Teck Resources Limited Q3 FY2026 earnings call

• Merger Progress: The merger with Anglo American is progressing as planned, with integration teams focused on day-one readiness and executive leadership appointments finalized. Regulatory approval from China's SAMR is expected within the original 12-18 month window.
• Operational Resilience: Operations demonstrated strong resilience despite severe weather events (flooding in Chile, drought/wildfires in Canada) and a strike at Highland Valley. Safety remained a priority with no high-potential incidents reported during weather events, though a fatality occurred at Antamina.
• QB Mine Performance: Despite severe weather impacts in August/September causing power outages and downtime, QB’s year-to-date metrics remain consistent with guidance. Construction of Rock Bench 6 commenced, and TMF development continues with no downtime for four consecutive quarters.
• Highland Valley Extension: Mine life extension project is >25% complete, aiming to sustain operations until 2046 with ~132,000 tonnes annual copper production. A planned grinding line shutdown for upgrades is scheduled for completion in January 2027.
• Cost Guidance Revision: Management lowered 2026 net cash unit cost guidance for both segments due to strong by-product pricing (silver) and operating discipline. Copper guidance reduced by 13 cents/lb; Zinc guidance reduced by 35 cents/lb.

Copper Segment: Generated gross profit before depreciation and amortization of $1.6 billion (margin of 65%), driven by record copper prices averaging $6.40/lb and increased production of 116,000 tons (+11% YoY). Net cash unit costs improved 15% to $1.77/lb. Zinc Segment: Generated gross profit before depreciation and amortization of $638 million (margin of 31%). Refined zinc production at Trail Operations increased 18% to 62,000 tons, while Red Dog concentrate production declined 13% to 107,000 tons due to lower grades. Net cash unit costs for zinc were 27 cents/lb.

• Production: 2026 annual production guidance for Copper and Zinc remains unchanged. Copper is expected between 410,000-460,000 tons (concentrate) and Zinc refined production at Trail at the high end of 190,000-230,000 tons.
• Capital Expenditure: 2026 project capital guidance unchanged at $900 million-$1.2 billion; total capex guidance unchanged at $2.1-$2.4 billion.
• Unit Costs (Revised Downward):
  • Copper Net Cash Unit Costs: Lowered midpoint by 13 cents/lb; new range $1.80-$2.00/lb.
  • Zinc Net Cash Unit Costs: Lowered midpoint by 35 cents/lb; new range 30-40 cents/lb.
  • Zinc Total Cash Unit Costs: Lowered to 70-80 cents/lb (from 80-90 cents/lb).

• Regulatory Risk: Ongoing engagement with China’s anti-trust regulators (SAMR) for final merger approval; delays could impact the transaction timeline.
• Operational & Weather Risks: Severe weather events (flooding, drought, wildfires) and climate change impacts pose risks to operational continuity and safety, particularly at newer operations like QB with limited flexibility.
• Labor Relations: Strike at Highland Valley Copper poses potential production impacts, though contingency plans are in place.
• Commodity Price Sensitivity: Unit costs are sensitive to silver and diesel price fluctuations; a $10/oz change in silver affects copper net cash costs by $0.02/lb and zinc by $0.05/lb.
• Safety Incidents: Occurrence of a fatality at Antamina highlights ongoing safety risks in joint ventures and operations.

Q: Analyst asked about the status of Chinese regulatory approval for the Anglo American merger and whether security of copper concentrate offtake was a condition. / A: CEO stated discussions with SAMR are constructive and unfolding normally. While he couldn't detail specific conditions or confirm media reports regarding concentrate offtake, he affirmed confidence in receiving approval within the 12-18 month window, noting they are closer to the end than the beginning of the process.

Q: Analyst inquired about QV's grade-up list timing for 2027 guidance and the company's strategy for copper concentrate sales (long-term vs spot). / A: CEO explained that opening additional mining phases in 2027 will provide more optionality and access to higher grades, supporting the guidance. CCO Ian added that they balance their book between long-term contracts and spot sales, carefully navigating the evolving benchmark landscape without committing to a specific shift in strategy.

Q: Analyst questioned if 2028 copper production guidance (which shows a decline) carries similar conservatism to current guidance given recent strong performance, asking if upside risk exists. / A: CEO clarified that the 2028 guidance decline is fundamentally driven by mine plan geology and grade depletion, not arbitrary conservatism. He emphasized that the guidance was anchored in observable performance and built-in improvements, suggesting the decline is structural rather than a conservative buffer.

Q: Analyst asked about the timing of the next maintenance shutdown at QV and the mine life outlook for Red Dog, specifically regarding sustaining projects to avoid production gaps. / A: CEO confirmed the next major shutdown at QV is in Q1 2027, following a comprehensive September shutdown. For Red Dog, he noted the current mine life ends around 2031, but the company is actively evaluating two nearby world-class ore bodies via a Pre-Feasibility Study to extend life, aiming to avoid a production gap through strategic planning.