Teck Resources Limited Class A · TSX:TECK.A
Teck Resources Limited Class A — Investor Day (April 2020)
165 slides from Teck Resources Limited Class A's investor day presentation, Apr 2, 2020
Slide 1: Modelling Workshop
Modelling Workshop April 2, 2020
Slide 2: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements 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 Securiti
Slide 3: Welcome and Overview
Welcome and Overview Fraser Phillips, Senior Vice President Investor Relations and Strategic Analysis
Slide 4: Agenda
Agenda In Eastern Standard Time 8:30-8:40am Welcome Fraser Phillips SVP, Investor Relations and Strategic Analysis 8:40-9:20am Base Metals Pricing and Michael Schwartz Concentrate Contracts Director, Market Research 9:20-9:50am Base Metals Operations James Woeller Manager, Strategic Initiatives and
Slide 5: Base Metals Pricing and Concentrate Contracts
Base Metals Pricing and Concentrate Contracts Michael Schwartz Director, Market Research
Slide 6: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements 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 Securiti
Slide 7: Agenda
Agenda Concentrates 101 Copper Concentrate Contracts Zinc Concentrate Contracts Lead Concentrate Contracts Other Costs / Revenues Impacting Invoices 3
Slide 8: Concentrates
Concentrates 101 PRIMARY CRUSHER SAG MILL BALL MILL CIRCUIT Water 200 80% Terms Typical Ore Grades mm 3mm • 0.5 – 1.0% Cu Ore Grade • 5.0 – 10% Zn TAILINGS THICKENER ROUGHER FLOTATION 80% TAILINGS 150µm • 2.0 – 4.0% Pb • < 0.2% Cu • < 1.0% Zn/Pb Concentrate Grade Wet Metric Tonne (Wmt) Typical Conce
Slide 9: Copper Concentrate Contracts
Copper Concentrate Contracts
Slide 10: Copper Concentrates - Payable Copper Terms
Copper Concentrates - Payable Copper Terms Payment based on copper content Typical Industry Contract COPPER CONTENT COPPER PAYMENT < 30% 96.5%; subject to minimum deduction of 1 unit, assuming a 26.0% Cu content ≥ 30% and < 38% 96.65% ≥ 38% 96.75% 6
Slide 11: Copper Concentrates - Payable Silver and Gold Terms
Copper Concentrates - Payable Silver and Gold Terms Payable precious metals can vary by region, customer and content Typical Industry Contracts SILVER CONTENT SILVER PAYMENT IN COPPER CONCENTRATE < 30 gms/dmt None ≥ 30 gms/dmt 90% GOLD CONTENT GOLD PAYMENT IN COPPER CONCENTRATE < 1 gms/dmt None ≥ 1
Slide 12: Copper Concentrates - Annual Contract Terms
Copper Concentrates - Annual Contract Terms1 TREATMENT REFINING PRICE TOTAL TC/RC YEAR CHARGE (TC) CHARGE (RC) PARTICIPATION IN US¢/LB IN US$/DMT IN US¢/LB 2012 $62.5 6.25¢ No 16.0¢ 2013 $73 7.3¢ No 18.72¢ 2014 $92 9.2¢ No 23.6¢ 2015 $107 10.70¢ No 27.44¢ 2016 $97.35 9.74¢ No 24.96¢ 2017 $92.50 9.25
Slide 13: Copper Concentrates - TC/RC
Copper Concentrates –TC/RC Spot TC/RC are more volatile than annual TC/RC • Treatment charge and refining charge (TC/RC) Historic Copper TC/RC1 (US$/dmt) is a deduction from payable copper $120 ‒ Theoretically represent what it takes to convert a tonne of concentrates into metal $90 ‒ Market-driven/
Slide 14: Copper Concentrates - Payable Metals Example
Copper Concentrates - Payable Metals Example Assumptions (Based on typical industry terms) PRICE (US$) ASSAY / CONTENT Copper (Cu) $5,600 /mt 26% Silver (Ag) $17.00 /tr oz 150 gms/dmt Gold (Au) $1,600.00 /tr oz 2 gms/dmt PAYMENT TERMS CALCULATION PER DMT (US$) 96.5% of Cu content Copper 26% -1% = 25
Slide 15: Copper Concentrates - Invoice Value Example
Copper Concentrates - Invoice Value Example (US$) Total Payable $1,569.10 Less: Deductions Base Treatment Charge $62.00 Refining Charge: Copper: 551 payable lbs x 6.2¢ /lb $34.16 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 ($98.24) INVOICE
Slide 16: Copper Concentrates - Total TC/RC Share of Value
