Teck cancels split, but prized copper assets will be in high demand

Teck cancels split, but prized copper assets will be in high demand

For months, analysts, investors and rivals have criticized Vancouver-based Teck Resources Ltd.’s proposal to split off its coal business from its copper and zinc business as being too complicated. Some said it was doomed from the start.

On April 26, Teck’s board and management essentially conceded that criticism was at least partially correct, announcing that it would scrap the proposed separation the same day that the final shareholder vote on the transaction was to be revealed.

The outcome wasn’t entirely unexpected: The Swiss mining and commodities trader Glencore PLC launched a campaign weeks ago to derail the separation and instead merge Teck’s assets into its fold.

At its annual meeting on Wednesday, Teck’s chief executive Jonathan Price conceded that his proposal was unlikely to have received the support of two-thirds of Teck’s shareholders, the threshold needed to move forward.

Glencore offer ‘non-starter’

Price reiterated that Glencore’s offer was a “non-starter” and did not alter his long-held stance that separating coal from copper remains the best strategy, given that demand for the latter is expected to double while that for the former levels off. But he offered little hint of how Teck would achieve that separation.

“Our plan going forward is to pursue a simpler and more direct separation, which is the best path to unlock the full value of Teck for our shareholders,” Price said in an April 26 press release.

A spokesman for Glencore declined to comment.

Teck did not reveal what a “more direct path” would mean, including whether it would try to sell its coal or its copper businesses to the highest bidder. Price declined to say if Teck has a specific timeline for evaluating “bids” for its assets.

If scrapping the separation plan counts as a misstep by Teck’s management, its stock price has only benefited: Since Glencore announced its merger proposal on April 3, Teck’s share price has risen more than 24 per cent to $61.61 — including 4.5 per cent on April 26.

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