Industry Minister Mélanie Joly says Ottawa would want to see longer-term commitments to Canada before Vancouver’s Teck Resources Ltd. is allowed to merge with U.K.-based miner Anglo American PLC.
“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 as she headed into a cabinet meeting Tuesday.
The merger, she said, “must be according to our national security concerns and objectives, including economic security.”
In announcing the deal last week, the companies said the combination would create a $70-billion copper mining powerhouse called Anglo Teck with headquarters and top executives based in Vancouver. They pitched it as a “merger of equals” even though Anglo American is worth more than double Teck.
The deal is subject to review under the Investment Canada Act, which can be used to block deals deemed against the national interest, including Canada’s economic security.
Joly said further conversations are needed and she plans to speak to the CEOs of both companies next week.
While the short term matters, she said, “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.”
Despite the promise of a Vancouver headquarters, Anglo Teck would remain incorporated in London, with Teck CEO Jonathan Price serving as deputy CEO while Anglo American chief executive Duncan Wanblad would retain the top position.
The companies could enter into legally binding undertakings with the government to ensure approval, said Camden Hutchison, director of the University of British Columbia’s Centre for Business Law.
That could include a promise to keep Anglo Teck’s headquarters in Vancouver for a fixed amount of time.
“Because the net benefit decision is relatively discretionary, the government actually has a lot of leverage to extract these undertakings,” said Hutchison.
Failing to honour such an undertaking could result in fines or, in extreme and unusual cases, the unwinding of a deal, he added.
Hutchison expects some sort of negotiation to take place between Ottawa and the companies. There may be legitimate economic concerns to iron out, but public perception is also important, said Hutchison.
“From a purely political standpoint, it’s probably important that the federal government demonstrates that they’re not asleep at the switch and just allowing Canadian companies to be taken over without any kind of scrutiny.”
Vancouver-based Teck Resources and Anglo American announce $70B merger
Teck and Anglo American have committed about $4.5 billion in spending in Canada over five years as part of the deal. However, a significant portion of that has already been announced by Teck, including the mine life extension of its Highland Valley copper mine.
Construction on that $2.4-billion project southwest of Kamloops, B.C., began last week.
There’s also up to $750 million in spending for the so-called Golden Triangle in northwest B.C., where Teck part-owns both the Galore Creek and Schaft Creek projects. Teck halted development of the Galore Creek mine back in 2007 because of rising capital costs and development timelines, and it still hasn’t seen production.
Spending promises also include up to $750 million for the Trail smelter for a strategic metals initiative, which could see it add copper refining to the existing lead and zinc production.
As well, the companies have promised at least $300 million in critical minerals exploration and technology in Canada.
“This merger of equals will create a Canadian-based global critical minerals champion, with significant economic, social, and strategic benefits for Canada,” Teck spokesperson Dale Steeves said in an emailed statement.
“We look forward to engaging with the government of Canada through the [Investment Canada Act] process about this opportunity to strengthen Canada’s critical minerals sector.”
