Glencore Plc underlined its continued interest in a deal with Teck Resources Ltd. by holding back $2 billion for a potential purchase of the Canadian miner’s coal business — cash it would otherwise have returned to shareholders.

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(Bloomberg) — Glencore Plc underlined its continued interest in a deal with Teck Resources Ltd. by holding back $2 billion for a potential purchase of the Canadian miner’s coal business — cash it would otherwise have returned to shareholders.

Glencore disclosed the new deals war chest in its first-half results Tuesday, as it joined rival miners in reporting a steep drop in profits after a retreat in commodity prices combined with a return to more normal trading conditions, following 2022’s wild swings.

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The Swiss company earlier this year made an unsolicited offer to buy all of Teck and then split their combined metals and coal businesses, which was repeatedly rejected. In June, it proposed buying Teck’s steelmaking coal business for about $8 billion as an alternative to its full takeover bid — still with the intention of spinning off the merged coal operations within a year or two.

The takeover fight with Teck has marked the first time that Glencore — one of the world’s biggest coal producers — has explicitly opened the door to exiting the business in the short term. It’s also representative of a wider return to merger and acquisition activity across the industry, as mega miners seek to expand in the metals needed for the shift to clean energy.

Read: Glencore’s Bid for Teck Shows It’s Willing to Abandon Coal

Glencore also has been busy with smaller deals beyond Teck, announcing deals to add aluminum and copper assets as well as secure lithium offtake for its trading business.

But Glencore made clear on Tuesday that it’s still very interested in the deal with Teck, in which it is seeking to combine the Canadian company’s steelmaking coal business with its own thermal coal mines.

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“In the calculation of ‘top-up’ shareholder returns for the current period, we positioned for an amount of $2.0 billion towards such potential transaction, as a reasonable balance between rewarding shareholders today, and ensuring that the company is appropriately capitalized,” Chief Executive Officer Gary Nagle said in the report.

Coal Questions

Nagle repeated previous comments that Glencore isn’t considering an exit from coal separately from the Teck bid. The spinoff plan has raised questions about Glencore’s future producing the most-polluting fuel — the company had until now said it would keep running its mines until they are depleted by 2050. 

“We have a terrific coal business, a world-class business steam coal business, and spinning it out by itself, our shareholders at this stage don’t want us to do that,” Nagle said. “They do see, that if we combine it with Teck’s met coal business we have an even bigger and even better coal business. They see that as something that is value accretive to them and are supportive of a spinout.”

Read: Glencore Half-Year Profit Drops 50% as Commodity Prices Ease 

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Glencore also laid out some new details about what its remaining metals business would look like if the Teck coal plan succeeds, including that its net debt cap would drop from the current $10 billion to $5 billion. The debt cap is a crucial determiner of its dividend payments.

Glencore’s pursuit of Teck is coming as the mining industry battles with falling prices, higher and inflation and the looming threat of problems with China’s crucial property sector.

Glencore reported first-half core earnings of $9.4 billion, half the record number it posted a year ago, though still one of its best-ever performances, and said it would top up its dividend by $1 billion and buy back a further $1.2 billion of its own stock. A year earlier, it announced combined top-up dividends and buybacks of $4.5 billion.

After years of fixing balance sheets and showering returns to shareholders, the biggest miners have returned to growth in the past year. BHP Group and Rio Tinto Group have recently completed their biggest deals in a decade, to gain more exposure to copper.

—With assistance from Mark Burton.

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