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Teck to break off steelmaking coal business into two companies

Teck’s steelmaking coal operations will break off into a pair of independent companies: Elk Valley Resources and Teck Metals.

Company officials said this comes as it undergoes reorganization of its business structure.

“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,” said Teck officials. 

“EVR (Elk Valley Resouces) 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.”

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This announcement comes after Teck was fined over $16.5-million for breaking several environmental protection laws in the Elk Valley.

More: Teck fined over $16.5-million for environmental violations in the Kootenays (Feb 8, 2023)

The company said the move has the goal of giving investors a choice in allocating their money between two businesses with different commodity focuses and value sets.

“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,” said Teck CEO 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.”

Teck said it will distribute shares of Elk Valley Resouces to Teck shareholders, but Teck Minerals will keep a commanding interest in the cashflow of the steelmaking coal through the transition period.

This will come in the form of an 87.4 per cent interest in the gross revenue royalty and preferred shares of Elk Valley Resouces.

“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 per cent of EVR free cash flow,” said Teck officials.

Elk Valley Resources will have common shares listed on the Toronto Stock Exchange.

As part of this separation, Teck said it will change its official name to Teck Metals Corp.

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