Teck Resources Limited Q2 FY2024 earnings call

• The sale of the remaining interest in the steelmaking coal business was completed on July 11, receiving C$7.3 billion in cash proceeds, marking a new era for Teck focused on metals essential to global development and the energy transition. • QB continued its ramp-up, with copper production increasing quarter-over-quarter, though geotechnical issues and mine access led to revised production guidance. • Teck achieved adjusted EBITDA of C$1.7 billion in the second quarter, a 13% increase from the same period last year, driven by record quarterly copper production and strong steelmaking coal sales volume. • The sale of the steelmaking coal business positions Teck to capitalize on the growing demand for copper. • Teck advanced its copper growth portfolio, achieving milestones in the permitting processes for the Highland Valley Mine Life Extension and San Nicolás.

In the second quarter, Teck's copper business saw gross profit before depreciation and amortization increase 118% compared to the same period last year, driven by a significant rise in copper prices and substantially higher sales volumes, though QB operating costs were elevated. QB copper production increased quarter-over-quarter, but production guidance for 2024 copper and molybdenum was revised due to geotechnical issues and mine access. For the zinc business, Red Dog had increased zinc and lead production, but gross profit before depreciation and amortization decreased in the quarter primarily due to reduced refined metal sales and lower zinc sale volumes. Steelmaking coal business had sales volumes of 6.4 million tons at the top end of the guidance range, but adjusted site cash costs were higher. Copper contributed significantly to the overall financial performance, while zinc and steelmaking coal also had their respective financial outcomes with varying revenue contributions.

• Revised 2024 QB copper production guidance to 200,000-235,000 tons, molybdenum production guidance to 2.4-4,000 tons, and net cash unit cost guidance to US$225-255 per pound. • Zinc 2024 annual production guidance remains at 565,000-630,000 tons, and net cash unit cost guidance at US$0.55-0.65 per pound. • Steelmaking coal 2024 sales volumes were at the top end of the guidance range, but prices and costs impacted results. • Teck announced significant cash returns to shareholders, including up to C$2.75 billion in share buybacks and a one-time supplemental dividend, with plans for disciplined capital allocation.

• Localized geotechnical issues at QB impacting grade profile and production guidance for the second half of 2024. • Uncertainty around permitting for copper growth projects such as San Nicolás due to potential regulatory changes. • Impact of inflation and labor shortages on operating costs in the steelmaking coal business, including increased reliance on contractors.

Q: Can you give more color on the localized geotech issue at QB and its impact on H2 copper grade?

A: Shehzad Bharmal explained it's a temporary access issue for higher grade areas in the mine due to a localized geotechnical issue, with work to complete the access reorientation by late 2024, and the impact on 2025-2026 is minimal.

Q: How are near-term growth projects ranked?

A: Jonathan Price stated that projects are evaluated based on risk-return characteristics, with brownfield expansions like QB and Highland Valley, and greenfield projects like Zafranal and San Nicolás, progressing in parallel.

Q: When will the C$500 million share buyback be completed?

A: Crystal Prystai expects the C$500 million share buyback to be completed in the third quarter, with the C$2.75 billion buyback targeted to be completed over a 12-24 month period.

Q: What are the key findings from the QB independent review?

A: Karla Mills mentioned the need for increased geotechnical drilling, more conservative assumptions on labor productivity and inflation, and enhanced oversight, with steps taken to embed learnings into future projects.

Q: What permits are needed for QB bottlenecking?

A: Shehzad Bharmal said optimization of QB requires no permits, while the debottlenecking study may need some permits, with submission expected by the end of the year.

Q: What is the expected tax rate going forward?

A: Crystal Prystai said the overall effective tax rate on a continuing operations basis is expected to be in the 41%-43% range for 2024 and beyond, with more detailed guidance to come as projects progress.