Melanie Joly rises during Question Period in the House of Commons.Spencer Colby/The Canadian Press
Mélanie Joly’s job description includes creating and preserving Canadian champions in every sector, including mining.
Teck Resources Ltd. just made the Industry Minister’s role far more interesting by revealing on Monday that the country’s largest critical mineral miner had a two-year dalliance with a division of Vale SA before agreeing to marry Anglo American PLC this fall.
The potential combination of Vancouver-based Teck and Vale Base Metals – the Brazilian conglomerate’s Toronto-based division, with nickel mines in Sudbury and Voisey’s Bay, N.L. – has more Canadian content than a maple cruller.
The scope of the Vale relationship, disclosed in a Teck circular published ahead of a vote on the Anglo merger, shows there is more than one way to build a global mining giant based in B.C.
In coming months, Ms. Joly must decide whether to approve or block the merger of Teck and Anglo, which is headquartered in London, if shareholders in the two companies approve their union at meetings scheduled for Dec. 9. The transaction is expected to receive the needed stamps of approval.
It is promised to be a tough high-stakes decision for the minister, as the federal government has made nurturing a homegrown producer of copper and other future-facing metals a central part of its industrial policy.
In 2023, a trio of federal ministers waved off an attempt to take over Teck by Switzerland’s Glencore PLC. (Glencore subsequently bought Teck’s coal business.) Last year, Ms. Joly’s predecessor said the government would only approve the acquisition of large critical-mineral miners under “the most exceptional circumstances.”
Teck and Anglo are trying to square the circle on those “exceptional circumstances” by promising to headquarter the combined company in Vancouver, with senior executives living in the city, while remaining domiciled in London.
Critics can point to similar promises when domestic champions Inco, Falconbridge and Alcan were sold to foreign buyers. Their local offices were subsequently stripped of decision-making powers.
In 2010, based in part on the hollowing out of corporate Canada that played out in the last round of mining M&A activity, Stephen Harper’s Conservatives halted Melbourne-based BHP Group Ltd.’s US$40-billion bid for Potash Corp. of Saskatchewan Inc.
Until Monday, Ms. Joly faced the unattractive option of using her veto power to block a massive public market transaction. In the absence of a deal, Teck is a wallflower, a mid-tier miner in an industry consolidating around its largest players.
For Ms. Joly, pulling Teck away from Anglo and potentially into a union with Vale Base Metals checks a whole lot of boxes. It would bring home mines that Vale acquired when it bought Inco for $19.4-billion almost 20 years ago.
Over the past few years, Rio de Janeiro-based Vale has been talking about raising cash by spinning out its critical-mineral mining division. It moved the unit’s head office to Toronto ahead of a potential listing on the Toronto Stock Exchange.
In 2024, while talks with Teck were playing out, Saudi Arabia’s Public Investment Fund and state-controlled Saudi miner Ma’aden pegged the value of Vale Base Metals by paying US$2.5-billion for a 10-per-cent stake in the division. That meant the company was worth US$25-billion.
At that time, Teck’s market capitalization was US$24.5-billion, making this a true merger of equals.
Based on the two miners’ structures, Vale would emerge as a minority shareholder in the combined miner. The combined company would logically be headquartered in Canada and listed on the TSX.
In contrast, Anglo is the far larger partner in the proposed union. Its shareholders would own 62.4 per cent of the combined company, while Teck’s would own 37.6 per cent.
In its takeover circular, Teck disclosed talks with Vale broke down over “valuation and governance considerations.” Those issues would still need to be overcome if the Anglo deal breaks down. And Teck would need to win the Brazilian government’s approval of the sale of Vale Base Metals, which is no simple feat.
Teck Resources' Highland Valley Copper Mine near Logan Lake, B.C.DARRYL DYCK/The Canadian Press
Is Vale still interested in Teck?
At a round table with mining analysts six weeks ago, Vale chief financial officer Marcelo Bacci said while the company was not actively searching for takeovers, “Vale remained open to opportunities especially in copper or strategic iron ore assets,” according to a report from RBC Capital Markets.
That sounds like a CFO who is still open to a deal with copper-rich Teck.
Ms. Joly may decide Anglo and Teck’s promises to maintain a Vancouver head office and spend at least $4.5-billion on expanding Canadian operations over the next five years are the “exceptional circumstances” the government requires. She may sign off on a merger.
If the minister decides to object to the marriage, she now knows Teck won’t be left stranded at the altar. Vale Base Metals is an attractive second suitor, waiting in the wings.