Teck says sale of steelmaking coal arm proceeding as planned

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Canada’s Teck Resources said the sale of its steelmaking coal arm is proceeding as planned despite doubts over the reported bid of Indian group JSW Steel after plunging relations between Ottawa and New Delhi.

JSW Steel has expressed interest in acquiring a stake in the $8bn coal unit, according to Reuters, but ties between Canada and India have cratered over the murder of a Sikh separatist leader in British Columbia.

Canadian premier Justin Trudeau has said there were “credible allegations” Indian government “agents” were behind the murder of Hardeep Singh Nijjar, killed in a suburb of Vancouver in June.

“The news about the geopolitical events between Canada and India is not something that’s causing us to slow down our process,” Teck chief executive Jonathan Price told the Financial Times’ Mining Summit on Thursday.

“We’re fully confident that we continue to proceed here and we continue to have options in front of us that will give us a good outcome.”

However, India has stopped issuing visas to Canadians and told Ottawa to reduce its diplomatic presence in the country.

Teck has not disclosed the names of bidders for its coal unit but JSW has been reported as one of the potential buyers. Canada is among the biggest suppliers of coal to India’s steel industry.

Teck’s sale of all or part of its coal unit, which includes four metallurgical coal mines in Canada’s British Columbia, is set to be one of the biggest mining deals in years.

London-listed Glencore in June offered to buy the coal business for an undisclosed cash sum, after its earlier hostile bid for the entirety of Teck, which also includes a metals division, was rejected.

Teck said at the time that it would engage with Glencore but noted it was just “one of a number” of proposals under consideration.

Glencore had previously offered to pay up to $8.2bn in cash for Teck’s coal business as part of its rejected proposal to buy all of Teck Resources in a $23bn cash-and-share deal.

Price told the FT that he would like to put a deal to shareholders before the end of the year.

“When we get to the point of having a competitive process and solid proposals, which is where we are now, I think it’s incumbent on us to move forward and to take a decision,” he said.

Whether the process concludes with a full sale of the asset for cash or a separation and partial sale, Teck will use the proceeds to paydown debt and fund planned capital spending in its metals business, before assessing how much to return to shareholders, Price said.

“In either scenario, I think what you see is us essentially underwriting our growth portfolio, improving our balance sheet and making a major return of capital to shareholders,” he added.

Teck’s metals business includes a widely coveted portfolio of copper projects in Chile and Peru. It plans to double production of the metal to 650,000 tonnes a year by 2026.

That pipeline has made them an attractive takeover target in a sector where several of the largest mining companies are seeking to boost their long-term access to the metals needed to build the electrical infrastructure required for the energy transition.

Separating its metals business from its coal business, will help Teck to become “a global critical minerals champion, with a long growth horizon and an ongoing portfolio of projects capable of execution”, Price said.

“That’s how we think we maximise value for shareholders and if that turns out to be an attractive proposition for others, then so be it.”