an interview that Teck could see competing bids from Vale SA VALE-N -0.96%decrease, Freeport-McMoRan FCX-N -5.94%decrease, or BHP Group Ltd BHPLF +2.05%increase, whose technical and engineering skills he rates highly.
“QB2 is an engineering debacle,” he said. “Having BHP would be great.”
Mr. Tebbs said Glencore, which is a part owner of Collahuasi alongside Anglo, may also try again to buy Teck.
While Glencore a few years ago failed in its attempt to acquire all of Teck, it ended up acquiring a majority stake in Teck’s legacy coal business.
Anglo didn’t consult with Glencore before launching its Teck takeover proposal and Mr. Wanblad in an interview acknowledged that he has no idea whether the Swiss miner might still have ambitions to buy Teck.
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