Glencore plc (GLEN) Earnings Call Transcript & Summary

Good afternoon to all of those joining or good morning or late good night, those who are in Australia. Thank you for joining. I know it's a very short notice. I appreciate that you've all canceled your agenda, those who have and are able to join us for this call. I'm joined also by Steve, our CFO to be able to tackle any questions you guys may have. You would have also seen on our website, we've posted a presentation, a short slide presentation, which I'll take you through. I hope you all have that in front of you. And without further ado, we'll just kick off straight into that presentation. What we're here today to present is a very compelling proposal for Glencore shareholders and importantly, for Teck shareholders. It's compelling in both the financial sense and it's compelling with regard to nonfinancial issues for this very interesting merger between our 2 companies. So what we're proposing to -- what we proposed to the Teck board is a merger of Glencore with Teck and a subsequent demerger of our coal business, Teck's coal business and our ferroalloys business. So if we move to Slide 3, you'll note that from a financial perspective, the all-share merger with Teck B shares is at a compelling premium. It's a 22% premium based on Teck B shares, share price, the undisturbed share price at the close of business last Friday, the 31st of March. A 20% premium based on that share price on the day we sent our proposal to Teck's board on the 24th of March. A 20% premium based on the Glencore versus Teck share price using the three-month VWAP and a 30% premium on that same share price calculation using a 12-month VWAP. Given the additional rights that TA shareholders have, they receive the same premium to the spot, which implies 12.73 Glencore shares for each one of Teck shares. Ultimately, where this lands up is a merger of 2 terrific companies in the ratio of 76.24 with very healthy premiums for the existing Teck shareholders. And importantly, Teck shareholders continue to be large shareholders in the combined entity. This is not cashing out. This is an all-share merger between the 2 companies. Once the merger is completed and simultaneously with the completion of this merger, there would be a subsequent demerger of the coal business, which will comprise Teck's coking coal business, Glencore's steam and coking coal business and Glencore's ferroalloys business. The Metals company would include all Glencore's Metals business as well as its marketing business, it's recycling business and our energy business, excluding coal, obviously. The coal company would include Glencore, as I said earlier, Glencore's coking coal and steam coal business, Teck's steam coal business and our ferroalloys business, along with the marketing activities that go with both those businesses. We would list the metals company would remain listed in London as a primary listing and it would have a secondary listing on the Toronto Stock Exchange, a very important exchange as well as the Johannesburg Stock Exchange for our important South African investors. We're also proposing that the coal company has secondary listings on both the TSX and the JSE, but its primary listing we're proposing to be in New York given the feedback we've received about from investors and the appetite for a very strong world-class coal business on that exchange. With respect to some of the social issues, the management, the Board and the name of the company, we proposed to Teck that they would appoint the Chairperson of the metal's company and Glencore would appoint a Chairperson of the coal company. We also proposed that Glencore would nominate the CEO of the metal's company, and Teck would nominate the CEO of the coal company. And beyond that, it would be the best of both. We do recognize the terrific skill and quality of the people within the Teck business, and we also know our business has terrific skills and quality people, and we believe putting these 2 groups of people together and the best of both will create even better company for both metals company and coal company. We would also propose that the name of the metal company is Glenteck, which incorporates a very important name within the history of Teck and within the mining industry in Canada and worldwide. The coal company, we have not yet come up with a name, but I'm sure we'll find some very smart consultants to give us a good name for the coal company. Moving on and people ask why now? Why is this something now? Well, we believe that given Teck have proposed a separate transaction, we have a transaction here which is materially better than the Teck proposed transaction. And let's go through why we believe it is. First and foremost, there's a meaningful premium, and I've been through the numbers on the slide before, a meaningful premium for Teck shareholders. That is key in terms of their ability to be able to realize value from day one. It's also an all-share merger. This is certainly not a sale. It's an all-share merger where Teck shareholders get to participate in the value creation of these 2 companies. So where does some of that value come from? First and foremost, we believe there's actual and realizable synergies of anywhere, and these are, we believe, reasonably conservative estimates of between $4.25 billion and $5.25 billion on an NPV basis. How those are made up, and we'll have a slide on that a little bit later. But clearly, with Glencore's marketing arm, there's significant marketing synergies around as well as the normal corporate synergies one would have in a transaction of this nature. We've also done work previously with Teck management, and we continue to engage with them in recent times around potential synergies between QB2 and Collahuasi. Of course, we recognize both QB2 and Collahuasi have outside shareholders, and we're very respectful of their rights and their participation in any discussions around synergies, but some of the discussions that we've had with them at a high