Goldcorp, Inco, Falconbridge and Nexen — Canada has lost a number of oil and mining giants to mergers and acquisitions over the past two decades.
If Canada doesn’t want to lose another major mining company to a large multi-national and see its headquarters moved offshore, a proposed merger between Anglo American and Teck Resources may be as good as it gets.
The merger would leave a great Canadian mining company still largely intact, and greatly enlarged, with the new company — Anglo Teck — maintaining its headquarters in Vancouver.
It’s not just a matter of national pride that one of Canada’s oldest and largest mining companies stays in Canada — there are real economic reasons for wanting to keep the company headquartered in Vancouver.
Premier David Eby has described the merger as the “best of both worlds” — one in which the “operating mind” of a much larger company will remain in Vancouver, which bolsters its reputation as a mining industry capital.
“If Vancouver was to become a global corporate headquarters town, that would be good for Vancouver,” said Stewart Muir, CEO for Resource Works. “And this deal will make Vancouver that.
“If that happens, it will be good for junior mining, which needs a boost. It will be good for the professional services that have always benefitted in this town from a healthy mining sector.”
“It is unprecedented for a major multi-national mining company to move its global headquarters to Canada in this fashion, and this will greatly enhance Canada’s role and leadership on the world stage with respect to critical minerals,” said Teck spokesperson Dale Steeves.
It’s a bit worrisome, therefore, for federal Industry Minister Melanie Joly to be musing out loud that the deal might not be good enough for Canada, which suggests the merger could be rejected as part of an Investment Canada Act review.
“There have been conversations with the companies, and clearly we wanted to make sure that there would be a net benefit to Canada,” Joly said, according to CBC. “But I think right now that it’s not enough.”
The Globe and Mail has reported that the prime minister himself told Anglo that it would need to locate the new company’s headquarters in Canada if the deal was to get federal approval.
It’s also been reported that the Canadian government wanted Anglo to fully domicile in Canada. That would mean incorporating in Canada and having its primary stock market listing here.
Anglo American boss Duncan Wanblad has publicly ruled that out. Wanblad himself is willing to move to Vancouver, where Anglo Teck would have its headquarters, but Anglo Teck would be incorporated in the UK and have its primary stock listing on the London Stock Exchange.
Should the federal government somehow scotch this deal, that could leave Teck vulnerable to hostile takeover bids. It was just a little over two years ago that Teck fended off a takeover bid from Glencore. Other potential buyers might not be so willing to keep a Teck presence in Canada. The deal currently on the table may be as good as it gets.
From a Canadian perspective, it’s hard to see a downside to the deal, except for the loss of a major Canadian mining stock from the Toronto Stock Exchange. The merger — described as a merger of equals — would create a company with a combined market cap of US$53 billion headquartered in Vancouver.
It would make Anglo Teck the fifth-largest mining company in the world by market cap, heavily focused on copper, with six operating copper mines worldwide.
Central to the deal is the synergies of combining the companies’ copper mines in Chile: Teck’s Quebrada Blanca and Anglo’s larger Collahuasi.
The mines are close enough together that operations could be combined in a way that could save about $1 billion a year in operating costs.
“The proposed merger of equals between Anglo American and Teck Resources brings together two world-class mining firms to create one of the world’s largest critical minerals companies and a top-tier global copper producer based right here in British Columbia,” said Michael Goehring, CEO of the Mining Association of BC.
Post merger, Teck chairwoman Sheila Murray would remain on as chair of Anglo Teck, and Teck CEO Jonathan Price would become co-CEO.
Anglo American CEO Duncan Wangled would move to Vancouver, along with “a significant majority of the executive management team.” A globally significant head office in Vancouver isn’t the only benefit to BC.
One of the biggest benefits of the merger for British Columbians may be the possibility of B.C. developing copper refining capacity.
Currently, copper concentrate produced in B.C. is shipped offshore for refining. The only copper refineries in Canada are in Eastern Canada.
The companies say they will explore “opportunities to add copper processing capacity at Trail and support the establishment of new critical minerals processing facilities in Canada.”
“As a large B.C.-based company with a bigger balance sheet, the Anglo Teck group will be able to invest in Teck’s existing B.C. development projects, including Galore Creek and Shaft Creek in the Northwest,” Goehring said.
The new company will be incorporated in London and will have its primary listing on the London Stock Exchange. But the headquarters would be Vancouver, with corporate offices maintained in London and Johannesburg.
The new, larger company would have an “enhanced global capital markets footprint,” with listings on the London, Toronto, New York and Johannesburg stock exchanges.
Anglo American is a diversified mining company with copper, iron, steelmaking coal, nickel, diamond, and manganese mines around the world. It was founded in Johannesburg in 1917, but later relocated its headquarters to London.
Teck has copper mines in Chile and B.C., a zinc mine in Alaska, and a lead-zinc smelter in Trail, B.C.
In a news release, the two companies said Anglo Teck would invest US$4.5 billion over five years in Canada, including on Teck’s Highland Valley copper mine expansion, which was just recently approved by the provincial government.
The company would also invest US$300 million in exploration and technology over five years.
The companies say they also plan on “improving critical minerals process capacity at Trail,” including significantly increasing the processing of germanium, and advancing “potential major new copper mines in northwestern British Columbia.”
Teck has two development projects in northwestern B.C. — Galore Creek, which it co-owns with Newmont, and an earlier stage copper-gold-molybdenum project, Shaft Creek.
The Tahltan Nation has business agreements with Teck on the Galore Creek mine expansion. The nation’s business development arm is welcoming the news of the merger.
“Their strategic goal to create a top-five global copper producer through the merging of two leading international mining companies, with its headquarters in Vancouver, represents a significant and exciting development for the mining industry,” said Todd den Engelsen, CEO of the Tahltan Nation Development Corporation.
PC: THE CANADIAN PRESS/Darryl Dyck
