Teck Resources to buy oilsands partner SilverBirch Energy for $435 million

CALGARY — Canada’s largest publicly traded miner is acquiring SilverBirch Energy Corp. for $435 million, snagging full ownership in two oilsands projects and spinning out the rest into a new junior company.

Teck Resources Ltd. said Monday it will pay $8.50 cash for each SilverBirch share plus one share of a new spin-out firm, to be called SilverWillow Energy Corp. Teck will also contribute $25 million of working capital to SilverWillow.

Once the deal closes, Teck would have 100 per cent interests in the Frontier and Equinox projects, as well as a nearby property called Twin Lakes. The Frontier project is expected to produce more than 277,000 barrels of bitumen a day and about 2.8 billion barrels are slated to be produced over the anticipated 30-year life of the project.

SilverWillow, to be staffed by the current SilverBirch team, would have the early-stage Audet, Birch Mountains and Jordan properties.

The move expands Teck’s oilsands business and allows it to use the truck-and-shovel open-pit mining expertise it’s honed by mining coal, copper and zinc.

“The Frontier ownership structure is simplified, our exposure to oilsands leases not amenable to mining is reduced and Teck now has the opportunity to explore new potential partnerships and other alternatives to move Frontier towards development,” CEO Don Lindsay said in a release.

All of the assets left with SilverWillow, on the other hand, require in-situ techniques in which steam, solvents or both are pumped underground to melt the bitumen so it’s thin enough to flow to the surface.

The cash portion of the deal marks a 31 per cent premium to the average volume-weighted SilverBirch share price over the past 20 days on the Toronto Stock Exchange.

On Monday afternoon, SilverBirch shares rose more than 33 per cent to $9.60 on the TSX. Teck shares dropped 1.7 per cent, or 64 cents, to $37.71.

SilverBirch’s management team would move over to SilverWillow, which would trade on the TSX Venture Exchange.

“So you’ll have the same experienced leadership team with its proven exploration and development record working for the shareholders in SilverWillow,” said Lutley.

“We’ll also have a work plan focused on doing what we do best,” which is exploring properties, moving them through regulatory and engineering stages and deciding whether to advance them, he added.

The transaction has the support of SilverBirch’s board and two major shareholders, and is expected to close in late March or early April.

Teck is a diversified miner producing steelmaking coal, zinc, copper and energy. The company’s energy business includes the 20 per cent stake in the Fort Hills project and a 50 per cent interest in the Frontier project in the Athabasca region of northern Alberta.
© 2012 The Canadian Press