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The logo for Canadian mining company Teck Resources is displayed above their booth at the PDAC annual conference in Toronto, on March 7.CHRIS HELGREN

Teck Resources Ltd. TECK-B-T chief executive Jonathan Price says Glencore PLC’s proposed takeover is a structurally flawed deal that will end up destroying value for Teck’s shareholders, and called it “a complete non-starter.”

Switzerland-based Glencore has proposed buying Vancouver-based Teck at a 20-per-cent premium to its market value. If Teck were to accept the US$23.1-billion deal, Glencore plans to subsequently separate itself into two companies, with one unit holding assets in thermal and metallurgical coal, and the other its base-metals portfolio, along with its oil assets.

“Glencore hasn’t presented a coherent plan for its proposed coal company,” said Mr. Price in an interview with The Globe and Mail.

“There’s no market for shares for a massive new thermal coal-focused company, and it would expose our shareholders to significant jurisdictional, ESG and execution risk.”

Mr. Price says Teck’s own near-term vision for his company is the far superior choice for shareholders.

Teck earlier this year said it planned to separate into two companies – Elk Valley Resources, which will hold its assets in metallurgical coal, and Teck Metals, which will hold its copper and zinc division. Its shareholders will vote on the proposal on April 26, with two-thirds approval needed for the deal to succeed.

That proposal got a lukewarm reception among investors, in part because it’s not a clean split. About 90 per cent of the cash flow from Elk Valley will go to Teck Metals over a period of about 11 years, meaning both business are linked for the foreseeable future. In addition, some investors have raised questions about Teck Metal’s ESG credentials, given it is being so heavily supported by a coal business.

This weekend, an investment group led by Pierre Lassonde, the co-founder of mining royalty company Franco-Nevada, said he hoped to take a controlling stake in Elk Valley once it is public, in part to insulate the company from being taken over by a foreign-owned miner.

Economic nationalism reached fever pitch last week when Teck’s controlling shareholder, Norman B. Keevil, said he had no intention of selling Teck to Glencore, no matter the price.

Through an investment holding structure, the Keevil family, along with Japan’s Sumitomo Metal Mining Co., own the majority of Teck’s super voting A shares, which carry 100 votes apiece. Mr. Keevil’s main objection to the deal is his contention that far too many domestic mining companies have been sold to foreign giants in the past. “Canada is not for sale,” he said.

Mr. Price said the nationalistic argument expounded by Mr. Keevil is not part of the board’s calculus, adding that the main lens in looking at the deal is whether it’s good for shareholders.

Several analysts think that Glencore will increase its offer for Teck, as early as this week. Even though Mr. Keevil has made it clear that he won’t budge, analysts say the strategy could nudge holders of Teck’s B-shares to vote down its proposed split, and indirectly signal to Teck’s board that they may be open to the approach from Glencore.

Mr. Price declined to comment on whether the company could be swayed by a higher takeover offer from Glencore.

“We can’t speculate on what Glencore may or may not do,” he said.

In an extensive investor presentation, released on Monday morning, Teck called Glencore’s proposed split a “poor copy of Teck’s strategy.” It also called the synergies of up to US$5.25-billion that Glencore says would result from a combination as “ill-defined, overstated and challenging to realize.”

Also in the presentation, Teck criticized Glencore’s governance record, saying it has been “in the news for the wrong reasons,” pointing to a US$700-million fine levelled by the U.S. Department of Justice, after the company pleaded guilty to a bribery scheme overseas.

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