Proceeds will be used to reduce debt, fund copper growth and return cash to shareholders.
Vancouver, British Columbia โ Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK) (โTeckโ) today announced that the sale of its remaining 77% interest in its steelmaking coal business, Elk Valley Resources (โEVRโ), to Glencore plc (โGlencoreโ) has received all necessary regulatory approvals.
The transaction is now expected to close on July 11. Teck expects to receive total cash proceeds of US$6.9 billion (CAD$9.5 billion)1 from the sale of the 77% interest in EVR, excluding closing adjustments.
โWe are pleased to have achieved a complete separation of our metals and steelmaking coal businesses to position Teck for its next phase of growth and responsible value creation,โ said Sheila Murray, Chair of the Board. โWe are confident that our leadership team is executing the right strategy to maximize long-term value for shareholders and all stakeholders.โ
โThis transaction marks a new era for Teck as a company focused solely on supplying metals that are essential to global development and the energy transition,โ said Jonathan Price, president and CEO. โBy moving forward as a company dedicated solely to energy transition metals, we will leverage our core portfolio of strong, cash-generating assets by developing our near-term copper growth projects. Completion of this transaction will provide substantial funding for our projects, giving Teck a path to increase copper production by an additional 30% beginning in 2028.โ
โThis transaction will allow us to reduce debt and retain a significant amount of cash to fund our near-term metals growth and maintain a strong balance sheet, while providing a significant cash return to our shareholders,โ Price said.
Use of funds obtained from transactions
Subject to the closing of the transaction and in accordance with Teck's Capital Allocation Framework, Teck intends to allocate the proceeds from the sale of the steelmaking coal business as follows:
- Cash return to shareholders
- Repurchase of up to US$2.0 billion (CAD$2.75 billion) of Class B subordinate voting shares.
- Distribution of approximately US$182 million (CAD$250 million) through the declaration of an eligible prepayment of CAD$0.50, to be declared by the Board of Directors of Teck on the Class A common shares and Class B subordinated shares. The supplemental prepayment is expected to be payable on September 27, 2024 to shareholders of record as of the close of business on September 13, 2024. This one-time supplemental prepayment is in addition to the regular base quarterly prepayment of $0.125 per share, resulting in a total expected eligible prepayment of $0.625 per share.
- Total cash return announced for shareholders from the sale of 100% of EVR for US$2.6 billion (CAD$3.5 billion).โ
- Debt reduction
- Execute a debt reduction program of up to US$2.0 billion (CAD$2.75 billion), including the cash tender offer announced separately today to purchase US$1.25 billion aggregate principal amount of Teck's outstanding public bonds.
- Copper growth well funded and generating value
- โโ Remaining revenues, net of taxes and transaction costs, will be retained to fund near-term copper growth. Teck will continue to advance its near-term copper projects, including the Highland Valley copper mine life extension, the Zafranal project, the San Nicolas project and QB debottlenecking, with first sanction decisions expected to be made in 2025. The current estimated capital cost attributable to Teck for these projects is US$3.3 to US$3.6 billion (CAD$4.5 to US$4.9 billion).
- Taxes and transaction costs
- It is estimated that US$750 million (CAD$1 billion) will be needed to pay taxes and transaction costs.
Creating value: how to boost copper growth
The completion of the EVR sale positions Teck as an industry-leading energy transition metals producer, poised to unlock the value of its unrivaled copper growth portfolio.
Teck operates a premium portfolio of high-quality, long-life producing assets in stable and well-understood jurisdictions in the Americas. With the commissioning of QB in 2024, Teck expects to double its copper production to approximately 600,000 tonnes/year.
In parallel, Teck is employing a rigorous investment framework in executing its near-term copper project portfolio, including QB debottlenecking, mine life extension of the Highland Valley copper mine, the Zafranal project and the San Nicolas project. These are relatively low-complexity projects with competitive capital intensities and located in well-established mining jurisdictions, with approvals expected from 2025. Longer term, Teck will advance a suite of significant brownfield and non-brownfield development options, including the Galore Creek project in British Columbia and the potential expansion of Trail Operations to include an electric vehicle battery recycling facility.
