Government pressure and operational challenges leave a mining merger in doubt
Anglo American PLC and Vancouver-based Teck Resources Ltd. could create a joint venture to manage their adjacent copper mines in Chile if their proposed $70-billion merger fails, Anglo’s chief executive said.
“An asset-level kind of deal is, of course, possible,” Duncan Wanblad told the Financial Post. “But the strength of the combined company outweighs the asset synergy itself in terms of what it will be able to do in the future.”
Such a deal would allow both companies to continue operating as separate entities while still deriving benefits from nearby assets, Wanblad said.
Government concerns over Canada’s net benefits
The comments come as the merger faces government scrutiny. Industry minister Mélanie Joly says the deal requires stronger commitments to Canada before receiving approval under the Investment Canada Act.
“There have been conversations with the companies, and clearly we wanted to make sure that there would be a net benefit to Canada. But I think right now that it’s not enough,” Joly said Tuesday as she headed into a cabinet meeting, according to The Canadian Press.
“We need to think about longer term and how can we make sure that ultimately we create jobs, but we have a strong headquarters, not only now but also for the next decade,” she said.
Anglo American CEO Duncan Wanblad acknowledged the government’s concerns during a recent interview with the Financial Post, saying his company did not directly engage with Ottawa until days before the deal’s public announcement.
“There’s a nervousness fuelled a lot by you guys and it builds a momentum,” Wanblad told the Financial Post, referring to media coverage. “It’s completely legitimate in the context of the evidence to the contrary, which is that the industry did get hollowed out here and a lot of mining companies left Canada.”
Synergies expected from the merger
The proposed deal would create Anglo Teck, a copper mining powerhouse headquartered in Vancouver but domiciled in the United Kingdom with its primary stock listing there. Anglo American shareholders would control 62.4% of the new company, while Teck shareholders would retain 37.6%.
Teck CEO Jonathan Price would become deputy CEO under Wanblad, who would retain his position in the merged entity and relocate from London to Vancouver.
The companies have committed about $4.5 billion in Canadian spending over five years, including $2.4 billion for extending the Highland Valley copper mine’s life near Kamloops, B.C., and up to $750 million for projects in northwestern B.C.’s Golden Triangle.
A key component involves synergies between Teck’s Quebrada Blanca mine and Anglo’s Collahuasi operation in Chile, both located about 10 kilometres apart. The companies project these synergies would save $800 million annually and boost production by 175,000 metric tons, according to Reuters.
However, the Chilean operations face complications. Glencore, Anglo’s equal partner at Collahuasi, has not yet discussed the merger, while Quebrada Blanca struggles with cost overruns and waste management issues.
Wanblad suggested that if the full merger fails, the companies could still pursue a joint venture for their Chilean assets, though he emphasized the complete combination would be preferable.
“Mergers of this scale and size don’t present themselves as an opportunity often,” he said.
