Teck Resources Limited Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Incident Acknowledgment: Acknowledged an incident at a peer's operation in BC and hoped for the safe and speedy rescue of workers in the underground work area.
• Second Quarter Highlights: Adjusted EBITDA was $722 million, showing improved profitability. The zinc segment performed strongly with Red Dog sales above guidance. Trail Operations was profitable. QB production outlook was revised due to TMF development risks. The Highland Valley Copper Mine Life Extension project was sanctioned. Continued to return cash to shareholders with $487 million in share buybacks in Q2 and over $1.1 billion YTD. Committed to safety and sustainability, named Best 50 Corporate Citizens in Canada for the 19th consecutive year.
• QB Performance: Impacted by TMF development work; modifying cyclones was not sufficient, so additional measures were implemented to improve sand dredging rates. Throughput increased, and consistent grades were expected in the second half of 2025. The shiploader outage at QB was extended to the first half of 2026 with no production impact. Molybdenum production stepped up, and targeting design rates at QB by year-end was emphasized.
• Highland Valley Mine Life Extension: Sanctioned, extending the mine life to 2046 with an average annual copper production of 132,000 tonnes. Capital estimate was CAD 2.1 billion to CAD 2.4 billion, with attractive project economics. Construction mobilization was underway, and construction was set to start in a few weeks.
• Cash Returns: $548 million was returned to shareholders in Q2, including $61 million in base dividends and $487 million in share buybacks. Over $1.1 billion was returned YTD.

Segment Performance

• Copper: Gross profit before depreciation and amortization declined by 3% to $673 million in Q2 2025 compared to the same period in 2024, primarily due to lower copper prices and higher operating costs, partially offset by increased byproduct revenues. Copper production was 109,000 tonnes. QB's online time was impacted by TMF development work. Established operations were performing in line with guidance. Highland Valley production improved, Antamina production was lower due to a shutdown, and Carmen de Andacollo had higher production. Net cash unit costs for copper improved by USD 0.14 per pound to USD 2.02 per pound. Copper production guidance was revised to 470,000 tonnes to 525,000 tonnes, and net cash unit costs to USD 1.90 to USD 2.05 per pound.
• Zinc: Performance in the zinc segment was very strong in Q2. Gross profit before depreciation and amortization increased 137% to $159 million. Red Dog sales were above the guidance range, and the net cash unit cost for zinc decreased by USD 0.20 per pound to USD 0.49 per pound. Trail operations were profitable due to an updated operating plan. Expected zinc and concentrate sales from Red Dog in Q3 are 200,000 tonnes to 250,000 tonnes. Annual guidance for zinc remained unchanged: concentrate production 525,000 tonnes to 575,000 tonnes, refine zinc production 190,000 tonnes to 230,000 tonnes, and net cash unit cost USD 0.45 per pound to USD 0.55 per pound.

Guidance

• QB production outlook was revised to 210,000 tonnes to 230,000 tonnes for the year due to TMF development risks. Production guidance for other operations was maintained. Incorporated an increase in copper production in 2028 and growth capital investment from the Highland Valley sanction. Copper production guidance was revised to 470,000 tonnes to 525,000 tonnes, and net cash unit costs to USD 1.90 to USD 2.05 per pound. Zinc guidance remained unchanged.

Risks

• TMF development at QB could continue to limit online time and throughput if not resolved.
• Shiploader outage at QB extended to the first half of 2026, though there was no current production impact.
• External factors or delays in TMF development could affect QB's production outlook.
• Material inflation, contingencies, and potential tariffs on construction materials could impact capital costs for projects like the Highland Valley Mine Life Extension.

Question and Answer

• Q: Some questions on QB2, tailings issue and impact on 2026. A: TMF development was limiting online time in Q2 and Q3, but it was expected to be resolved, and guidance for 2026 was maintained.
• Q: Pace of CapEx, first half $700 million, guidance $2.3 billion. A: Second half spend included the Highland Valley Mine Life Extension project, TMF development, and sustaining projects.
• Q: QB shiploader repairs, duration and CapEx impact. A: Repair assessment was ongoing, and the shutdown was extended to the first half of 2026 with no finalized CapEx yet.
• Q: QB and Collahuasi discussions. A: Discussions on synergies were confidential, and the priority was ramping QB to steady state.
• Q: Highland Valley extension, technical report and throughput. A: A technical report was expected in August, and throughput was variable based on the ore mined.
• Q: QB recoveries and transition ore. A: Recoveries were expected to improve in the second half of 2025 with less transition ore.
• Q: HVC CapEx breakdown and read-through to other projects. A: HVC CapEx included contingencies, inflation, and tariff impacts; the same rigorous approach was taken for future projects.
• Q: U.S. project update. A: Work was ongoing to define the right project, but details were not available yet.
• Q: QB TMF CapEx classification. A: TMF spend was now part of sustaining capital as it was ongoing operation spend.
• Q: Shiploader insurance. A: Investigations into the root cause were ongoing, and insurance coverage included interruptions.