Teck Resources is set to separate its metals and coal operations into two independent publicly-listed companies, Teck Metals, and Elk Valley Resources (EVR), as part of its business restructuring process.
The separation will be carried out as a spin-off of EVR into an individual steelmaking coal business by distributing the EVR common shares among shareholders.
According to the Canadian mining company, the separation will allow investors to choose between two businesses with different commodity fundamentals and value propositions.
EVR will operate as an individual steelmaking coal producer, with an implied enterprise value of around $11.5bn.
Teck Resources will change its name to Teck Metals and will focus on the premier, low-cost base metals production, with a top-tier copper development portfolio.
Teck CEO Jonathan Price said: “This transformative transaction creates two strong, sustainable, world-class mining companies committed to responsibly providing essential resources the world needs.
“Both Teck Metals and EVR have high-quality operating assets and strong financial foundations, with talented and dedicated employees, committed to ensuring safe and responsible operations.
“It provides investors with choice in response to the evolving investment landscape, and establishes a pathway to the full financial separation of the two companies over time.”
Teck Metals will retain a substantial interest in the cash flows of EVR, holding an 87.5% interest in a gross revenue royalty and preferred shares of EVR common stock.
It will receive quarterly payments that include Royalty payments and preferred share redemption amounts totalling around 90% of EVR free cash flow.
In addition, Teck has signed an agreement with its partners Nippon Steel Corporation (NSC) and POSCO, to exchange their stakes in the Elkview and Greenhills operations for EVR shares.
NSC will exchange its 2.5% interest in Elkview and pay $1.025bn in cash to obtain a 10% stake in EVR and an interest in the Transition Capital Structure.
POSCO will exchange its 2.5% stake in Elkview, and 20% in Greenhills JV, to obtain a 2.5% stake in each of the EVR shares and the Transition Capital Structure.
Teck board chair Sheila Murray said: “This transaction is the culmination of a comprehensive review by our Board to determine the best path to realize the full potential of the two businesses, while at the same time ensuring ongoing responsible management and operation for the long term.
“We are confident that pursuing this plan will position both businesses for even greater success, allow shareholders to optimise their exposure to the different underlying commodities, and support a sustainable future for the benefit of employees, local communities, and Indigenous peoples.”
