Teck Resources has announced it is splitting the company as part of a plan to separate the coal mining operations from the rest of the metal mining portfolio.
The split will create Elk Valley Resources, which will focus on the steel-making coal mining operations in the southeast corner of the province, while Teck Metals Corp. will be involved with low-cost base metal production and copper development, according to a press release issued Tuesday, Feb. 21.
“This transformative transaction creates two strong, sustainable, world-class mining companies committed to responsibly providing essential resources the world needs,” said Jonathan Price, CEO, Teck. “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.
“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.”
The spinoff plan also includes further terms.
Elk Valley Resources will pay quarterly royalties to Teck Metals Corp of up to $7 billion, and stopping royalty payments by the end of 2028, whichever comes first.
Upon completion of the separation, it is expected that Elk Valley Resources will have $1 billion in cash and other working capital, no debt, and $88 million in leases relating to coal operations. Additionally, Elk Valley Resources will have credit facilities in place to meet reclamation bonding requirements, as well as establishing a $50 million Environmental Stewardship Trust with escalating fixed annual contributions.
Further to the separation plan, Nippon Steel Corporation and Posco, two East Asian-based steel-making companies, will exchange minority interests in the Elkview and Greenhills mines for interests in Elk Valley Resources, which will then own 100 per cent of steelmaking coal operations.
‘A good news story’ says Sparwood mayor
Sparwood Mayor David Wilks called the announcement a “good news story,” noting it will bring surety to the Elk Valley coal mining operations.
“They [Elk Valley Resources] certainly have their challenges, whether it’s with selenium and expansion of new projects … but what I think this provides is an opportunity to focus in on just coal, rather than having to deal with nickel and copper and all of the other resources that Teck is known for worldwide.”
Wilks confirmed the administration and maintenance complex at Elkview operations will continue to move forward, as will a planned 500-person central office in Sparwood.
The four coal mines are a huge source of direct and indirect employment for Elk Valley communities, and the East Kootenay region at large.
Based on economic data from 2021, Teck estimated that approximately 4,000 people from Elkford, Fernie, Sparwood, Cranbrook and the Crowsnest Pass were directly employed by the coal mining operations. Teck also estimated that nearly 8,000 jobs were created or sustained in those same communities due to Gross Domestic Product (GDP) contributions from coal mining operations.
Sparwood, Elkford and Fernie also benefit from the Elk Valley Property Tax Sharing Agreement, which collects and shares property tax revenue from the the coal mines, which is a 25-year partnership signed through to 2032.
Wilks added that the spinoff will provide an opportunity for First Nations to have a closer working relationship with Elk Valley Resources, as opposed to a global corporate mining entity.
Fernie Mayor Nic Milligan concurred, and said he was optimistic for the future.
“Change always gives one pause but based on the announcement and particularly the commitment to the continuity of personnel and the continued commitment to strong environmental and social performance I am cautiously optimistic about the creation of Elk Valley Resources,” said Milligan. “Transformation can be unsettling but, having worked in that industry for most of my career, I have only seen subsequent organizations get stronger, more responsive, and more collaborative.
Milligan also said the investments from Nippon Steel Company and POSCO into Elk Valley Resources “demonstrates a recognition and consequent commitment to a stable and responsible supply and suggests confidence in the steelmaking coal industry.”
Milligan also singled out the plan for the Environmental Stewardship Trust and noted Elk Valley Resources will maintain environmental commitments with the Nature Positive by 2030 initiative, achieving net zero by 2050 and ongoing work to implement initiatives identified in the Elk Valley Water Quality Plan.
Kootenay East MLA Tom Shypitka was also bullish on the announcement, noting he will be meeting with Teck on Friday to learn more about the implications of the company split on local coal mining operations.
“It means everything to our economy here, so of course, we want to ensure that we continue doing business in a responsible way and I think Teck’s proven that over the years,” Shypitka said. “There’s ups and downs, there’s never a straight linear path to success — you gotta take the good with the bad — but you gotta examine the partner you’re dealing with, and I think Teck, overall, has proven to be a responsible partner in the Kootenays.”
Environmental and water quality issues remain
By all indications, Elk Valley Resources will be assuming the environmental responsibilities associated with the coal mining operations, particularly the Elk Valley Water Quality Plan.
Coal mining pollution in the Elk Valley waterways has been a long running concern from both the Ktunaxa Nation Council and environmental advocacy organizations such as Wildsight.
Much of that concern focuses on selenium and the leachate from waste rock piles from the open pit mining process.
Teck has faced significant financial penalties for pollution in Elk Valley waterways, the largest being a $60 million fine that was levied in two years ago, following investigation of leachate depositing selenium and calcite into the Upper Fording River in 2012.
Teck was also recently fined approximately $16.5 million for non-compliance with environmental permits, particularly failing to have a water quality treatment facility at Fording River South operational by the end of 2018, which is now up and running as of July 2022.
The company consistently notes the $1.2 billion investment into into water quality initiatives, with constructed capacity to treat and remove selenium from up to 77.5 million litres per day.
Efforts are also underway to take water pollution concerns with the Kootenay watershed, particularly Lake Koocanusa, to an International Joint Commission, an entity that investigates and adjudicates transboundary water issues between Canada and the United States.