Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
France’s TotalEnergies will buy an extra stake in western Canada’s Fort Hills oil sands mine from Teck Resources, the companies said on Friday, leaving partner Suncor Energy with a smaller slice than planned in a project that has struggled with operational challenges.
Suncor announced in October an agreement to buy Teck’s 21.3% interest in the mine, but TotalEnergies on Friday said it would exercise its right to first refusal and buyan additional 6.65% of Teck’s share for C$312 million ($234 million) on the same terms as Suncor’s deal with Teck.
“We still expect the sale of our entire interest in Fort Hills to close in the first quarter,” said Teck spokesperson Chris Stanell.
Fort Hills is a 194,000 barrel per day (bpd) open-pit truck and shovel mine, where raw oil sands bitumen is extracted and then sent to upgraders. The project has struggled with operational challenges, delaying production increases and raising costs.
In December TotalEnergies filed an application in the Alberta Court of King’s Bench challenging the validity of the right of first refusal notice it received from Teck.
Teck said TotalEnergies did not succeed in its court application.
The deal means operator Suncor will expand its majority interest to just under 69% of Fort Hills, instead of 75.4% as planned.
“Fort Hills partners have a Right of First Refusal and Total is exercising their right to acquire a portion on a pro-rata basis,” Suncor spokesperson Sneh Seetal said. “We will acquire the rest as originally planned.”
TotalEnergies, which also owns a 50% stake in the Surmont oil sands project, said last year it wants to spin-off its Canadian oil sands operations as the assets do not fit its low-emissions strategy.
“Total didn’t want Suncor to get the asset for a song,” said Jonah Resnick, an analyst with energy consultancy Wood Mackenzie. “For Total, increasing its overall working interest means they have a little bit more to add to the table for the new entity they’re spinning out.”
Shareholders will vote on the spin-off plan at TotalEnergies’ annual general meeting in May.
Buying an additional stake in Fort Hills takes the company’s total share of the project to 31.23%.
“By seizing this opportunity to grow its business under attractive conditions, TotalEnergies EP Canada will deliver value to the future shareholders of the spin-off entity”, Jean-Pierre Sbraire, CFO of TotalEnergies, said in a statement.
(By Nia Williams; Editing by Diane Craft and Josie Kao)
Read more: Teck’s oil sands exit faces legal challenge
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