Proposal for a merger between Glencore and Teck 

Glencore plc (“Glencore”) confirms that it submitted a proposal to the Board of Directors of Teck Resources Limited (“Teck”) on 26 March 2023 to merge with Teck and to simultaneously demerge their combined metals and coal businesses (the “Proposed Merger Demerger”) to create:

• MetalsCo: a world-class standalone transition metals focused business with a diversified portfolio comprising Glencore’s and Teck’s metals and minerals assets, Glencore’s metals and energy (excluding coal) marketing, recycling and distribution businesses and its investment in Viterra. The investment in Viterra would be subject to a strategic review and potential divestment.
• CoalCo: a highly cash-generative standalone coal and carbon steel materials business comprising Glencore’s and Teck’s coal assets, Glencore’s ferroalloys assets and Glencore’s coal and ferroalloys marketing businesses.

Glencore is proposing a combination exchange ratio of 7.78 Glencore shares per Teck B share, which represents a valuation premium of:

• 22% based on Glencore’s and Teck B’s undisturbed last close prices as of 31 March 2023, being the last close prior to the proposal becoming public;
• 20% based on Glencore’s and Teck B’s last close prices as of 24 March 2023, being the last close before the date of the proposal to Teck;
• 20% based on Glencore’s and Teck B’s three-month VWAPs as of 24 March 2023; and
• 30% based on Glencore’s and Teck B’s twelve-month VWAPs as of 24 March 2023.

In addition, Glencore is proposing a combination exchange ratio of 12.73 Glencore shares per Teck A share, which represents a valuation premium of:

• 22% based on Glencore’s and Teck A’s undisturbed last close prices as of 31 March 2023;
• 20% based on Glencore’s and Teck A’s last close prices as of 24 March 2023;
• 43% based on Glencore’s and Teck A’s three-month VWAPs as of 24 March 2023; and
• 73% based on Glencore’s and Teck A’s twelve-month VWAPs as of 24 March 2023.

At these proposed exchange ratios, Glencore and Teck shareholders would own approximately 76% and 24% of the merged entities, respectively.

Glencore believes that the Proposed Merger Demerger is compelling and would create significant value for both Teck and Glencore shareholders. The Proposed Merger Demerger would create two standalone companies with substantially larger and more diversified portfolios of assets than those of the proposed standalone Teck Metals and Elk Valley Resources.

MetalsCo would be a must-own global base metals company with a Tier 1 portfolio of copper assets, an unrivalled suite of copper growth opportunities as well as being a leading supplier of cobalt, zinc and nickel, well positioned to meet the demand required for the energy transition. In 2022, MetalsCo would have generated approximately US$16 billion of proforma EBITDA.

CoalCo would be a leading, highly cash-generative, diversified coal producer that would be able to sustain an attractive cash flow payout to investors through the cycle. In 2022, CoalCo would have generated approximately US$26 billion of proforma EBITDA. Further, unlike the proposed Teck separation, the Proposed Merger Demerger would not require any intercompany financial arrangements between the metals and coal businesses going forward; shareholders of CoalCo would participate in the business’ cash flow generation immediately upon close.

Each of MetalsCo and CoalCo would be uniquely positioned within their respective peer groups from an asset quality, scale and diversification perspective, to provide their shareholders with highly liquid exposure to Tier 1 assets and, in the case of MetalsCo, a leading growth pipeline. Glencore and Teck shareholders would be well positioned to participate in a valuation re-rating over time.

The scale and quality of Glencore’s business, together with its uniquely complementary footprint and strategic fit with Teck, including its strong and demonstrable commitment to being a responsible and ethical operator, make Glencore the obvious partner for an all-share merger with Teck, and a simultaneous demerger.

Given the complementary nature of Glencore’s and Teck’s portfolios, the Proposed Merger Demerger is expected to unlock approximately US$4.25 – 5.25 billion of post-tax synergy value (on an NPV basis) across marketing, operating and overhead optimisation, which would be shared by both Teck and Glencore shareholders.

Glencore has deep respect for Teck’s legacy in Canada as well as its strong technical expertise and would recognise and reflect these strengths in any transaction. Glencore’s Canadian assets form a significant part of Glencore’s global business and have a history that dates back more than 100 years. Glencore employs around 9,000 people in Canada, including contractors. The Proposed Merger Demerger would deliver real benefits to Canada.

As part of the Proposed Merger Demerger, Glencore would agree to:

• designate either Teck’s Vancouver or Glencore’s Toronto office as MetalsCo’s global Industrial Head Office, which would manage approximately 3x Teck’s current metals production;
• maintain significant Canadian representation on each of MetalsCo’s and CoalCo’s Board of Directors;
• ensure that Canadians continue to serve in the management of MetalsCo’s and CoalCo’s Canadian assets;
• provide ongoing and long-term employment in Canada for Canadians; the Proposed Merger Demerger would not materially change the day-to-day operations at Teck’s assets in Canada;
• maintain a listing of MetalsCo and CoalCo on the TSX;
• continue to invest in Canadian capital expenditure programmes in each of MetalsCo and CoalCo and make new investments in a reinvigorated exploration program in Canada;
• honour all of Teck’s commitments to local Canadian communities as well as to Indigenous communities to ensure their interests are acknowledged and protected; and
• honour all of Teck’s social, labour and environmental programs in Canada.

Glencore remains committed to supporting the goals of the Paris Agreement and intends to respect the net zero climate strategy Teck has announced in respect of its steelmaking coal operations.

In addition, Glencore intends that CoalCo would oversee a responsible decline of its thermal coal portfolio production in line with Glencore’s current ambition to achieve net zero by 2050, with a supportive policy environment. Glencore also intends for CoalCo to continue to uphold Glencore’s commitment to responsible operating practices. Further study of the emissions pathway of the combined companies would be required in order to establish revised combined targets.