Teck Resources Limited Class A · TSX:TECK.A
Teck Resources Limited Class A — Investor Day (March 2017)
122 slides from Teck Resources Limited Class A's investor day presentation, Mar 30, 2017
Slide 1: Investor and Analyst Day
Investor and Analyst Day March 30, 2017
Slide 2: Forward Looking Information
Introduction Forward Looking Information Both these slides and the accompanying oral presentation contain certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of the Securities A
Slide 3: Forward Looking Information
Introduction Forward Looking Information operational and financial performance of the company generally. The foregoing list of assumptions is not exhaustive. Adjusted EBITDA, potential EBITDA and financial metrics and ratios are based on or assume exchange rates, sales, commodity prices and producti
Slide 4: Overview and Strategy
Overview and Strategy March 30, 2017 Don Lindsay, President and Chief Executive Officer
Slide 5: Safety at Teck
Overview and Strategy Safety at Teck • Improved performance across safety metrics in 2016 • High Potential Injury frequency reduced by ~50% since 2013 High Potential Incident Frequency 1.2 Frequency (per 200,000 hours worked) 1 0.8 0.6 0.4 0.2 0 2013 2014 2015 2016 Next phase of YTD High Potential I
Slide 6: Sustainability Highlights
Overview and Strategy Sustainability Highlights Indigenous Relations Tailings Management • 25 new agreements in 2016; • Follow industry best practices agreements in place at all operations • Independent tailings review boards for • Major IBA signed with Ktunaxa Nation, all major facilities & project
Slide 7: Senior Management Update
Overview and Strategy Senior Management Update Retiring Joining Greg Waller Fraser Phillips SVP, Investor Relations SVP, Investor Relations & Strategic Analysis & Strategic Analysis 5
Slide 8: Capitalizing on the Turn in the Cycle
Overview and Strategy Capitalizing on the Turn in the Cycle • Record results in Q4 2016 Gross Profit $2.0 billion Cash Flow from Ops $1.5 billion Adjusted Net Profit1 $930 million • Generating significant cash flow • Reducing debt • Dividend review 6 1. Adjusted profit attributable to sharehol
Slide 9: Consistent Long-Term Strategy
Overview and Strategy Consistent Long-Term Strategy Diversified business model Attractive portfolio of long life assets Low half of the cost curve Appropriate scale Low risk jurisdictions 7
Slide 10: Significant Cash Flow Generation
Overview and Strategy Significant Cash Flow Generation Potential EBITDA1 >C$5 Billion • Strong operating margins Zinc • Increasing zinc production Copper • Significant leverage to coal, Steelmaking Coal copper and zinc prices Less: Corporate 2017 Based on Current Prices Energy starts contributing EB
Slide 11: Staged Growth/Value Pipeline
Overview and Strategy Staged Growth/Value Pipeline In Construction Pre-Sanction Medium-Term Future Options Growth Options Galore Creek Copper Schaft Creek Strong platform with substantial QB Phase 2 NuevaUnión Mesaba growth options HVC Brownfield Zafranal Antamina Brownfield San Nicolás (Cu-Zn) Zinc
Slide 12: Quebrada Blanca 2: Potential Tier 1 Asset
Overview and Strategy Quebrada Blanca 2: Potential Tier 1 Asset Top 15 copper producer globally ‒ 300 ktpa copper equivalent production in first 5 years Total costs (AISC) well in low half of cost curve ‒ Exceptionally low strip ratio Initial mine life 25 years with ~25% of reserves & resource
Slide 13: NuevaUnión: A New Approach to Project Development
Overview and Strategy NuevaUnión: A New Approach to Project Development Teck and Goldcorp have combined Relincho & El Morro projects and formed a 50/50 joint venture company • Committed to building strong, mutually beneficial relationships with stakeholders & communities Capital smart partnership •
Slide 14: Satellite Project: Overview
Overview and Strategy Satellite Project: Overview • Situation: Strong base metal (copper, zinc) growth options largely invisible to the market • Objective: To surface the value of Teck’s copper development projects (ex-QB2 & Staged Growth/Value Pipeline NuevaUnión) in 3-5 years Future Options • Rout
Slide 15: Satellite Project: Quality Base Metal Assets
Overview and Strategy Satellite Project: 5 Quality Base Metal Assets Galore Creek (50%) • Rare significant copper-gold-silver deposit in developing district • High average grade; potential for first quartile C1 costs • Substantial design and engineering Mesaba (100%) work completed in 2012 • Very la
Slide 16: Summary
Overview and Strategy Summary • Continuing to execute for higher production per share − No equity dilution − No operating assets sold − Investing in production growth from Fort Hills − Maintaining strong liquidity − Reducing debt & managing maturities • Record quarterly results in Q4 2016 • Generati
Slide 17: Finance
Finance March 30, 2017 Ron Millos, SVP Finance and Chief Financial Officer
Slide 18: Financial Resources for the Future
Finance Financial Resources for the Future Achieved significant debt reduction Generating significant cash flow Disciplined capital spending 3
Slide 19: Achieved Significant Debt Reduction
Finance Achieved Significant Debt Reduction Notes Outstanding 7.5 7.0 Current Debt Portfolio1 Public notes outstanding US$5.1B 6.5 Average coupon 5.7% 6.0 US$ Billion Annual interest savings ~US$55M Weighted average term to maturity ~15 years 5.5 Debt to debt-plus-equity ratio2 ~28% 5.0 Undrawn cred
Slide 20: Re-aligning Our Capital Structure
Finance Re-aligning Our Capital Structure Current Dec. 31, 2012 Notes outstanding ~US$5.1B1 US$7.2B Assets $35.6B2 $34.6B Equity $17.6B2 $18.0B Adjusted EBITDA3 >$5B4 $4.3B Ratios Debt-to-debt plus equity3 ~27%1,5 29% Debt/EBITDA3 ~1.4x1,5 1.7x 1. As at March 8, 2017. 2. As at December 31, 2016. 3.