level where they are very supportive of trying to realize synergies for the better of all shareholders in both operations. And we believe by putting QB2 and Collahuasi together in conjunction with the fellow shareholders in these respective assets, there's significant synergies to be gapped. For shareholders in both Glencore and Teck, what does that leave them? It leaves them continued exposure to 2 stand-alone global mining giants. We have a metal company, which is the metals company, the go-to metals company, the best copper company in the world bar none. It will have Tier 1 portfolio of copper assets and an unrivaled suite of growth opportunities that both Glencore and Teck bring into this new company. In addition to these copper opportunities, there's a terrific nickel business, a world-class zinc business and the cobalt byproducts that we get out of our -- out of the Glencore copper business is a significant contributor to the world as the world decarbonizes. From a coal perspective, we have the world's best steam coal export business. We have Teck's excellent coking coal business associated with Glencore's coking coal business. And people forget we have some world-class coking coal assets in Australia, which will also be contributed to this business. And this coal company, along with the ferroalloys business would be highly cash generative. It will be a diversified producer around the world present in South Africa, in Colombia, in Australia and in Canada. It would provide very attractive capital returns through the cycle for its investors. And the key issue between these 2 companies, which is going to be a key differentiator between the current Teck proposal and the proposal we've put to the Teck board is that there's no intercompany arrangements between metals company and coal company. There will be 2 truly stand-alone companies. There will be no reliance on each other for funding or anything of the like. We believe that the metals company will have a significant cash flow stream that through the cycle, we'll be able to invest in its projects as the world needs to build these projects and bring copper into the market. And the coal company being highly cash generative, would be able to distribute 100% of its final cash flows back to shareholders as a terrific yield to those shareholders. And lastly, given the nature of how these companies will be made up, we believe that both of them should trade at a premium relative to their peers in the market. And this value creation is something real for all shareholders from day 1. So moving on to Slide 5 where we break down the synergies into a little bit more detail. And we believe these are really comfortably deliverable. Starting at the top where our marketing synergies around being able to have networks of information, blending opportunities geographic arbitrage opportunities, smelter optimization, concentrate complex and simple concentrate lending and fees. This provides huge amounts of opportunity for the combined metals business. It's not only combined [indiscernible] opportunity for Metals business, but in the coal business as well, the ability to be able to supply coking coal from Australia and from Canada into various markets and create those geographic arbitrages. So we believe there's at least $300 million of EBITDA available annually on a combined basis to those businesses on an NPV basis, that's a little under $3 billion of NPV, absolutely realizable real NPV that these businesses will achieve by moving ahead with this structure and not an alternative structure. Of course, we also have some overlapping infrastructure around the world and various other overheads. Operating models, which can be put together and significant synergies realized by cost savings. We believe there's at least $200 million of annual EBITDA savings across operating and overhead optimization, and that adds an additional $1.5 billion of synergy value to this transaction on an NPV basis. We then also had a look at the Collahuasi, QB2 long-term operational synergies. And as I said before, this is a discussion we've been having for some time with our colleagues at Teck. And we believe from a Glencore and Teck perspective only. So just taking into account the synergies that the combined shareholders of Glencore and Teck would be able to achieve. There's a minimum of $1 billion of NPV synergies available to those shareholders. This is real where we see Collahuasi higher grade ore through the QB2 terrific processing facilities that are just being commissioned at the moment. There's obviously also significant overhead and procurement synergies that we believe can be achieved by putting these 2 great assets together and building what we believe would be the best premier copper operation in the world. So when we add all that together, we have a total synergy value of anywhere between $4.25 billion and $5.25 billion. And as we said -- as I said previously, these are comfortably deliverable to all our combined shareholders. And really, the icing on the cake is the fact that the re-rate potential, which we've been quite conservative on for these 2 assets is significant. These are 2 bigger, better, more diversified businesses. They, in fact, both of them will be leaders in their field, the best metals company, the best coal company in the world. And on an initiative basis, and we believe this is conservative, we used 0.5 turn of EBITDA re-rate, which we believe would add at least $15 billion of market cap onto the value of these 2 companies. Now the great thing about what we're proposing under this merger is that these are shared with all shareholders. This is not a cash buyout. This is not purchases. This is not a sale of Teck. This is a merger on a 76-24 ratio basis with a premium where all shareholders get to benefit in these fantastic synergies. Moving on to Slide 6. We obviously are as Glencore, a very big investor and operator in Canada, and we believe that we will deliver real benefits to Canada through this merger. We have a