Canadian diversified miner Teck Resources announced on Tuesday it would spin off its steelmaking coal business into a new company, called Elk Valley Resources (EVR), to focus on energy transition metals.
The remaining business will take a new name, Teck Metals, and retain steelmaking coal cash flows for the transition period.
The deal will be structured as EVR’s spin-off. Teck shareholders will receive 0.1 common shares in EVR and about USD 0.39 in cash for each Teck share they own, or approximately 51.9 million total EVR common shares and USD 200 million in cash. Shareholders will be able to choose to maximize the amount of cash or EVR shares they receive, subject to proration, via a Dutch auction.
Teck also agreed with its partners and major customers in the steelmaking coal business, Japan’s Nippon Steel Corporation (NSC) and South Korea’s POSCO, to exchange their minority interests in the Elkview and Greenhills operations for stakes in EVR.
Why it matters
“This transformative transaction creates two strong, sustainable, world-class mining companies committed to responsibly providing essential resources the world needs,” Teck CEO Jonathan Price said.
The transaction simplifies the portfolio of each company, allowing for more accurate allocation of capital, he said.
“It provides investors with choice in response to the evolving investment landscape, and establishes a pathway to full financial separation of the two companies over time,” Price explained.
Nippon Steel President Eiji Hashimoto said the company was glad to participate in EVR.
“High-quality steelmaking coal is essential in pursuing our carbon neutral strategy, where NSC aims to achieve both stable and efficient steel production and carbon neutrality,” he noted.