Slide 21: Higher Margin Despite Lower Prices
Finance Higher Margin Despite Lower Prices Gross Profit Margin1 vs. Indexed Prices 50% 1.00 • Average commodity prices dropped 11% in 2014-2016 Teck Commodity Price Index 40% 0.90 Gross profit margin (%) • 8-point margin improvement, driven by cost management program ‒ Implemented in 2013 30% 0.80 ‒
Slide 22: Capital Expenditures
Finance Capital Expenditures Total Capital Expenditures 2012-2017 $3,000 $2,500 New Mine Development $2,000 Major Enhancements $M $1,500 Sustaining Capital $1,000 $500 Capitalized Stripping $0 2012 2013 2014 2015 2016 2017 Guidance 7
Slide 23: Significant Cash Flow Generation
Finance Significant Cash Flow Generation Potential EBITDA1 >C$5 Billion • Strong operating margins Zinc • Increasing zinc production Copper • Significant leverage to coal, Steelmaking Coal copper and zinc prices Less: Corporate 2017 Based on Current Prices Energy starts contributing EBITDA in 2018 1
Slide 24: Tax Efficient Earnings in Canada
Finance Tax Efficient Earnings in Canada ~$6 billion in available tax pools1, including: • $4.6B in loss carryforwards • $1.3B in Canadian Development Expenses Applies to: • Cash income taxes in Canada Does not apply to: • Resource taxes in Canada • Cash taxes in foreign jurisdictions Multiples shou
Slide 25: Financial Resources for the Future
Finance Financial Resources for the Future Achieved significant debt reduction Generating significant cash flow Disciplined capital spending 10
Slide 26: Business Units
Business Units March 30, 2017 Dale Andres, Senior Vice President, Base Metals Robin Sheremeta, Senior Vice President, Coal
Slide 27: Agenda
Business Units Agenda Introduction Base Metals Steelmaking Coal 3
Slide 28: Safety is a Core Value
Business Units Safety is a Core Value Our Key Focus Areas We are Improving 1. High Potential Risk Control • High Potential Incidents: 12% reduction 2. Occupational Health & Hygiene • Lost Time Injuries: 11% reduction 3. Courageous Safety Leadership • Total Recordable Injuries: 13% reduction 4
Slide 29: >$1B of Annualized Savings
Business Units >$1B of Annualized Savings… Annualized Savings from Major Cost Reduction Program Initiatives Mining Productivity ($354M) Contractors/Consultants Reduction ($216M) Employee Cost Reduction ($191M) Consumables ($77M) Idling & Energy Savings ($66M) Admin savings ($79M) Equipment Rental Sa
Slide 30: "One Teck" Approach
Business Units “One Teck” Approach Our organizational structure enables collaboration, innovation & continual improvement Driving a “One Teck” philosophy where it adds value • Safety • Tailings & water management • Truck shovel productivity • Strategic & group sourcing • Accelerated Maintenance Proj
Slide 31: Innovation Drives How We Manage, Improve & Grow
Business Units Innovation Drives How We Manage, Improve & Grow Manage Improve Grow • Encourage & share front • Automation • Rethinking projects line innovation • Sensor-based ore sorting ‒ QB Phase 2 • Advanced data analytics • Partnerships ‒ NuevaUnión Broad portfolio of existing, emerging & future
Slide 32: Agenda
Business Units Agenda Introduction Base Metals Steelmaking Coal 8
Slide 33: Operating Strategy
Base Metals Operating Strategy • Stable operations – Maintain cost discipline • Improvement priorities driven by value – Long term competitiveness • Manage risk & seize opportunities – Advance key extension & growth projects 9
Slide 34: Continued Cost Focus in Copper
Base Metals Continued Cost Focus in Copper Mill Throughput • Focused mill throughput improvements − Additional 9% increase in 2017 Tonnes (millions) 90 0.50 − Mitigating lower ore grades 80 0.45 Grade (%) 70 0.40 60 0.35 • Significant benefits from cost reductions 50 2012 2013 2014 2015 2016 2017 20
