Teck Resources Limited Class A · TSX:TECK.A
Teck Resources Limited Class A — Investor Day (November 2015)
146 slides from Teck Resources Limited Class A's investor day presentation, Nov 4, 2015
Slide 1: Modelling Workshop
Modelling Workshop November 4, 2015
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: Agenda
Agenda Overview Greg Waller, VP, Investor Relations & Strategic Analysis Base Metal Pricing & Concentrate Contracts Michael Schwartz, Manager, Market Research Base Metal Operations Greg Waller, VP, Investor Relations & Strategic Analysis Steelmaking Coal Operations Lori Rozali, Investor Relations Ma
Slide 4: The Value of Our Diversified Business Model
Overview The Value of Our Diversified Business Model Cash Operating Profit YTD Q3 2015 2015 Leverage to Commodities & FX1 Production Unit of Estimated Estimated Guidance2 Change Profit 3 EBITDA3 Copper Coal 27 Mt US$1/tonne $21M /$1∆ $32M /$1∆ Base 55% Coal Metals 35% Copper 350 kt US$0.01/lb $5M /$
Slide 5: Cost of Sales
Overview Cost of Sales Total Cost of Sales1 Transportation Operating Cost Breakdown 19% Labour 42% Supplies 31% Operating Energy 17% Costs Depreciation & Other 10% 47% Amortization 20% Total 100% Concentrate Purchases 12% 6 1. Year to date as at Q3 2015.
Slide 6: Analyst Estimates
Overview Analyst Estimates Analyst Earnings Estimates 2014 Objectives $0.40 • To help model accuracy • To reduce variance in $0.30 earnings estimates $0.20 Observations • No consistent under or $0.10 over estimation • Significant variation in some quarters $0.00 Q1 Q2 Q3 Q4 Reported 7
Slide 7: Analyst Revenue Scenarios
Overview Analyst Revenue Scenarios 2016F Revenue at Current Prices 2016F Revenue at 25% Higher Prices 7 10 Range: $7,200-8150 Range: $8,201-9,438 Mean: $7,599 9 Mean: $8,829 6 8 5 7 Frequency 6 Frequency 4 5 3 4 2 3 2 1 1 0 0 7200 7400 7600 7800 8000 8200 8400 8600 8800 9000 9200 9400 9600 C$M C$M •
Slide 8: Interactive Analyst Centre
Overview Interactive Analyst Centre 8
Slide 9: Production & Site Cost Guidance
Overview Production & Site Cost Guidance Actual 2014 Current 2015 Guidance Steelmaking Coal Coal production 26.7 Mt 25-26 Mt Coal site costs C$54 /t1 Coal transportation costs C$38 /t Combined coal costs C$92 /t C$83-86 /t Combined coal costs US$84 ~US$64-66 /t2 Copper Copper production 333 kt 345-3
Slide 10: Current 2015 Capital Expenditures Guidance
Overview Current 2015 Capital Expenditures Guidance Major New Mine Capitalized ($M) Sustaining Enhancement Development Sub-total Stripping Total Coal $75 $30 $ - $105 $395 $500 Copper 200 15 105 320 225 545 Zinc 180 - - 180 60 240 Energy - - 910 910 - 910 Corporate 10 - - 10 - 10 TOTAL $465 $45 $1,0
Slide 11: Agenda
Agenda Overview Greg Waller, VP, Investor Relations & Strategic Analysis Base Metal Pricing & Concentrate Contracts Michael Schwartz, Manager, Market Research Base Metal Operations Greg Waller, VP, Investor Relations & Strategic Analysis Steelmaking Coal Operations Lori Rozali, Investor Relations Ma
Slide 12: Basic Concentrate Contract
Base Metals Pricing & Concentrate Contracts Basic Concentrate Contract Total Payable Metals $xx Less: Deductions Treatment Charges $xx Refining Charges $xx Total Deductions $xx INVOICE VALUE $xx 12 Invoice value = our reported revenue
Slide 13: Copper Pricing & Concentrate Contracts
Copper Pricing & Concentrate Contracts
Slide 14: Payable Copper Terms
Copper Concentrates Payable Copper Terms Typical Industry Contract Copper Content Copper Payment < 32% 96.5%; subject to minimum deduction of 1 unit, assuming a 28.6% Cu content ≥ 32% and < 38% 96.65% ≥ 38% 96.75% Payment based on copper content 14
Slide 15: Payable Silver & Gold Terms
Copper Concentrates Payable Silver & Gold Terms Typical Industry Contracts Silver Content In Copper Concentrate Silver Payment < 30 gms/dmt None ≥ 30 gms/dmt 90% Gold Content in Copper Concentrate Gold Payment < 1 gms/dmt None ≥ 1 gms/dmt 90-98%, depending on grade Payable precious metals can vary b
Slide 16: Annual Contract Terms
Copper Concentrates Annual Contract Terms Treatment Charge Refining Charge Price Total TC/RC Year (TC) in US$/dmt (RC) in US¢/lb Part. in US¢/lb 2006 $95 9.5¢ Yes 24.4¢ 2007 $60 6.0¢ No 15.4¢/ 2008 $45 4.5¢ No 11.5¢ 2009 $75 7.5¢ No 19.2¢ 2010 $46.50 4.7¢ No 11.9¢ 2011 $56 5.6¢ No 14.4¢ 2012 $62.5 6
Slide 17: Treatment Charge & Copper Refining Charge (TC/RC)
Copper Concentrates Treatment Charge & Copper Refining Charge (TC/RC) Historic Copper TC/RC 60¢ • TC/RC is a deduction from payable copper 50¢ includes price participation in 2006 − Theoretically represent what it take to 40¢ convert a tonne of concentrates into metal − Market-driven/negotiated comm
Slide 18: Payable Metals Example
Copper Concentrates Payable Metals Example Assumptions (Based on typical industry terms) Price (US$) Assay / Content Copper (Cu) $5,500 /mt 27% Silver (Ag) $15.00 /tr oz 150 gms/dmt Gold (Au) $1,100.00 /tr oz 2 gms/dmt Payment Per Dmt Terms Calculation (US$) 96.5% of Cu content Copper 27% -1% = 26%
Slide 19: Invoice Value Example
Copper Concentrates Invoice Value Example (US$) Total Payable $1,560.50 Less: Deductions Base Treatment Charge $107.00 Refining Charge: Copper 573 payable lbs x 10.7¢ /lb $61.31 Silver 4.3 payable tr oz x 40¢ /tr oz $1.72 Gold 0.06 payable tr oz x $6 /tr oz $0.36 Total Deductions ($170.39) INVOICE V
