Teck Resources' Highland Valley Copper Mine is seen near Logan Lake, B.C., in September.DARRYL DYCK/The Canadian Press
Teck Resources Ltd. TECK-B-T held talks with Vale Base Metals Ltd., the critical minerals arm of Brazil’s Vale SA, before agreeing to an acquisition by Anglo American PLC NGLOY this fall.
Vancouver-based Teck on Monday released its proxy circular ahead of an upcoming shareholder vote on the Anglo transaction and the document contains details about discussions that led up to the deal.
In the circular, there is reference to on-again, off-again talks with an unidentified company called “Party X” that started in 2023, discussing the possibility of a no premium, all-share transaction.
Three sources familiar with the talks said that Party X is Vale Base Metals.
The Globe and Mail is not identifying the sources because the individuals are not authorized to speak publicly.
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Teck declined to reveal the name of Party X publicly, but in an e-mailed statement company spokesperson Doug Brown wrote that Teck’s board evaluated a range of options designed to create long-term value for shareholders, including maintaining the status quo and potential alternative transactions.
Vale declined to comment.
Had Teck gone the route of finalizing a deal with Vale Base Metals, the regulatory approval process would likely be smoother.
The federal government must approve the transaction on a net economic benefit to Canada for it to pass.
Vale Base Metals is based in Toronto. It owns a suite of massive nickel mines in Canada, including major operations in Sudbury, and it is a big employer domestically.
Anglo, by comparison, has little presence in Canada, but it is committing to move its headquarters to Vancouver while retaining its domicile in London.
In the circular, Teck said talks with Party X began in May, 2023. That was shortly after Teck called off a shareholder vote on whether it should split the company into two divisions – its legacy coal business and its critical minerals business. Talks with Party X were subsequently put on hold while Teck conducted an auction of its coal business.
In early 2024, Teck and Party X started discussions again. That was a few months after Teck announced its intentions to sell its coal business to Glencore PLC. Around the same time as Teck was engaged with Party X, it was in discussions with Anglo.
One of the sources said that Teck considered a “vend in” of Vale Base Metals. That would have seen Teck essentially purchase Vale Base Metals in a stock-based transaction. Had that deal occurred it would have solved the lingering question of the future of Vale Base Metals. In the past, Vale SA, which is primarily an iron ore miner, has mulled either merging its base metals business with another party, or spinning it off into a separate publicly traded unit.
Teck’s big focus is on growing its copper business, and while Vale Base Metals is best known for its nickel business, it also offered several attractive copper assets which appealed to Teck, one of the sources said.
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Vale Base Metals’ copper assets include Salobo, Brazil’s biggest copper mine, Sossego, also in Brazil and Voisey’s Bay in Labrador, which contains nickel and copper.
In September, 2024, Teck’s talks with Party X fell apart because of disagreements over valuation and governance considerations.
The same source said that while discussions had not progressed far enough to determine who would be the chief executive officer of the merged entity, Teck was planning on pushing the case for one of its team members to run the merged entity. Jonathan Price is currently the chief executive officer of Teck.
On Dec. 9, Teck shareholders will meet to vote on its all-stock, no-premium transaction with Anglo. At least two-thirds of votes cast must be in favour for it to pass. While there has been pushback from some investors who feel the takeover price isn’t high enough, the odds of the deal getting the nod appear to be in Teck’s favour.
Orest Wowkodaw, an analyst with Scotia Capital, who had earlier expressed skepticism that the deal would garner the necessary votes, changed his mind late last week.
“We now believe there is stronger likelihood of Teck B shareholders supporting the transaction in the absence of an alternative higher offer,” he wrote.