Slide 35: Highland Valley at Inflection Point
Base Metals Highland Valley at Inflection Point Copper Production & Grade • Lower grade Lornex & Highmont in 2017 175 0.40 − Continued cost reduction efforts 150 0.35 − Tailings construction to restart Grade (%) Copper (kt) 125 0.30 • Advancing plans to extend mine life & 100 0.25 enhance production
Slide 36: Rising Zinc Production at Antamina
Base Metals Rising Zinc Production at Antamina • Large zinc production increase expected 120 Copper & Zinc Production − >50% in 2017 vs. the last 5 years 100 Production (kt) − Higher ratio of Cu-Zn ore 80 60 • Key projects advancing 40 − New truck shop nearing completion 20 − Tailings dam constructi
Slide 37: Chile Operations
Base Metals Chile Operations • Plant debottlenecking continues at Carmen de Andacollo (CDA) − Offsetting lower grade & harder ore − >8% throughput in 2017, with crushing & other improvements • Adapting Quebrada Blanca to current conditions − Conversion from heap/dump leach to dump leach only complet
Slide 38: Quebrada Blanca Phase 2 Project
Base Metals Quebrada Blanca Phase 2 Project Project Capital1 Copper Equivalent Production2 Molybdenum Production2 US$4.7 300,000 7,700 billion tonnes per year tonnes per year Mine Life Copper in Reserves C1 Cash Costs2 25+ 14.2 US$1.28 years billion pounds per pound • Initial mine life uses ~25% of
Slide 39: NuevaUnión Project
Base Metals NuevaUnión Project Initial Project Capital Copper Production1 Gold Production1 US$3.5 190,000 315,000 billion tonnes per year ounces per year Mine Life Copper in Reserves2 Gold in Reserves2 32+ 16.6 8.9 years billion pounds million ounces • Copper equivalent production of 250 kt per year
Slide 40: Preparing Red Dog for the Future
Base Metals Preparing Red Dog for the Future • Harder ore & lower grades at Aqqaluk Throughput to Offset Grade Decline 5 20 − Higher grade Qanaiyaq pit started Throughput (Mt) • NANA royalty to 35% in 2H 2017 4 15 Grade (%) • Advancing studies to maintain current production levels 3 10 − Value Impro
Slide 41: Excellent Extension Potential at Red Dog
Base Metals Excellent Extension Potential at Red Dog Aktigiruq Lik Anarraaq Su Focusing on near-mine & district ~15 km satellite areas, particularly: Paalaaq • Anarraaq - new mineral resource Aqqaluk Main Qanaiyaq • Aktigiruq - 18km drill program 17
Slide 42: Solid Feed Base & Performance at Trail
Base Metals Solid Feed Base & Performance at Trail • Annual production records set in 2016 Solid Production Performance 120 % Compared with 2012 Base − Zinc: 312 kt 110 − Lead: 99 kt − Silver: 24 Moz 100 • Red Dog & Pend Oreille are important 90 feed sources 80 • Investing in No. 2 Acid Plant 2012 2
Slide 43: Increasing Value in Base Metals
Base Metals Increasing Value in Base Metals • Driving results through operating excellence • Targeted improvements to enhance value • Life extension options at core assets • Advancing QB Phase 2 & NuevaUnión 19
Slide 44: Agenda
Business Units Agenda Introduction Base Metals Steelmaking Coal 20
Slide 45: Operating Strategy
Steelmaking Coal Operating Strategy • Maximize synergies in Elk Valley: – Provides flexibility & optionality • Sustain: – Top quartile haul truck productivity – Low operating costs • Achieve: – Top quartile maintenance performance – Maximize plant production • Reduce operating risk: – Invest in new
Slide 46: Strip Ratio Supports Future Production