Slide 20: Total TC/RC Share of Value
Copper Concentrates Total TC/RC Share of Value Total TC/RC as a Percentage of Payable Example 14% Case 12% 10% TC (US$/dmt) 8% 6% 4% 2% $5,500 $6,000 $6,500 $7,000 $7,500 $8,000 $8,500 Copper Price (US$/t) TC US$60/dmt TC US$80/dmt TC US$100/dmt TC US$120/dmt Total TC/RC percentage of total payable
Slide 21: Historic Copper Metal Prices
Copper Metal Historic Copper Metal Prices Daily Copper Prices & Stocks 500¢ 1400 450¢ 1200 400¢ thousand tonnes 350¢ 1000 US¢/lb 300¢ 800 250¢ 600 200¢ 150¢ 400 100¢ 200 50¢ 0¢ 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 plotted to LME Stocks Comex SHFE Price August 19, 2015 2
Slide 22: Historic Copper Metal Premiums
Copper Metal Historic Copper Metal Premiums Historic Copper Metal Premium $250 • Metal premium is charged by a metal producer to a customer − Theoretically to cover the cost of shipping $200 US$/tonne metal to a customer (i.e. transportation, warehousing, financing, alloying and $150 marketing) − Ma
Slide 23: Zinc Concentrate Contracts
Teck Zinc Concentrate Contracts
Slide 24: Payable Zinc & Silver Terms
Zinc Concentrates Payable Zinc & Silver Terms Typical Industry Contracts Zinc Content Zinc Payment < 53.3% Deduct 8 units ≥ 53.3% 85% Silver Content In Zinc Concentrate Silver Payment ≤ 93.3 gms/dmt (3 tr.oz) None > 93.3 gms/dmt (3 tr.oz) Deduct 3 tr.oz and pay for 70% of remaining content 24
Slide 25: Annual Contract Terms
Zinc Concentrates Annual Contract Terms Benchmark Price Basis Year Treatment Charge In US$/t (TC) in US$/dmt 2010 $272.50 $2,500 2011 $229.00 $2,500 2012 $191.00 $2,000 2013 $211.00 $2,000 2014 $223.00 $2,000 2015 $245.00 $2,000 Spot 2015 $195.00 $1,800 No refining charges for zinc concentrate 25 So
Slide 26: Treatment Charge (TC)
Zinc Concentrates Treatment Charge (TC) Historic Zinc TC • TC is a deduction from payable zinc $600 − Theoretically what it take to convert a tonne of concentrates into metal $500 − Market driven/negotiated commercial term $400 − Charged by a refinery to a mine; revenue US$/dmt for a refiner and cos
Slide 27: Treatment Charge - Price Participation
Zinc Concentrates Treatment Charge - Price Participation Escalator / Example Pricing Basis Price De-escalator Calculation (US$) Participation (US$) (US$/t) Add escalator Add 9¢/dmt At $2,300, escalator is $27 > base price of $2,000/t from benchmark for every $1 treatment over the base price ($2,300
Slide 28: Payable Zinc Example
Zinc Concentrates Payable Zinc Example Assumptions (Based on typical industry terms) Price (US$) Assay / Content Zinc (Zn) $1,800 /mt 55% Silver (Ag) $15.00 /tr.oz 5 tr.oz/dmt Payment Per Dmt (US$) Terms Calculation 85% of Zn content 85% x 55% = 46.75% x Zinc $841.50 (min. deduction 8 units) $1,800/
Slide 29: Invoice Value Example
Zinc Concentrates Invoice Value Example (US$) Total Payable $862.50 Less: Deductions Base Treatment Charge $245.00 Price Participation $2,000 - $1,800 = $200 ($6.50) (De-escalator) x 3.25¢/$1 = Total Deductions ($238.50) INVOICE VALUE (CIF main delivery port) $624.00 Total treatment charge is ~28% o
Slide 30: Total TC Share of Value
Zinc Concentrates Total TC Share of Value Total TC as a Percentage of Payable 33% Example 31% Case 29% TC (US$/dmt) 27% 25% 23% 21% 19% 17% 15% $1,600 $1,700 $1,800 $1,900 $2,000 $2,100 $2,200 Zinc Price (US$/t) TC US$175/dmt TC US$200/dmt TC US$225/dmt TC US$250/dmt Total TC percentage of total pay
Slide 31: Historic Zinc Metal Prices
Zinc Metal Historic Zinc Metal Prices Daily Zinc Prices & Stocks 250¢ 1,800 1,600 200¢ 1,400 thousand tonnes 1,200 US¢/lb 150¢ 1,000 800 100¢ 600 400 50¢ 200 0¢ 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 plotted to LME SHFE Price October 21, 2015 31 Source: LME, SHFE
Slide 32: Historic Zinc Metal Premiums
Zinc Metal Historic Zinc Metal Premiums • Metal premium is charged by a metal producer to a customer Historic Zinc Metal Premiums − Theoretically to cover the cost of shipping $400 metal to a customer (i.e. transportation, $350 warehousing, financing, alloying and marketing) $300 − Market-driven/neg
Slide 33: Lead Concentrate Contracts
Teck Lead Concentrate Contracts
Slide 34: Payable Lead & Silver Terms
Lead Concentrates Payable Lead & Silver Terms Typical Industry Contracts Lead Content Lead Payment ≤ 60% Deduct 3 units > 60% 95% Silver Content In Lead Concentrate Silver Payment ≤ 50 gms/dmt None > 50 gms/dmt 95% 34
Slide 35: Annual Contract Terms
Lead Concentrates Annual Contract Terms Benchmark Price Basis Year Treatment Charge In US$/t (TC) in US$/dmt 2010 $220 $2,000 2011 $230 $2,500 2012 $215 $2,000 2013 $215 $2,000 2014 $215 $2,000 2015 $223 $2,000 Spot 2015 $180 Flat No refining charges for lead concentrate 35 Source: CRU
Slide 36: Treatment Charge (TC)
Lead Concentrates Treatment Charge (TC) • TC is a deduction from payable lead Historic Lead TC − Theoretically what it take to convert a $450 tonne of concentrates into metal $400 − Market driven/negotiated commercial term $350 − Charged by a refinery to a mine; revenue $300 for a refiner and cost t
Slide 37: Treatment Charge - Price Participation
Lead Concentrates Treatment Charge - Price Participation Escalator / Example Pricing Basis Price De-escalator Calculation (US$) Participation (US$) (US$/t) Add escalator Add 6¢/dmt At $2,500, escalator is $30 > base price of $2,000/t from base for every $1 treatment over the base price ($2,500 - $2,
