Glencore’s Buying Teck’s Coal Division (And Leaving The Rest Of The Firm Behind)

Glencore’s Buying Teck’s Coal Division (And Leaving The Rest Of The Firm Behind)
Paul Allison, CFA

4 months ago2 mins

What’s going on here?

Glencore announced plans to buy Teck Resources’ coal division, making it clear that the Swiss mining giant was focused on splitting up before the relationship even started.

What does this mean?

Glencore made a move on Teck Resources earlier this year, but walked away with nothing but a bruised ego. But then the mining giant sidled up with a revised offer to buy just the rival firm’s coal business, suggesting this was probably never about accepting Teck Resources for its whole self. Instead, it looks like Glencore has a plan to merge Teck’s coal division with its own, before spinning off the newly combined duo. Persistence paid off, and that plan is now well underway: Teck Resources agreed to sell over three-quarters of its coal business for just shy of $7 billion.

Glencore stock
Source: Google Finance

Why should I care?

The bigger picture: Hidden gems.

The US has been embracing its dirty side lately. Europe’s sanctions on Russian coal have left the region with a gap in supply, so the US seized the chance to plug it. And during all that digging, newcomer Ramaco Resources recently found over a million tons of rare-earth elements – the precious materials essential for technologies like electric batteries – buried in coal pits. The US only uses around 10,000 tons of rare-earth elements a year, but with China, the world’s main exporter, tightening its grip on supply, Ramaco could have plenty of willing buyers.

For markets: Loyalty is everything.

Coal has more than its fair share of detractors, but the black stuff was still responsible for making a third of the world’s electricity last year. And while the International Energy Agency says coal will start falling out of favor next year as renewable sources become more mainstream, major countries and industries are unlikely to dump the cheap source of power completely. That could be a problem: the agency believes we need to use 90% less coal to meet net-zero targets by 2050.

Global coal consumption
Source: International Energy Agency
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