Steelmaking Coal Strip Ratio Supports Future Production Clean Strip Ratio • Low strip ratio in 2016 due timing of 11 permitting 10 9 • Strip ratio increase expected in 2017 Clean Strip Ratio 8 ‒ Coal Mountain near end of life 7 ‒ New developments have higher 6 strip ratios & better quality coal 5 ~
Slide 47: Operating With Excellence
Steelmaking Coal Operating With Excellence • Drive mining productivity improvements Truck Productivity* 110% ‒ Up 21% in the last 5 years ‒ Additional 3% improvement in 2017 Percentage of Target 100% 90% • Cost reduction efforts reduced truck/shovel mining costs1,3 80% ‒ Down 16% in the last 5 years
Slide 48: Competitive Position on Margin Curve
Steelmaking Coal Competitive Position on Margin Curve Operating Margin1 $100 • High quality hard coking coal $80 assets provide strong margins US$ per Tonne $60 • Competitive mining costs $40 Teck $20 • Operations well positioned in a $- volatile market $(20) Source: Wood Mackenzie 1. Quality-adjust
Slide 49: Sustaining Capex Supports Long Term Vision
Steelmaking Coal Sustaining Capex Supports Long Term Vision 400 Steelmaking Coal Sustaining Capital 16 13.00 350 11.50 14 • Investing in mobile 11.00 300 12 10.00 Long-Term equipment lasting >15 years $/tonne (clean) 250 Average 10 200 6.50 ~$7.00/tonne 8 $M 150 3.50 4.50 5.00 6 • Sustaining capital
Slide 50: Five Year Plan: Sustain Million Tonnes
Steelmaking Coal Five Year Plan: Sustain 27 Million Tonnes1 Conceptual Production Profile 28 24 Objectives Production (million tonnes) 20 • Manage transition from Coal Mountain 16 • Pursue incremental production 12 capacity in remaining Valley mines 8 • Evaluate Cardinal River mine life extension 4
Slide 51: Summary
Steelmaking Coal Summary • Safe and productive operations • High margin business • Planning to produce ~27 Mt for decades 27
Slide 52: Projects
Projects March 30, 2017 Tim Watson, SVP, Project Development and Engineering Alex Christopher, SVP, Exploration, Projects and Technical Services
Slide 53: Agenda
Projects Agenda Fort Hills Quebrada Blanca Phase 2 3
Slide 54: Project Overview
Fort Hills Project Overview • Nameplate capacity increased to 194 kbpd • Steady state production increased to 186 kbpd • First oil end of 2017 • Expect to achieve 90% of nameplate capacity by end 2018 4 Source: Fort Hills Energy Limited Partnership, Fall 2016.
Slide 55: Project Progress
Fort Hills Project Progress Progress as of February 28, 2017 • Final installation of all modules & process vessels • Ore preparation mechanically complete >80% Construction complete • 55% progress on first oil scope1 • Site work now focused on piping, electrical & instrumentation • Permanent power i
Slide 56: Major Milestones
Fort Hills Major Milestones Six Major Project Areas Target Date / Status 1. Mining1 Completed 2. Ore Prep1 Completed 3. Major Infrastructure1 Completed 4. Primary Extraction & Tailings ‒ Primary Extraction April 2017 ‒ Tailings August 2017 5. Utilities June 2017 6. Secondary Extraction (First
Slide 57: Ore Preparation: Crusher
Fort Hills 1 Ore Preparation: Crusher Fall 2016 9 Source: Fort Hills Energy Limited Partnership
Slide 58: Ore Preparation: Slurry Prep
Fort Hills 1 Ore Preparation: Slurry Prep Fall 2016 11 Source: Fort Hills Energy Limited Partnership
Slide 59: Ore Preparation: Hydro-Transport Lines
Fort Hills 1 Ore Preparation: Hydro-Transport Lines Fall 2016 12 Source: Fort Hills Energy Limited Partnership
Slide 60: Primary Extraction: Primary Separation Cell
Fort Hills 2 Primary Extraction: Primary Separation Cell Fall 2016 15 Source: Fort Hills Energy Limited Partnership
Slide 61: Utilities
Fort Hills 3 Utilities Fall 2016 18 Source: Fort Hills Energy Limited Partnership
Slide 62: River Water Intake