Slide 38: Payable Lead Example
Lead Concentrates Payable Lead Example Assumptions (Based on typical industry terms) Price (US$) Assay / Content Lead (Pb) $1,800 /mt 54% Silver (Ag) $15.00 /tr oz 455 gms/dmt Payment Per Dmt Terms Calculation (US$) 95% of Pb content Lead 54% - 3% = 51% x $1,800/mt = $918.00 (min. deduction 3 units)
Slide 39: Invoice Value Example
Lead Concentrates Invoice Value Example (US$) Total Payable $1,113.00 Less: Deductions Base Treatment Charge $223.00 Price Participation $2,000 - $1,800 = $200 ($8.00) (De-escalator) x 4¢/$1 = 13 payable tr oz Silver Refining Charge $15.60 x $1.2/tr oz= Total Deductions ($230.60) INVOICE VALUE (CIF
Slide 40: Total TC Share of Value
Lead Concentrates Total TC Share of Value Total TC as a Percentage of Payable 25% Example 24% Case 23% 22% TC (US$/dmt) 21% 20% 19% 18% 17% 16% 15% $1,600 $1,700 $1,800 $1,900 $2,000 $2,100 $2,200 Lead Price (US$/t) TC US$200/dmt TC US$215/dmt TC US$230/dmt TC US$245/dmt Total TC percentage of total
Slide 41: Historic Lead Metal Prices
Lead Metal Historic Lead Metal Prices Daily Lead Prices & Stocks 200¢ 500 180¢ 450 160¢ 400 140¢ 350 120¢ 300 100¢ 250 80¢ 200 60¢ 150 40¢ 100 20¢ 50 0¢ 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 LME SHFE Price 41 Source: LME, SHFE
Slide 42: Historic Lead Metal Premiums
Lead Metal Historic Lead Metal Premiums • Metal premium is charged by a metal producer to a customer Historic Lead Metal Premiums − Theoretically to cover the cost of shipping $500 metal to a customer (i.e. transportation, $450 warehousing, financing, alloying and marketing) $400 − Market-driven/neg
Slide 43: Conclusion
Teck Conclusion
Slide 44: Things to Keep in Mind
Base Metals Pricing & Concentrate Contracts Things to Keep in Mind • We report contained copper, zinc, lead & moly − Peers may report payable • Copper, zinc and lead refined metals are sold basis LME price, plus a premium − The LME cash settlement monthly average is usually used − Silver, gold, indi
Slide 45: Additional Data Sources
Base Metals Pricing & Concentrate Contracts Additional Data Sources Wood Mackenzie and CRU both report monthly activity on TC/RC’s, TC’s and premiums in their monthly monitors for copper, lead & zinc concentrates. CRU also has a monthly historic data file covering both annual and spot numbers. 45
Slide 46: Agenda
Agenda Overview Greg Waller, VP, Investor Relations & Strategic Analysis Base Metal Pricing & Concentrate Contracts Michael Schwartz, Manager, Market Research Base Metal Operations Greg Waller, VP, Investor Relations & Strategic Analysis Steelmaking Coal Operations Lori Rozali, Investor Relations Ma
Slide 47: Copper Mines – Simplified Models
Copper Mines – Simplified Models
Slide 48: Overview of Simplified Models for Copper
Base Metal Operations Overview of Simplified Models for Copper Cathode Producer e.g. Quebrada Blanca Concentrate Producer e.g. Highland Valley Antamina Modelling Issues Ore mix & grades; mine life 48
Slide 49: Production Modelling
Base Metal Operations Production Modelling Ore milled (tonnes) x head grade (%) x recovery (%) = Production (tonnes) 2014 Examples: Highland Valley Red Dog Antamina Copper-only ore 35,107 Copper-zinc ore 15,343 Tonnes milled (000's) 49,932 Tonnes milled (000's) 4,300 Tonnes milled (000's) 50,450 Cop
Slide 50: Model – Copper Cathode Producer; Quebrada Blanca - Annual
Base Metal Operations Model – Copper Cathode Producer; Quebrada Blanca - Annual 2012 2013 2014 Revenues (C$ millions) 499 422 375 Sales (000's tonnes) 62.2 55.3 48.9 Reported in our financials Metal Prices & Fx Rate Copper US$/lb 3.61 3.32 3.11 Fx C$/US$ 1.00 1.03 1.11 Revenues (C$millions) Copper (
Slide 51: Model – Copper Cathode Producer; Quebrada Blanca - Quarterly
Base Metal Operations Model – Copper Cathode Producer; Quebrada Blanca - Quarterly Q1 14 Q2 14 Q3 14 Q4 14 2014 Revenues (C$ millions) 98 92 91 94 375 Sales (000's tonnes) 12.4 12.3 11.9 12.3 48.9 Reported in our financials Metal Prices & Fx Rate Copper US$/lb 3.19 3.08 3.17 3.00 3.11 Fx C$/US$ 1.10
Slide 52: Model – Copper Concentrate Producer; Highland Valley - Annual
Base Metal Operations Model – Copper Concentrate Producer; Highland Valley - Annual 2012 2013 2014 Revenues (C$ millions) 1,012.0 882.0 943.0 Metal Prices Copper 3.61 3.32 3.11 Reported in our financials Moly 13.00 10.00 11.50 US$/C$ 1.00 0.97 0.91 Copper Con Value US$/t con Copper Payable 2,688 2,4
Slide 53: Model – Highland Valley - Annual (cont.)
Base Metal Operations Model – Copper Concentrate Producer; Highland Valley - Annual (cont.) 2012 2013 2014 Operating Costs 445 438 484 Distribution Costs 37 34 40 Total Costs 482.0 472.0 524.0 Reported in our financials Operating Margin (Before Dep'n) 530 408 419 DD&A 115 111 154 Operating Profit 41
Slide 54: Model – Highland Valley - Quarterly
Base Metal Operations Model – Copper Concentrate Producer; Highland Valley - Quarterly Q1 14 Q2 14 Q3 14 Q4 14 2014 Revenues (C$ millions) 224 266 229 224 943 Metal Prices Copper 3.19 3.08 3.17 3.00 3.11 Reported in our financials Moly 10.00 14.00 13.00 9.00 11.50 US$/C$ 0.91 0.92 0.92 0.88 0.91 Cop
Slide 55: Model – Highland Valley - Quarterly (cont.)
