Teck sells oil sands stake to Suncor for $1 billion

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Teck Resources Ltd. (TECK.B-TSX, TECK.A-TSX, TECK-NYSE) has agreed to sell its interest in an Alberta oil sands project, a move that was announced ahead of the release of the company’s third quarter financial results.

The Vancouver mining giant said it has agreed to sell its 21.3% interest in the Fort Hills Energy Ltd. Partnership and certain associated downstream assets to Suncor Energy Inc. [SU-TSX, NYSE] for approximately $1 billion in cash. The deal is subject to customary closing adjustments reflecting a November 1, 2022 effective date. It increases Suncor’s stake in the project to 75.4%.

News of the sale came after the close of trading on October 26, 2022. As a result of the sale agreement, Teck recorded an after-tax, non-cash impairment charge of $952 million in the third quarter of 2022.

“This transaction advances our strategy of pursuing industry leading copper growth and rebalancing our portfolio of high-quality assets to low carbon metals,’’ said Teck CEO Jonathan Price. “We will review the use of the proceeds in accordance with our capital allocation framework in 2023,’’ he said.

Closing is expected to occur in the first quarter of 2023.

With an expected mine life in excess of 50 years, The Fort Hills oil sands project in the Athabasca region of Alberta was considered one of Western Canada’s best oil sands assets. It is located 90 kilometres north of Fort McMurray.

The partners announced that they were proceeding with construction in October 2013.

At that time, former Teck President and CEO Don Lindsay said Fort Hills, with the company’s other oil sands assets, was part of a new energy division that was expected to create value, significant cash flow, and diversification for Teck’s business for decades to come.

The project had a contingent resource of 3.3 billion barrels of bitumen.

However, on Thursday, the company said its strong financial results in the third quarter were offset by the impairment of its interest in Fort Hills.

Teck reported an adjusted profitable attributable to shareholders of $923 million or $1.77 per share in the third quarter of 2022.

Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $1.9 billion in the third quarter when Teck recorded a loss before taxes of $76 million.

Teck is a diversified mining company with interests in such key metals as copper, zinc coal. In its third quarter results, Teck disclosed its revised costs guidance for the QB2 copper project, which currently under construction in northern Chile. The company said the QB2 capital cost guidance is US$7.4-US$7.75 billion based on current foreign exchange assumptions, cost pressures related to weather and subsurface conditions, COVID-19 impacts and other factors.

The marks an increase from the prior guidance of US$6.9-US$7.0 billion.

On October 26, 2022 when Teck’s Class B common shares closed at $48.48. The shares are currently trading in a 52-week range of $57.50 and $32.05.


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