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Glencore Extends Proposal to Acquire Teck’s Steelmaking Coal Enterprise

Glencore, a renowned mining and trading company, has put forth an enticing proposition to acquire Teck Resources’ steelmaking coal business as a separate entity. Despite Teck Resources rejecting Glencore’s initial $22.5 billion merger offer on two occasions, the former disclosed receiving numerous proposals for its coal division on June 6. These developments arise as Teck Resources revises its strategy to separate the coal segment from its copper and zinc unit, which previously failed to garner sufficient support from shareholders in late April.

Teck Resources has officially confirmed its engagement with Glencore concerning the coal proposal. Glencore, known for its mining and trading activities in thermal coal (a vital fossil fuel used in electricity production) and a limited amount of coking coal (essential for steel manufacturing), intends to demerge the coal units of both organizations.

Analysts from Deutsche Bank (ETR:DBKGn) have suggested an alternative solution if Teck Resources is presently reluctant to consider selling Teck Metals. They propose an appealing “middle ground,” which involves selling the coking coal assets to Glencore. Such a move would provide Teck Resources with a cleaner exit from the coal sector, while allowing Glencore to divide its business into CoalCo and MetalsCo.

Although Glencore’s CEO, Gary Nagle, previously mentioned that acquiring Teck’s coal business as a standalone unit ranked lower on their priority list, the Swiss mining company is still actively pursuing its merger plans. Glencore finds Teck’s steelmaking coal mines particularly attractive, given their scarcity worldwide, which aligns with the growing global momentum to phase out coal-fired power generation.

Various parties have expressed interest in Teck Resources’ coal business, including Canadian mining entrepreneur Pierre Lassonde and Japanese steel manufacturer Nippon Steel Corporation. In its initial proposal, Glencore offered up to $8.2 billion in cash to Teck shareholders who may wish to minimize their exposure to thermal coal.

The dynamics surrounding Glencore’s bid for Teck Resources’ steelmaking coal business have generated considerable intrigue within the mining industry. As these negotiations progress, the fate of this potential acquisition hangs in the balance, ultimately shaping the future trajectories of both companies.

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