Swiss commodities powerhouse Glencore has acquired, pending approval, a majority stake in Elk Valley Resources (EVR), the steelmaking coal unit of Canada’s Teck Resources, in a $9 billion deal. The sale ends the saga that began in April when Glencore made an unsolicited $23 billion bid for the whole company.
Additionally, the deal throws a spotlight on the mining industry’s efforts to navigate the changing market dynamics as the world slowly shifts from fossil fuels to renewable energy.
Glencore mines and trades polluting thermal coal used to produce electricity and smaller amounts of coking coal used to make steel. After merging Teck’s steelmaking coal business with Glencore’s existing coal assets, Glencore CEO Gary Nagle says he plans a demerger within two years post-acquisition.
Nagle has previously argued that coal is still needed to support the energy transition. Reducing Glencore’s reliance on thermal coal while expanding its coal division with coking coal, he contends, will help meet demand while positioning the company for a transition to green future-facing commodities in the least painful way possible for investors.
“There’s a potential value creation uplift for our shareholders to demerging coal, including EVR, as opposed to a less certain value creation that would be just demerging our existing coking coal business,” Nagle told reporters.
By demerging, moreover, Glencore will reposition itself as the world’s biggest miner and trader of copper, nickel, and cobalt: all essential commodities for the clean-energy transition. Copper is essential for the transmission and distribution of clean electricity while both cobalt and nickel are essential component materials for electric-vehicle batteries.
Teck, meanwhile, can focus on mining copper and zinc. “This transaction will be a catalyst to re-focus Teck as a Canadian-based critical minerals champion with an extensive portfolio of copper growth projects, unlocking the full value potential of the company,” Jonathan Price, president and CEO, said in a press release. As the transition to renewable energy and a low-emissions economy is anything but straightforward, both Glencore and Teck have found what they hope is a delicate balance between decarbonization and a shift toward critical minerals.