Copper Concentrates - Total TC/RC Share of Value Total TC/RC percentage of total payable varies with copper price Total TC/RC as a Percentage of Total Payable 14% Example Case 12% 10% TC (US$/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$80
Slide 17: Zinc Concentrate Contracts
Zinc Concentrate Contracts Teck
Slide 18: Zinc Concentrates - Payable Zinc & Silver Terms
Zinc Concentrates - Payable Zinc & Silver Terms Typical Industry Contracts ZINC CONTENT ZINC PAYMENT < 53.3% Deduct 8 units ≥ 53.3% 85% SILVER CONTENT IN ZINC CONCENTRATE SILVER PAYMENT ≤ 93.3 gms/dmt (3 tr.oz) Below 3 tr.oz = full deduction. 0% payable. > 93.3 gms/dmt (3 tr.oz) Deduct 3 tr.oz and p
Slide 19: Zinc Concentrates - Annual Contract Terms
Zinc Concentrates - Annual Contract Terms1 No refining charges for zinc concentrate BENCHMARK TREATMENT PRICE BASIS YEAR CHARGE (TC) IN US$/DMT IN US$/t 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 2016 $203.00 $2,000 2017 $1
Slide 20: Zinc Concentrates - Treatment Charge (TC)
Zinc Concentrates - Treatment Charge (TC) • TC is a deduction from payable zinc Historic Zinc Treatment Charge1 (US$/dmt) − Theoretically what it takes to convert a $400 tonne of concentrates into metal − Market driven/negotiated commercial term $300 − Charged by a refinery to a mine; revenue for a
Slide 21: Zinc Concentrates - Treatment Charge And Price Participation
Zinc Concentrates - Treatment Charge And Price Participation PRICING BASIS PRICE PARTICIPATION ESCALATOR / DE-ESCALATOR EXAMPLE CALCULATION (US$) (US$) (US$/t) Add escalator Add 5¢/dmt At $2,300, escalator is $5 > base price of $2,200/t from benchmark for every $1 over the base price ($2,300 - $2,20
Slide 22: Zinc Concentrates - Payable Metals Example
Zinc Concentrates - Payable Metals Example Assumptions (Based on typical industry terms) PRICE (US$) ASSAY / CONTENT Zinc (Zn) $2,400 /mt 50% Silver (Ag) $17.00 /tr.oz 5 tr.oz/dmt PER DMT PAYMENT TERMS CALCULATION (US$) 85% of Zn content 85% x 50% = 42.5% Zinc $1,008.00 (min. deduction 8 units) 50%
Slide 23: Zinc Concentrates - Invoice Value Example
Zinc Concentrates – Invoice Value Example (US$) Total Payable $1,031.80 Less: Deductions Base Treatment Charge $245.00 Price Participation (escalator) $2,400 - $2,200 = $200 x 5.0¢/$1 = +$10.00 Total Deductions ($255.00) INVOICE VALUE (CIF main delivery port) $776.80 Total treatment charge is ~25% o
Slide 24: Zinc Concentrates - Total TC Share of Value
Zinc Concentrates - Total TC Share of Value Total TC percentage of total payable varies with zinc price Total TC as a Percentage of Total Payable 35% Example Case 30% Example TC (US$/dmt) Case 25% 20% 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$200/dmt
Slide 25: Lead Concentrate Contracts
Lead Concentrate Contracts Teck
Slide 26: Lead Concentrates - Payable Lead & Silver Terms
Lead Concentrates - Payable Lead & Silver Terms Typical Industry Contracts LEAD CONTENT LEAD PAYMENT ≤ 60% Minimum deduct 3 units > 60% 95% SILVER CONTENT IN LEAD CONCENTRATE SILVER PAYMENT ≤ 50 g/dmt Minimum deduction 50g/dmt = 0% > 50 g/dmt Minimum deduction 50g/dmt Then pay 95% 22
Slide 27: Lead Concentrates - Annual Contract Terms
Lead Concentrates - Annual Contract Terms1 No refining charges for lead concentrate BENCHMARK TREATMENT PRICE BASIS YEAR CHARGE (TC) IN US$/DMT IN US$/t 2010 $220 $2,000 2011 $230 $2,500 2012 $215 $2,000 2013 $215 $2,000 2014 $215 $2,000 2015 $223 $2,000 2016 $175 $2,000 2017 $130 $2,000 2018 $99 $2
Slide 28: Lead Concentrates - Treatment Charge (TC)
Lead Concentrates - Treatment Charge (TC) • TC is a deduction from payable lead Historic Lead Treatment Charge1 − Theoretically what it take to convert a tonne (US$/dmt) $300 of concentrates into metal − Market driven/negotiated commercial term $250 − Charged by a refinery to a mine; revenue $200 fo
Slide 29: Lead Concentrates - Payable Metals Example