long history in Canada. We're currently finishing our Onaping Depth project in Sudbury Basin, which is over $1 billion of capital spend. We employed thousands of people in Canada as to Teck. And on the right-hand side of the slide, you can see the commitments we have made to ensuring Teck's Canadian legacy will be secured. So let's look a little bit more -- into a little bit more detail on each of the 2 companies, and start with the metals company, which will be the leading decarbonization critical metals exposure vehicle. There will be no better company in the world. So looking across the top, it certainly is to drive commodity exposure. It's got the commodities that the world needs. The world's best suite of copper assets, currently the largest producer of cobalt, a key ingredient in home electronics and EVs, a very large producer of the battery-grade nickel, low-carbon battery-grade nickel. And together with Teck's zinc assets and Glencore zinc assets, very large zinc producer, providing the important galvanizing ability for steel around the world, particularly in offshore winter [ lands ]. These are significant scale assets, each one in their own would be market leaders. They're high-quality assets. If we just run through some of the names and those people and those on the call obviously understand the industry know that the Collahuasi, Antaminas, QB2, Antapaccay, Katanga and Mutanda of the world are the leading copper producers in the world. Nickel, we mentioned, of course, our integrated nickel operations in the Sudbury Basin. We also have Murrin in Australia, both of them producing low-carbon high-grade battery-grade nickel. And on the zinc side, Red Dog, a world-class asset, combined with Glencore's world-class Kazzinc and Murrin and Mount Isa assets gives us significant ability to supply the zinc the world needs as the world decarbonizes. And married to those assets, we've obviously got our resourcing business. This is something that's growing and would be a key part of this decarbonization metals company as primary metal competes with secondary recycled metal in a circular economy bringing our recycling business into this metal company would set it apart not only because of the quality of the assets, but also because the ability to provide this recycling material to our customers. And of course, there's the metals and energy marketing side, where Glencore is the leader of marketing commodities around the world, very successful over many, many years, we'll bring that expertise into the metals company and continue to market obviously, Glencore's material, but it's material from the Teck assets, creating additional synergies as outlined in the previous slide. Together, both companies have a significant pipeline of growth opportunities. In previous Capital Market Day presentations and industry presentations that we've made. We've outlined Glencore's clear path to grow its copper production from 1 million to 2 million tonnes of copper. This is predominantly brownfield expansion, lower risk low capital intensity, easy achievable copper production. The vast majority of Glencore are brownfield, out of projects that, again, that you know, we've got our Agua Rica project, our [indiscernible] project, the expansion in the Mutanda sulfides, our Collahuasi expansion, which we do in conjunction with our partners in Collahuasi, and our Antapaccay expansion. We also have, of course, our terrific greenfield El Pachón project, which eventually will come into the market. And likewise, Teck have their own terrific suite of projects. The new range, the expansion of QB2 into QB3, San Nicolas, Zafranal, Galore Creek, NuevaUnion and Schaft Creek, all very good projects in their own rights. These 2 -- this metals company will be diversified geographically as well across the key mining regions around the world, we're covering Chile. We cover Peru, we cover Kazakhstan, we cover the DRC, we cover Canada. We cover the U.S., we cover Australia and a number of projects in places like Argentina and even Mexico. These are terrific assets in jurisdictions across the world and having that Geographic diversification is critical. We've seen around the world how many countries continue to change sometimes the rules of the game, whether it be -- whether it be in Chile, whether it will be in Peru, wherever it may be. So having these assets across the world in all these geographies gives this company huge strength in terms of its diversification geographically. At the bottom of the slide, you'll be able to see an indicative 2025 EBITDA breakdown between the various commodities, copper making up 60% of the indicative EBITDA in 2025. That obviously includes the huge value provided by our Cobalt business. And this asset -- this company would have the best of both operating cultures and be supplemented by Glencore's expertise in marketing. So moving on to Slide 9. That visually just shows you what kind of company we will be building together here with our Teck shareholder colleagues. At the moment, Teck produces just over 250,000 tonnes of copper, and once QB2 is ramped up, and we're very happy to see first concentrate come out last week, and congratulations to Jonathan and his team, they would ramp up to over 440,000 tonnes of copper. Glencore currently had 1 million tonnes of copper. Putting the 2 together, will be a 1.3 million tonne copper producer and nearly 1.5 million tonne copper producer once QB2 has been ramped up. But that's just really the base business. 