Teck's zinc and lead smelting and refining complex, left, in Trail, B.C., in November, 2012.DARRYL DYCK/The Canadian Press
The critical metals strategy of Teck Resources Ltd. TECK-B-T has taken a step backward – a big one. The downgrade is the result of the company’s plan to join forces with Anglo American PLC NGLOY, whose product portfolio includes copper but also heaps of distinctly uncritical products.
Two years ago, Teck, under its then-new chief executive officer, Jonathan Price, a Briton who spent much of his career at Australian mining giant BHP, was touting Teck’s critical metals trajectory. The company, having ditched its oil sands business, was about to wave goodbye to its vast British Columbia coal division, which made (somewhat) politically correct metallurgical coal (used to make steel, not electricity).
Glencore of Switzerland, one of the last mining groups on the planet that still believes in the value of the grubbiest of fuels, bought Teck’s coal for US$6.9-billion.
The sale was not universally endorsed by Teck insiders and investors, if only because the coal business produced gorgeous amounts of cash flow for the company at a time when it was spending fortunes on the overbudget expansion of its Quebrada Blanca copper mine high in the Chilean Andes.
Coal was fairly easy money: The long-life asset produced almost two-thirds of Teck’s revenue and three-quarters of its profit, which could be used to fund a slower, but perhaps more secure, critical metals rollout. Coal was also Teck’s biggest Canadian asset by far, allowing the company to wave the Maple Leaf even if its growth ambitions lay in Chile.
Analysis: Teck Resources justified its takeover to shareholders – but not to Canadians
Still, Teck pushed ahead with the transformation. Coal had to go, and the company would focus on copper, which is used in everything from electric vehicles and wind turbines to transmission lines and solar panels. Mr. Price wanted to become Mr. Green. “Separating our base metals from our coal would support our desire to become a true Canadian critical minerals champion,” he said in an interview with The Globe and Mail in 2023.
And the shares would be revalued upward, reflecting investors’ appetite for companies that were not making millions or billions by trashing the planet. It seemed like a winning strategy, and Teck shares climbed to $70 in 2024, from $40 in 2022. Mr. Price was vindicated, and Canadian politicians and investors were happy that a homegrown critical metals powerhouse was in the making. The coal sale to Glencore was approved under the Investment Canada Act with little fuss.
While the strategy looked good in the press releases, it wasn’t working so well on the ground.
The main vehicle to make Teck a copper giant, Chile’s enormous Quebrada Blanca open-pit mine, ran into severe engineering, delay and cost-overrun problems. The original price of its expansion, known as QB2, was put at US$5.2-billion; the final cost will be as much as US$8.8-billion. QB2’s first output came in March, 2023, almost two years later than planned, partly because of the COVID-19 pandemic.
Today, the tailings pond – the enormous basin that stores the waste material from the mining process – is struggling with technical problems that will further delay the mine reaching full output. The seemingly endless stream of disappointing news about QB2, including production shortfalls, sent the shares tumbling in the last two years, angering investors.
Anglo-Teck deal will be first for Ottawa’s ‘exceptional circumstances’ test for approval
Anglo to the rescue? This week, the London company, which has South African roots and a South African CEO, Duncan Wanblad, announced an all-share, no-premium “merger of equals” with Teck – though it looks more like a takeover. Anglo’s shareholders will own 62.4 per cent of the company; Teck’s will own 37.6 per cent. Mr. Wanblad will become CEO of Anglo Teck, as the new company will be called. The head office will be in Vancouver.
To be sure, copper, and fixing QB2 so it can produce the metal profitably, is driving the merger. Anglo owns 44 per cent of the Collahuasi mine, about 15 kilometres from QB2; putting the two mines together would turn Anglo Teck into the world’s fifth-biggest copper producer.
But Anglo is more than just copper – far more. While copper is its top product, it is also a big name in iron ore, an uncritical metal whose production comes with a rather nasty carbon footprint. In 2024, Anglo’s iron ore income (measured by earnings before interest, taxes, amortization and depreciation) was a hefty US$2.6-billion, or two-thirds of its copper income of US$3.8-billion.
There’s more. Anglo is also a big producer of metallurgical coal and diamonds, through De Beers, one of the world’s top diamond producers. When its way-over-budget Woodsmith polyhalite mine in England finally opens, Anglo will be a key producer of crop nutrients – fertilizer. Anglo wants to sell both the coal division and De Beers, but it has been unable to find buyers and may be stuck with them for some time.
The upshot is that if the merger of Anglo and Teck succeeds – a big if – Teck will lose its status as a pure Canadian critical metals company in the making. Its copper assets will find themselves sitting awkwardly among piles of iron ore, coal, diamonds and fertilizer.
How ironic that a company that billed itself as the next critical metals champion will now depend, at least somewhat, on the cash flow and profits from noncritical metals to fix its copper problems in the Andes. Maybe Teck should have kept its coal.
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.