Teck Resources' Quebrada Blanca (QB) mine in Chile.
Teck Resources Ltd. TECK-B-T chief executive officer Jonathan Price says the Canadian miner has no immediate plans to sell its royalty on Barrick Mining Corp.’s B-N Fourmile project in Nevada, preferring to wait and see how the massive gold project evolves over time.
The Globe and Mail reported last month that Vancouver-based Teck owns a royalty on Fourmile that would see Barrick pay it 10 per cent of the net profits from the mine. Fourmile is expected to be in production in three to four years. The royalty, which could net in excess of $1-billion over time to Teck, increases to 15 per cent of net profits once six million ounces of gold are produced.
Fourmile has been framed by Barrick as “one of the century’s greatest gold discoveries.” In a preliminary economic assessment, Barrick said it could produce up to 750,000 ounces a year for at least 25 years.
“We recognize that that’s a valuable asset,” Mr. Price said about Teck’s royalty on Fourmile in a conference call with analysts on Thursday after the release of its first-quarter earnings.
Teck will monitor how Fourmile advances, he said, and given there is significant technical work still to be done to bring it into production, that will affect the value of the royalty.
“So something that we will remain very close to of course, but that’s one for the future,” he said.
Last September, Teck agreed to be acquired by British miner Anglo American PLC NGLOY. The deal was approved by shareholders and cleared by Ottawa on regulatory grounds. Anglo is still waiting on regulatory approval from China’s State Administration for Market Regulation, which has the authority to scrutinize deals for antitrust concerns because the two miners sell vast amounts of copper and other commodities into its market.
When asked in the call whether China has indicated the potential for asset divestitures as part of the approval process, Mr. Price said that there has been “no indication of any request for remedies associated with the approval process at this time.”
Both Teck and Anglo expect China to approve the transaction either later this year or early in 2027.
If Anglo closes the transaction, it plans to move its headquarters to Canada and rename itself “Anglo Teck.”
Under a proposal this month by S&P Dow Jones Indices that is out for feedback among industry participants, Anglo Teck could end up qualifying for inclusion in the S&P/TSX 60, something that both Teck and Anglo have lobbied for.
S&P DJI in its feedback request said it is considering foreign companies for inclusion, as long as they are listed in Canada, and meet criteria around liquidity and size. Under the current rules, companies have to be domiciled and incorporated in Canada to be included in the index.
Anglo, whose primary stock listing is on the London Stock Exchange, has already committed to a secondary listing in Canada if the deal closes.
Emma Chapman, vice-president of investor relations with Teck, said in the Thursday analyst call that it is unclear, in the event that S&P DJI approves the change, whether the timing would line up with the expected close of the transaction. Teck, she added, will work hard ”to try and facilitate an accelerated decision.”
James Wyatt-Tilby, senior vice-president of corporate affairs with Anglo, said in an e-mail that the possible inclusion of Anglo Teck in the index is “an encouraging development.”
Teck handily beat analyst expectations for profit in the first quarter, but in its release warned the war in the Middle East could drive up its energy costs.
The mining industry is heavily reliant on diesel-powered trucks, and the Middle East is a major refiner of the fuel. The price of diesel has risen even more markedly than the price of gasoline since the Iranian war began in late February.
Teck said that while it doesn’t see any significant risk of disruption in its fuel supply, there could be “an amplified impact” on costs at its Chilean operations owing to its reliance on diesel imports. Teck in Chile operates the Quebrada Blanca (QB) mine, which is the company’s main growth engine.
After incurring billions of dollars in cost overruns during the construction of QB and difficulties during its ramp-up, the mine has performed well in recent quarters. Copper production at QB was above expectations in the first quarter.