Suncor Energy Inc. will buy out Teck Resources Ltd.’s 21.3% stake in the Fort Hills oilsands project for about $1 billion, the two companies said late Wednesday.

The oilsands mine north of Fort McMurray, Alberta, has a capacity of 194,000 barrels per day and is currently owned by Suncor, Teck, and the French company Total Energies EP Canada Ltd.

When the deal is finalized, Suncor, which is based in Calgary and runs Fort Hills, will have a 75.4% stake in the oilsands project. The rest, or 24.6%, will be owned by TotalEnergies.

In a news release, Suncor interim president and CEO Kris Smith said, “The acquisition of an additional interest in Fort Hills meets our return goals, builds on our strategy to optimize our portfolio around our core operated assets, and shows Suncor’s confidence in the long-term value of the Fort Hills project.”

The Fort Hills oilsands mine opened in 2018, but it has had a lot of problems since then.

The mine wasn’t able to quickly reach full capacity because the Alberta government decided in 2019 to cut back on oil production in the province.

This was done to help fix the growing price discount for Canadian oil, which was caused by a lack of pipeline export capacity.

Then, in 2020, the COVID-19 pandemic caused oil prices to drop, which shut down one of Fort Hills’ two production trains.

Suncor said that the deal announced on Wednesday is based on the current market value of Fort Hills. As a result, Suncor will take a non-cash accounting impairment charge of about $2.6 billion on its existing 54.1 per cent interest when it reports its third-quarter results on November 2.

On Nov. 29, the company will also give a talk to investors.

Teck, which is based in Vancouver, said it expects to take a non-cash impairment charge of $950 million in the third quarter of 2023.

Teck will hold its earnings call for the third quarter on Thursday morning.

Teck has said for a long time that it would like to sell its share of Fort Hills.

The company is building a copper mine in Chile that will cost $5 billion.

It has said that it wants to focus on metals and minerals that are important for a world with less carbon like copper, zinc, and coal used to make steel.

In a press release on Wednesday, Teck CEO Jonathan Price said, “This transaction advances our strategy of pursuing industry-leading copper growth and rebalancing our portfolio of high-quality assets to low-carbon metals.”

The company will review how to use the money from the sale early in 2023.

Suncor said on Wednesday that it had done a thorough review of the Fort Hills project and had started a multi-year improvement initiative” to increase the mine’s output and lower its operating costs.

“Even though the Fort Hills mine had problems in its early years, including problems caused by government-ordered production shut-downs, I have full confidence in our current mine plan, which was made with fresh outside mining perspectives.” according to Smith.

Suncor said it will pay for the deal with cash from the sales of assets that are already happening.

The deal will go through in the first quarter of 2023 if the government gives its approval.

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