Canada’s biggest diversified miner, Teck Resources, on Wednesday announced the sale of its 21.3% interest in the Fort Hills Energy partnership to Suncor Energy for C$1-billion in cash.
With the transaction, Teck is exiting the oil sand business, in line with its strategy of pursuing growth in metals needed for the transition to a low-carbon world.
“This transaction advances our strategy of pursuing industry leading copper growth and rebalancing our portfolio of high-quality assets to low-carbon metals,” said CEO Jonathan Price.
“We will review the use of proceeds in accordance with our capital allocation framework early in 2023.”
Upon closing, Suncor’s aggregate share in the project will increase to 75.4% with TotalEnergies owning 24.6%.
Forts Hills, located in Athabasca near Fort McMurray, is an openpit truck and shovel mine, where raw oil sands bitumen is extracted and upgraded. The project has struggled with operational issues and Teck previously indicated that it wanted to sell its interest.
“While the Fort Hills mine has faced challenges in the early years of the mine life, including challenges due to government directed production shut-ins, I have full confidence in our current mine plan assembled with fresh external mining perspectives,” said Suncor interim president and CEO Kris Smith.
He said Suncor had been conducting an in-depth review of the Fort Hills project and had developed and commenced a multi-year performance improvement initiative. This recognises the medium-term challenges in asset performance and drives the necessary actions focused on optimising production, operating costs and capital requirements over the long term.
In the next 36 months, Suncor expects lower gross production and increased operating costs a barrel, each impacted by about 5% when compared with its most recent corporate guidance for 2022, owing to physical mine constraints, as well as accelerated development of further mine pits for increased sustained long-term production.
Closing of the transaction is subject to customary conditions including receipt of relevant regulatory approvals, and is expected to occur in the first quarter of 2023.
As a result of the transaction, Teck expects to record an after-tax, non-cash impairment charge of about $950-million in the third quarter of 2022.