After negotiations lasting more than a year, commodities trader Glencore has successfully concluded a deal to acquire shares in the thermal coal assets of mining company Teck Resources, paving the way for it to focus on other mining operations.
Under the deal, the multinational commodities company, whose headquarters are in Switzerland, succeeded in separating the thermal coal activity from the rest of the Canadian Tech’s other mining businesses, which was part of a previous offer that the latter rejected, according to what the specialized energy platform reviewed.
The lengthy negotiations between the two companies are due to Tech’s rejection of Glencore’s previous offer worth $23 billion, which included separating thermal coal activity from metals, according to a statement published by Glencore on… website Today is Tuesday, November 14, 2023.
A watershed moment for Glencore
Glencore CEO Gary Nagle said that the acquisition of a majority of Tech’s shares is a watershed moment, which will enable the Canadian company to get rid of thermal coal activities, despite the enormous profitability of these assets, but they are highly polluting to the environment.
Glencore aims to reduce carbon emissions through several stages, leading to achieving carbon neutrality by 2050, according to website to the company.
He added that it is planned that Glencore will focus on mining activities necessary for energy transition operations, separate it into an independent company, and list it on the New York Stock Exchange within two years, following the closing of the acquisition deal.
According to the agreement, Glencore will pay $6.93 billion for 77% of Tech’s shares, and the rest of the shares are owned by Nippon Steel Corp of Japan and Posco of South Korea.
Glencore also bears the value of a loan obtained by TEC on the thermal coal assets, amounting to between US$250 million and US$300 million.
Immediately after the deal was announced, Glencore’s share price rose by 3.1% on the London Stock Exchange, while Tech’s share price jumped by 5.1% during pre-session trading in New York.
Part of Glencore’s mining activity – photo from the company’s website
Mining industry challenges
Glencore’s takeover of Tech has highlighted the challenges of the thermal coal mining industry, which is a lucrative business but which has recently seen investors increasingly hesitant about putting money into it.
Until the acquisition deal was announced, Glencore had previously said that it would continue operating its thermal coal mines until they ran out, even if its competitors disposed of this activity.
Nippon, which currently owns 2.5% of Tech’s assets, is injecting additional liquidity to raise its stake to 20%, while Posco is raising its stake to 3%.
Tech said: “We have now disposed of the thermal coal business, and will use the proceeds of the loan repaid by Glencore to work on new mineral mines, and distribute a portion of them as dividends to shareholders.”
“We were able to achieve what we thought was best in this transaction and conducted a clean separation of activities,” added Tech CEO, Jonathan Pryce.
Glencore’s acquisition of TEC’s thermal coal business increases the latter’s attractiveness to major companies in the mining industry, which want to mine more copper.
It is noteworthy that the implementation of Glencore’s acquisition of Tech requires the approval of the Canadian government, which has begun to lift measures to protect its natural resources.
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2023-11-14 17:14:22
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