Fort Hills 4 River Water Intake Fall 2016 21 Source: Fort Hills Energy Limited Partnership
Slide 63: Main Substation
Fort Hills 5 Main Substation Fall 2016 23 Source: Fort Hills Energy Limited Partnership
Slide 64: Tank Farm: Trans Canada Pipeline Limited
Fort Hills 6 Tank Farm: Trans Canada Pipeline Limited Fall 2016 25 Source: Fort Hills Energy Limited Partnership
Slide 65: East Tank Farm
Fort Hills 7 East Tank Farm Fall 2016 27 Source: Fort Hills Energy Limited Partnership
Slide 66: Site Plot Plan
Fort Hills Site Plot Plan ~5km x ~5km Utilities Substation Secondary 3 8 5 Extraction 6 2 1 Athabasca River TPL Primary Extraction Tank Ore Prep & Tailings Farm Highway #63 MINE East Tank 4 River Water Intake Farm 7 ~50 km 28
Slide 67: Secondary Extraction Plot Plan
Fort Hills 8 Secondary Extraction Plot Plan 29 Source: Fort Hills Energy Limited Partnership
Slide 68: Secondary Extraction
Fort Hills 8 Secondary Extraction Fall 2016 32 Source: Fort Hills Energy Limited Partnership
Slide 69: Secondary Extraction
Fort Hills 8 Secondary Extraction Fall 2016 33 Source: Fort Hills Energy Limited Partnership
Slide 70: Secondary Extraction Aerial View
Fort Hills 8 Secondary Extraction Aerial View Fall 2016 34 Source: Fort Hills Energy Limited Partnership
Slide 71: Summary
Fort Hills Summary • Tracking to plan for first oil at end of 2017 • Expect 90% of nameplate capacity by end 2018 • Expect to generate 45 years of cash flows from steady state production of 186 kbpd 35 Source: Fort Hills Energy Limited Partnership, Fall 2016.
Slide 72: Agenda
Projects Agenda Fort Hills Quebrada Blanca Phase 2 36
Slide 73: Feasibility Study Overview
Quebrada Blanca Phase 2 Feasibility Study Overview Project Capital1 Capital Intensity2 C1 Cash Costs2 US$4.7 ~US$16,000 US$1.28 billion $/tonnes annual CuEq per pound Throughput Copper Equivalent Production2 Molybdenum Production2 140,000 300,000 7,700 tonnes per day tonnes per year tonnes per year
Slide 74: Long Life with Resource Optionality
Quebrada Blanca Phase 2 Long Life with Resource Optionality Initial Mine Life Copper in Reserves Copper in Resources 25 14.2 11.1(M&I) 17.5(I) years billion pounds billion pounds • LOM Reserves • 1.26 billion tonnes (P&P), at 0.51% Cu and 0.019% Mo • Resources • 1.32 billion tonnes (M&I), at 0.38% C
Slide 75: Key Infrastructure Components
Quebrada Blanca Phase 2 Key Infrastructure Components • Mine & 140 kt/d concentrator, • Tailings facility for 1.26 Bt • Concentrate pipeline (164 km) • Port & filter plant at Punta Patache • Desal plant & pipeline (160 km) • Supporting roads and infrastructure • 3rd party power and transmission Comm
Slide 76: Existing Site – Expanded Footprint
Quebrada Blanca Phase 2 Existing Site – Expanded Footprint • Concentrator located west of existing QB mine pit • QB2 pit is open to east (existing plant site) and at depth • Waste dumps located north & south of existing pit • Tailings Management Facility (TMF) located directly south of the concentra
Slide 77: Project Wide Optimization Since 2012
Quebrada Blanca Phase 2 Project Wide Optimization Since 2012 CONCENTRATOR TAILINGS FACILITY METALLURGY Increased milling rate New Location: Updated recovery to reflect use of +5 kt/d (135 to 140 kt/d) 7 km vs 45 km from concentrator desalinated water Deleted two ore reclaim feeders Reduced capacity:
Slide 78: Attractive Production Metrics
Quebrada Blanca Phase 2 Attractive Production Metrics Annual Average Category Unit First First LOM 5 Years 10 Years Mining Total material moved million t 97.7 96.2 82.4 Processing Total ore processed million t 50.7 50.9 50.9 Head grade – copper % 0.60% 0.56% 0.51% Head grade – molybdenum % 0.020% 0.