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 funneled into this terrific growth pipeline that the new company would have. So if we move on to Slide 10, we have a better view of what that pipeline looks like. As I said, Glencore today, about 1 million tonnes of copper, QB2 about 250,000 tonnes and QB2 being ramped up to 440. That leaves us up to 1.4 million tonnes. We then have a list, and I've been through the names before, but if you look through the brownfield projects, Glencore contributing more brownfield projects than Teck at this stage. But I mean, that's -- it's not about counting the numbers, it's about putting the best of all projects together efficiently allocating capital to the lowest capital intensive, highest margin projects to bring those tonnes into the market as we need it. So the brownfield project is significant. I've been through them, the Collahuasi fourth line, the QB2 expansions, the Mutanda sulphides, [indiscernible] and others, that provides significant growth of copper projects, low-risk copper projects for this new metals company. And once we built those brownfield projects and the world still needs the copper that it needs to decarbonize, we have a host of greenfield projects. In Glencore, we have the world's best greenfield project in El Pachón in Argentina, 100% owned by Glencore, while in Teck, they also have 3 very big greenfield projects. The 50% owned Galore Creek, the 50% owned NuevaUnion and a 75% owned Schaft Creek. Now of course, having all of these projects, along with El Pachón and the 2 slightly smaller projects in San Nicolas and Zafranal, allows the company to be able to allocate capital efficiently, smartly and to the right projects at the right time to be able to maximize value for both Teck and Glencore shareholders. And that brings the combined business up to around 3 million tonnes of copper production, certainly the best and biggest copper producer in the world, bar none. Moving on to the coal company. As I said earlier, this is a highly cash-generative coal and carbon steel business. It will be the leader in the world in terms of that type of business. So starting again on the left on Slide 12. This would have the world's best seaborne steam coal business. In Australia, last year, the business produced over 60 million tonnes of high-quality seaborne steam coal. South Africa, a little over 15 million tonnes and Colombia maybe [ 20 million ] tonnes. On the Met side, Teck's own business, the Elk Valley resources, that produced to over 21 million tonnes of high-quality coking coal and that will be supplemented with Glencore's own high-quality coking coal out of Australia last year producing just under 13 million tonnes. So a real player in the met coal business. So we have a business year that is, although it has more steam coal in tonnes than met coal, a very balanced in terms of potential revenue and earnings between the 2 businesses between met and steam. It certainly is not a heavily weighted steam coal business. It's a -- from a profitability perspective at quite an equal met and steam coal business. In addition to that, in the steam coal numbers for Glencore's tonnage, we do include our soft coking coal, which we know and we saw during 2022 has the ability to swap between a high-quality steam coal and into a semisoft met coal depending on market conditions. We also have our leading producer of ferroalloys in our new coal company. We produced at least 1.5 million tonnes of ferrochrome, high-quality ferrochrome, critical in the world's need for stainless steel, a terrific business that's been cash generative throughout the cycle. The business would have zero net debt. And that's a joy for any coal company today to have zero net debt on a using 2023 consensus numbers, you'd have an EBITDA in that coal company of around $16 billion and pretax cash flow of around $14 billion. And the intention is that this coal company would have a 100% cash payout shareholder return policy. There's no preference dividends, there's no royalties other than existing royalties within the current leases to be paid to any other company to help fund those companies grow or do anything else. These cash flows are for the shareholders, the Teck and Glencore shareholders of their company. And importantly, we don't ignore climate, and we fully intend for the coal company to respect the net zero climate strategy Teck has announced in the spec of its coking coal business and to also continue to oversee the responsible decline of the thermal coal business currently in Glencore's portfolio. So moving on to the final slide and a summary of where we are. We are unlocking unique and compelling value for all stakeholders. Teck shareholders, Glencore shareholders through this merger employees, communities and the like. We create 2 stand-alone companies with substantially larger and a more diversified portfolio of assets than those -- than the proposed check metals and the Elk Valley resources is currently proposing. The metals company will be a world-class stand-alone transitional metal business. It will have a diversified portfolio. It will be the leading player in copper, the leading player in cobalt and key player in both zinc and nickel, which are all needed for the energy transition. Likewise, the coal company will be a leading player in steam and met coal and will be highly cash generative as a stand-alone coal and carbon steel business. And unlike Elk Valley resources, it will have no financial -- ongoing financial obligations to metals company. Metals coal through its own cash generation, will be able to fund itself, fund its growth, fund its expansion to that 3 million tonnes. The exchange ratio, as we've outlined on the first slide of 7.78 Glencore shares per Teck B share represents a significant premium of 22% based on Teck's undisturbed last close on Friday last week on 31st of March and it is a significant premium on the 30-day VWAP and the 12-month VWAP for those same shares. When we put those together in terms of ratio, as we said, Glencore and Teck shareholders would merge together and jointly own the new company 76-24. There's certainly no sale of Teck to Glencore. Huge synergy potential, $4.25 billion to $5.25 billion of synergy value before any potential re-rating and we believe that re-rating could unlock conservatively $15 billion for Glencore and Teck shareholders. And of course, we have a full commitment to continue to Teck's legacy and deliver real benefits to Canada. So with that, I'll end the presentation and turn it over to Q&A.