Lead Concentrates - Payable Metals Example Assumptions (Based on typical industry terms) PRICE (US$) ASSAY / CONTENT Lead (Pb) $1,800 /mt 54% Silver (Ag) $17.00 /tr oz 455 gms/dmt PAYMENT TERMS CALCULATION PER DMT (US$) 95% of Pb content Lead 54% - 3% = 51% x $1,800/mt = $918.00 (min. deduction 3 un
Slide 30: Lead Concentrates - Invoice Value Example
Lead Concentrates – Invoice Value Example (US$) Total Payable $1,139.00 Less: Deductions Base Treatment Charge $170.00 Silver Refining Charge 13 payable tr oz x $1.5/tr oz = $19.50 Total Deductions ($189.50) INVOICE VALUE (CIF main delivery port) $949.50 Total treatment and refining charges are ~17%
Slide 31: Lead Concentrates - Total TC/RC Share of Value
Lead Concentrates - Total TC/RC Share of Value Total TC percentage of total payable varies with lead price Total TC as a Percentage of Total Payable 25% Example Case 23% TC (US$/dmt) 21% 19% 17% 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$215/dmt TC US
Slide 32: Other Costs / Revenues Impacting Invoices
Other Costs / Revenues Impacting Invoices
Slide 33: Copper Logistics Costs
Copper Logistics Costs (US$) $1,471/t Cu $0 - $45/wmt ~$20/wmt $30 - $55/wmt Considerations • Does the mine run a pipeline, and are those included in the operating costs? • Does the mine own its own port, or is it a third party? • Is there a negotiated COA with shipping companies? • Where is it goin
Slide 34: Zinc Logistics Costs
Zinc Logistics Costs (US$) $777/t Zn $0 - $45/wmt ~$20/wmt $30 - $55/wmt Considerations • Red Dog trucks materials to its own port, but it has nine months of storage costs. • Antamina has a pipeline to its own port, but has dewatering costs. • Is there a negotiated COA with shipping companies, which
Slide 35: Copper Metal - Historic Prices
Copper Metal - Historic Prices Copper Prices1 Zinc Prices1 350¢ 1600 180¢ 700 325¢ 1400 160¢ 600 140¢ 300¢ 1200 500 Thousands tonnes Thousand tonnes 120¢ 275¢ 1000 400 US ¢/lb 100¢ 250¢ 800 US¢/lb 80¢ 300 225¢ 600 60¢ 200 200¢ 400 40¢ 175¢ 200 100 20¢ 150¢ 0 0¢ 0 Jan-18 Jan-19 Jan-20 Jan-18 Jan-19 J
Slide 36: Copper Metal - Historic Premiums
Copper Metal - Historic Premiums • Metal premium is charged by a metal producer Historic Copper Metal Premium1 (US$/mt) to a customer $250 − Theoretically to cover the cost of shipping metal to a customer (i.e. transportation, $200 warehousing, financing, alloying and US$/tonne marketing) $150 − Mar
Slide 37: Appendix
Appendix Teck
Slide 38: Notes
Notes Slide 8: Copper Concentrates - Annual Contract Terms 1. As at March 2020. Sources: CRU, Wood Mackenzie. Slide 9: Copper Concentrates –TC/RC 1. As at March 2020. Source: CRU, Wood Mackenzie. Slide 15: Zinc Concentrates - Annual Contract Terms 1. As at March 2020. Source: CRU, Wood Mackenzie. Sl
Slide 39: Base Metals Operations
Base Metals Operations James Woeller, Manager Strategic Initiatives and Business Analysis
Slide 40: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements Both these slides and the accompanying oral presentation contain certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of the Securiti
Slide 41: Agenda
Agenda Copper Operations Copper Concentrate Example – Highland Valley Copper Cash Costs Other Considerations Zinc Operations Zinc Concentrate Example – Red Dog Zinc Cash Costs Trail Operations Other Considerations 3
Slide 42: Copper Operations
Copper Operations Teck
Slide 43: Copper Operations - Production Model
Copper Operations Production Model Production • Production reported as contained metal (tonnes) • Calculated results may not match reported results due = to rounding and production location (port vs. mine) • Remaining reserves stated in our most recent Ore Milled Annual Information Form (AIF) (tonne
Slide 44: Copper Concentrate Operation - Revenue Model
