TIDMGLEN
RNS Number : 3648T
Glencore PLC
14 November 2023
Glencore plc
Baar, Switzerland
14 November 2023
Acquisition of a 77% interest in Teck's steelmaking coal
business for US$6.93 bn
Glencore plc ("Glencore") announces that it has entered into a
binding agreement with Teck Resources Limited ("Teck"), for the
acquisition of a 77% effective interest in the entirety of Teck's
steelmaking coal business, Elk Valley Resources ("EVR"), for
US$6.93 bn in cash, on a cash free debt free basis, subject to a
normalised level of working capital.
Concurrently, Teck has agreed with Nippon Steel Corporation
("NSC") that its current 2.5% interest in Elkview Operations will
be rolled up to equity in EVR, and that NSC will acquire additional
equity in EVR from Teck, such that on closing NSC will hold a 20%
equity interest in EVR.
POSCO has advised Teck that it intends to exchange its current
2.5% interest in Elkview Operations and its 20% interest in the
Greenhills joint venture, for a 3% interest in EVR.
At closing, Glencore will also acquire from Teck, NSC and
POSCO's attributable share of a shareholder loan from Teck to EVR
which is repayable out of EVR's cash flows. The amount payable for
this portion of the loan is expected to be some US$250-US$300
million on closing.
The transaction is subject to mandatory regulatory approvals,
being Investment Canada Act ("ICA") and competition approvals. The
transaction is expected to close in Q3 2024.
Commenting on the transaction, Gary Nagle, CEO of Glencore,
said:
"We are pleased to have reached agreement to acquire Teck's
steelmaking coal operations in the Elk Valley. These world-class
assets and the experienced people that operate them are expected to
meaningfully complement our existing thermal and steelmaking coal
production located in Australia, Colombia and South Africa.
"Glencore has high regard for the business that has been
developed over many decades in British Columbia and looks forward
to maintaining and enhancing its operational performance,
environmental stewardship and social contribution.
"We are dedicated to working with all governing bodies and
stakeholders to ensure that the transaction is of benefit to
Canada, which includes a commitment from Glencore regarding
employment, engaging in further reclamation efforts and to engage
constructively and meaningfully with the Indigenous Nations in the
Elk Valley.
"This transaction also deepens our longstanding commitment to
Canada, supporting our position as one of the largest diversified
miners and suppliers of critical minerals in Canada, in one of the
world's leading mining jurisdictions.
We have a longstanding relationship with NSC and POSCO and we
look forward to working closely with them as our future partners in
EVR."
Overview of EVR
On close, assuming the POSCO roll-up proceeds, EVR will own 100%
interests in the entities holding the Elkview, Fording River,
Greenhills and Line Creek mines in Southeast British Columbia, and
46% of Neptune Terminals in North Vancouver.
Key historical information on EVR, as reported by Teck, is
outlined below:
- Production of steelmaking coal of 21.5 mt in 2022 and 17.3 mt
year to date to 30 September 2023
- EBITDA of C$7.4 bn in 2022 and C$3.7 bn year to date to 30 September 2023
- Profit before tax of C$6.0 bn in 2022 and C$3.1 bn year to date to 30 September 2023
- Gross assets as at 30 September 2023 of C$18.5 bn
Global population growth, increased urbanisation, and a growing
middle class should continue to drive long-term demand for steel
and the steelmaking coal required to produce it. The high-quality
steelmaking coal mined in the Elk Valley is an essential input to
steelmaking in its current form. Steel is necessary for
constructing transportation and infrastructure such as ocean-going
vessels, rail, bridges and buildings, as well as energy transition
infrastructure including wind turbines, all such products being
critical to our current and future way of life.
Benefits to Canada
Glencore has a proven history and track record of acquiring,
developing, operating and rehabilitating coal mines, for the
benefit of stakeholders, including employees, local communities,
and host governments.
Glencore's Canadian assets form a significant part of our global
business with c. 9,000 people in Canada including contractors and
have a history that dates back more than 100 years. Glencore is one
of the largest diversified miners and suppliers of critical
minerals in Canada. Our current operations span seven industrial
assets producing and recycling mainly nickel, copper, zinc and
cobalt.
Glencore has a strong track record of investment in the country
and is committed to building on EVR's continuing success as a
world-class Canadian steelmaking coal producer with a focus on
social and environmental responsibility. In this respect,
consistent with Glencore's long history of success in, and
commitment to, Canada, under the terms of the agreement with Teck,
Glencore will offer to enter into commitments with the Canadian
government under the ICA that will ensure, among other things,
that:
-- EVR will continue to operate in Canada through both a
Vancouver head office and regional offices in Calgary, Alberta, and
Sparwood, British Columbia, including completing the construction
of a new Sparwood office.
-- EVR will maintain significant employment levels in Canada
with no net reduction in the number of employees in the business in
Canada as a result of the transaction.
-- EVR will increase capital expenditures in Canada such that
they will amount to over C$2 billion (excluding deferred stripping)
over three years.
