Teck’s Highland Valley Copper mine near Logan Lake, B.C.Handout
Teck Resources Ltd. TECK-B-T had hoped its plan to split in two would be a bulwark against a takeover by a foreign competitor. With that hope dashed, the power to keep Teck Canadian may rest with Ottawa.
Glencore PLC, GLNCY the Switzerland-based mining company and commodities trader, served notice this week that it intends to keep pursuing Teck, after the Canadian miner scrapped its plan to spin off its coal assets hours before shareholders were set to vote on the proposal.
Glencore has said that if Teck won’t negotiate a friendly deal it will take its offer, valued at US$23-billion, directly to the Vancouver-based company’s shareholders. From the standpoint of many investors, the question would be which option offers the best value.
But for the federal government, any dealwith a foreign buyer would strike at the heart of its ambitions to position Canada as a major player in the race to transition to a low-carbon economy. The Liberals have pounced on the critical minerals that Teck strips from the earth – copper and zinc among them – as key to the future of the national economy. This week, they made it clear they would prefer that a Canada-based industry leader control those reserves at home, rather than an acquirer with an overseas head office.
“The government has been following developments closely and is in contact with the company and the B.C. provincial government,” Adrienne Vaupshas, a spokesperson for Deputy Premier Chrystia Freeland, said in a statement. “We need companies like Teck here in Canada – companies with a strong commitment to Canada.”
The comments followed a letter the government sent to the Vancouver Board of Trade, in which Ms. Freeland and her cabinet colleagues François-Philippe Champagne and Jonathan Wilkinson hinted strongly that they are counting on an independent Teck to play a major role in the country’s green transition. The minerals Teck produces are used to manufacture electric vehicles and renewable energy sources.
“This is all the more important today as we confront unprecedented geopolitical, economic, and environmental changes,” they wrote.
On Thursday, Ms. Freeland met with mining industry officials to get their views ahead of the first meeting of the Energy Transformation Task Force, a Canada-U.S. initiative aimed partly at building up the critical minerals supply chain between the two countries. The United States, bolstered by US$369-billion in green incentives in its Inflation Reduction Act, is both a partner and a competitor in the energy transition effort.
Ottawa is betting big. This month, it made a splash with billions of dollars in taxpayer support for a Volkswagen AG battery plant in St. Thomas, Ont. That is just one part of a larger strategy to establish a made-in-Canada supply chain for all things EV – critical minerals, auto parts, assembly, and the software and artificial intelligence to run it all. But Canada is not the only country trying to establish a foothold in what is seen as the industry of the future.
How much power does the government have to keep Teck out of foreign hands? A takeover by Glencore would go under the feds’ microscope as part of what is called a “net-benefit review.” In these reviews, the government assesses the impact of foreign investments on economic activity in Canada, including employment, production and capital levels.
With the government deeming copper and other metals critical to the future of the Canadian economy, Glencore or any foreign miner bidding for Teck would also be scrutinized through the lens of national security.
The government has plenty of latitude to block or place conditions on deals within the provisions of the Investment Canada Act, according to Bryce Tingle, the N. Murray Edwards Chair in business law at the University of Calgary. “I’m unaware of any time when its judgment of that act has been successfully challenged, and the act itself is worded broadly enough to give the government a great deal of discretion,” Prof. Tingle said.
Norman B. Keevil, Teck’s chair emeritus, also has veto power over any deal, as holder of a controlling position in the company’s supervoting A shares. He has said he’s not interested in selling the company to Glencore, but he has also said he would not exercise his veto power if the board, management and a majority of B shareholders wanted it. That would put the government in a key role.
In 2010, prime minister Stephen Harper’s Conservatives blocked BHP Billiton’s $38.6-billion hostile bid for Potash Corp. of Saskatchewan. After a net-benefit review, the government said a takeover by the Australian company would not have beneficial effects on Canada’s ability to compete in world markets, improve productivity or bolster its overall economic activity. The Saskatchewan government also opposed the deal, saying the fertilizer product amounted to a strategic interest.
“Maybe it was national security, but it also felt a lot like keeping a very important domestically owned company here in Canada,” Prof. Tingle said.
Teck’s now-scrapped plan to spin off its steelmaking coal assets was initially conceived in hopes of winning back some climate-change-conscious investors that had soured on the company, because of the assets’ high carbon emissions. Later, after Glencore entered the picture, the proposed split became a way of fending off the takeover bid. But too many shareholders balked at the arrangement, in which 90 per cent of the spinoff’s cash flows would have been sent back to Teck for an estimated 11 years.
Glencore had said its offer was contingent on Teck abandoning the spinoff. Under its plans, it and Teck’s coal assets would be merged. With Teck’s split off the table, Glencore is proceeding with its pitch.
Steven Tian, a corporate governance scholar at Yale University, said Glencore’s current and past ties to authoritarian regimes, including those in Russia, Kazakhstan, Qatar and the Democratic Republic of Congo, would be heavily scrutinized on national security grounds both in Canada and by the Biden administration, which would be consulted as part of a review.
“All of these governments are going to have a lot of questions about selling off one of the last and largest freestanding, independent copper miners in North America to a foreign company that frankly has a lot of ties to authoritarian dictators,” Mr. Tian said.
Around 15 per cent of Glencore’s current profits in its metals division come from the DRC and Kazakhstan.
Glencore’s less-than-stellar record operating abroad would likely also attract scrutiny on national security grounds. Last year, Glencore pleaded guilty to bribery and market manipulation in the U.S., and paid more than US$1-billion in penalties.
“Glencore paid more in fines last year than Teck made in profits,” Mr. Tian said. “That is astounding to me.”
British Columbia Premier David Eby has also raised the issue of Glencore’s fines, while lauding Teck’s record on environmental and Indigenous issues.
But Jack Mintz, President’s Fellow of the School of Public Policy at the University of Calgary and a corporate director, said the government’s clout could be limited in this case. Glencore can argue it has well-established operations in Canada, including copper, nickel and zinc mining and processing, agricultural facilities and consulting. It employs 9,000 full-time staff and contractors in the country.
Putting restrictions on foreign companies would not help in the quest to develop critical minerals, he said.
“Why does Canadian ownership of Teck matter for the development of critical minerals here? We already have many mining operations that are foreign controlled, and they are already in the most significant critical minerals, which are zinc and nickel.”
With a report from Niall McGee
Editor’s note: This story was edited to remove reference to Centerra Gold’s Kumtor mine.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
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