[Operator Instructions] And the question comes from the line of Ian Rossouw from Barclays.

First question, just does this approach for Teck make you think differently about your own portfolio. I mean if this deal doesn't proceed, would you consider spinning off your coal and ferroalloys business? And then just secondly, do you expect any sort of antitrust issues on any of the commodities, I guess, copper, zinc, cobalt, nickel?

Yes. Thanks, Ian. On coal, Look, we've always said that we would continue, and we have continued our engagement with shareholders after our climate vote last year. And we always said that there was a strong support from our shareholders to divest, that's something we would do. To date, we have not had that strong support, but we continue to engage with our shareholders. What we're doing here is something different. It's not just a simple vanilla divestment. This is something that's using the coal assets and a divestment of the crises to create value for Glencore and Teck's shareholders. It's a unique opportunity to put the Glencore steam coal business with Teck's met coal business and Glencore Ferroalloys business, which creates huge value for the respective shareholders and it allows an opportunity to put the 2 metals businesses together, which in turn creates significant value for the shareholders and stakeholders in that sense. So that's the value creation we are attempting to achieve through this terrific proposal. On the antitrust, of course, there's more work to be done. It's early days. We have done some cursory work, and we don't believe there are any major antitrust impediments to implementing this transaction.

And the next question comes from the line of Liam Fitzpatrick from Deutsche Bank.

Two questions from my side. Just given that the Teck board and the major A Class shareholders are not supportive at this stage and you need them to really get this over the line. How disciplined will you be on value? Because everything that you're putting in the presentation today is about a merger rather than an actual takeover. That's the first question. The second one, I guess, coming back to Ian's question on one-off pursue a split of your own business in the first instance. Have you considered that as an easier step first of all, before attempting these types of transactions?

I'll answer the second 1 first. We don't believe that doing that as a first step is value. Firstly, as assured of creating the value always is as value accretive as doing that in one transaction. We believe it makes a lot of sense doing it as one. Given that Teck have gone ahead and announced their proposed demerger or spinoff of coal, it was the opportunity to do this and create that value. We don't believe that doing our transaction first and then trying to implement this given Teck would have already done this is it's a much harder transaction to implement and potentially not as value accretive. On your issue about emerge and takeover versus takeover, I mean this is clearly a merger. We've approached Teck for some time on that basis. We continue to approach Teck on that basis. This is a win-win for all shareholders, for Teck shareholders and for Glencore shareholders. This is not a sale of Teck, this is not a takeover of Teck. This is a merger of Teck, and that's what we want to implement, yes.

Could I just follow up briefly on the regulatory question because Teck put in their release that your proposal could take 24 months to get through all the various hoops and approvals. Do you agree with that? Could it be that complex and lengthy in terms of getting through the -- all the approvals that you need?

I mean we know approvals do take some time. But given the fact that we have done some high-level work on it, we don't believe there are any major impediments to be able to implement this and that's why we think the risk of not -- the antitrust risk is extremely low. And the upside here is significant value creation as well as a big premium for Teck shareholders from day one.

And the next question comes from the line of Alain Gabriel from Morgan Stanley.

I have 2 of them, please. The first 1 is, Gary, given that the deal terms have already been presented and scrutinized extensively by the tech board and then retracted on various grounds, and reading through the letter from Teck, their stance was pretty firm and definitive to some extent. What do you hope will change from here going forward? That's my first question.