Base Metal Operations Model – Copper Concentrate Producer; Highland Valley - Quarterly (cont.) Q1 14 Q2 14 Q3 14 Q4 14 2014 Operating Costs 107 121 114 142 484 Distribution Costs 9 11 10 10 40 Total Costs 116 132 124 152 524 Reported in our financials Operating Margin (Before Dep'n) 107 132 101 79 4
Slide 56: Antamina Modelling Issues - Ore Mix & Grade
Base Metal Operations Antamina Modelling Issues - Ore Mix & Grade 2013 2014 Tonnes milled (000's) Copper-only ore 32,468 69% 35,107 70% Milled ore mix must equal Copper-zinc ore 14,571 31% 15,343 30% reserves mix over mine life 47,039 50,450 tpd 128,874 138,219 Copper Copper grade milled must equal
Slide 57: Antamina Modelling Issues - Mine Life
Base Metal Operations Antamina Modelling Issues - Mine Life Mineral Reserves At December 31, 2014 Proven Probable Total Tonnes Grade Tonnes Grade Tonnes Grade Ore (000's) (%) (000's) (%) (000's) (%) Mix Copper Operating at 138 ktpd equals Copper only ore 144,500 1.00 230,900 0.97 375,400 0.98 58% ~5
Slide 58: Copper Cash Costs 1H 2015
Base Metal Operations Copper Cash Costs 1H 2015 HVC CMA QB CdA DP BU Sales (kt) 67.0 36.3 22.3 35.6 6.8 168.0 Optg Profit Method OP before D&A (C$M) 205 200 45 72 0 522 Fx C$/US$ 1.24 1.24 1.24 1.24 1.24 1.24 OP before D&A (US$M) 165 161 36 58 0 421 Margin US$/ pay lb 1.16 2.09 .74 .77 0 1.17 Copper
Slide 59: Copper Unit Costs 1H 2015
Base Metal Operations Copper Unit Costs 1H 2015 Excludes • Capitalized stripping • Sustaining capital 59
Slide 60: Zinc Mines – Simplified Models
Zinc Mines – Simplified Models
Slide 61: Model – Red Dog - Annual
Base Metal Operations Model – Zinc Concentrate Producer; Red Dog - Annual 2012 2013 2014 Revenues (C$ millions) 892 874 1240 Metal Prices Zinc - average 0.88 0.87 0.98 Reported in our financials Lead 0.94 0.97 0.95 US$/C$ 1.00 0.97 0.91 Zinc Con Value US$/t con Zinc Payable 882 872 982 Treatment Cha
Slide 62: Model – Red Dog - Annual (cont.)
Base Metal Operations Model – Zinc Concentrate Producer; Red Dog - Annual (cont.) 2012 2013 2014 Lead Con Value US$/t con Lead Payable 1,053 1,087 1,064 Treatment Charge (world terms) 200 175 175 Calculated based on PP 4 8 6 “benchmark” terms Net Payable 849 904 884 Lead Con Sales Contained metal (t
Slide 63: Model – Red Dog - Annual (cont.)
Base Metal Operations Model – Zinc Concentrate Producer; Red Dog - Annual (cont.) 2012 2013 2014 Total Revenues (C$ millions) 892 874 1240 Operating Costs 212 222 252 Distribution Costs 107 109 135 Royalties 137 125 215 Total Costs (C$ millions) 456 456 602 Reported in our financials Operating Margi
Slide 64: Red Dog Seasonality
Base Metal Operations Red Dog Seasonality • Operates 12 months; ships ~ 4 months • Shipments to inventory in Canada and Europe; Direct sales to Asia • Zinc Sales 65% Q3/Q4 35% Q1/Q2 • Lead Sales 100% Q3/Q4 0% Q1/Q2 64
Slide 65: Model – Red Dog - Quarterly
Base Metal Operations Model – Zinc Concentrate Producer; Red Dog - Quarterly Q1 Q2 Q3 Q4 2014 Revenues (C$ millions) 208 147 459 426 1240 Metal Prices Zinc - average 0.92 0.94 1.05 1.01 0.98 Reported in our financials Lead 0.96 0.95 0.99 0.91 0.95 US$/C$ 0.91 0.92 0.92 0.88 0.91 Zinc Con Value US$/t
Slide 66: Model – Red Dog - Quarterly (cont.)
Base Metal Operations Model – Zinc Concentrate Producer; Red Dog - Quarterly (cont.) Q1 Q2 Q3 Q4 2014 Lead Con Value US$/t con Lead Payable 1,076 1,064 1,109 1,020 1,067 Treatment Charge (world terms) 175 175 175 175 175 Calculated based on PP 7 6 11 0 6 “benchmark” terms Net Payable 894 884 923 844
Slide 67: Model – Red Dog - Quarterly (cont.)
Base Metal Operations Model – Zinc Concentrate Producer; Red Dog - Quarterly (cont.) Q1 Q2 Q3 Q4 2014 Total Revenues (C$ millions) 208 147 459 426 1240 Operating Costs 44 28 95 85 252 Distribution Costs 29 17 46 43 135 Royalties 32 9 93 81 215 Total Costs 105 54 234 209 602 Reported in our financial
Slide 68: Trail – Simplified Models
Trail – Simplified Models
Slide 69: Model – Trail Profit
Base Metal Operations Model – Trail Profit 1. Optimization of concentrates feed mix which generates the highest profitability from treatment charges, free metal, by-products 2. Maximize the utilization of assets whether its stockpiles or equipment 69
Slide 70: Model – Trail Profit Modelling Issues
Base Metal Operations Model – Trail Profit Modelling Issues 1. Revenue Trail Produces: • Zinc • Lead Reported products, and paid for in concentrates • Silver • Gold • Specialty Metals – Indium, Germanium etc. Unreported products, but not • Chemicals & Fertilizers paid for in concentrates 2. Concentr
Slide 71: Model – Smelter Revenue; Trail - Annual
Base Metal Operations Model – Smelter Revenue; Trail - Annual 2012 2013 2014 Revenues (C$ millions) 1,865 1,751 1,699 Metal Sales Zinc (000's tonnes) 287.4 294.1 276.9 Lead (000's tonnes) 88.3 85.2 77.9 Silver (million ounces) 22.9 22.5 20.6 Gold (thousand ounces) 60.0 62.0 49.7 Reported in our Meta
Slide 72: Model – Smelter Cost of Sales; Trail - Annual
Base Metal Operations Model – Smelter Cost of Sales; Trail - Annual 2012 2013 2014 Cost of sales (C$ millions) Concentrates 1,239 1,145 1,042 Operating costs 461 386 393 Reported in our Distribution costs 105 108 122 Depreciation and amortization 50 51 66 financials Payable Metals (from previous) 1,
Slide 73: Model – Smelter Revenue; Trail - Quarterly
