Proceeds will be used to reduce debt, fund copper growth and return cash to shareholders.
Vancouver, British Columbia – Teck Resources Limited (TSX: TECK.A and TECK.B; NYSE: TECK) (“Teck”) today announced that it has received all necessary regulatory approvals for the sale of its remaining 77% interest in its steelmaking coal business, Elk Valley Resources (“EVR”), to Glencore plc (“Glencore”).
The transaction is expected to close on July 11. Teck expects to raise total cash proceeds of US$6.9 billion (CAD$9.5 billion)1 from the sale of its 77% interest in EVR, excluding closing adjustments.
“We are pleased to achieve the full separation of our metals and steelmaking coal businesses and lead Teck into its next phase of growth and responsible value creation,” said Sheila Murray, chairman of the board of directors. “We are confident that our management team has the right strategy in place to maximize long-term value for our shareholders and all stakeholders.”
“This transaction marks the beginning of a new era for Teck, a company focused on delivering metals critical to global development and energy transition,” said Jonathan Price, president and CEO. “Moving forward as a pure-play energy transition metals company, we are building a core portfolio of strong, cash-generating assets through the development of near-term copper growth projects. The completion of this transaction provides significant funding for our projects and puts Teck on a path to increase its copper production by an additional 30% as early as 2028.”
“This transaction allows us to reduce debt, preserve significant cash to fund near-term metals growth and maintain a strong balance sheet, while returning significant cash to shareholders,” Price said.
Use of transaction proceeds
Subject to the closing of the transaction and in accordance with Teck's capital allocation framework, Teck intends to allocate the proceeds from the sale of its steelmaking coal business as follows:
- Cash returns to shareholders
- The repurchase of up to US$2 billion (CAD2.75 billion) of Class B subordinate voting shares.
- Teck's board of directors will distribute approximately US$182 million (CAD$250 million) through the declaration of a qualified dividend of C$0.50 on both its Class A common shares and Class B subordinated shares. The additional dividend is expected to be paid on September 27, 2024 to shareholders of record as of the close of business on September 13, 2024. This one-time additional dividend will be paid in addition to the company's regular base quarterly dividend of $0.125 per share, bringing the total amount of qualified dividends to be paid to $0.625 per share.
- The total cash return to shareholders from the sale of 100% of EVR was announced to be US$2.6 billion (CAD$3.5 billion).
- Debt reduction
- Implement a debt reduction program of up to US$2 billion (C$2.75 billion), including a cash tender offer to purchase US$1.25 billion aggregate of Teck's outstanding public notes, which was announced separately today.
- Ample funding and growing value of copper
- The remaining proceeds, net of taxes and transaction expenses, will be retained to fund near-term copper growth.Teck continues to advance its near-term copper projects, including the Highland Valley Copper Mine life extension, the Zafranal Project, the San Nicolas Project and the QB Debottleneck, with initial permitting decisions expected in 2025.Teck's current estimated capital costs for these projects are US$3.3 billion – US$3.6 billion (C$4.5 billion – C$4.9 billion).
- Taxes and transaction costs
- It is estimated that taxes and transaction costs will cost US$750 million (CAD1 billion).
Value Creation: Realizing Growth for Copper
With the completion of the EVR sale, Teck is well positioned to solidify its position as an industry-leading energy transition metals producer and maximize the value of its unmatched copper growth portfolio.
Teck operates a premium portfolio of long-life, high-quality producing assets in stable, well-understood jurisdictions across the Americas. Upon ramp-up of QB in 2024, Teck expects to double its copper production to approximately 600,000 tonnes per annum.
In parallel, Teck is employing a rigorous investment framework to execute on its near-term copper pipeline, including QB Debottlenecking, Highland Valley Copper Mine Life Extension, the Zafranal Project and the San Nicolas Project. These are relatively low-complexity projects, have competitive capital intensity, are located in established mining jurisdictions and are on track to be approved as early as 2025. Longer-term, Teck is progressing a series of significant brownfield and greenfield development options, including its Galore Creek Project in British Columbia and the expansion of its Trail operations to establish an electric vehicle battery recycling facility.
This portfolio of projects offers shareholders continued value creation opportunities with significant long-term growth potential, enabled by a strong balance sheet and disciplined capital allocation.
