Glencore woos Teck
As this issue of the Crucible was heading to print, Swiss commodities giant Glencore sweetened its takeover approach to Canadian miner Teck Resources, which looked determined to reject Glencore’s initial $22.5bn all-shade bid. The unsolicited bid, involving a sub-sequent spin off of the combined coal business, valued Teck at a 20% premium to its share price on 26 March. Ahead of Teck’s AGM in Vancouver on 26 April, where the deal would require a vote in favour by two-thirds of the shareholders, Glencore made Teck shareholders an additional offer worth $8.2bn to buy them out of the coal spin-off while offering them a 24% stake in the combined industrial metals business the merger would create.
Glencore and Teck are both copper and zinc producers as well as coal miners. Teck’s Highland Valley Copper mine in Canada also has by-product molybdenum. The merger and coal spin-off plan shows Glencore to be keen to focus on metals, particularly copper, critical to electrification and clean energy transition, while de-risking its exposure to coal. But it now needs to con-vince the voting block of Teck’s majority shareholders, the Keevil family and Japan-based Sumitomo Mining & Metals.
The trouble with targets
As we reported in March, the EU’s Critical Raw Materias (CRM) Act is out and now needs to make its way through the European Parliament. The critical minerals consist of 34 materials or groups (such as HREE, LREE, PGMs), or the following 16 are de-fined in a new category as strategic raw materials (i.e. with heightened demand growth and supply risks): bismuth, boron—metallurgy grade, cobalt, copper, gallium, germanium, lithium—battery grade, magnesium metal, manganese—battery grade, natural graphite—battery grade, nickel—battery grade, platinum group metals, rare earths for magnet production (Nd, Pr, Tb, Dy, Gd, Sm, and Ce), silicon metal, titanium metal, and tungsten.
For strategic materials, The CRM Act sets out targets for 2030:
- At least 10% of the EU’s annual consumption for extraction
- At least 40% of the EU’s annual consumption for processing,
- At least 15% of the EU’s annual consumption for recycling,
- Not more than 65% of the EU’s annual consumption of each strategic raw material at any relevant stage of processing from a single third country.
This last is a target for diversification, not necessarily onshoring. For example, the EU is 100% reliant on imports for magnesium, but 59% of supply is recorded as coming from China, i.e. less than 65% from a single country. Magnesium production in the West has been in decline ever since Dow Chemical shut it US plant in 1998, followed five years later by the EU’s only primary smelter, Pechiney’s plant in Marignac, France closing, and a few years on Norsk Hydro’s plant in Becancour, Canada.
None of the magnesium projects touted in the 2000s, from Iceland to Australia, with the Netherlands and the Republic of Congo in be-tween, took off, as—green targets regardless—China’s thermal Pidgeon process plants pushed cleaner but costlier electrolysis out of the market. Antidumping measures in the US meanwhile largely locked out Russian supply, some of which turned to Europe, but mostly to Russia’s aluminium and steel industries, and a portion to internal consumption in the titanium reduction process. The war in Ukraine is not conducive to boosting magnesium imports from Russia to the EU. Ukraine’s own primary magnesium production disappeared in the 1990s. For new primary sources, the EU can turn to emerging production in Asia (Turkey, Malaysia, South Korea) or increased recycling — but maintaining domestic primary production proved uneconomic 20 years ago.
The West, the East and the South
The strategic metal of the hour, lithium, is the poster child for tie -ups between OEMs and raw material suppliers. The CRM Act proposes a broader creation of a networking club of “consuming and resource-rich countries to promote the secure and sustain-able supply of CRMs.” It is difficult to get away from the fact that, to achieve this, the EU would need to undertake a significant charm offensive in the global East and South. And that this EU charm offensive is getting out of the blocks a full decade after China’s Belt and Road initiative—fittingly named, especially when one thinks of the Chinese investments in roads and other infra-structure in DR Congo in exchange for a 68% stake in a JV with state miner Gecamines that ties up the bulk of the mineral re-sources in the DRC’s copper-cobalt belt.
China is not the only global player vying for influence in the min-eral rich DRC, a country the size of western Europe. Two years ago the DRC government ratified a military co-operation agree-ment with Russia, unencumbered by the human rights concerns that had led to curbs on arms supplies by the US and Europe. Resource-rich countries faced with armed conflicts at home that look to Russia and China as security partners are torn when it comes to the war in Ukraine or a potential conflict in East Asia. Worsening geopolitical relations between the so-termed West and two of the East’s largest countries pose a dilemma for the global South — where resource rivalries will play out. It is a sepa-rate, hard CRM challenge to guess who will end up in which club.