Canada’s Teck Resources Ltd. said its board unanimously rejected a bid to purchase the company from one of the world’s largest miners, Glencore PLC, as the possibility of large-scale mergers rise in the industry amid high demand for metals needed in the transition away from fossil fuels.

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The surprise bid for Canada’s largest diversified miner came days after Teck produced its first copper concentrate from its Quebrada Blanca 2 (QB2) project in Chile, its largest project in terms of construction which is expected to double its copper production in the near future.

Glencore offered 7.78 Glencore shares for each Teck Class B subordinate voting share and 12.73 Glencore shares for each Teck Class A common share. The offer represents a 20 per cent premium for both classes, making it worth about US$23.2 billion at Friday’s closing prices, according to Bloomberg calculations.

In a statement on April 3, Teck said that it currently does not intend to sell. It described Glencore’s move as “unsolicited and opportunistic” and added that the deal would expose Teck shareholders to thermal coal and oil trading, which goes against the company’s objectives of moving towards producing commodities that support the energy transition.

“The board is not contemplating a sale of the company at this time,” Sheila Murray, Teck’s chairperson, said in the statement. “The special committee and board remain confident that the proposed separation into Teck Metals and Elk Valley Resources (EVR) … is a much more compelling transaction and does not limit our optionality going forward.”

Murray was referring to Teck’s announcement in February, when it said that it would beannouncement in February into two independent publicly listed entities: one that will solely focus on the metals needed for the energy transition, and one that will run its steelmaking coal operations.

Despite the separation, Teck Metals will continue to use cash flow from Elk Valley Resources.

Some analysts predicted that the separation could pave the way for companies to put in takeover bids for Teck.

Glencore’s proposal would also create two separate companies, which the company’s chief executive Gary Nagle said would be “materially better” than Teck’s proposed separation. According to Glencore’s model, the two companies wouldn’t depend upon each other and would act as stand-alone firms.

“Ultimately where this lands up is a merger of two terrific companies in the ratio of 76-24 with very healthy premiums for Teck shareholders,” Nagle said on a conference call on April 3.

Copper is expected to play a key role in the shift away from fossil fuels, given it is essential for most electricity-related infrastructure, including electric vehicles and wind turbines, and to transfer electricity. But analysts say that most big mining companies have limited growth opportunities for the red metal, which has set the tone for large-scale mergers.

Teck, on the other hand, is in the process of completing its QB2 project in Chile which is expected to produce 285,000 to 315,000 tonnes of copper annually between 2024 and 2026. Overall, it expects to increase its copper production to between 545,000 and 640,000 tonnes per year in the same time period.

The mining industry in general has witnessed a series of big takeover attempts in the past few years as resource industries tackle issues linked to climate change, rising costs and poorer quality of deposits.

In February, Newmont Corp., the world’s largest gold miner by output, offered to buy Newcrest Mining Ltd., Australia’s largest gold miner, for the equivalent of US$17 billion. While Newcrest rejected the deal, Newmont is likely to offer a counter. Late last year, Yamana Gold Inc. agreed to sell itself to two Canadian rivals, Agnico Eagle Mines Ltd. and Pan American Silver Corp., for about US$4.8 billion.

In rejecting Glencore’s bid, Teck also said that the move had a “high execution risk” since the proposal would require “complex approvals” from various regulatory bodies that could take up to two years to complete.

In response, Glencore’s Nagle said that while approvals do take time, the Swiss multinational has done such “high-level work” that there wouldn’t be any major impediments.

Nagle said some of the reasons Teck gave for rejecting the deal are not “real issues” and he hopes to have further discussions with the company.

The merger could create the third largest copper producer in the world with an annual production of about 1.3 million tonnes , he said.

Bank of Nova Scotia analyst Orest Wowkodaw described Glencore’s offer as an opportunistic bid to take advantage of Teck’s separation. “Given the ongoing industry challenges in building large scale copper capacity, we are not surprised to see the return of large scale M&A (mergers and acquisitions),” he said in a note.

However, Wowkodaw added that given the family control of Teck’s A shares, the likelihood of a successful transaction with Glencore was “extremely low” even in the event of an improved offer.

“I remain fully committed to Teck’s proposed transaction to create two world-class, well-focused, independent companies and I unequivocally support the board’s decision to reject Glencore’s unsolicited offer to acquire Teck,” Norman Keevil, chairman emeritus and the voice of the family that controls Teck Resources, said in a statement. “Now is not the time to explore a transaction of this nature.”

• Email: nkarim@postmedia.com | Twitter: naimonthefield