Base Metal Operations Model – Smelter Revenue; Trail - Quarterly Q1 14 Q2 14 Q3 14 Q4 14 2014 Revenues (C$ millions) 392 450 438 419 1,699 Metal Sales Zinc (000's tonnes) 61.9 72.1 70.2 72.7 276.9 Lead (000's tonnes) 19.0 22.0 19.2 17.7 77.9 Silver (million ounces) 5.1 5.8 5.5 4.2 20.6 Gold (thousan
Slide 74: Model – Smelter Cost of Sales; Trail - Quarterly
Base Metal Operations Model – Smelter Cost of Sales; Trail - Quarterly Q1 14 Q2 14 Q3 14 Q4 14 2014 Cost of sales (C$ millions) Concentrates 252 273 266 251 1042 Operating costs 95 98 98 103 394 Reported in our Distribution costs 29 30 30 33 122 financials Depreciation and amortization 15 15 16 20 6
Slide 75: Agenda
Agenda Overview Greg Waller, VP, Investor Relations & Strategic Analysis Base Metal Pricing & Concentrate Contracts Michael Schwartz, Manager, Market Research Base Metal Operations Greg Waller, VP, Investor Relations & Strategic Analysis Steelmaking Coal Operations Lori Rozali, Investor Relations Ma
Slide 76: Multiple Price Assessments
Steelmaking Coal Multiple Price Assessments Metallurgical Coal Price Assessments vs. Quarterly Benchmark Price 305 255 $ / tonne 205 155 105 55 Platts FOB Semi Soft Quarterly Contract Settlement TSI Premium HCC FOB Australia Platts FOB Prem Low Vol Platts FOB 64 Mid Vol TSI HCC FOB Australia IHS HCC
Slide 77: > 90% Hard Coking Coal
Steelmaking Coal > 90% Hard Coking Coal High Quality Product Mix 4,000 3,500 3,000 2,500 Mt 2,000 >90% HCC 1,500 1,000 >90% HCC >90% 500 HCC 0 Proven & Probable Reserves Measured & Indicated Resources Inferred Resources Coking Coal PCI Coal Thermal Coal 77
Slide 78: Average Realized Price
Steelmaking Coal Average Realized Price Historical Average Realized Prices 88% 350 Discount to the benchmark price 96% 93% 300 is a function of: 250 94% 1. Product mix: >90% hard coking coal 92% YTD 200 91% 2. Direction of quarterly benchmark US$ / tonne 150 prices and spot prices 100 - Q4 2015 benc
Slide 79: Simplified Annual Model – Revenue
Steelmaking Coal Simplified Annual Model – Revenue 2012 2013 2014 Suggested Methodology Sales (Mt) 24.0 26.9 26.2 Assume sales=production; sales guidance given each quarter Average Realized Price: Benchmark Price (US$/t) Quarterly – in our release; find in industry news Average Realized % of Benchma
Slide 80: Simplified Annual Model – Unit Costs
Steelmaking Coal Simplified Annual Model – Unit Costs (C$/tonne) 2012 2013 2014 Suggested Methodology Unit costs: Site costs 57 50 51 Based on guidance Inventory write downs 0 1 3 Transportation 37 38 38 Based on guidance Total cash unit costs 94 89 92 Calculate: Site costs + inventory write downs +
Slide 81: Simplified Annual Model – Total Costs
Steelmaking Coal Simplified Annual Model – Total Costs (C$M) 2012 2013 2014 Suggested Methodology Total Costs: Site costs 1,367 1,326 1,327 Calculate: Site costs (C$/t) x sales (Mt) Inventory write downs 0 20 89 Calculate: Inventory write downs (C$/t) x sales (Mt) Transportation 888 1,025 996 Calcul
Slide 82: Simplified Annual Model – Gross Profit
Steelmaking Coal Simplified Annual Model – Gross Profit (C$M) 2012 2013 2014 Suggested Methodology Revenue 4,647 4,113 3,335 Calculate: Sales (Mt) x average realized price (C$/t) Total cash costs 2,255 2,384 2,422 Calculate: Total cash unit costs (C$/t) x sales (Mt); or add the above Gross profit, b
Slide 83: Simplified Quarterly Model – Revenue
Steelmaking Coal Simplified Quarterly Model – Revenue FY Q1 Q2 Q3 Q4 Suggested Methodology 2014 Assume sales=production; sales guidance Sales (Mt) 6.2 6.8 6.7 6.5 26.2 given each quarter Average Realized Price: Quarterly – in our release; find in industry Benchmark Price (US$/t) 143 120 120 119 news
Slide 84: Simplified Quarterly Model – Unit Costs
Steelmaking Coal Simplified Quarterly Model – Unit Costs FY (C$/tonne) Q1 Q2 Q3 Q4 Suggested Methodology 2014 Unit costs: Site costs 52 53 50 48 51 Based on guidance Inventory write downs 5 2 3 4 3 Transportation 38 37 38 39 38 Based on guidance Calculate: Site costs + inventory write Total cash uni
Slide 85: Simplified Quarterly Model – Total Costs
Steelmaking Coal Simplified Quarterly Model – Total Costs FY (C$M) Q1 Q2 Q3 Q4 Suggested Methodology 2014 Total costs: Site costs 348 360 335 312 1,327 Calculate: Site costs (C$/t) x sales (Mt) Calculate: Inventory write downs (C$/t) x Inventory write downs 30 14 22 23 89 sales (Mt) Calculate: Trans
Slide 86: Simplified Quarterly Model – Gross Profit
Steelmaking Coal Simplified Quarterly Model – Gross Profit FY (C$M) Q1 Q2 Q3 Q4 Suggested Methodology 2014 Calculate: Sales (Mt) x Average Realized Revenue 880 833 798 824 3,335 Price (C$/t) Calculate: Total cash unit costs (C$M) x sales Total cash costs 588 633 611 590 2,422 (Mt) Gross profit, befo
Slide 87: Remember Non-IFRS Costs
Steelmaking Coal Remember Non-IFRS Costs Total Cash Cost YTD Q3 2015 vs. 2014 120 106 YTD 2014 100 US$/t (C$1.10 Q3 2015 / US$) (C$1.26 78 / US$) 80 Site1 $50 $36 US$/t 60 Transportation 35 $28 IFRS 40 IFRS Total $85 $64 Costs Capitalized Stripping $15 $12 20 Full Cash Cost $100 $76 0 Sustaining Cap
Slide 88: Agenda
Agenda Overview Greg Waller, VP, Investor Relations & Strategic Analysis Base Metal Pricing & Concentrate Contracts Michael Schwartz, Manager, Market Research Base Metal Operations Greg Waller, VP, Investor Relations & Strategic Analysis Steelmaking Coal Operations Lori Rozali, Investor Relations Ma
Slide 89: What Are The Oil Sands?
