Over the past 48 hours, Jonathan Price, the chief executive of Teck Resources Ltd. TECK-B-T, has reeled off benefits that will come from Anglo American PLC’s NGLOY takeover of Canada’s critical minerals champion. Yet after all the explanations, two questions remain unanswered: Why this deal? And why now?
Of all the options available, why did Teck settle for a full-blown sale, instead of, say, a joint venture on its troubled Chilean mine? And why is Teck, a copper miner (among other metals), selling itself while its stock is struggling? There is endless talk about the dearth of copper assets around the world but Teck didn’t even demand a premium on its shares.
These questions matter because, until very recently, Teck was considered so crucial to Canada’s future in a greener global economy that the federal government bear-hugged the company when it was under attack from Glencore PLC in 2023.
To protect companies such as Teck from takeover suitors, Ottawa changed its rules for foreign takeovers, telling the world that acquisitions of Canadian mining companies that engage in significant critical minerals operations would only be approved “in the most exceptional of circumstances.”
That rule change was only in July, 2024. Just over a year later, Teck is testing the limits of its own protection, and it isn’t fully clear why.
“The industrial logic of an Anglo-Teck combination is compelling due to the material operational synergies available in Chile,” Bank of Nova Scotia analyst Orest Wowkodaw wrote in a note to clients. “However, the timing of this deal is hard to understand from a Teck perspective, and the relatively modest implied premium, along with the loss of a Canadian mining champion and the primary [stock exchange] listing, are all disappointments.”
Anglo-Teck deal will be first for Ottawa’s ‘exceptional circumstances’ test for approval
If the deal is completed, Anglo Teck says it will keep a Toronto Stock Exchange listing, but its “primary” listing will be on the London Stock Exchange.
To Teck’s credit, it has tried to make the deal with Anglo as Canadian as possible. The combined company’s global headquarters will be in Vancouver (and there will be job cuts at Anglo’s current HQ in London because of this); its chief executive officer, deputy CEO and chief financial officer will have their principal office and principal residences in Canada; it will remain listed on the TSX; and its board chair will be Teck’s current board chair.
In other words, Teck argues the merged company is Canadian. To this end, some Canadian politicians have already thrown their support behind the proposal, including B.C. Premier David Eby and Vancouver mayor Ken Sim.
But did it have to be this complex? Why not create a joint venture between Teck’s Quebrada Blanca project in Chile and the nearby Collahuasi mine, of which Anglo American only holds a minority ownership? So far, these two assets have been marketed as the crux of this merger. Couldn’t they be combined in a similar way to how Barrick Gold Corp. and Newmont Mining Corp. settled on a joint venture of their Nevada mines in 2019?
It matters because no one can control the future. CEOs change. Boards change. Governments change. Despite all the guarantees written into this deal, wild things can happen. How many people saw Donald Trump winning the U.S. presidency again when rioters stormed the Capitol in January, 2021?
What happens if Nigel Farage, who is surging in the polls and is quite nationalist, wins the next British election? The Anglo-Teck merger still has asterisks on who really holds power. The company will be headquartered in Canada, but incorporated in Britain. The deal is a merger of equals, yet Anglo is clearly much bigger.
There may be explanations for all of this. There are, for instance, some real financial benefits to Teck from doing a full-blown merger. Not only does Anglo American have a better credit rating, “the combined company will have expanded regional and product diversification, and potential synergies will create opportunities to improve its margins, with the merged entity’s copper costs likely to be in the lower half of the cost curve,” debt rating agency Moody’s Ratings wrote in a note.
But it’s on Teck to explain if these outweighed other options, and why it had to sell in the first place. Is the QB mine expansion so bad that there was no other way out? If so, why does Mr. Price get to carry on at the merged company as deputy CEO?
Pierre Lassonde, who co-founded Canada’s Franco-Nevada Corp., the world’s biggest mining royalty company, addressed this in an interview with The Globe and Mail on Tuesday. “I think that Jonathan Price should be nominated to the Canadian Mining Hall of Shame,” he said, “and the entire board of Teck should join him.”
Maybe Mr. Lassonde, who is notoriously outspoken, is over the top. But there’s at least some truth to what he’s getting at: A year ago, Teck’s shares were trading at their highest level in nearly two decades and selling the company wasn’t even remotely in the cards. What changed?
What do you want to know about the Anglo Teck deal?
On Friday, Sept. 12 at 12 p.m. ET, mining reporter Niall McGee and business columnists Andrew Willis and Eric Reguly will answer your questions about one of the biggest mining deals. What were the circumstances that led to Anglo buying Teck?
How likely is it that the government will let it happen? What does this mean for Canada’s critical mineral strategy? Submit your question now.