-- EVR will increase research and development activities in
Canada to at least C$150 million over three years, including on
innovation in relation to water quality treatment technologies - a
50% increase over current levels.
-- EVR will increase its contributions to Canadian sponsorship,
community and charitable programs.
-- EVR will participate as a major funding partner with up to
C$15 million for the proposed renal/oncology addition to the East
Kootenay Regional Hospital in Cranbrook.
-- EVR will have a goal to become a nature positive business by
conserving or rehabilitating at least three hectares for every one
hectare affected by its mining activities going forward.
-- EVR will develop and implement a climate transition strategy
which will include medium term scope 1 and 2 emissions reduction
targets, a long-term goal of net zero in respect of scope 1 and 2
emissions by 2050 as well as a commitment to work with partners
towards an ambition to achieve net-zero Scope 3 emissions by
2050.
-- EVR will honour the existing agreements between EVR and
Indigenous Nations and will work with local Indigenous Nations to
identify opportunities to increase participation in benefits from
the activities of EVR.
A summary of these commitments is set out in the Appendix to
this announcement.
Demerger
Glencore continues to believe that a standalone company
containing its combined coal and carbon steel materials business,
including Glencore's stake in EVR, would be well positioned as a
leading, highly cash-generative bulk commodity company, likely
attracting strong investor demand given such yield potential.
As before, Glencore therefore intends to demerge the combined
business, once Glencore has sufficiently delevered, which is
expected to occur within 24 months from close. Glencore will manage
its post-demerger balance sheet, post servicing its formulaic base
cash distribution, to a revised c.US$5 billion net debt cap, down
from the current level of c.US$10 billion, alongside our continued
commitment to minimum strong BBB/Baa ratings.
Glencore intends for the demerged company to continue to oversee
the responsible decline of its thermal coal operations in line with
Glencore's current targets and ambition to achieve net zero by
2050, with a supportive policy environment, and to adopt the
climate transition strategy for the EVR business that will be
developed and implemented pursuant to Glencore's ICA
commitments.
For further information please contact:
Investors
Martin Fewings t: +41 41 709 28 80 m: +41 79 737 56 42 martin.fewings@glencore.com
Media
Charles Watenphul t: +41 41 709 24 62 m: +41 79 904 33 20 charles.watenphul@glencore.com
www.glencore.com
This announcement contains inside information.
Glencore LEI: 2138002658CPO9NBH955
Appendix 1
Summary of Proposed ICA Commitments
Glencore will submit to the Director of Investments written
undertakings to His Majesty the King in right of Canada that are
consistent with all of the commitments set out below, each of which
shall have a term of three years commencing from closing of the
acquisition of EVR.
1. EVR will continue to be operated through an entity
incorporated under the laws of Canada or of a province or territory
thereof.
2. EVR will maintain its Canadian head office in Vancouver,
British Columbia, and will have regional offices in Calgary,
Alberta, and Sparwood, British Columbia, that will oversee and
support EVR's operations. EVR's offices will perform a wide range
of functions in Canada including finance (management reporting and
budgeting, internal controls and assurance, financial reporting and
accounting), logistics, research and innovation, technical
services, community and government affairs, legal, ESG engagement,
stakeholder relations, human resources, compliance, regulatory and
public affairs.
3. EVR will complete construction of the new office facility in
Sparwood, British Columbia.
4. At least a majority of the directors of EVR, and at least a
majority of executive and senior management level roles of EVR,
will be comprised of Canadians.
5. In the event of a public listing of a company that, directly
or indirectly, owns EVR following a demerger, during the term of
these undertakings, the company whose shares are listed will have a
listing on the Toronto Stock Exchange (TSX) and Canadians will
participate on the board of directors of any such listed
company.
6. EVR will continue to have significant employment levels in
Canada.
7. EVR will maintain the terms of its current collective
bargaining agreements and when they expire negotiate in good faith
the terms of the new agreements.
8. EVR will maintain and, where appropriate, enhance health and
other benefits provided to its employees.
9. Canadians will be given a full and fair opportunity to apply
and compete for employment opportunities that arise at EVR in
Canada; separately, opportunities will be created for Canadians to
obtain international experience in Glencore's global
operations.
10. EVR will increase capital expenditures such that they will
amount to over C$2 billion over the term of the undertakings, not
including deferred stripping.
11. EVR will undertake significant research and development
activities in Canada, totalling at least C$150 million over the
term of the undertakings, including on innovation to develop water
quality treatment technologies.
12. EVR will continue to use Canadian and Indigenous suppliers
of goods and services in a manner consistent with its past
practice.
13. EVR will spend at least C$30 million on sponsorship,
community and charitable programs in local communities over the
term of the undertakings which will include honoring EVR's existing
commitments in respect of specific projects and ongoing
participation in local community events and charities investing in
improvements to housing and daycare access.
14. EVR will participate as a major funding partner for the
proposed renal/oncology addition to the East Kootenay Regional
Hospital in Cranbrook should it proceed, with a funding commitment
of up to C$15 million.