Energy What Are The Oil Sands? • A natural mixture of sand, water, clay and heavy viscous oil called “bitumen” • Unconsolidated…not rock • Sand and water must be removed from the bitumen before it can be transported, upgraded or refined into petroleum products • Bitumen will not flow unless heated o
Slide 90: Understanding the Terminology
Energy Understanding the Terminology • Petroleum is the general term for solid, liquid, or gaseous hydrocarbons • Crude oil is a naturally occurring petroleum • Bitumen is a type of crude oil that must be extracted via mining or in-situ • Diluent is a lighter hydrocarbon used to assist pipeline move
Slide 91: Fort Hills Project
Fort Hills Project
Slide 92: Fort Hills By The Numbers
Energy Fort Hills By The Numbers1 Teck’s Sanction Capital2 Teck’s Estimated 2015 Spend Teck’s Remaining Capital3 ~$2.94 $850 ~$1.5 billion million billion Operating & Sustaining Costs3 Sustaining Capital3 Teck’s Share of Production $25-28 $3-5 13,000,000 per barrel of bitumen per barrel of bitumen b
Slide 93: Fort Hills Simplified Process Flowsheet
Energy Fort Hills Simplified Process Flowsheet Mining Ore Ore Preparation Reject Truck and Shovel Feeder/Crusher Feed Surge Ore Preparation Hydrotransport Paraffinic Froth Primary Extraction Treatment Solvent (PFT) Recovery Bitumen Froth Unit Bitumen Primary Diluent Separation Flotation Product Cell
Slide 94: Fort Hills Bitumen Production & Blend Supply
Energy Fort Hills Bitumen Production & Blend Supply Estimated Fort Hills Production 60 60 Fort Hills Mine Project: • Teck Share: 20% or 36 kbpd of bitumen • Mine start-up: December 2017 50 50 • 90% production reached after 12 months • Production varies, depending on operating conditions and throughp
Slide 95: Pricing & Quality
Teck Pricing & Quality
Slide 96: Fort Hills Bitumen Netback Calculation Model
Energy Fort Hills Bitumen Netback Calculation Model Cash Margin1 Calculation Example $70 $15.50 $60 $1.25 $11 $7-9 $60 $55.50 $10 $50 $22 $40 $37 $30 $3 $1-2 $2-3 $20 $13 $10-$11 $10 $- Teck seeks to secure dedicated transportation capacity for Fort Hills volumes to key markets to minimize WCS disco
Slide 97: Crude Oil Pricing Benchmarks
Energy Crude Oil Pricing Benchmarks Oil Sands Diluent Supply • Natural Gas Liquids (C5+) • Diluent pool of many qualities • Priced as differential off WTI • Location: Edmonton, Alberta Brent WCS @ • Light Sweet Crude Oil Hardisty • Global Marker Western Canadian Select (WCS) • Location: Sullom Voe,
Slide 98: Western Canadian Select (WCS)
Energy Western Canadian Select (WCS) Average Monthly WTI-WCS Differential $45 Western Canadian Select (WCS) Is The Benchmark $40 $23.12 Price For Canadian Heavy Oil At Hardisty, Alberta $35 $30 WCS differential to West Texas Intermediate (WTI) $15.69 $16.60 $25 • Contract settled monthly as differen
Slide 99: Sufficient Transportation Capacity In Western Canada
Energy Sufficient Transportation Capacity In Western Canada Western Canadian Transport Supply & Demand 8,000 2 New Pipelines 7,000 Assumptions Fort Hills’ First Oil 6,000 • Fort Hills first oil late 2017 Enbridge Expansions 5,000 • Enbridge mainline capacity expansions 4,000 kbbls/day move forward 3
Slide 100: Diluent (C5+) Pricing
Energy Diluent (C5+) Pricing Average Monthly WTI/Diluent (C5+) Differential Diluent (C5+) at Edmonton, Alberta Is The Benchmark $20 Contract For Diluent Supply For Oil Sands $15 Diluent (C5+) differential to West Texas Intermediate $10 (WTI) US/bbl • Contract settled monthly as differential to Nymex
Slide 101: Blend Cost Details
Energy Blend Cost Details Blend Cost Estimated $8-12 Per Barrel Of Bitumen Typical Diluted Bitumen (Dilbit) Blend Based On: Western Canadian Select 1) Acquisition of Diluent at Edmonton (WCS) at Hardisty • Assuming US$60 WTI price, plus the forecasted NYMEX WTI/C5+ contract differential of US$0.50/b
Slide 102: Western Canada Diluent Supply
Energy Western Canada Diluent Supply Readily Available Diluent Demand (2015 CAPP Supply Forecast) 1000 800 Edmonton C5+ Diluent Pool 600 Comprised of Local and k bbls/day Imported Condensates 400 1) Local condensate supplied from Western Canada 200 2) Imported condensate via pipelines & rail • Refin
Slide 103: Markets
Teck Markets
Slide 104: The US is a Prime Market
Energy The US is a Prime Market Existing North American Pipelines to US/Canadian Markets Enbridge Mainline Kitimat • In service Edmonton • US Midwest,Eastern Canada markets Hardisty Enbridge Flanagan South Superior • Phases 1 & 2 operational Q4 2014 Saint John Vancouver Montreal • 600 k bbls/day cap
Slide 105: Additional US Pipeline Capacity Proposed
Energy Additional US Pipeline Capacity Proposed New/Proposed North American Pipelines to US Markets Enbridge Line 9B Reversal Kitimat • Construction competed, operational 2nd half 2015 Edmonton • Ontario, Quebec markets Hardisty Keystone XL1 Superior Saint John • Cushing-US Gulf Coast Market Link: I
Slide 106: Asia is a Growing Market
Energy Asia is a Growing Market Proposed North American Pipelines to Tidewater Ports Trans Canada Energy East Kitimat • Under regulatory review Edmonton • Eastern Canada, offshore markets Hardisty Enbridge Northern Gateway Superior • Conditionally approved, pending sanction Saint John Vancouver Mont
Slide 107: Tidewater Market Premium
Energy Tidewater Market Premium Average of ~US$2-$3 per bbl Fort Hills Blend @ Hardisty (US/bbl) $53 $51.00 $51 $49.00 $49 $47.00 $48.00 $47 BASE CASE*** $45.00 $45 $44.00 $43.50 $43 $42.00 $41 $39 $37 $35 WCS Diff $17.00 WCS Diff $15.50 TransCanada WCS Diff $14.00 WCS Diff $13.00 Enbridge WCS Diff
Slide 108: Growing Rail Capacity in Western Canada
Energy Growing Rail Capacity in Western Canada Western Canadian Rail Capacity Estimated Rail Costs & Cycle Times 1.5 Oil Sands Million barrels / day 1.0 Vancouver Canada West Coast 0.5 8-11 days $9-$16/bbl East Coast 13-17 days US East $15-22/bbl Coast 0.0 Port Arthur Q1 2013 Q1 2014 Q1 2015 Q1 2016
Slide 109: Regional Pipeline Logistics & Market Strategy
