The federal government is giving Switzerland’s Glencore PLC GLNCY a clear path to acquiring Canada’s largest coal miner from Teck Resources Ltd., TECK-B-T while making it clear Ottawa will block any foreign player bidding for all of Teck itself, the country’s critical minerals champion.
Although federal officials previously signed off on acquisitions of major metals producers – so long Inco Ltd., farewell Alcan Inc. – the current regime signalled a more protectionist, nationalist approach this week during a news conference at a condo construction site in Toronto.
Hard-hat-clad federal Finance Minister Chrystia Freeland was in front of the cameras, talking up what her government is doing to build more rental housing – offering low interest rate loans to developers. A reporter asked for the government’s view on the Glencore bid, made public just a few hours earlier.
Ms. Freeland moved seamlessly from housing to rhyming off a list of conditions the Swiss resource conglomerate must meet to win approval for its US$6.93-billion bid for a 77-per-cent stake in Elk Valley Resources Ltd., Teck’s B.C. steelmaking coal business. (Two Asian steelmakers will own the remainder.)
She went through the list twice.
Glencore needs to tick boxes on job guarantees – Elk Valley’s 4,000 workers make it one of southeastern British Columbia’s biggest employers. The potential owner needs to honour Indigenous rights, protect the environment and maintain a B.C. head office.
There was no sense the government has strategic concerns around a foreign company owning coal mines that churn out impressive amounts of cash – Elk Valley generated a $6-billion profit last year – and similarly hefty carbon emissions. Coal is yesterday’s mineral. Politicians aren’t fussed over who milks cash from its decline.
The government has a very different view on Teck, the country’s top copper producer. Ms. Freeland all but built a stone wall and moat around the Vancouver-based miner, which Glencore tried to acquire in April.
“Teck is an important company for Canada, because today, critical minerals and metals are important to Canada, and for the world, as never before,” said Ms. Freeland, adding she had already talked to Teck CEO Jonathan Price about a deal announced just six hours earlier.
Critical minerals “are absolutely essential for Canada’s economic future. And they have real strategic significance,” said Ms. Freeland. “Teck is a very important player in that space. It is a Canadian global champion and we are very supportive of that.”
Politicians as practised as the Finance Minister, in a government as tightly scripted as this one, use news conferences to send clear messages. They deliver answers, even if they’re not asked questions.
Ms. Freeland’s remarks on Teck and Glencore were part of a choreographed process between the government and two companies.
The Swiss miner is welcome to all the coal it wants. But foreign miners of all stripes can forget about snapping up Teck, a mid-sized fish in a global ocean full of mining sharks. The Conservative government’s 2010 decision to block Australia’s BHP Group Ltd.’s bid for Potash Corp. of Saskatchewan no longer looks like a one-time policy.
How will this dance play out?
Early Tuesday, prior to the Finance Minister’s news conference, Glencore set out the “benefits to Canada” contained in its bid for Elk Valley. Each benefit matched an item on Ms. Freeland’s list.
To win Ottawa’s approval, Glencore promised to maintain Canadian jobs and boost capital spending at Elk Valley to $2-billion over three years. The Swiss miner pledged to increase Indigenous nations participation in Elk Valley and run a “nature positive” miner.
When it comes to white-collar jobs, often eliminated in takeover, Glencore committed to an Elk Valley headquarters in Vancouver, plus regional offices in Sparwood, B.C., and Calgary. To sweeten the pot, it will kick in $15-million for a proposed renal/oncology clinic at a hospital in Cranbrook, B.C.
Ottawa’s review of the Elk Valley acquisition will play out over several months – Teck predicts the Elk Valley sale will close in the third quarter of next year. As long as Glencore can pass this test – and it has already provided the correct answers – it can acquire control of coal mines Teck purchased in 2008 for $14-billion.
The final act in this corporate drama will play out over the next two years. If Glencore wins Elk Valley, it plans to spin out all of its steelmaking and thermal coal businesses worldwide. This cash-spinning miner would likely list on the Toronto and New York stock exchanges and find a faithful following, alongside oil sands stocks, among investors who value dividends over carbon emissions.