15. EVR will continue to maintain in Canada all of its
registered Canadian IP (namely patents, trademark registrations,
and copyright registrations).
16. EVR will maintain or, where appropriate, enhance its
training and development programs.
17. EVR will maintain a Graduate program that provides at least
40 Engineer-in-Training/Professional-in-Training graduate positions
per year to people with mining and mining industry related
technical qualifications from universities in Canada.
18. EVR will maintain a co-op training program for university
students to help build a pipeline of Canadian mining professionals
in a range of disciplines which could include mining engineering,
geotechnical engineering, geology, mechanical engineering,
electrical engineering, process engineering, environmental science,
organizational development, health & safety, business and
information technology. This training program will support a cohort
of at least 220 students annually.
19. EVR will maintain its participation in relevant Canadian
industry associations.
20. EVR will spend at least C$200 million on rehabilitation and
closure activities over the term of the undertakings and will
implement Glencore's Policies and Standards in relation to
rehabilitation and closure which includes:
a. closure practices that are aligned to international good
practice including those of the ICMM;
b. progressive rehabilitation being undertaken wherever
possible;
c. having a credible closure plan in place that could be
initiated at any time;
d. external financial provisioning, as required by the relevant
regulatory authority in the jurisdiction, e.g., bonds, payments or
other, based on the rehabilitation liability for the current
disturbance footprint;
e. internal provisioning for post-closure costs that matches the
asset's specified closure objective; and
f. ensuring that consideration has been given to all options for
post operational land use.
21. EVR will have a goal to becoming a nature positive business
by conserving or rehabilitating at least three hectares for every
one hectare affected by its mining activities going forward.
22. EVR will continue to implement the Elk Valley Water Quality
Plan, including by continuing ongoing research and development
aimed at developing and implementing innovations to manage and
improve water quality in relation to its operations.
23. EVR will develop and implement a climate transition strategy
for its business that will include:
a. medium term targets in respect of Scope 1 and Scope 2
emissions at EVR's operations which will seek to achieve or enhance
the existing goals or targets set by EVR having regard to what is
practical and feasible given existing technologies;
b. a long-term goal to net zero in respect of Scope 1 and 2
emissions by 2050; and
c. a commitment to work with partners towards an ambition to
achieve net-zero Scope 3 emissions by 2050, recognising that
achievement is uncertain and we cannot ensure the outcome
alone;
24. EVR will implement Glencore's ethics and compliance
programme and will appoint a Regional Compliance Officer for its
business.
25. EVR will maintain and, where appropriate, enhance its
corporate policies regarding diversity and inclusion and health and
safety.
26. EVR will implement Glencore's Group Sustainability Framework
with the following specific goals:
a. Protecting its people and communities' health and promoting
well being;
b. Protecting its people by creating workplaces free from
fatalities and injuries;
c. Being a responsible operator who minimises and mitigates its
impacts on the environment and seeks opportunities to protect and
restore ecosystems where we operate;
d. Ensuring the safe, responsible and sustainable management of
its Tailings Storage Facilities; and
e. Being a trusted community partner and supporter of
socio-economic opportunity.
27. EVR will honour the existing agreements between Teck Coal
Limited and Indigenous Nations in a manner commensurate with its
past practice, and will work with local Indigenous Nations to
identify opportunities to increase participation in benefits from
the activities of EVR.
28. Glencore or EVR, as appropriate, will notify the Director of
Investments at least five days prior to the implementation of any
decision that would materially affect the performance of these
undertakings.
Notes for Editors
Glencore is one of the world's largest global diversified
natural resource companies and a major producer and marketer of
more than 60 commodities that advance everyday life. Through a
network of assets, customers and suppliers that spans the globe, we
produce, process, recycle, source, market and distribute the
commodities that support decarbonisation while meeting the energy
needs of today.
With around 140,000 employees and contractors and a strong
footprint in over 35 countries in both established and emerging
regions for natural resources, our marketing and industrial
activities are supported by a global network of more than 40
offices.
Glencore's customers are industrial consumers, such as those in
the automotive, steel, power generation, battery manufacturing and
oil sectors. We also provide financing, logistics and other
services to producers and consumers of commodities.
Glencore is proud to be a member of the Voluntary Principles on
Security and Human Rights and the International Council on Mining
and Metals. We are an active participant in the Extractive
Industries Transparency Initiative.
We recognise our responsibility to contribute to the global
effort to achieve the goals of the Paris Agreement by decarbonising
our own operational footprint. We believe that we should take a
holistic approach and have considered our commitment through the
lens of our global industrial emissions. Against a 2019 baseline,
we are committed to reducing our Scope 1, 2 and 3 industrial
emissions by 15% by the end of 2026, 50% by the end of 2035 and we
have an ambition to achieve net zero industrial emissions by the
end of 2050. For more detail see our 2022 Climate Report on the
publication page of our website at glencore.com/publications.
linkedin.com/company/glencore
twitter.com/glencore
instagram.com/glencoreplc
facebook.com/glencore
youtube.com/glencorevideos
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