Regional Pipeline Logistics & Market Strategy
Slide 110: Key Commercial Objectives
Energy Key Commercial Objectives Committed Logistics Solutions in Alberta Nominal Bitumen & Blend Logistics Operator Capacity Status (kbpd) Fort Hills Northern Courier Hot Bitumen TransCanada 202 Construction: ~30% complete Mine Terminal East Tank Farm - Blending Suncor 292 Construction: ~25% comple
Slide 111: Market Access Strategy
Energy Market Access Strategy Diversified Market Access Teck Marketing Plan for 50 kbpd Diluted Bitumen Blend Sufficient Export Capacity In Place • Includes Pipeline And Rail Capability • No shut in risk, but price risk likely Kitimat Edmonton Targeting Long Term Market Access Hardisty • US Gulf Coa
Slide 112: Appendix
Teck Appendix
Slide 113: Enbridge Flanagan South Pipeline Tariff
Energy Enbridge Flanagan South Pipeline Tariff Hardisty to USGC Enbridge Flanagan South Tariff Website: http://www.enbridge.com/DeliveringEnergy/Shippers/Tariffs/Enbridge-Pipelines-FSP-LLC- Flanagan-South-Tariffs.aspx Fixed Toll $7.76 US/bbl Power $0.18 US/bbl Future Mainline Fees* $0.80 US/bbl Tota
Slide 114: TransCanada Keystone Tariff
Energy TransCanada Keystone Tariff Hardisty to USGC TransCanada Keystone Comprised of Two Tolls: 1) From Hardisty, Alberta to US Border, and http://www.transcanada.com/docs/Our_Businesses/Transcanada_Keystone-neb-tariff-no-16.pdf 2) From US Border to US Gulf Coast http://www.transcanada.com/docs/Our
Slide 115: Industry Links
Energy Industry Links Crude Monitor http://www.crudemonitor.ca/home.php Canadian Association of Petroleum Producers http://capp.ca/ Alberta Energy bitumen valuation methodology http://www.energy.alberta.ca/OilSands/1542.asp Condensate Equalization Data http://capp.ca/publications-and-statistics/indu
Slide 116: Agenda
Agenda Overview Greg Waller, VP, Investor Relations & Strategic Analysis Base Metal Pricing & Concentrate Contracts Michael Schwartz, Manager, Market Research Base Metal Operations Greg Waller, VP, Investor Relations & Strategic Analysis Steelmaking Coal Operations Lori Rozali, Investor Relations Ma
Slide 117: Consolidated Statements of Income Overview
Other Income Statement & Balance Sheet Items Overview Consolidated Statements of Income (Unaudited) Year ended (C$ in millions, except for share data) 31-Dec-2014 Revenues $8,599 Cost of sales -7,071 Gross profit 1,528 • General and admin costs Other operating expenses • Exploration and R&D General
Slide 118: General and Administration
Other Income Statement & Balance Sheet Items General and Administration • Represents corporate sales, general and administration costs Avge C$ millions Q1 Q2 Q3 Q4 2012 Qtr General and administration 28 34 33 42 34 137 Avge C$ millions1 Q1 Q2 Q3 Q4 2013 Qtr General and administration 34 34 30 31 32
Slide 119: Exploration & Research and Development
Other Income Statement & Balance Sheet Items Exploration & Research and Development Avge C$ millions Q1 Q2 Q3 Q4 2012 Qtr Exploration 24 34 36 8 26 102 Research and Development 5 4 5 5 5 19 Avge C$ millions Q1 Q2 Q3 Q4 2013 Qtr Exploration 14 25 27 20 22 86 Research and Development 2 4 4 8 5 18 Avge
Slide 120: Other Operating Income (Expense)
Other Income Statement & Balance Sheet Items Other Operating Income (Expense) Other Operating Income (Expense) Year ended Year ended Avge (C$ in millions) 31-Dec-2013 31-Dec-2014 C$ millions Q1 Q2 Q3 Q4 2012 Qtr Other operating 80 (107) 57 54 (6) (24) Settlement pricing adjustments $(62) $(130) inco
Slide 121: Other Operating Income (Expense) – Why Pricing Adjustments?
Other Income Statement & Balance Sheet Items Other Operating Income (Expense) – Why Pricing Adjustments? Revenue • Majority of our metal sales from mines are as concentrates • Concentrate sales priced off LME, but net of TC/RC’s Pricing Adjustments • Prices finalized 2-3 months after sale • Price ri
Slide 122: Other Operating Income (Expense) - Pricing Adjustments
Other Income Statement & Balance Sheet Items Other Operating Income (Expense) - Pricing Adjustments • Negative pricing adjustments of $141M in Q3 2015 Simplified Pricing Adjustment Model • Driven by quarterly change 100 Q1 2012 in key commodity prices Pre-tax Settlement Adjustment (C$M) • Weighted t
Slide 123: Non-Operating Income (Expense)
Other Income Statement & Balance Sheet Items Non-Operating Income (Expense) Non-Operating Income( Expense) Year ended Year ended (C$ in millions) 31-Dec-2013 31-Dec-2014 Gain on sale of investments $42 $1 Provision for marketable (32) (8 • Largely eliminated in adjusted securities Foreign exchange g
Slide 124: Finance Expense
Other Income Statement & Balance Sheet Items Finance Expense Finance Expense Year ended Year ended (C$ in millions) 31-Dec-2013 31-Dec-2014 Debt interest $358 $384 Financing fees & discount amortization 6 7 Net interest expense on retirement benefit plans 29 16 Accretion on decommissioning and resto
Slide 125: Long-Dated Debt Maturity Profile
Other Income Statement & Balance Sheet Items Long-Dated Debt Maturity Profile $3,000 $2,750 • No debt due until 2017 $2,500 − Weighted average maturity ~14.5 years $2,250 − Weighted average coupon (interest rate) ~4.8% $2,000 − Average maturity <US$600M $1,750 • Pro-forma debt to debt-plus-equity ra
Slide 126: Capitalized Stripping
Other Income Statement & Balance Sheet Items Capitalized Stripping C$ millions 2012 2013 2014 Steelmaking Coal 495 471 443 Copper 194 231 225 Zinc 43 42 47 Energy 0 0 0 Total 732 744 715 • Guidance provided annually 126
Slide 127: Sustaining Capital
Other Income Statement & Balance Sheet Items Sustaining Capital C$ millions 2012 2013 2014 Long Term Steelmaking Coal 328 255 175 ~ 300 Copper 219 238 170 ~ 250 Zinc 134 161 154 ~ 100 Corporate 30 31 12 Total 711 665 511 ~ 650 - 700 • Guidance provided annually • Currently running below long-term av
Slide 128: Agenda
Agenda Overview Greg Waller, VP, Investor Relations & Strategic Analysis Base Metal Pricing & Concentrate Contracts Michael Schwartz, Manager, Market Research Base Metal Operations Greg Waller, VP, Investor Relations & Strategic Analysis Steelmaking Coal Operations Lori Rozali, Investor Relations Ma
