Japan’s JFE Steel Corp is in talks to buy a stake in the metallurgical coal business of Canada’s Teck Resources, two people aware of the development told Reuters, adding to the list of suitors that also includes miner Glencore.
Major steelmakers are seeking to diversify their supplies of coking coal due to sanctions on Russia, one of the leading producers.
The previously unreported talks between JFE and Teck have been ongoing since September, another source said. The sources declined to be identified as they are not authorized to speak publicly.
“We will continue to consider the acquisition of interests in coking coal, but we cannot answer individual questions,” a spokesperson for Tokyo-based JFE Steel said in an email. JFE is one of Japan’s largest steelmakers.
Teck said it does not comment on speculation and referred to its earlier statement that the company is engaging with various counterparties regarding the steelmaking coal business.
The talks are early and may not result in a deal, one of the sources added. It was unclear what stake JFE was seeking or what price it was offering.
There are only handful of steelmaking coal producers in the world, with the biggest in Australia, Canada and Russia.
Japan’s Nippon Steel has previously said it was looking to buy a 10% stake in Teck’s coal business for C$1.15 billion, valuing the overall business at about C$11.5 billion, with an option of increasing its stake to 17.5%.
Teck has been considering splitting its coal and copper businesses since March, but shareholders voted down its original proposal. In April, Teck rebuffed a $22.5 billion unsolicited takeover offer for the entire company from Swiss mining and trading firm Glencore.
Glencore has said it will consider buying the coal business for about $8.5 billion.
Teck shares were trading down 0.6%, while the benchmark Toronto share index was down 0.1%.
JFE Steel holds 15% equity in India’s JSW Steel, which was also exploring an investment in Teck’s coal business. But Reuters reported in September the process had slowed down due to India-Canada diplomatic tensions.
Earlier this month, Teck CEO Jonathan Price said the company had received multiple suggestions from investors on how to separate its coal and metals businesses and he was hoping to make a decision on the split by the end of this year.
Price said the company had two options — a 100% sale of the coal business for cash or a partial sale of the coal business, with proceeds going to growing the copper business.
