A consortium led by Canadian mining veteran Pierre Lassonde is proposing to buy Teck Resources Ltd.’s TECK-B-T coal operations, a deal that could stop Swiss giant Glencore PLC GLNCY in its tracks, and offer a made-in-Canada solution that may be palatable to Ottawa.
Mr. Lassonde is co-founder and chair emeritus of Franco-Nevada Corp. FNV-T, the world’s biggest mining streaming and royalty firm. He has also been an outspoken critic against the incursion of foreign mining companies into Canada over the past two decades.
“We’ve had discussions with Teck, we’ve put forward a plan, and we have signed a [confidentiality agreement]. We’re waiting to hear from them as to which way they want to proceed,” Mr. Lassonde said in an interview.
In an e-mail to The Globe and Mail, Teck spokesperson Chris Stannell declined to comment.
Mr. Lassonde had already signalled that he was interested in Teck’s coal business, and if Teck’s proposal to split itself into two companies had been accepted by its shareholders last month, a consortium led by Mr. Lassonde was looking at taking a sizable equity position. Mr. Lassonde’s new proposal is much bigger in scope, entailing the purchase of Teck’s entire coal business.
“Teck wants to move forward, we’ve been told very definitively,” said Mr. Lassonde. “For them, it’s a question of consulting their bankers and consulting other groups. We’re told that they want to get something done between eight to 12 weeks.”
If Teck’s board were to accept the proposal from Mr. Lassonde, it would not appear to necessitate a shareholder vote. To require such a vote, Teck would have to be selling all, or substantially all, of its assets.
But according to the company’s 2022 year-end financials, the coal unit comprised around one-third of its assets, with its zinc and copper business comprising the balance.
Glencore last month offered to buy Vancouver-based Teck in a stock-and-cash deal worth about US$22.5-billion. The giant Swiss mining and commodities trading house was rebuffed by Teck’s board on two occasions.
But Glencore made it clear it has no intention of backing down. After Teck withdrew its restructuring proposal before a scheduled shareholder vote last month, Glencore said it remained interested, and may take an offer directly to the company’s shareholders.
Canada’s federal government has given strong signals it has concerns over Glencore buying Teck, with Prime Minister Justin Trudeau, Finance Minister Chrystia Freeland, Industry Minister François-Philippe Champagne and Natural Resources Minister Jonathan Wilkinson all citing Teck’s importance to the domestic critical minerals industry and stressing they like the fact that Teck is a Canadian company.
Mr. Lassonde will likely need the backing of Teck’s joint venture partners in producing steelmaking coal, Japan’s Nippon Steel Corp. NPSCY and South Korea’s POSCO, before his proposal can succeed. He indicated optimism that both will back his plan.
“You can assume that being the largest buyers of the coal, there would be a logical assumption that they would want to be part of the solution,” said Mr. Lassonde.
Both POSCO and Nippon have already said they aren’t interested in a Glencore acquisition of Teck’s metallurgical coal assets, owing to ESG concerns over Glencore’s thermal coal business.
POSCO had supported Teck’s split plan and was poised to exchange its minority stake in Teck’s Elkview and Greenhills operations for an equity and royalty position in a new coal unit spun off by Teck.
Nippon had a similar deal in place and had agreed to a long-term coal offtake rights agreement.
Nippon and POSCO did not respond to a request for comment.
No deal can move forward without the blessing of Teck’s controlling shareholder, Norman B. Keevil, who owns class A shares with 100 votes apiece.
Last month when Glencore’s proposal for Teck was made public, Dr. Keevil said it was of utmost importance that Teck remain in Canadian hands, telling The Globe that “Canada is not for sale.” Dr. Keevil did not respond to a request for comment.
If a shareholder vote on Mr. Lassonde’s proposal is not required, Teck’s single-voting class B shareholders would not be in a position to veto the deal.
Teck’s board still has a fiduciary duty to get the best deal for shareholders. In some cases, cultural fit and deal certainty can take precedence over price. Teck has already raised significant concerns around Glencore’s previous offers, include the contention that being acquired by Glencore would harm its ESG rating.
Teck has also said that there is considerable regulatory uncertainty around a Glencore acquisition. Ottawa would subject Glencore to a net benefit and national-security review, a process that could drag on for more than a year.
After the Teck split vote failed last month, the big Canadian miner said it would explore other options, including a cleaner split of the company. Under the previous plan, Teck’s new coal division would have had to pay the metals division around 90 per cent of its cash flow for about a decade, a scenario that many shareholders didn’t like.
Teck’s B shares rose by 3.3 per cent on the Toronto Stock Exchange on Tuesday to close at $61.17 apiece.