Copper Concentrate Operation Revenue Model Revenues • Including any by-product revenues, but reported (C$ million1) net of applicable treatment and refining charges = • Transportation costs included as a cost of sale • Copper and molybdenum sales reported on a contained metal Metal Sales basis; sale
Slide 45: Highland Valley Simplified Revenue Example (1/2)
Copper Concentrate Operation Highland Valley Simplified Revenue Example (1/2) 2017 2018 2019 Revenues C$M 733 941 1,005 Reported in financials Sales Copper Contained tonnes 89,100 102,600 123,800 Reported in financials Moly Contained k lbs 8,900 9,000 6,700 Reported in financials Metal Prices & FX C
Slide 46: Highland Valley Simplified Revenue Example (2/2)
Copper Concentrate Operation Highland Valley Simplified Revenue Example (2/2) 2017 2018 2019 Revenues C$M 733 941 1,005 Reported in financials Sales Copper Contained tonnes 89,100 102,600 123,800 Reported in financials Moly Contained k lbs 8,900 9,000 6,700 Reported in financials Metal Prices & FX C
Slide 47: Copper Concentrate Operation - Gross Profit and Cost of Sales
Copper Concentrate Operation Gross Profit and Cost of Sales Gross Profit (C$ million) = Revenues (C$ million) • Operating cost includes: site costs (mining, milling, G&A), - inventory changes and write-downs, and is net of Operating & Transportation Cost capitalized stripping (C$ million) • Transpor
Slide 48: Highland Valley Gross Profit and Cost of Sales Example
Copper Concentrate Operation Highland Valley Gross Profit and Cost of Sales Example 2017 2018 2019 Revenues C$M 733 941 1,005 Reported in financials Cost of Sales Operating Costs C$M 488 561 568 Reported in financials Transportation Costs C$M 32 37 42 Reported in financials Depreciation & Amortizati
Slide 49: Copper Unit Cost Reconciliation 2019 (1/2)
Copper Cash Costs Copper Unit Cost Reconciliation 2019 (1/2) Revenue as reported C$M 2019 $2,469 • By-product revenue: By-product revenue (A) Smelter processing charges (B) C$M C$M (311) 164 ‒ Includes both by-products and Adjusted revenue1 C$M $2,322 co-products (e.g. Antamina zinc) Cost of sales a
Slide 50: Copper Unit Cost Reconciliation 2019 (2/2)
Copper Cash Costs Copper Unit Cost Reconciliation 2019 (2/2) Revenue as reported C$M 2019 $2,469 • By-product revenue: By-product revenue (A) Smelter processing charges (B) C$M C$M (311) 164 ‒ Includes both by-products and Adjusted revenue1 C$M $2,322 co-products (e.g. Antamina zinc) Cost of sales a
Slide 51: Copper Cash Costs - Gross Profit Method 2019
Copper Cash Costs Gross Profit Method 2019 HVC Ant. CDA QB Copper Sales kt 124 101 55 21 301 Reported in financials Payable Assumption % 96.50 96.50 96.50 100.00 96.50 Typical industry terms Gross Profit C$M 196 457 23 (59) 617 Reported in financials Depreciation & Amortization (D&A) C$M 199 157 66
Slide 52: Antamina Ore Mix and Grade
Other Considerations Antamina Ore Mix and Grade 2018 2019 Tonnes milled (000's) 1 Copper-only ore 29,333 57% 29,998 59% Milled ore mix must equal 1 Copper-zinc ore 21,914 43% 21,091 41% reserves mix over mine life Total 51,247 51,089 Copper 2 Grade (%) 0.97 1.00 2 Copper grade milled must equal Reco
Slide 53: Precious Metals Streams and Royalties
Other Considerations Precious Metals Streams and Royalties Carmen de Andacollo • 100% of gold produced delivered to a subsidiary of Royal Gold Inc.; Teck is paid 15% of monthly average gold price • Teck reports gold production and sales in our AIF; also included in our Interactive Analyst Center Ant
Slide 54: Zinc Operations
Zinc Operations Teck
Slide 55: Zinc Operations - Production Model
Zinc Operations Production Model Production • Production reported as contained metal (tonnes) • Calculated results may not match reported results due = to rounding • Remaining reserves stated in our most recent Ore Milled Annual Information Form (AIF) (tonnes) x Zinc Guidance 2017 2018 2019 2020* 20
Slide 56: Zinc Concentrate Operation - Revenue Model