Slide 129: Income & Resource Taxes Overview
Income & Resource Taxes Overview • Statutory and Effective Tax Rates and basic overview; by jurisdiction − Canada − Chile − Peru − US • Summary of Effective Tax Rates • Correlation between Operating Profit and Effective Tax Rate 129
Slide 130: Canadian Tax - Rates
Income & Resource Taxes Canadian Tax - Rates BC Mining Other Capital (Coal & HVC) (Trail) Gains (1/2) ($ millions) Income before taxes $1,000 $1,000 $1,000 BC Mining Tax (13%) (130) 0 0 Net Income $870 $1,000 $1,000 Taxable Income $870 $1,000 $500 Income taxes (combined Federal & (226) (260) (130) P
Slide 131: Canadian Tax – Tax Pools
Income & Resource Taxes Canadian Tax – Tax Pools • Canadian Development Expense (CDE) = $1.2 Billion − 30% declining balance write-off − Historical costs of resource properties • Net Operating Loss (NOL) = $5.0 Billion − Expiry 2027-2034 − 100% write off − Accelerated depreciation of past investment
Slide 132: Canadian Tax – Highland Valley; Elk Valley
Income & Resource Taxes Canadian Tax – Highland Valley; Elk Valley • BC Provincial Mineral Tax − Mine-by-mine − Two-tier tax system (minimum 2% of net current proceeds; maximum 13% of cumulative net revenues) − Generally allows immediate write off of costs incurred − Accounting treatment: income tax
Slide 133: Canadian Tax – Fort Hills; Frontier
Income & Resource Taxes Canadian Tax – Fort Hills; Frontier Alberta Provincial Oil Sands Royalty • Accounting treatment: operating expense • Implemented Jan. 1, 2009; applicable to all new oil sands projects on crown-owned leases in Alberta • Two-rate system − Pre-payout base royalty at 1% - 9% of G
Slide 134: Chilean Tax – Quebrada Blanca; Carmen de Andacollo
Income & Resource Taxes Chilean Tax – Quebrada Blanca; Carmen de Andacollo Corporate Income Tax Rates 2015 2016 2017 2018+ 1st Level 22.5% 24.0% 25.5% 27.0% (on taxable income) 2nd Level (on taxable income; 12.5% 11.0% 9.5% 8.0% withholding tax on dividends) Total 35.0% 35.0% 35.0% 35.0% 134
Slide 135: Chilean Tax – Specific Mining Royalty Regimes
Income & Resource Taxes Chilean Tax – Quebrada Blanca; Carmen de Andacollo Specific Mining Royalty Regimes 4% / 5% Until Grandfathered under stability on operating margin (sliding scale) 2017 agreement with the government for QB and Andacollo, respectively From 5.0% - 34.5% 2018 on operating margin
Slide 136: Chilean Tax – Specific Mining Royalty (from 2018)
Income & Resource Taxes Chilean Tax –Specific Mining Royalty (from 2018) Operating Profit Margin Marginal Bracket Lower Limit Upper Limit Rates 1 0% 35% 5.00% 2 35% 40% 8.00% 3 40% 45% 10.50% 4 45% 50% 13.00% 5 50% 55% 15.50% 6 55% 60% 18.00% 7 60% 65% 21.00% 8 65% 70% 24.00% 9 70% 75% 27.50% 10 75%
Slide 137: Peruvian Tax - Antamina
Income & Resource Taxes Peruvian Tax - Antamina Income Tax Rates 2017/ 2015 2016 2019 2018 Corporate 30% 28% 27% 26% Withholding tax on dividends* 6.8% 6.8% 8.0% 9.3% *4.1% still applies to distribution of pre-2015 retained earnings 137
Slide 138: Peruvian Tax - Antamina Mining Royalty Regimes
Income & Resource Taxes Peruvian Tax - Antamina Mining Royalty Regimes Special Mining 4.00%-13.12% 2015 Burden Rate on operating margin (sliding scale) Special Mining Tax & 3.0%-20.4% 2016+ Modified Mining Royalty on operating margin (sliding scale) Deductible for income tax purposes 138
Slide 139: Peruvian Tax – Special Mining Burden (2015)
Income & Resource Taxes Peruvian Tax – Special Mining Burden (2015) Operating Profit Margin Marginal Scale # Lower Limit Upper Limit Rates Peruvian 1 Tax Rates 0% 10% 4.00% 2 10% 15% 4.57% Special Mining Burden (2012-2015) 3 15% 20% 5.14% 4 20% 25% 5.71% 5 25% 30% 6.28% 6 30% 35% 6.85% 7 35% 40% 7.4
Slide 140: Peruvian Tax – Combined Special Mining Tax & Modified Mining Royalty
Income & Resource Taxes Peruvian Tax – Combined Special Mining Tax & Modified Mining Royalty (From 2016) Operating Profit Margin Marginal Scale # Lower Limit Upper Limit Rates 1 0% 10% 3.00% 2 10% 15% 4.15% 3 15% 20% 5.30% 4 20% 25% 6.45% 5 25% 30% 7.60% 6 30% 35% 8.75% 7 35% 40% 9.90% 8 40% 45% 11.
Slide 141: US Tax – Red Dog
Income & Resource Taxes US Tax – Red Dog • Special Deductions: ‒ % depletion allowance is 22% on sales (capped at 50% of taxable income) ‒ Manufacturing deduction is 6% of net income • Pay the higher of Regular and Alternative Minimum Tax (AMT) • 5% withholding tax on dividends Statutory Income Tax
Slide 142: US Tax – General Illustration
Income & Resource Taxes US Tax – General Illustration Effective ($ millions) tax rate Revenue $1,000 Less: Cost of sales 500 Net Income before AMLT 500 Less: AMLT 24 Net Income before % depletion - (AMT Taxable 476 Income) Deduct: % depletion 220 Regular Taxable Income 256 Pay Higher of Regular and
Slide 143: Effective Rates on Operating Income 2015
Income & Resource Taxes Effective Rates on Operating Income 2015 Effective Tax Rates Across Our Jurisdictions (assuming full repatriation of foreign earnings to Canada) Canada Non- Peru Chile US* Consolidated** Mining Mining Income tax 26% 26% 30% 22.5% 23% 27% Mining tax net of income tax – 10% 4%
Slide 144: Effective Rates Including G&A and Finance Expense
Income & Resource Taxes Effective Rates Including G&A and Finance Expense Expected Effective Tax Rate Tax Profit ($M) Tax Rate Expense At Various Operating Profit Levels (Loss) (Recovery) 80% Operating Profit 2,000 35% 700 70% 9% G&A and Finance Expense (400) 26% (104) Effective Tax Rate (%) 60% Net
Slide 145: Key Takeaways
Income & Resource Taxes Key Takeaways • “The combined effect of resource taxes and higher rates in foreign jurisdictions tends to be magnified in periods when our operating earnings are lower relative to our head office administrative and finance charges incurred in Canada. This occurs because resou
Slide 146: Modelling Workshop
Modelling Workshop November 4, 2015