Slide 79: Competitive Capital Intensity
Quebrada Blanca Phase 2 Competitive Capital Intensity Capital Intensity of Chilean Copper Projects $25,000 US$ per Annual Tonne CuEq Production $20,000 QB2 Range $15,000 $10,000 $5,000 $0 2008 2009 2010 2011 2012 2013 2014 2015 QB2’s capital intensity is comparable with recent Chilean projects 43 So
Slide 80: Robust Economics and Tier 1 Attributes
Quebrada Blanca Phase 2 Robust Economics and Tier 1 Attributes NI 43-101 Case Copper Price (US$ per pound) $2.75 $3.00 $3.25 $3.50 Net present value at 8% (US$ millions) 565 1,253 1,932 2,604 Internal rate of return (%) 9.7% 11.7% 13.5% 15.2% Payback from first production (years) 6.8 5.8 5.0 4.4 Ann
Slide 81: Marketing
Marketing March 30, 2017 Andrew Stonkus, Senior Vice President, Marketing and Sales Réal Foley, Vice President, Coal Marketing Glenn Burchnall, Director, Energy Marketing and Logistics
Slide 82: Agenda
Marketing Agenda Overview Steelmaking Coal Base Metals Energy Summary 3
Slide 83: World Economy in 2017
Marketing World Economy in 2017 Global growth expected to increase to 3.4%, from 3.1% in 2016 • India expected to be the fastest-growing large economy at 7.6% • China plans to keep growth >6.5%, per the 13th Five Year Plan • Growth expected to pick up in commodity-exporting emerging markets & develo
Slide 84: China's 13th Five-Year Plan
Marketing China’s 13th Five-Year Plan • Transition to a more consumer-based economy • Infrastructure construction remains a key pillar • Supply-side reforms, e.g. coal and steel capacity reductions • Copper demand expected to be strong, driven by power grid and new electric vehicle (NEV) sectors • Z
Slide 85: Agenda
Marketing Agenda Overview Steelmaking Coal Base Metals Energy Summary 6
Slide 86: Good Market Fundamentals
Steelmaking Coal Marketing Good Market Fundamentals • Price volatility easing • Demand growth in emerging markets • China supply constraints • Limited restarts 7
Slide 87: Price Volatility Easing
Steelmaking Coal Marketing Price Volatility Easing Coal Price Assessments • Price induced closures globally 300 • Supply disruptions from weather 270 & temporary mine failures 240 210 $ / tonne • Q4 inventory build by mills due to 180 further supply disruption 150 concerns 120 90 • Price induced sup
Slide 88: Improving Steel Demand & Output Globally
Steelmaking Coal Marketing Improving Steel Demand & Output Globally GDP and Crude Steel Production Steel Demand $120,000 Global 2,000 YoY Growth 2017 1,700 $80,000 1,400 Global +0.5% 1,100 $40,000 800 China -2.0% $0 500 1986 1991 1996 2001 2006 2011 2016 2021f Developing, ex-China +4% $20,000 900 De
Slide 89: China's Operating Day Policy Influence on Demand
Steelmaking Coal Marketing China’s Operating Day Policy Influence on Demand China’s Coking Coal Production China's Coking Coal Imports & Stock Changes 50 40 Approximate Period of 276 Operating Days Policy 35 36 35 45 30 25 24 Million tonnes 40 Million tonnes 20 35 15 13 10 9 8 30 5 3 2 25 0 Jan Feb
Slide 90: Capacity Reductions Continue in China
Steelmaking Coal Marketing Capacity Reductions Continue in China Steel Capacity Reduction Target Coal Capacity Reduction Target 160 900 140 800 140 800 120 700 600 100 Million tonnes 500 Million tonnes 80 65 400 360 60 50 290 300 40 25 200 150 20 100 0 0 2016-2020 2016 actual 2017 target 2018-2020 2
Slide 91: Large Users Increasing Seaborne Imports
Steelmaking Coal Marketing Large Users Increasing Seaborne Imports Guofeng Project Seaborne Coking Coal Imports • Inland plant relocating to coastal area • Capacity: crude steel 8Mt, hot metal 8Mt 70 • Status: Construction to be started in 2017; 60 completion in 2021 50 39 40 26 Hegang Project • Inl
Slide 92: Strong Demand Fundamentals ex. China
Steelmaking Coal Marketing Strong Demand Fundamentals ex. China Seaborne Steelmaking Coal Imports (Average of CRU and Wood Mackenzie, Change 2021 vs. 2016) 305 295 285 Mt 275 265 2016 Brazil Vietnam Europe India Other 2021, China 2021 & CIS ex. Source: CRU; Wood Mackenzie China China’s import demand
Slide 93: Growing India Steelmaking Coal Imports
Steelmaking Coal Marketing Growing India Steelmaking Coal Imports Seaborne Steelmaking Coal Imports India’s Hot Metal Capacity; Required to Meet India Hot Metal Production Projects and Operations 80 70 60 50 Mt 40 30 z 20 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 201
