Teck's QB2 open pit mine in Chile.Marcos Zegers/The Globe and Mail
Teck Resources Ltd. TECK-B-T sought Wednesday to assuage concerns that it might not be able to reach a joint-venture agreement to combine two giant Chilean copper operations, a key rationale for Anglo American PLC’s NGLOY proposed acquisition of the company.
Vancouver-based Teck late last month announced it had reached a friendly arrangement with London-based Anglo to be acquired in an all-stock, no-premium deal worth about $20-billion.
Both parties have said that combining Teck’s Quebrada Blanca (QB) copper mine with Anglo’s Collahuasi operation could add US$1.4-billion a year in profit to the new company, to be known as Anglo Teck.
But creating a joint venture to operate both mines could be tricky as multiple other companies are involved, other than Teck and Anglo, and all would need to reach agreement on a new ownership structure.
Teck owns 60 per cent of QB, with Japan’s Sumitomo Metal Mining Co. Ltd. holding 30 per cent, and Chile’s National Copper Corp. owning 10 per cent.
Meanwhile, Anglo owns 44 per cent of Collahuasi, with Switzerland’s Glencore PLC owning 44 per cent, while a holding company owned by Japan’s Mitsui & Co. Ltd. holds the remaining 12 per cent.
In a conference call with analysts on Wednesday after the release of the company’s third-quarter earnings, Teck chief executive Jonathan Price said he is confident that an agreement can be reached with all parties involved, but he also conceded that it isn’t a fait accompli.
“There’s no way of forcing anybody into a joint venture,” he said. “It will require the agreement of all parties.”
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However, some Teck investors are concerned because they are being asked to vote on the proposed Anglo acquisition on Dec. 9, well before the joint-venture details will have been worked out.
Mr. Price said Wednesday that much of the work around commercial agreements and the structure of the joint venture “remains ahead of us.”
Glencore and the other owners of Collahuasi would likely be able to benefit from processing ore from that mine in a newly built processing plant that Teck constructed for QB.
“We think this will be of significant benefit to the owners of QB and Collahuasi, and we expect all parties to be motivated to work together to generate this value for their shareholders,” Mr. Price added.
However, with each partner vying to obtain the maximum percentage possible in the joint venture, the exact ownership structure is yet to be determined. Whether Anglo Teck will ultimately end up with a stake that its shareholders deem fair is unknown.
At least two-thirds of votes cast by Teck shareholders at the meeting in December must be in favour for the Anglo deal to close.
Jefferies analyst Christopher LaFemina said in a note to clients Wednesday that he expects Teck shareholders will vote in favour of the deal, as long as there are no competing bids for either Teck or Anglo.
He thinks Glencore and Rio Tinto PLC could team up to launch a bid for Anglo.
Alternatively, BHP Group Ltd. could once again attempt to acquire Anglo, Mr. LaFemina said. The Australian miner tried to buy Anglo in 2024 for US$49.1-billion, but was rebuffed.
The Anglo Teck deal must be approved by Ottawa, which is scrutinizing it to ensure it offers a net economic benefit to Canada.
China’s State Administration for Market Regulation also has the authority to block the transaction if it determines it could harm competition in China or give Anglo Teck an unfair advantage in its copper market.
“Our base case is the merger gets done, but it will be an uphill battle to the finish line,” Mr. LaFemina wrote.