Share buyback details
The share repurchases are expected to be completed pursuant to a regular issuer purchase agreement (“NCIB”) and are subject to market conditions and receipt of regulatory approvals in connection with the renewal of the NCIB in November 2024. Any share repurchases after November 21, 2024 will be subject to regulatory approval of the renewed NCIB. The Company will determine the timing of purchases and may repurchase fewer or greater numbers of shares depending on market conditions, the requirements of the issuer purchase program and applicable securities laws.
Advisor
Barclays Capital Canada Inc., Ardea Partners LP, TD Securities Inc. and CIBC World Markets Inc. acted as financial advisors to Teck. Stikeman Elliott LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP acted as legal advisors, and Felesky Flynn LLP acted as legal and tax advisor to Teck.
BMO Capital Markets, Goldman Sachs & Co. LLC and Origin Merchant Partners acted as financial advisors to the special committee, and Blake, Cassels & Graydon LLP and Sullivan & Cromwell LLP acted as legal advisors to the special committee.
Forward-Looking Statements
This news release contains forward-looking information and forward-looking statements (collectively, forward-looking statements) as defined under applicable securities laws. These statements relate to future events or the Company's future performance. All statements other than statements of historical fact are forward-looking statements. The use of words such as “continue,” “estimate,” “expect,” “may,” “will,” “potential” and similar words are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. These statements speak only as of the date of this news release.
These forward-looking statements include, but are not limited to, statements regarding the expected closing of the transaction, the timing of the closing of the transaction, Teck's future strategy, including with respect to its business and assets and future and ongoing project development, the expected use of proceeds, including the timing and form of cash returns to shareholders, the expected benefits of the transaction, the Company's ability to satisfy the closing conditions, and other statements that are not historical facts.
Although the Company believes that the forward-looking statements in this press release are based on current, reasonable and complete information and assumptions, such statements, by their nature, are subject to a number of factors that could cause actual results to differ materially from management's expectations and plans expressed in the forward-looking statements. These factors include, but are not limited to, the following factors, many of which are beyond the Company's control and the effects of which are difficult to predict: the possibility that the transaction will not be completed as planned, or at all, due to the occurrence of events, changes or other circumstances that may give rise to the right of one or both of the parties to terminate the transaction; the possibility that the expected benefits of the transaction will not be realized within the expected time period, or at all, as a result of changes in general economic and market conditions, including credit, market, currency, operational, commodity, liquidity and financing risks generally and risks specific to the transaction; laws and regulations and their enforcement; and the possibility that Teck's business will not perform as expected or in a manner consistent with its historical performance. reputational risks and the reaction of Teck's customers, suppliers and employees to the transaction, the possibility that the transaction may be more costly than expected as a result of unanticipated factors or events, a material deterioration in economic and industry conditions, general competitive, economic, political and market conditions and other risks inherent to the Company's business and/or factors beyond Teck's control that could have a material adverse effect on Teck or alter its ability to complete the transaction or its currently expected use of the transaction proceeds.
Forward-looking statements involve inherent risks and uncertainties that are beyond our ability to predict or control. Further information about these forward-looking statements and the risks, assumptions and uncertainties associated with our business is contained in our most recent Annual Information Form (with cover page on Form 40-F) filed under our profile on SEDAR+ (www.sedarplus.ca) and EDGAR (www.sec.gov), as well as subsequent filings under our profile. We undertake no obligation to update any forward-looking statements, except as required by securities laws.
About Tech
Teck is a leading Canadian resources company focused on responsibly supplying metals essential to economic development and the energy transition. Teck has a portfolio of world-class copper and zinc businesses in North and South America and an industry-leading copper growth pipeline. The company is focused on creating value by driving responsible growth and ensuring resilience built on stakeholder trust. Headquartered in Vancouver, Canada, Teck's shares are listed on the Toronto Stock Exchange under the symbols TECK.A and TECK.B and on the New York Stock Exchange under the symbol TECK. For more information about Teck, please visit www.teck.com or visit www.teck.com. translator.
Investor Contact:
Fraser Phillips
Senior Vice President, Investor Relations and Strategic Analysis
604.699.4621
fraser.phillips@teck.com
Media Contact:
Dale Steves
Director of Stakeholder Relations
236.987.7405
dale.steeves@teck.com
24-19-TR
