Pierre Lassonde speaks at the announcement of the building of a new pavillion to honour painter Jean Paul Riopelle, in Quebec City, Dec. 2, 2021. Lassonde said he was surprised when he learned that Elk Valley would emerge from Teck's spinout of the company without a significant Canadian shareholder.Jacques Boissinot/The Canadian Press
Pierre Lassonde, the wealthy gold entrepreneur turned ally of Teck Resources Ltd.’s controlling shareholder Norman Keevil, is planning to buy a blocking stake in Teck’s spin-out coal company to ensure it stays in Canadian hands.
Mr. Lassonde’s strategy aligns philosophically with that of Mr. Keevil, who has rejected this week’s proposal by Glencore PLC GLNCY of Switzerland, one of the world’s biggest commodities companies, to merge with Vancouver-based Teck TECK-B-T in an all-share deal. Mr. Keevil, a Canadian resources nationalist who has decried the hollowing out of the Canadian mining industry in recent decades, has said he will not sell to a foreign company at any price.
In an interview Friday, Mr. Lassonde, co-founder of Canada’s Franco-Nevada gold royalty company, said he had a double motivation for taking a big position in Elk Valley Resources, the coal company that is to be hived off by Teck, subject to shareholder approval later this month.
“I believe Elk Valley is fantastic, long-term value and I want this world-class asset to remain Canadian,” he said.
Elk Valley would hold all of Teck’s metallurgical coal assets, which are located in British Columbia, leaving Teck as a base metals company with a focus on copper and zinc. Teck is valuing its Elk Valley offspring at $11.5-billion. Its shares would be listed on the Toronto Stock Exchange and start trading on June 6. After the spin-off, Elk Valley, which would start life with a debt-free balance sheet, would deliver at least $14-billion in payments to Teck, through royalties and dividends, for up to 11 years.
Mr. Lassonde said he was surprised to learn that Elk Valley would emerge without a significant Canadian shareholder, one who could block a takeover attempt. The biggest shareholders, with a combined 12.5 per cent, would be Nippon Steel of Japan and South Korean steel maker Posco. The rest – 87.5 per cent – would be owned by a diverse range of Teck shareholders.
Without a blocking shareholder, Elk Valley would be vulnerable to a takeover from its first days of trading, when a flurry of buying and selling is expected as millions of shares hit the market. Funds that follow ESG (environmental, social and governance) principles almost certainly would sell the shares in a company devoted to coal alone, and hedge funds and other investors would gamble on making quick profits by buying the shares or selling them short, a bet that they will lose value.
Industry insiders have said that several investment groups from Australia, the United States and Europe are keen to buy Elk Valley and take it private. Were a buyer to change the nature of the company by, say, shrinking production or eliminating new coal projects, the payment stream to Teck might be jeopardized.
Mr. Lassonde is trying to put together a group of investors who would buy up to $300-million of Elk Valley shares, potentially giving them 10 per cent to 20 per cent of the company. He said he would put up more than a third of the cash and would buy along with a small group of Canadian co-investors. It is not known if Mr. Keevil would be among them. He could not be reached for comment on Friday.
“I would love to own up to 20 per cent of Elk Valley,” Mr. Lassonde said. “It will be a Canadian mining giant and should absolutely stay in Canadian hands.”
Mr. Lassonde’s stake, plus the 12.5 per cent held by Nippon Steel and Posco, which are considered allies of Teck and Mr. Keevil, would create a control block, meaning Elk Valley’s takeover would be impossible without their approval.
Glencore PLC covets Elk Valley, too. Its proposal is to merge its base metals division with that of Teck Resources Ltd., creating a new company called GlenTeck. The second part of Glencore’s proposal would involve Glencore and Teck Resources creating a new company to hold their thermal and metallurgical coal assets.
Teck shareholders are to vote on spinning off the company’s coal assets on April 26. The deal requires two-thirds of both the class A shares, with 100 votes per share, and the single-vote class B shares to be put into motion.