Sumitomo Metals backs Teck’s split plan

Teck owns 60% of Quebrada Blanca Phase 2 project and Sumitomo Metal Mining, together with Sumitomo Corporation, have a collective 30% interest. (Image courtesy of Teck Resources.)

Japan’s Sumitomo Metal Mining (SMM) confirmed on Thursday its support for Teck Resources’ (TSX: TECK.A, TECK.B) (NYSE: TECK) planned spinoff into two companies in the face of an alternative proposal from Glencore (LON: GLEN), which wants to buyout Canada’s largest diversified miner.

The company, one of Teck’s top shareholders, holds 18.9% of the Class A shares and 0.1% of the Class B shares of Teck. It also has a 49% stake in Temagami Mining, which itself holds 55% of Teck’s Class A shares.

The Vancouver-based mining giant operates under a dual-class structure, in which Class A shares are each worth 100 votes. Class B shares are worth one vote each.

SMM and Teck have a decades-long partnership in mining, including the joint development and construction of the Pogo gold mine in Alaska, and the Quebrada Blanca copper mine in Chile.

Teck is trying to get backing for its proposed restructuring ahead of a shareholder vote on the proposal on April 26. It wants to to split up its metal and steelmaking coal businesses into two companies, Teck Metals and Elk Valley Resources.

POSCO, both a customer and a JV partner with Teck on its Elkview and Greenhills operations, as well as China Steel Corporation, are among the shareholders that have backed the Canadian miner in the last 24 hours.

Glencore published on Wednesday an open letter to Teck shareholders, saying it was open to talk improvements to its proposal directly with Teck shareholders if the board continued to rebuff its offer.

The Canadian company quickly replied by saying that Teck has previously engaged “extensively” with Glencore – for six months on “essentially the same proposal” – and repeatedly determined it is not in the best interest of its shareholders.

Glencore’s initial bid represented a 20% premium to Teck’s March 26 closing price, when it was privately made.

The Swiss miner and commodities trader has indicated it could raise its current $23 billion bid if shareholders vote against Teck’s plans next week.