Teck Resources Ltd has made a significant announcement, revealing plans to spin off its steelmaking coal unit as it shifts its focus towards industrial metals like copper, essential for the global energy transition. The company will re-brand itself as Teck Metals Corp while the divested unit will be listed in Toronto as Elk Valley Resources Ltd (EVR).
CEO Jonathan Price emphasized that the divestiture would streamline the company’s portfolio, making it more attractive to investors and allowing Teck to concentrate on critical metals like copper. “This transaction will unlock the full potential of our copper growth portfolio, which is significantly undervalued,” Price stated.
Despite facing challenges in its steelmaking coal business over the past few years, including supply-chain disruptions and labor shortages, Teck remains optimistic about the future. Shareholders are set to receive EVR shares and cash totaling C$200 million, with Teck retaining an 87.5% interest in gross revenue royalty from the steelmaking coal business during the transition period.
Analysts at RBC Capital Markets viewed the announcement positively, though they cautioned that significant changes may take time to materialize. Meanwhile, Japan’s Nippon Steel Corp has expressed interest in acquiring a stake in EVR, offering C$1 billion in cash for a minority interest in Teck’s Elkview operations.
Teck also reported a lower-than-expected fourth-quarter profit, largely attributed to challenges in its steelmaking coal business. The transaction is expected to be completed in the second quarter of 2023.