Slide 94: Supply Response to Prices
Steelmaking Coal Marketing Supply Response to Prices Seaborne Steelmaking Coal Exports (Cumulative change since January 2016 vs. corresponding period in 2015) 4 350 3 300 2 1 250 0 US$/t Mt -1 200 -2 150 -3 -4 100 -5 50 -6 -7 0 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 No
Slide 95: Restarts Coming Gradually
Steelmaking Coal Marketing Restarts Coming Gradually Announced Restarts: Seaborne Steelmaking Coal Exports 16 • ~14 Mt restarts announced: 14 − ~1/3 is HCC 12 − Gradual implementation expected 10 Mt 8 • Majority of restarts announced by: 6 − New owners 4 − Junior companies 2 − Mozambique 0 2016 2017
Slide 96: Good Market Fundamentals
Steelmaking Coal Marketing Good Market Fundamentals • Prices doubled in past year • India leading demand growth • China cutting production capacity • Seaborne steelmaking coal exports lower in past year 17
Slide 97: Agenda
Marketing Agenda Overview Steelmaking Coal Base Metals Energy Summary 20
Slide 98: Strong Fundamentals
Base Metals Marketing Strong Fundamentals Copper • Global mine production growth slowing • Deficits starting to develop Zinc • Concentrate market in significant deficit • Smelters cutting production • Reported stocks declining 21
Slide 99: Slowing Copper Mine Production Growth
Base Metals Marketing Slowing Copper Mine Production Growth Copper Mine Production Peaks in 2019 Uncommitted Projects Increasingly Delayed Existing and Fully Committed Mines 30,000 12,000 15% 15% 10% in in in 28,000 Base Base Base 10,000 26,000 Case Case Case 24,000 Thousand Tonnes 8,000 Thousand To
Slide 100: Chinese Copper Demand to Remain Strong
Base Metals Marketing Chinese Copper Demand to Remain Strong Significant Power Grid Investment Potential Annual Growth in Most Sectors 3.5 282 300 3.0 250 202 200 2.5 150 Ktpa RMB trillion 2.0 20% 100 71 50 48 19 1.5 21 -7 -75 23% 37% 0 1.0 25% -50 -100 0.5 43% 52% 0.0 11th - 5yr Plan 12th - 5yr Pla
Slide 101: Wood Mackenzie Copper Outlook Moved to Deficit
Base Metals Marketing Wood Mackenzie Copper Outlook Moved to Deficit Wood Mackenzie 2017 Refined Balance Wood Mackenzie 2018 Refined Balance 600 600 500 500 400 Market now in deficit 400 2018 market also despite lower demand moved into deficit 300 300 Thousand tonnes Thousand tonnes 200 200 100 100
Slide 102: Global Stocks Stable Despite Price Decline
Base Metals Marketing Global Stocks Stable Despite Price Decline Copper Stocks • Price correction late 2016 1,800 500 as more balanced market 450 1,600 expected 1,400 400 350 • Total stocks (including Thousand tonnes 1,200 300 bonded), in days of global US¢/lb 1,000 250 800 consumption: 200 600 150
Slide 103: Long-Term Copper Mine Production Still Needed
Base Metals Marketing Long-Term Copper Mine Production Still Needed Forecast Copper Refined Balance 1,000 • At 2.1% global demand growth, 521 kt new supply needed annually 0 • Mine production falls ~230 kt per -1,000 year after 2019 Thousand tonnes -2,000 • Market finely balanced through 2018 ‒ Coul
Slide 104: Copper Market Moving to Deficit
Base Metals Marketing Copper Market Moving to Deficit • Global mine production growth slowing • Demand growth positive • Deficits starting to develop • Global stocks are low • Market needs new projects 27
Slide 105: Slowing Zinc Mine Production Growth
Base Metals Marketing Slowing Zinc Mine Production Growth Zinc Mine Production Has Peaked Uncommitted Projects Increasingly Delayed 20,000 Existing and Fully Committed Mines 10,000 18,000 9,000 8,000 16,000 7,000 Thousand Tonnes Thousand Tonnes 6,000 14,000 5,000 4,000 12,000 3,000 2,000 10,000 1,00
Slide 106: Concentrate Stocks at Historic Lows
Base Metals Marketing Concentrate Stocks at Historic Lows Chinese Zinc Concentrate Port Stocks Zinc Treatment Charges 500 250 6,500 450 6,000 400 200 Domestic TC (RMB/t) 5,500 Imported TC ($/dmt) 350 150 kdmt 300 5,000 250 4,500 200 100 150 4,000 100 50 3,500 50 0 0 3,000 Jul-10 Jul-11 Jul-12 Jul-13
Slide 107: Zinc Metal Market Moving Towards Tightness
