Permanently fixing the problems at QB2 is critical not only to Teck’s near-term future, but to the ultimate success of Anglo’sMarcos Zegers/The Globe and Mail
Teck Resources Ltd. TECK-B-T chief executive Jonathan Price is confident that operational struggles at its QB2 mine in Chile will be behind it by the end of this year, as the company waits to see if antitrust regulators will approve the acquisition of the company by Anglo American PLC NGLOY.
Vancouver-based Teck in September announced a US$20-billion takeover by London-based Anglo that saw it agree to a no-premium sale during a time of weakness in its operations.
The deal received approval from both shareholders and the Canadian federal government in December. In a Thursday earnings call with analysts following the release of the company’s fourth-quarter results, Mr. Price said that Teck has also received competition and antitrust approval from Canada, Chile, Australia, Japan, the EU and the U.S.
However, more antitrust approvals are needed for the deal to close, including from South Korea and China.
Anglo-Teck merger faces growing pushback in South Africa
Under scrutiny is the impact the combination of Anglo and Teck will have on the global copper industry, and whether too much power would be concentrated in one entity. Anglo Teck would control just less than 5 per cent of the copper market.
“We are working collaboratively with Anglo to secure the remaining approvals required to complete the transaction,” Mr. Price said in the call.
When the deal was announced, Teck and Anglo said it could take up to 18 months to close, a timeline that remains in place.
In a note to clients on Thursday, Christopher LaFemina, analyst with Jefferies, said that should China block the Teck deal it would be “a significant negative” for the company, but the risk of that happening appears to be “relatively low.”
Relations between Canada and China have improved in recent months, with Prime Minister Mark Carney last month announcing a reduction in tariffs on imports of Chinese electric cars and declaring that this country is open to more inbound investment from China.
Around the time that Anglo made its bid for Teck, the Canadian miner’s biggest copper operation, QB2, was consistently missing its production targets, owing to engineering problems with its tailings dam. The slow drainage of water was causing tailings levels in the dam to rise higher than expected.
However, over the past few months, Teck has started to get a handle on the situation. The company has been able to raise the crest height of the dam by using rock benches, and it is using a sand wedge to improve drainage. The mitigation work on the dam will continue over the next few months.
Teck undertaking major overhaul at QB2 mine in Chile after years of struggles
During the call, Mr. Price said he expects that by the end of the year, QB2’s production will no longer be constrained by problems at the tailings dam.
Permanently fixing the problems at QB2 is critical not only to Teck’s near-term future, but to the ultimate success of Anglo’s ambitions.
Located close to QB2 is Anglo’s Collahuasi copper mine. Anglo plans to combine QB2 and Collahuasi into one gigantic mining operation. Glencore PLC and Japan Collahuasi Resources B.V. are also shareholders in Collahuasi.
If Anglo succeeds in buying Teck, it will become a top-five copper producer globally. The price of the commodity has risen significantly since the deal was announced last fall in part because of supply disruptions at Grasberg in Indonesia, one of the world’s biggest copper mines.
Copper on Thursday traded at around US$5.76 a pound, down from its all-time high of around US$6.50 a pound last month.
Teck a few years ago sold a majority stake in its legacy metallurgical coal business to Glencore for US$6.9-billion after an earlier attempt to separate coal from its critical minerals business failed.
Dating back to 1913, Teck is one of Canada’s biggest diversified mining companies, with domestic and international operations in copper, zinc, lead and germanium.
Anglo has committed to moving its global headquarters to Vancouver if the Teck transaction closes.