Mining giant Glencore is expanding its global coal mining operations, announcing a $6.9 billion deal to acquire a majority stake in Canadian firm Teck Resources' steelmaking coal business.

The purchase comes as the price of high-quality coking coal has risen steadily amid government policies aimed at curbing coal supply despite ongoing demand growth. This market dynamic is driving divergence between coking coal, vital for steel production, and thermal coal used in power generation.

While some miners are retreating from coal given the global push towards decarbonization, Glencore is taking the opposite approach, confident the commodity will remain essential for steel mills in the years ahead.

Glencore CEO Gary Nagle said Teck's mines will be incorporated into a stand-alone coal company spanning the miner's Australian and Colombian operations. This pure-play coal business "would be well positioned as a leading, highly cash-generative bulk commodity company," he stated.

For its part, Teck said the $9 billion windfall will help pivot towards copper and other metals critical to the energy transition. "This sale will ensure that Teck is well capitalized...while maintaining a strong balance sheet," said President and CEO Jonathan Price.

Glencore chose New York to list its newly-incorporated coal company due to the deep pools of capital and openness to investing in fossil fuels among American investors, a source close to the company said.

Gary Nagle previously complained European investors overemphasize environmental and ethical factors rather than profitability.

Glencore expects the Teck deal to close by the third quarter of 2024, allowing for a New York listing of the coal spin-off in the second half of 2026.

(Writing by Alex Guo  Editing by Emma Yang)
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