Zinc Concentrate Operation Revenue Model Revenues • Including any by-product revenues, but reported net of (C$ million1) applicable treatment charges and price participation = • Transportation costs included as a cost of sale • Zinc and lead sales reported on a contained metal basis; Metal Sales sal
Slide 57: Red Dog - Simplified Revenue Example (1/2)
Zinc Concentrate Operation Red Dog – Simplified Revenue Example (1/2) 2017 2018 2019 Revenues C$m 1,752 1,696 1,594 Reported in financials Sales Zinc Contained tonnes 533,700 521,200 561,200 Reported in financials Lead Contained tonnes 113,100 95,100 92,700 Reported in financials Metal Prices & FX Z
Slide 58: Red Dog - Simplified Revenue Example (2/2)
Zinc Concentrate Operation Red Dog – Simplified Revenue Example (2/2) 2017 2018 2019 Revenues C$m 1,752 1,696 1,594 Reported in financials Sales Zinc Contained tonnes 533,700 521,200 561,200 Reported in financials Lead Contained tonnes 113,100 95,100 92,700 Reported in financials Metal Prices & FX Z
Slide 59: Zinc Concentrate Operation - Gross Profit and Cost of Sales
Zinc Concentrate Operation Gross Profit and Cost of Sales Gross Profit (C$ million) = Revenues (C$ million) - • Operating cost includes: site costs (mining, milling, G&A), transport to port, inventory changes and write-downs, Operating & Transportation Cost and is net of capitalized stripping (C$ mi
Slide 60: Red Dog Gross Profit and Cost of Sales Example
Zinc Concentrate Operation Red Dog Gross Profit and Cost of Sales Example 2017 2018 2019 Revenues C$M 1,752 1,696 1,594 Reported in financials Cost of Sales NANA Royalty: Operating Costs C$M 242 248 312 Reported in financials Transportation Costs C$M 127 131 139 Reported in financials • Currently 35
Slide 61: Zinc Unit Cost Reconciliation 2019 (1/3)
Zinc Cash Costs Zinc Unit Cost Reconciliation 2019 (1/3) Revenue as reported C$M 2019 $2,968 • Mining operations only Less: Trail Operations Revenues Less: Other Revenues C$M C$M (1,829) (8) ‒ Adjust for Trail intra-segment Add back: Intra-segment revenues Less: By-product revenue (A) C$M C$M 519 (3
Slide 62: Zinc Unit Cost Reconciliation 2019 (2/3)
Zinc Cash Costs Zinc Unit Cost Reconciliation 2019 (2/3) Revenue as reported C$M 2019 $2,968 • Mining operations only Less: Trail Operations Revenues Less: Other Revenues C$M C$M (1,829) (8) ‒ Adjust for Trail intra-segment Add back: Intra-segment revenues Less: By-product revenue (A) C$M C$M 519 (3
Slide 63: Zinc Unit Cost Reconciliation 2019 (3/3)
Zinc Cash Costs Zinc Unit Cost Reconciliation 2019 (3/3) Revenue as reported C$M 2019 $2,968 • Mining operations only Less: Trail Operations Revenues Less: Other Revenues C$M C$M (1,829) (8) ‒ Adjust for Trail intra-segment Add back: Intra-segment revenues Less: By-product revenue (A) C$M C$M 519 (3
Slide 64: Red Dog Seasonality
Zinc Cash Costs Red Dog Seasonality Zinc Sales2 (%) • Operates 12 months, ships ~ 4 months 40% 34% • ~65% of zinc sales in second half of year 30% 30% • ~100% of lead sales in second half of year 21% 15% 20% • Seasonality of Red Dog unit costs largely 10% due to seasonality of lead sales 0% Q1 Q2 Q3
Slide 65: Trail Operations
Trail Operations Profit Levers • Optimization of concentrate feed mix to maximize profitability from treatment charges, free metal, and by-products • Maximize the utilization of assets Modelling Considerations • Revenue – Trail produces: ‒ Zinc, lead, silver, gold are reported products and paid for
Slide 66: Trail Operations - Revenue
Trail Operations Revenue 2017 2018 2019 • Revenue estimates Revenues C$M 2,266 1,942 1,829 Reported in financials calculated as volumes Sales Refined Zinc tonnes 309,400 303,600 284,300 Reported in financials multiplied by price Refined Lead tonnes 85,800 57,600 68,100 Reported in financials Refined
Slide 67: Trail Operations - Gross Profit and Cost of Sales
