The World’s No. 2 Met Coal Exporter is Spinning Off Its Coal Mines. Here’s Why.
02/23/2023 - Canadian miner Teck Resources Ltd. is splitting off its metallurgical coal business into a separate public company that will be owned in part by two of its biggest steelmaking customers, the company has announced.
Called Elk Valley Resources, the new company will operate Teck’s Elk Valley mines in British Columbia, with Nippon Steel and POSCO holding equity stakes in the business. Teck is the world’s No. 2 exporter of hard coking coal.
The remainder of Teck Resources will be reorganized as Teck Metals, with a focus on copper and zinc.
“This transformative transaction creates two strong, sustainable, world-class mining companies committed to responsibly providing essential resources the world needs,” said Teck chief executive Jonathan Price.
“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.”
As part of the plan, Teck met coal customers and partners Nippon Steel Corp. and POSCO will exchange minority ownership interests in certain Teck mines for equity positions in Elk Valley Resources. POSCO will wind up with 2.5% of the common shares, and Nippon Steel, which will make a CA$1.025 billion cash investment in Elk Valley, will own 10% of the common shares.
Nippon additionally plans to sign a long-term supply agreement with Elk Valley once the spinoff is complete. The steelmaker said access to high-quality coking coal is necessary for its decarbonization efforts.
“To reduce CO2 emissions while securing stable and efficient iron production, the use of high-quality steelmaking coal is essential, because it is required to make high-strength cokes, which play important roles such as reducing CO2 emissions by improving reduction efficiency, securing enough space for hydrogen gas to penetrate in blast furnaces, and generating enough heat to melt and take iron out of blast furnaces in the hydrogen reduction process,” it said.
“In order to address a concern that steelmaking coal production capacity may shrink in the future, since capital investment for fossil fuels, including coal, has been decreasing in a trend of pursuing carbon neutrality, Nippon Steel has decided to increase its investment in high-quality steelmaking coal, which is essential in pursuing its own carbon neutral strategy,” it added.