Base Metals Marketing Zinc Metal Market Moving Towards Tightness Daily Zinc Prices & Stocks 250¢ 1,800 1,600 200¢ 1,400 1,200 Stocks US¢/lb 150¢ 1,000 800 100¢ 600 50¢ 400 200 0¢ 0 Plotted to March 15, 2017 LME Stocks SHFE Price Stocks inflection point in 2005/2006 Source: LME/SHFE Stocks are drawin
Slide 108: Zinc Stocks Approaching Critical Levels
Base Metals Marketing Zinc Stocks Approaching Critical Levels Zinc Prices vs. Days of Reported Stocks 250¢ • Significant mine closures Mar 15, 2017 completed 200¢ 2007 Dec 31, 2016 • Mine production has fallen US¢/lb 150¢ Jan 2016 Jan 2015 Jan 2014 • Asian metal production 100¢ Jan 2013 curtailments
Slide 109: Committed Zinc Supply Insufficient for Demand
Base Metals Marketing Committed Zinc Supply Insufficient for Demand Forecast Zinc Refined Balance 1,000 • Insufficient mine supply to constrain refined production 0 − 2014-2020: demand increase of 2.8 Mt vs. supply increase 792 kt (1,000) Thousand tonnes • Market in deficit from 2014 (2,000) • Inven
Slide 110: Structural Deficits in Zinc
Base Metals Marketing Structural Deficits in Zinc • Concentrate market in significant deficit • Smelters cutting production • Short term production restarts needed • Stocks declining & insufficient to meet demand 33
Slide 111: Agenda
Marketing Agenda Overview Steelmaking Coal Base Metals Energy Summary 34
Slide 112: Market Moving Towards Balance
Energy Marketing Market Moving Towards Balance World Liquid Fuels Production & Consumption • Production cuts & demand growth 100 5 expected to balance market in 2017 96 3 mbpd 92 1 88 -1 • Price upside limited by US production 84 -3 growth in short term Implied stock change and balance (right axis)
Slide 113: Guiding Principles for Fort Hills Marketing
Energy Marketing Guiding Principles for Fort Hills Marketing Strategic Objectives Key Commercial Activities • Successful commissioning & start-up • Bitumen production*: 37 kbpd • 12-month ramp up to 90% capacity • Diluent acquisition: 11 kbpd • Maximize sales volumes & bitumen netbacks • Blend sales
Slide 114: Recent Pipeline Announcements Constructive
Energy Marketing Recent Pipeline Announcements Constructive Western Canada Supply/Demand Balance Constrained Pipeline Excess Pipeline Capacity ; Rail Capacity 7,000 Available 6,500 6,000 Keystone XL kbpd 5,500 5,000 TransMountain & Enbridge 4,500 4,000 3,500 3,000 2012 2013 2014 2015 2016 2017 2018
Slide 115: US Midwest/Gulf Coast Key Markets
Energy Marketing US Midwest/Gulf Coast Key Markets Disposition & Refining Capacity US/Canada Heavy Crude Refining Capacity For Canadian Heavy (kbpd) 4000 Additional 3000 Capacity kbpd Available for Western Canada 2000 Canadian Heavy 1800 1000 Canadian Heavy 1200 Usage 600 0 0 2015 2019 2015 2019 US
Slide 116: Portfolio Approach to Market Access
Energy Marketing Portfolio Approach to Market Access Blended Bitumen Pipelines • Fort Hills partners have secured long-term pipeline access to Hardisty ‒ Significant Canadian market hub Edmonton Hardisty ‒ Access to common carriage and Asia contract capacity pipelines Vancouver Superior Montreal Sai
Slide 117: Hardisty is Canada's "Cushing"
Energy Marketing Hardisty is Canada’s “Cushing” • Crude oil storage: 29 mbbls, 425 kbbls contracted by Teck • Export pipeline takeaway capacity: 3.7 mbpd – Enbridge common carrier – Keystone & Express pipelines – Origination point for 2 proposed pipelines • Rail car loading capability: 120 kbpd 40 S
Slide 118: Target Customers
Energy Marketing Target Customers • High quality bitumen that is attractive to refiners • Targeting key customers throughout North America • Term contracts under negotiation 41 Source: Suncor
Slide 119: Summary
Energy Marketing Summary • Marketing an established, well accepted type of crude • Well positioned with significant storage at Hardisty market hub • Developing a portfolio of market access opportunities to diversified markets 42 Source: Enbridge
Slide 120: Agenda
Marketing Agenda Overview Steelmaking Coal Base Metals Energy Summary 43
Slide 121: Summary
Marketing Summary Steelmaking Coal • Price volatility easing • Good demand growth forecast Copper • Global mine production growth slowing • Deficits starting to develop Zinc • Concentrate market in significant deficit • Smelters cutting production • Reported stocks declining Energy • Established typ
Slide 122: Investor and Analyst Day
Investor and Analyst Day March 30, 2017