Teck Resources has agreed to divest its entire stake of 21.3% held in the operating Fort Hills oil sands project in Canada to Suncor Energy for a price of around CAD1bn ($737m) in cash.

The deal involves the stake of Teck Resources in the project holding company Fort Hills Energy Limited Partnership and some associated downstream assets.

Teck Resources 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.

“We will review the use of proceeds in accordance with our capital allocation framework early in 2023.”

Following the closing of the deal, Suncor Energy will raise its stake in the Fort Hills oil sands project to 75.4%. The other partner in the open-pit truck and shovel mine is TotalEnergies EP Canada with a stake of 24.6%.

Suncor Energy is the operator of the oil sands project, which is located in the Athabasca region in Alberta, 90km north of Fort McMurray.

The company said that its new mining and upgrading and Fort Hills operating leadership teams have been carrying out an in-depth review of the Fort Hills oil sands project. The teams are said to have developed and started a multi-year performance improvement initiative.

Suncor Energy stated that the next 36 months are expected to see reduced gross production and higher operating costs per barrel at the project, each affected by nearly 5% when compared to its most recent corporate guidance for 2022. The reasons cited by the company for these are the physical mine constraints and expedited development of additional mine pits for increased sustained production for the long-term.

Suncor Energy interim president and CEO Kris Smith said: “The acquisition of an additional interest in Fort Hills meets our return objectives, builds upon our strategy to optimise our portfolio around our core operated assets and underscores Suncor’s confidence in the long-term value of the Fort Hills Project.

“This acquisition is a part of our Base Plant mine replacement strategy.”

The deal, which is subject to regulatory approvals and other customary conditions, is expected to close in Q1 2023.