Tech Resources Ltd. has held talks with Lundin Mining Corp and Glencore plc as the Vancouver mining company continues to weigh its options for landing its highly profitable but out-of-coal business.
Mining industry sources said Tech CEO Don Lindsay has struck deals with Toronto-based copper miner Lundin and Swiss mining and commodities trading giant Glencore over the past year or so, but talks with the two companies ultimately lead to nowhere. Hui.
Tech, Canada’s largest base metal mining company with a market value of $17.5 billion, is working with Barclays Investment Bank’s Toronto office on a potential sale or spinoff of its coal division, sources said. A spinoff as a separate, publicly traded entity appears more likely than a sale because most diversified mining companies want to eliminate coal from their portfolios, and bank financing for coal deals, he said. It’s getting harder to secure. Barclays itself has faced public scrutiny for its involvement in the coal transaction.
The sources are not being identified because they were not authorized to speak publicly.
Tech Resources’ revenue jumps on record high copper prices
The tech has in the past spoken openly about possibly spinning off, or selling its coal assets as it seeks to increase its exposure to copper, to which investors attribute the higher valuation.
Sources said an option discussed would have seen Tech and Glencore merging their “green” metals, such as copper and cobalt, and splitting the coal assets of the two companies into a separate company.
In an interview, Mr Lindsay said the board is “investigating the portfolio makeup thoroughly,” but added that it was “old news”.
When asked to comment on Tech’s discussion with Glencore and Lundin, he said, “I can’t really comment, and I find it all kind of amusing that people speculate about.”
Mining companies regularly pitch each other over deal ideas, and the tech has pursued asset sales in the past, such as the potential sale of its 80-percent stake in Peru’s Zafranal copper mine in 2019.
Glencore declined to comment. A spokesperson for Lundin said the firm does not comment on M&A speculation. Barclays also declined to comment.
Bloomberg reported earlier this week that the tech is actively exploring options for its metallurgical coal business, including a sale or spinoff. Metallurgical coal, also called coking coal, is used to make steel.
Even though metallurgical coal prices hit record highs this year, shares of Tech are trading far from their peak levels. Because of investor concerns over coal’s harmful environmental footprint, investors do not value coal companies as much as they pay to copper producers. Metals such as copper and nickel are viewed more favorably by investors because of their increasing use in clean energy, such as wind power, solar power, and as a key component in electric cars.
RBC Dominion Securities analyst Sam Crittenden wrote in a note to clients Wednesday, “The valuation of coal operations has declined in recent years due to ESG concerns, while its role in copper valuations is expanding. ” (ESG refers to environmental, social and governance issues.)
The world’s biggest mining companies – Glencore, Tech, BHP, Vale and Anglo American Plc – are plotting ways to dump their carbon-intensive assets, mostly coal, oil and iron ore, or reduce their risk. “We’re about to see a game-changing landscape,” Anglo American CEO Mark Cutifani said in an interview with The Granthshala in February. “At some point soon, there will be a restructuring of businesses and assets.”
The process is well underway and is reshaping many large mining companies as they prepare for a net-zero emissions future – something the tech was committed to in early 2020 when it took a political stand on the risk of its oil sands. Was caught in a firearm. (The tech still owns a stake in the Fort Hills oil sands operation.) There are miners everywhere. Focus on metals – copper, nickel, zinc, cobalt, aluminum and ferroalloys – which are essential materials for the electrification of entire industries such as car production. The dirtiest mining products will be sold, discontinued, discontinued or discontinued.
Rio Tinto began the process in 2018, when it sold its last coal asset in Australia to various buyers, including Glencore, for just US$4 billion. Since then, Glencore has vowed to end its coal operations to meet its net-zero pledge; It will not increase its coal reserves to offset production.
In August BHP agreed to sell its oil and gas assets to Woodside Petroleum Limited of Australia and plans to sell its thermal coal operations (thermal coal is used to generate electricity). In June, Anglo American spun off the South African Coal division, forming a company called Thungela Resources Limited with its stock market listing.
Unlike BHP, where fossil fuel operations are a relatively small part of their business, Tech Coal is center stage, the largest component of its current revenue and profit.
But with metallurgical coal prices trading at historically high levels as global economics hit back at COVID-19 on sharper steel demand, the idea of selling the business has now puzzled some analysts. Scotia Capital analyst Orest Vocodow wrote in a note that Teck needs substantial free cash flow generated by the coal business to build its QB2 copper mine in Chile, which is about 60 percent complete.
“We don’t believe the timing is prudent for a potential near-term strategic move for the coal business,” he said. “It’s a concept to potentially revisit in the 2023+ time frame when QB2 ramps up and is generating positive free cash flow.”
Credit Suisse analyst Kurt Woodworth estimated in a note that Tech’s coal business could be worth at least $11.5 billion and said the sale or spinout would give the stock a much-needed boost.
“Tech needs to do something to catalyze price, as solid execution on QB2, a major bull move in copper, and now all-time record high coal prices have not allowed the stock to rise above its 2018 high. given,” he said.
Shares of Tech closed 3.5 percent higher at $33.80 on the Toronto Stock Exchange on Wednesday.
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