Thanks for your question. What we propose to take is something that's very compelling. It's incredibly compelling, both financially and non-financially. This is a very compelling merger. Unfortunately, we've -- we have engaged with Teck for some months now, but not substantively. We would through be able to -- we haven't gone to the press on this either. We've done this bilaterally. We have a very good relationship with Jonathan. And we would propose that we sit down with Jonathan and his team and work through. We've read the response that they've sent out today. We believe that perhaps some of the issues that they raised are not real issues. And why we say that is not because they don't believe that they are real issues, but with some work, with getting around the table and working together, we can explain why we don't think they're issues and how they can be mitigated and how value can be created by putting these 2 -- by merging these 2 companies together.

And my second question is that hypothetically, if the deal does not go ahead, do you see an opportunity to sit down with Teck and talk more about JV opportunities and synergies from company to company level without any merger of the 2 companies?

Absolutely. I mean we've already done a merger of Mesaba and PolyMet and the teams worked terrifically well together. We've been working with Teck for some time already on ideas around the QB2, Collahuasi merger. Now that we can't do alone. We need obviously to include the other shareholders. But we've already had discussions with them and work being undertaken. So we certainly -- one thing about our company, we hear about value. And if we cannot get this transaction done, I believe we're leaving massive value on the table, but of course, there's other value to be gained by working with Teck and their great management team in looking at shareholders at asset -- I mean, looking at synergies at asset level.

[Operator Instructions] And the next question comes from the line of Jason Fairclough from Bank of America.

Just to follow up a little bit on this. So you've approached the Board of Teck. They've said no. And bottom line is, unless they've sort of changed their mind, that's kind of it. So just wondering what does the plan B? Are there other companies where you see value through combination? And then, I guess, just secondly, in terms of the vision for marketing, you're saying splitted in two, I guess I'm just wondering what are the implications there for cost of capital, economies of scale, et cetera.

I'll leave the second one, I think it's probably good -- Steve can probably take the second one, he is on the call, but I'll mention -- I'll talk on the first one. Jason, we're obviously looking at opportunities all the time in this company, but as I said in the previous answer to Alain, it's always about value creation. And when we look around where do we see the best value creation is this bar none. This is the best value creation for Teck shareholders, for Teck stakeholders as well as for Glencore shareholders and stakeholders. I mean, we're not going to get into plan B, C, D, and E where we want to go for plan A, which makes the most sense for all combined shareholders.

Okay. And Jason, just on -- can you hear me Jason?

Yes.

Yes, absolutely, Steve here. On the marketing, it shouldn't be -- I don't see any particular negatives either from financing or cost of capital. We would see the marketing of both alloys and coal move across into CoalCo, and that would seamlessly continue to doing what they're doing allied with the additional coking coal units specifically. So that's where we do see some synergies. The vast majority of the synergies -- the majority of the synergies would apply across the metalsCo. And of the -- we would see some of the existing 500 or so our estimate on the existing EBIT within our 2.2% to 3.2% range. That would be the marketing for coal and alloys that would move across. 300 of that, as we said, would be compensated or additional synergies on the marketing across both metals and coal. And we would look to also as we work through these numbers, given the performance of the business over the last 2 or 3 years and with the higher working capital, the high interest rates, we think, long term, we would be able to move to a $2 billion to $3 billion EBIT range across marketing within MetalsCo, which is a slight upgrade on our existing 2.2 to 3.2 range as well. But we don't see any particular negatives just a continuation of 2 strong marketing business and synergies across both companies.

And the next question comes from the line of Danielle Chigumira from Credit Suisse.

First question is on the CoalCo. So could you tell us what the combined rehabilitation liabilities are on the coal portfolio? And what's the plan for funding those long-term given the comments around 100% payout ratio? And the second question is on the Viterra -- so the plan includes Viterra in MetalsCo with a plan for divestment. How advanced currently as is planned for divestments for Viterra?

I mean, I'll just -- I missed the second question, so maybe you can repeat in a second, but let me just answer the first question. Each company obviously has its own rehab obligations in terms of both statutorily, what they need to do and operationally, what needs to be done. As you would know, in coal operations in many cases, a lot of rehab gets done as you mind. Backfill with top soil and rehab as you mine to limit the extent of the end of life of mine rehab obligation. Under the current EBR proposal, there's obviously a fund being set aside or cash flow being set aside to be able to sit there and fund that the closure rehab when those mines close. Under our proposal, there's no need to do that. These -- this business will be very cash generative through the cycle, it will have its cash available from its diversified business across geography, across product be able to fund those ongoing rehab obligations and close obligations as they occur. And do you mind repeating the second question? I heard you say something about Viterra, but I just missed it.

