Teck Resources has agreed to divest a 100% stake in its steelmaking coal business, EVR, to Glencore, Nippon Steel (NSC) and South Korea’s POSCO.
The deal implies $9bn (C$13.34bn) in enterprise value for Teck’s coal business.
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Glencore will acquire a 77% stake in EVR for a cash consideration of $6.93bn on a cash-free, debt-free basis.
NSC currently owns a 2.5% stake in Teck’s steelmaking coal unit.
In a press statement, Teck said: “NSC has agreed to acquire a 20% interest in EVR in exchange for its current 2.5% interest in Elkview Operations plus $1.3bn in cash payable to Teck at the closing of the NSC transaction and $0.4bn paid out of cash flows from EVR.
“NSC will also enter a long-term steelmaking coal offtake rights arrangement at market terms, continuing NSC’s long-standing commercial arrangement for the purchase of steelmaking coal from the Elk Valley.”
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By GlobalDataSouth Korea’s Posco will acquire a 3% stake in EVR in exchange for a 2.5% interest in Elkview Operations and its 20% stake in the Greenhills joint venture.
Proceeds from the sale will be used by Teck to strengthen its balance sheet and return cash to shareholders, among others.
Teck, however, will retain all steelmaking coal cash flows until the completion of the deal.
Subject to competition and regulatory approvals, including the Investment Canada Act (ICA), the transaction is due for completion in Q3 2024.
In a press statement, Glencore said: “At closing, Glencore will also acquire from Teck, NSC and POSCO’s attributable share of a shareholder loan from Teck to EVR, which is repayable out of EVR’s cash flows. The amount payable for this portion of the loan is expected to be some $250m–$300m on closing.”
Assuming the Posco’s roll-up proceeds, EVR will own the entities holding the Elkview, Fording River, Greenhills and Line Creek mines in south-east British Columbia.
It will also own a 46% stake in Neptune Terminals in North Vancouver.
Glencore is planning to demerge the combined business within 24 months of the deal’s close.
