Ottawa approves Glencore takeover of Teck’s coal business with stringent conditions

The federal government has approved Glencore PLC’s GLNCY US$6.9-billion acquisition of the metallurgical coal business of Teck Resources Ltd. TECK-B-T with stringent and legally binding conditions.

Federal Industry Minister François-Philippe Champagne had been reviewing the deal on both a net-benefit and national-security basis over the past eight months.

Ottawa over the past few years has stepped in to prevent deals involving the foreign acquisition of Canadian mining companies.

In approving the deal Thursday night, Mr. Champagne also released a new stricter policy directive around net-benefit reviews of foreign takeovers of miners with significant critical-minerals operations.

“Henceforth, such transactions will only be found of net benefit in the most exceptional of circumstances,” he said. “This high bar is reflective of the strategic importance of Canada’s critical minerals sector and how important it is that we take decisive action to protect it.”

The deal between Switzerland-based Glencore and Vancouver-based Teck was announced last fall and came after Teck entertained takeover offers from several other parties over a period of about six months. Teck agreed in November to sell 77 per cent of its coal business to Glencore. The remaining 23 per cent was sold to Japan’s Nippon Steel and South Korea’s POSCO. Those transactions were promptly approved by Innovation, Science and Economic Development Canada.

Mr. Champagne said in Thursday night’s release that he was approving the deal, but that it came with a long list of conditions that are being imposed on Glencore.

For the next 10 years, the coal business must retain a Canadian head office in Vancouver and have a majority of Canadian directors. As well, at least 66 per cent of executive and senior-management roles must be Canadian.

Glencore has also committed to maintain significant levels of employment in the coal business over the next five years.

The Swiss miner also agreed to invest an additional $350-million in mine rehabilitation and closings in Canada over five years.

Glencore will also be responsible for payment of all environmental obligations under Canadian law stemming from the acquisition through to 2050, even in the event that it subsequently sells the coal business to another party.

“Glencore’s commitment will result in generational assurance of sound environmental stewardship of the asset, regardless of its future ownership,” Mr. Champagne said in the statement.

Founded in 1913, Teck is Canada’s largest diversified mining company, a major employer in British Columbia and one of the oldest miners in the country.

Glencore originally proposed buying all of Teck early last year, including the company’s copper and zinc mines, in a US$23.1-billion transaction. But Teck repeatedly rejected Glencore’s advances.

The company’s controlling shareholder, Norman B. Keevil, said he was opposed to Glencore buying all of Teck, telling The Globe that “Canada is not for sale.” Mr. Keevil later softened his stand, saying that if Teck’s management, board and shareholders were in favour of a deal with Glencore he would not exercise his veto power.

After the Glencore transaction for Teck’s coal business was announced, Ottawa indicated that approving the deal wasn’t a sure thing.

Deputy Prime Minister Chrystia Freeland said the transaction would be closely scrutinized, with consideration for the impact on Canadian jobs, Indigenous rights and environmental concerns.

British Columbia Premier David Eby also said he had concerns about Glencore buying Teck’s coal operations because of Glencore’s past regulatory offences. Glencore in 2022 paid more than US$1-billion in fines to settle bribery and market-manipulation cases with U.S., British and Brazilian regulators.

Working in Glencore’s favour for approval was the fact that metallurgical coal isn’t classified as a critical mineral in Canada.

Another big plus for Glencore is it already had a large footprint in Canadian mining, employing roughly 9,000 people in the country. The bulk of its operations here are a result of its 2013 acquisition of fellow Swiss miner Xstrata PLC, which bought former Canadian mining giant Falconbridge Ltd. in the mid-2000s.

After the deal closes, Teck will sharpen its focus to copper and zinc. Last year, the company put a massive copper mine, called QB2, into production in Chile.