Teck’s bid to gain China wealth fund’s backing for coal split hits wall, report says

Teck Resources (TSX: TECK.A, TECK.B; NYSE: TECK), Canada’s largest diversified miner, is reportedly struggling to secure the support of top shareholder China Investment Corporation (CIC) for a plan to exit coal.

The Vancouver-based miner denied a Bloomberg report claiming that CIC, China’s largest sovereign wealth fund, was in favour of Glencore’s (LSE: GLEN) bid to buy the miner.

CIC has not disclosed how it voted, but it is said to favour any plan that would allow investors to end their coal exposure cleanly for an attractive cash return, people close to the matter told Bloomberg News on Thursday.

According to the news outlet, Teck’s chief executive officer Jonathan Price met with CIC representatives last week to learn details on what the fund is expecting.

Price did not receive any confirmation that CIC would back a revised plan, the quoted sources, who spoke on condition of anonymity, said.

CIC’s behaviour can be explained by China’s view of Canada’s critical minerals strategy – introduced by the federal government late last year, said analysts from the Macdonald-Laurier Institute, a public policy think tank based in Ottawa. 

The policy aims to protect natural resources from foreign ownership and secure supply chains for critical minerals.

“While keeping Teck in Canadian hands is clearly in our national interests, China probably now prefers that its investment in Teck be transferred to the less explicitly hostile Swiss company,” said MLI’s senior fellow Charles Burton.

Teck, which continues to fend off a relentless takeover push from Glencore, had to withdraw its original proposal to split up the company into two units — base metals and coal —  just hours ahead of a shareholder meeting in April.

Teck said at the time it had failed to gather enough support for the spinoff, adding it would work on a new, simpler proposal.

The company maintains that divesting its coal business is a better option for shareholders than being taken over by Glencore. 

CIC first invested in Teck during the depths of the great financial crisis of 2008 and 2009, paying $1.7 billion for a 17.5% equity stake.

Over the years, the fund has sold down part of its interest and it currently holds 10.3% of Teck’s Class B shares.

If Glencore ends up acquiring Teck, the deal would go down in history as one of the world’s biggest-ever mining takeovers.