Canadian diversified miner Teck Resources on Tuesday announced a sweeping overhaul of its business, which will see it reorganise into two two independent, publicly listed companies. The company would change its name to Teck Metals and would spin off its steelmaking coal business into Elk Valley Resources (EVR).

CEO Jonathan Price said on Tuesday that the transaction simplified the portfolio of each company, allowing for strategic and financial focus and the ability to pursue tailored capital allocation strategies.

“It provides investors with choice in response to the evolving investment landscape, and establishes a pathway to full financial separation of the two companies over time,” he said.

The transaction will complete the diversified major's exit from fossil fuels to focus on metals that are required in the shift to a low-carbon world. Teck last year sold its interest in the Fort Hills oil sands mine, in Alberta.

The separation is structured as a spin-off of Teck’s steelmaking coal business by way of a distribution of EVR common shares to Teck shareholders. EVR will be listed on the TSX.

Teck Metals will retain a substantial interest in steelmaking coal cash flows through a transition period in the form of an 87.5% interest in a gross revenue royalty and preferred shares of EVR.Teck shareholders will receive common shares of EVR in proportion to their Teck shareholdings at an exchange ratio of 0.1 of a common share of EVR for each Teck share (or about 51.9-million total EVR common shares) and about $0.39 cash per share for an aggregate of $200-million.

On completion of the separation, it is expected that EVR will be capitalised with $1-billion in cash and other working capital, no debt and $88-million in leases relating to operations. EVR will also have credit facilities in place to meet its existing reclamation bonding requirement and will establish an environmental stewardship trust for long-term environmental obligations.

Further, Teck has reached agreement with its steelmaking coal joint venture partners and major customers, Nippon Steel Corporation (NSC) and Posco, to exchange their minority interests in the Elkview and Greenhills operations for interests in EVR. As a result, EVR will own 100% of its steelmaking coal operations.

NSC’s exchange of its Elkview interest and its $1.025-billion cash investment will give it a 10% interest in EVR common shares and the transition capital structure. Posco will receive a 2.5% interest in EVR common shares and the transition capital structure.

“This significant participation by two of the world’s largest steelmakers highlights the long-term, critical importance of high-quality steelmaking coal in order to reduce emissions and build essential infrastructure globally,” said Price.

EVR and NSC will enter into an investor rights agreement, pursuant to which NSC will be entitled to certain customary rights including a right to nominate one director to the board of directors of EVR, pre-emptive rights on future securities issuances, and registration rights. NSC will agree to certain customary transfer and standstill restrictions.