Sure. So the plan is to include Viterra in MetalsCo with a plan for its divestment. So how advanced the plans for the Viterra divestment today?

I mean, Viterra, this is -- we covered on our investor call is a terrific business, and we believe that there's value creation by -- for Glencore by divesting that business and putting into its own in some shape or form value creation by taking it out at Glencore. It sort of gets grouped together as a mining company, and of course, it's not a mining company. It's an agricultural origination and marketing and distribution company, a world-class business. We will act on Viterra where the right value opportunity comes up. There's obviously opportunities come up all the time, but we're certainly not going to do something just for the sake of doing something. We want to maximize the value of Viterra for our shareholders, and that will be done when the right opportunity presents itself.

And the next question comes from the line of Chris LaFemina from Jefferies.

Gary, you mentioned pretty confident view around antitrust. And if we go back to when Glencore bought Xstrata, I remember we did like the HHI scores, and there was no clear anticompetitive risks around that merger. But MOFCOM did extend the review period and ultimately determined that this was anticompetitive and Glencore and Xstrata had to propose remedies, I think the sale of [indiscernible] was a result of that. And at the time, which was a decade ago, copper probably not as strategically important to the Chinese. I think the combined market shares of Glencore and Xstrata was smaller in copper than what Glencore and Teck would be. So what gives you the confidence that you can get approval from MOFCOM. And then secondly, if you can't, let's assume that this deal were to go forward and MOFCOM were to object. Does that mean that the deal can happen? Or would you have to propose remedies? Or could you go ahead with it anyway.

Yes, Chris, thanks for your question. Look, I mean, it's early days on antitrust, but we certainly weren't going to make proposal to merge Teck with Glencore until we have done some work. And we've done some work and the high-level work that we've done gives us a lot of confidence that MOFCOM as well as all other antitrust authorities should have no issue with approving the proposed merger of the 2 companies and then the demerger of the coal company, we believe that based on the work we've done, and we're very happy to sit with Teck and take them through the Teck management and take them through that work that we don't believe that there is a risk and antitrust risk around this transaction.

And the next question comes from the line of Andrew Keches from Barclays.

I heard you refer earlier to the coal company having zero net debt. I would presume that means you're leaving the bond structures of Glencore and Teck attached to the remain Co, the base metals business. So first question, I guess, a, can you confirm that? And then the follow-up to that would be -- what does that imply for your gearing and your leverage post transaction? And would there be a plan to take leverage back down below? I mean, I recognize your commitments are on a net debt basis, including 100% RMIs, and you may still be below that, but you are going to lose EBITDA as a result of this transaction. So just help us think through that.

Yes. Thanks, Andrew. It's Steven here. You're correct on the assumption that all the debt would remain within the -- within MetalsCo as sort of shares are issued and spinoff of CoalCo would be done on a debt-free basis exactly in accordance with that. We would look on a pro forma basis, exactly you said, within the MetalsCo. It will have lost some of its coal cash flows clearly as well, but it's gaining enormous additional value and contribution through the copper, zinc and metals assets. We've run some numbers and in comparison to Glencore's existing, we would still have a financial strategy to both achieve, maintain and optimize around the strong BBB BAA rating, which is consistent with where Glencore is at the moment. And we've looked at various metrics and scenarios and the $10 billion optimal level or cap of hours, we would look to reset that around the $8 billion level. So we would take that down. Relative to the pro forma metals business. That was a net debt to EBITDA of about 0.5x on a pro forma 2022 basis. There is growth in volume. There is improvements in that overall portfolio. And we think set around the level $8 billion level would be consistent with maintaining our strong financial profile and targets of our current BBB+ BAA1 level, which is where we are. Both companies are effectively net debt at the moment. So through any particular transition period on a like-for-like basis, there'd be an allocation towards the balance sheet in MetalsCo of around $2 billion from that $10 billion to $8 billion and then reset at that level, which we believe is consistent with Glencore's financial policy and ratings targets as they stand at the moment.

And the next question comes from the line of Tyler Broda from RBC.

Great. Two questions for me. One of them is around the JV structures, I guess, on Antamina. Is there any -- you'd get majority control at this point? Is there any provisions around that or any constraints around that? And then on Collahuasi, how would you expect to share the benefits with Anglo American? And then the second question would be the Elk Valley spin-out vote is expected on April 26. Is it still possible to do the deal after that?