This pipeline itself offers a continued opportunity for shareholder value creation with significant long-term growth potential, enabled by a resilient balance sheet and disciplined capital allocation.
Share buyback details
The share repurchase will be completed pursuant to the normal course public offering (โNCIBโ) program, subject to market conditions and receipt of applicable regulatory approvals in connection with the renewal of the NCIB in November 2024. Any repurchase after November 21, 2024 is contingent upon regulatory approval of a renewed NCIB. The Company will determine the timing of any purchase and may repurchase a smaller or larger number of shares, subject to market conditions, the requirements of the public offering program and applicable securities laws.
Advisors
Barclays Capital Canada Inc., Ardea Partners LP, TD Securities Inc. and CIBC World Markets Inc. acted as financial advisors to Teck. Stikeman Elliott LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as legal advisors, and Felesky Flynn LLP acted as legal tax advisor.
BMO Capital Markets, Goldman Sachs & Co. LLC and Origin Merchant Partners acted as financial advisors to the Special Committee and Blake, Cassels & Graydon LLP and Sullivan & Cromwell LLP acted as legal advisors to the Special Committee.
Forward-looking statements
This press release contains certain forward-looking information and forward-looking statements as defined under applicable securities laws (collectively, forward-looking statements). These statements relate to future events or our future performance. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "continue," "estimate," "expect," "may," "will," "potential" and similar expressions is intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. These statements speak only as of the date of this press release.
These forward-looking statements include, but are not limited to, statements relating to the expected closing of the transaction, the timing of the closing of the transaction; Teck's business and assets and its future strategy, including with respect to the development of current and future projects; the expected use of proceeds, including the timing and format of any return of cash to shareholders; the anticipated benefits of the transaction; our ability to satisfy closing conditions; and other statements that are not historical facts.
Although we believe that the forward-looking statements in this news release are based on information and assumptions that are current, reasonable and complete, these statements are by their nature subject to a number of factors that could cause actual results to differ materially from management's expectations and plans as set forth in such forward-looking statements, including, without limitation, the following factors, many of which are outside of our control and the effects of which may be difficult to predict: the possibility that the transaction will not close when expected or at all due to the occurrence of any event, change or other circumstances that could give rise to the right of one or both parties to terminate the transaction; the possibility that the anticipated benefits of the transaction will not be realized in the anticipated time frame or at all as a result of changes in general economic and market conditions, including credit, market, currency, operational, commodity, liquidity and financing risks generally and relating specifically to the transaction; laws and regulations and their application; the possibility that Teck's business will not perform as expected or in a manner consistent with historical performance; reputational risks and the reaction of Teckโs customers, suppliers and employees to the transaction; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; material adverse changes in economic and industry conditions; general competitive, economic, political and market conditions; and other risks inherent to our business and/or factors outside of Teckโs control that could have a material adverse effect on Teckโs ability to consummate the transaction or alter the currently expected use of proceeds from the transaction.
Forward-looking statements involve risks and uncertainties that are beyond our ability to predict or control. More information about the risks, assumptions and uncertainties associated with these forward-looking statements and our business can be found in our most recent Annual Information Form filed under our profile on SEDAR+ (www.sedar.com).www.sedarplus.ca) and in EDGAR (www.sec.gov) on Form 40-F, as well as subsequent filings which can also be found under our profile. We undertake no obligation to update any forward-looking statements except as required by securities laws.
About Teck
Teck is a leading Canadian resource company focused on responsibly delivering essential metals for economic development and the energy transition. Teck has a portfolio of world-class copper and zinc operations in North and South America and an industry-leading copper growth pipeline. We are focused on creating value by promoting responsible growth and ensuring resilience built on a foundation of stakeholder trust. Headquartered in Vancouver, Canada, Teck shares are listed on the Toronto Stock Exchange under the symbols TECK.A and TECK.B and on the New York Stock Exchange under the symbol TECK. Learn more about Teck at www.teck.com or follow us. @RecursosTeck.
Investor Contact:
Fraser Phillips
Senior Vice President, Investor Relations and Strategic Analysis
604.699.4621
Fraser Phillips@Teck.com
Media Contact:
Dale Steeves
Director of Stakeholder Relations
236.987.7405
dale.steeves@teck.com
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