Teck CEO says miner will only make m & A deal for coal business if benefits are clear

Open this photo in the gallery:

Teck Resources Ltd. TECK-B-T chief executive Jonathan Price says he is pleased with the progress the Canadian miner has made in talks with interested parties to buy its coal business, but he has made it clear that a transaction will only be carried out under certain circumstances.

In April, Vancouver-based Teck cancelled a planned split of the company into independent metals and coal units after it failed to get enough support from shareholders. Since then, the company has been entertaining m&an opportunity for the coal business. Several bidders are already known, including Switzerland’s Glencore PLC GLNCY, Japan’s Nippon Steel NPSCY and a consortium led by mining veteran Pierre Lassonde.

In a conference call with analysts on Thursday, following the release of the company’s second-quarter earnings, Mr.Price said there has been “a lot of interest” in the coal business-both for all or just part of it – and that Teck is keeping an open mind. However, given the huge profit of the coal business, he said Teck will only make a deal if the Stars match.

“We will only make transactions if the benefits to our shareholders and other stakeholders are clear,” he said.

Teck’s share price has been steadily weighed down by its large exposure to environmentally unfriendly coal. Earlier in the year, the company announced its intention to divest the coal division, but the metals business would have saved about 90 percent of the new coal company’s cash flow for about a decade. After canceling a shareholder vote on the initiative, Teck said it would focus on pursuing a simpler and more direct separation of its operations.

While the company has actively spoken with potential buyers, Mr. Price said he would not rush into a transaction and refused to be fixed on any timeline.

“There is a detailed data room and a due diligence process that is working its way, which we will complete,” he said.

“We are not sitting on our hands here. We are taking a very active, diligent approach that is moving this forward as quickly as we can – but also ensuring that we take the time to deliver the best outcome here for shareholders and stakeholders.”

The dollar value of a potential transaction is far from the only consideration for Teck. The company will also consider the impact on its employees and its Indigenous stakeholders, Mr.Price.

The only known offer for Teck’s entire coal business is the one put forward by Glencore, which is worth up to $ 8.2 billion.

But that offer has received a less than enthusiastic reception from some interested parties, including British Columbia Prime Minister David eby, who said he is concerned about Glencore’s corporate record, referring to the company’s various regulatory violations related to bribery and corruption. While Mr. Eby does not have the authority to block a Glencore bid for Teck, he has indicated that he will ask Ottapora to do so.

On Thursday Teck lowered its copper forecast for the year by about 15 percent to between 330,000 and 375,000 tons, largely due to delays in the construction and commissioning of its QB2 copper mine in Chile. The Giant Mine began commercial production in the quarter and cost $ 8.1 billion to build.

Harry ” Red ” Conger, Teck’s chief operating officer, said on the conference call that various adjustments and modifications that led to the production cut are now in the rear view mirror, and he expressed confidence that the mine will be at its full production potential by the end of the year.

QB2 is Teck’s underlying asset as it tries to shift more of its revenue mix towards copper and away from coal.

Teck also reported Thursday that a worker was killed at QB2 during the quarter. The death occurred in a part of the mine that had been deactivated and was not operational, Teck spokesman Chris Stannell wrote in an email to The Globe and Mail.

“Lessons from the investigation are being shared across Teck and with industry colleagues to prevent future incidents,” he said.