Australian copper absent from Glencore boss’s Teck merger pitch

Glencore’s remaining Queensland copper assets could be surplus to requirements if the company succeeds in its megamerger with Canadian miner Teck.

A worker handles molten copper at the at the Glencore Copper Smelter in Mount Isa. Picture: NCA NewsWire / Dan Peled

Glencore’s remaining Queensland copper assets could be surplus to requirements if the company succeeds in its megamerger with Canadian miner Teck, with the state’s mining, smelting and refining group a notable absentee from the copper assets talked up by Glencore boss Gary Nagle this week.

Glencore faces a battle to convince Teck’s board and shareholders to back its $US23bn ($34bn) merger offer this week, after Glencore proposed a deal to first combine their assets and then split into two separate coal and metals businesses.

Teck’s board is instead intent on spinning out its coal business to existing shareholders, flagging Glencore’s massive thermal coal business as a big risk to shareholders – but flagged potential interest in a deal after the separation of its own coal business.

Any deal would largely mean business as usual for Glencore’s Australian coal operations, which produced 61.2 million tonnes of thermal coal in 2022, or 63 per cent of Glencore’s global total, and all of its 12.7 million tonnes of coking and semisoft coal output.

But the proposal is likely to lead to renewed speculation that Glencore could hang a sale sign on its Mount Isa copper mining and smelting complex, plus its Townsville refinery.

Mr Nagle told The Australian last week that Australia had fallen behind Canada as a top tier investment jurisdiction for mining, after coal royalty hikes in Queensland in 2022 and this year’s decision by the NSW government to impose a domestic reservation policy to protect supply to its coal-fired electricity generation.

And, while Mr Nagle made pointed references to the value of the company’s Queensland zinc production in his pitch to analysts overnight on Monday, as well as Glencore’s Murrin Murrin nickel mine in WA, the copper hub did not rate a mention.

Those assets are central to Glencore’s pitch that it can be at the centre of the global electrification push, with Murrin producing about a third of the company’s total nickel output last year – and 7 per cent of its cobalt, but remaining its only major cobalt source outside the Democratic Republic of Congo.

Glencore’s Australian zinc production accounted for 60 per cent of its 938,500 tonne output last year, and Australian mines produced 86.6 per cent of its lead.

Mr Nagle told analysts combining Glencore and Teck’s copper production would create the world’s “premier” copper producer, with combined output of about 1.5 million tonnes in the near-term and significant growth options.

“That leaves us as the third biggest copper producer in the world, but it‘s really the base business that is there and allows the cash flows from those base businesses to be funnelled into this terrific growth pipeline that the new company would have,” he said.

“That brings the combined business up to around 3 million tons of copper production, certainly the best and biggest copper producer in the world, bar none.”

But Glencore’s remaining Australian copper operations represent an increasingly minor component of its global operations.

Glencore has already sold its Ernest Henry copper mine to Evolution Mining, and a deal to sell its Cobar mine in NSW to Metals Acquisition Corp is still pending.

Australia produced only 10.2 per cent of Glencore’s 1.06 million tonne copper output in 2022, with its three Mount Isa copper mines, plus the smelter and refinery, accounting for about 70,500 tonnes of that total.

And its ageing Mount Isa operations have become increasingly difficult to mine, with the value of its smelter and refinery – which also process limited quantities of third-party product – largely at the mercy of Australia’s soaring energy prices.

Glencore also faces a 2024 decision over a $40m to $60m relining of its smelter to extend the life of the facility beyond 2026.

But Australia’s biggest independent copper producer, OZ Minerals, is about to be swallowed up by BHP and local investors will then be starved for options for exposure to the industrial metals, suggesting its Queensland operations could still attract considerable interest from local players, if a decision was made to sell them.

Originally published as Australian copper absent from Glencore boss’s Teck merger pitch