Teck Resources Limited Spinoff Notes

April 26, 2023 Update

Teck Resources withdrew its coal spin-off plan:


February 28, 2023 Update

Teck Resources Limited (TECK) announced this week that it will spin into two independent companies, Teck Metals, and Elk Valley Resources, which will trade under the ticker EVR. With the expectation of a close in Q2 of 2023.

The separation of the two companies is expected to create world-class resource companies, each with different commodity fundamentals, and unique value propositions. Teck Metals will be focused on growth-oriented, low-cost base metals production, while Elk Valley Resources will be a high-margin steelmaking coal producer focused on long-term cash generation and providing cash returns to shareholders, with significant equity value accretion potential.

Teck Metals will retain steelmaking coal cash flows through a transition period in the form of an 87.5% interest in a gross revenue royalty and preferred shares of EVR under the transition. Within the transaction, Nippon Steel Corporation will also exchange its current 2.5% interest in Elkview Operations and $1.025 billion in cash payable to Teck Metals, for 10% ownership in EVR.

The strategy behind this transaction is that TECK trades at a discount to copper peers (4.5x EBITDA vs. 7.5x). By getting rid of its coal exposure, TECK is hoping to attract a broader investor base.

Here is the slide deck for the transaction. It appears like a clever “ESG Greenwashing” exercise as Teck Metals can say it doesn’t “own” any coal assets but still gets to benefit from the cash flow that is generated by coal assets.