Synopsis: Teck Resources, Canada’s largest diversified mining company, is concerned over the missing shareholder votes from its biggest shareholder, China Investment Corp, as it seeks to fend off a $22.5bn hostile takeover by Glencore.
Canada’s largest diversified mining company, Teck Resources, is facing a crucial vote from its shareholders to split the company into two entities, which could save it from a hostile US$22.5-billion takeover by Swiss mining and commodities giant Glencore. Teck Resources is reportedly baffled that its biggest shareholder, China Investment Corp (CIC), has gone missing in action this week. Holding more than 10% of Teck’s stock, CIC is a critical player in the current shareholder vote. However, with an hour left ahead of the deadline, the Chinese company’s vote had not come in, and Teck did not know why.
CIC is China’s largest sovereign wealth fund, managing assets of more than US$1.2-trillion. CIC’s investment in Teck Resources in July 2009 seemed like another step in Beijing’s overall strategic plan to lock down global resources while they were cheap. However, the picture is more complicated than that. As a sovereign wealth fund that manages part of the People’s Republic of China’s foreign-exchange reserves, CIC is fully integrated into the Chinese Communist Party-state’s corporate, military, and security apparatus, subordinate to the overall vision of the party.
CIC’s behaviour is consistent with China’s view of Canada’s critical minerals strategy, introduced by the federal government late last year to protect natural resources from foreign ownership and secure supply chains for critical minerals. While keeping Teck in Canadian hands is clearly in the national interest, China probably prefers that its investment in Teck be transferred to the less explicitly hostile Swiss company.
Teck CEO Jonathan Price has said his understanding of Teck’s relationship with CIC is “very open, collaborative”. However, as relations between Canada and China have chilled in recent years, CIC has been reducing its holdings in Teck from a 17.5% equity stake of a few years ago to 10.3% today. It’s very likely these selloffs were not made simply to reap vast profits.
It is no secret that China has reserves of trillions of U.S. dollars, accumulated through its massive exports of manufactured goods to pretty well every country on the planet. However, China also has an ever-growing need for raw materials to feed those factories. China certainly understands that Canada’s critical minerals strategy is really about constraining Beijing’s determination to gain a stranglehold on international sources of elements that are critical to the high-tech future. The unstated message is that long-term geopolitics increasingly trumps short-term economics, and Chinese investment in Canadian mining companies is no longer welcomed by us.
If a takeover by Glencore begins to unfold, Ottawa can lawfully veto the deal as not being in Canada’s net economic or security interests, as it would jeopardize our national security, including by negatively impacting on Canada’s critical minerals strategy.
It’s clear that CIC’s behavior is consistent with China’s interests, and that the party is working hard in Bern, extracting maximum concessions for China in return for thwarting the Teck split and leaving the Canadian resource company ripe for a takeover by Glencore.
The CIC is a function of an integrated party-state-military-civilian-market regime complex whose end goal is severely at odds with the interests and values of Canada and the liberal democratic West. With the Chinese Communist Party lurking in the shadows behind Teck’s fate, there really is only one choice for Canada.
Key Takeaways from the above news:
In recent years, there has been a growing concern about China’s strategic intentions towards Canada's critical minerals. The Canadian government is taking steps to protect the country’s natural resources from foreign ownership, and to secure supply chains for critical minerals, which are essential for the high-tech future of the global economy.
- Teck Resources is Canada’s largest mining company seeking to split into two entities to prevent a takeover by Glencore
- Glencore Canada’s largest diversified is a Swiss mining and commodities company that has launched a hostile takeover bid for Teck Resources.
- China Investment Corp (CIC) is Teck’s biggest shareholder with over 10% of Teck’s stock and is critical in the shareholder vote.
- CIC’s behavior could be linked to China’s view of Canada’s critical minerals strategy to secure natural resources from foreign ownership and ensure supply chains.
- CIC may prefer to transfer its investment to Glencore, which is less hostile than Teck.
- CIC is integrated into the Chinese Communist Party-state’s corporate, military, and security apparatus, and its primary purpose is not economic profitability but to serve other Chinese regime purposes.
- Canada can veto a takeover by Glencore if it jeopardizes its national security, including Canada’s critical minerals strategy.
- As relations between Canada and China have chilled in recent years, CIC has been reducing its holdings in Teck from a 17.5% equity stake of a few years ago to 10.3% today.
- If a takeover by Glencore begins to unfold, Ottawa can lawfully veto the deal as not being in Canada’s net economic or security interests, as it would jeopardize our national security, including by negatively impacting on Canada’s critical minerals strategy.
