Teck Resources Limited announced today the reorganization of its business to separate Teck into two independent, publicly-listed companies: Teck Metals Corp. (Teck Metals) and Elk Valley Resources Ltd. (EVR).

The separation will create two world-class resource companies and provide investors with choice for allocating investment between two businesses with different commodity fundamentals and value propositions, the company stated.

“Teck Metals will be growth-oriented, with premier, low-cost base metals production, a top-tier copper development portfolio and a disciplined capital returns policy. EVR will be a high-margin Canadian steelmaking coal producer, focused on long-term cash generation and providing cash returns to shareholders, with significant equity value accretion potential. Both companies will remain committed to strong environmental and social performance,” a company news release outlined.

“This transformative transaction creates two strong, sustainable, world-class mining companies committed to responsibly providing essential resources the world needs,” said Teck CEO Jonathan Price.

“Both Teck Metals and EVR have high-quality operating assets and strong financial foundations, with talented and dedicated employees, committed to ensuring safe and responsible operations. The transaction simplifies the portfolio of each company, allowing for strategic and financial focus and the ability to pursue tailored capital allocation strategies. 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.”

“This transaction is the culmination of a comprehensive review by our board to determine the best path to realize the full potential of the two businesses, while at the same time ensuring ongoing responsible management and operation for the long term,” added Sheila Murray, Teck’s Board Chair.

“We are confident that pursuing this plan will position both businesses for even greater success, allow shareholders to optimize their exposure to the different underlying commodities, and support a sustainable future for the benefit of employees, local communities, and Indigenous peoples.”

The separation is structured as a spin-off of Teck’s steelmaking coal business by way of a distribution of EVR common shares to Teck shareholders, the company release explained.

“Teck Metals will retain a substantial interest in steelmaking coal cash flows through a transition period in the form of an 87.5% interest in a gross revenue royalty (the “Royalty”) and preferred shares of EVR (collectively, the “Transition Capital Structure”).

“Under the Transition Capital Structure, Teck Metals will receive quarterly payments consisting of royalty payments and preferred share redemption amounts that will in aggregate equal 90% of EVR free cash flow.

‘Teck shareholders of record as of the applicable distribution record date will receive common shares of EVR in proportion to their Teck shareholdings at an exchange ratio of 0.1 common share of EVR for each Teck share (or approximately 51.9 million total EVR common shares) and approximately $0.39 cash per share for an aggregate of $200 million in cash,” the company said.

Shareholders will be able to elect to maximize the amount of cash or common shares of EVR they receive, subject to proration, through a Dutch auction election process. Details of the election will be set out in the management proxy circular to be provided to Teck shareholders.

As part of the separation, Teck will change its name to Teck Metals Corp. and continue to be listed on the Toronto and New York stock exchanges (“TSX” and “NYSE”). EVR has applied to have its common shares listed on the TSX.

Learn more.

Lead image from Teck’s report to shareholders

e-KNOW

Article Share