We don't see any issues around -- Tyler, thanks. We don't see any issues around the Antamina control issue, putting the shares together. We don't see any issues around that. It should be no problem under the existing shareholders' agreements. In terms of the sharing of the synergies with our other shareholder, remember, it's not only [ Anglo ] who are shareholders in Collahuasi and it's not only Teck who owns QB2. There's other shareholders on both sides. So we need to be cognizant of all stakeholders in this discussion, and it should be an equitable and fair sharing of synergies between all stakeholders bringing value to the table. Sorry, Tyler, what was your last question if I recall?

Well, just the vote for the spin-offs coming up on, I think it's April [ 29 ] or something. I guess after that vote as gone through, is it still possible to do this transaction from your side?

Well, it depends if that's goes through.

And the next question comes from line of Myles Allsop from UBS.

Just a few quick questions. With the structure of the CoalCo and the base metal company. Why did you decide to retain oil marketing with the metals business? Secondly, just with the marketing synergies of $300 million, how does that split broadly between the coal business and the metals business? And then with -- if we see the Teck deal being approved, is at the end of the journey? We're proposing this. Could you -- would you ever consider adding a cash sweetener to try to make this deal happen?

Why we've included the energy marketing business with the metals companies for a few reasons. Number 1 is the energy marketing business relies heavily on banking lines, and those banking lines exist -- there's significant banking lines in the -- in the Metals business, we don't -- as we said, we have run CoalCo with zero net debt and very few banking lines. So from a bankability perspective, it makes more sense in the metals company, number one. Number two, the energy business is -- it's a diversified energy business. Oil and products are not the majority of that business in terms of profitability, particularly in 2022. It also marked significant amounts of transition energy products. LNG, as the world recognized as a key energy source as part of the transition to a decarbonized future. And LNG is making a big -- is taking a bigger, bigger portion of that energy marketing business. It also includes biofuels marketing. It also includes power. It also includes carbon. So these are key parts of the NG transition. And as those parts of the business grow and the traditional older school top oil marketing shrinks, it becomes more and more relevant in an energy transition vehicle. The question if Teck approved this is at the end of the journey, I think that was your second or your third question. Of course, I mean, the shareholders need to decide if assuming the Teck go ahead with their vote on the 26th of April, the shareholders need to decide. And if it goes ahead, well, that is the end of this proposal. This proposal can't be implemented afterwards. It needs to be implemented now. We believe it's a substantially better proposal than the current one being put to shareholders.

And adding a cash sweetener. Is that an option as you see it? Or is this going to stay as an equity transaction?

Myles. What we propose to check is something that's incredibly compelling and something that is a merger. When you start adding cash, then it becomes takeover and all those sorts of things. So we purposely put together something that is a true merger here, where Teck shareholders get to participate in all the value creation that we outlined in our [ class ].

And the question comes from the line of Bob Brackett from Bernstein.

I suppose that's Bob Brackett at Bernstein. In terms of next steps, I suppose there's clearly the April 26 vote. There's also a bit of this education campaign that you're doing today, and I assume we'll continue for Teck shareholders. There's a third possibility where you'll respond to the letter, the rejection letter from Teck sort of factor by factor. Are those logical next steps? And within that, one of the concerns Teck had was the energy marketing business. So I understand you just said it makes more sense for the energy marketing business to stay in the MetalsCo. But if that's a deal breaker or a maker, could you put energy marketing by itself or put it into coal?

Thanks for your question. Look, in terms of next steps, I mean, we didn't expect to be on this call this afternoon with you, but it's always good to talk to you, of course. So the next steps are being worked on. I mean, we would like to engage with Teck management further. We did receive the letter. Jonathan was great. He called me before the letter came, all very in good spirit and the strong relationship that we're building between us. So the next steps will be determined as we go going forward. Of course, should Jonathan want to engage further and understand more about the energy business and I've outlined why I believe the energy business makes abundant sense in the metals company. We're very happy to work with Jonathan and his team to show them the value that energy would create for metals company within the construct that we proposed.

There are no further questions at this time. I would like now to hand the conference over to our speaker, Gary Nagle for any closing remarks.

First, just to thank everybody again, I know a very short notice and for some people, very strange times of the day. So thank you all very much for joining us. We really appreciate it. What we've put out here is, as we've said a number of times, a very compelling merger. This is a merger between 2 great mining companies, and it's compelling in both the financial sense and with regard to nonfinancial metrics where we unlock true value for all stakeholders. So with that, I'd like to thank everybody for joining.