Trail Operations Gross Profit and Cost of Sales Gross Profit (C$ million) = Revenues • Includes reported products, unreported products (C$ million) and premiums - Concentrate Purchases • Payable metal terms and applicable freight costs, (C$ million) net of treatment charge and price participation -
Slide 68: Trail Operations - Gross Profit and Cost of Sales
Trail Operations Gross Profit and Cost of Sales 2017 2018 2019 Revenues C$M 2,266 1,942 1,829 Reported in financials • Concentrates costs Cost of Sales includes intra-segment Concentrates 1,480 1,240 1,163 Reported in financials Operating Costs C$M C$M 437 467 519 Reported in financials revenue paid
Slide 69: Other Considerations
Other Considerations Red Dog sells ~30% of zinc production to Trail Operations • Equivalent to ~60% of Trail’s zinc feed • Red Dog also sells some lead production to Trail • Intra-segment payment based on payable terms and treatment charges • On consolidation, zinc and lead revenues (Red Dog) are el
Slide 70: Appendix
Appendix Teck
Slide 71: Notes
Notes Slide 5: Copper Operations – Production Model 1. Net cash unit costs is a non-GAAP financial measure. See “Non-GAAP Financial Measures” slides and “Use of Non-GAAP Financial Measures” section of the Q4 2019 news release for further information. Slide 6: Copper Concentrate Operation – Revenue M
Slide 72: Use of Non-GAAP Financial Measures
Non-GAAP Financial Measures Use of Non-GAAP Financial Measures Our financial results are prepared in accordance with International Financial Reporting Standards (IFRS). This document refers to a number of Non-GAAP Financial Measures, which are not measures recognized under IFRS in Canada and do not
Slide 73: Reconciliation of Gross Profit Before Depreciation and Amortization
Non-GAAP Financial Measures Reconciliation of Gross Profit Before Depreciation and Amortization Three months ended Three months ended Twelve months ended Twelve months ended (C$ in millions) December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 Gross profit $ 460 $ 1,011 $ 3,340 $
Slide 74: Copper Unit Cost Reconciliation
Non-GAAP Financial Measures Copper Unit Cost Reconciliation Three months ended Three months ended Twelve months ended Twelve months ended (C$ in millions, except where noted) December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 Revenue as reported $ 592 $ 633 $ 2,469 $ 2,714 By-pr
Slide 75: Zinc Unit Cost Reconciliation (Mining Operations)
Non-GAAP Financial Measures Zinc Unit Cost Reconciliation (Mining Operations)1 Three months ended Three months ended Twelve months ended Twelve months ended (C$ in millions, except where noted) December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 Revenue as reported $ 745 $ 820 $
Slide 76: Zinc Unit Cost Reconciliation (Mining Operations) - Continued
Non-GAAP Financial Measures Zinc Unit Cost Reconciliation (Mining Operations)1 - Continued Three months ended Three months ended Twelve months ended Twelve months ended (C$ in millions, except where noted) December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 Payable pounds sold (m
Slide 77: Steelmaking Coal Operations
Steelmaking Coal Operations Ryan Podrasky, Director Finance and Operating Excellence
Slide 78: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements 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 Securiti
Slide 79: Our Steelmaking Coal Strategy
Our Steelmaking Coal Strategy Safe, sustainable and productive operations Potential to produce ~27+ million tonnes for decades Maximizing and sustaining strong cash flow, focusing on cost reduction and productivity Execute on digital transformation and innovation, which is expected to generate signi
Slide 80: An Integrated Long Life Steelmaking Coal Business
An Integrated Long Life Steelmaking Coal Business ELK VALLEY • 925 million tonnes1 of reserves Prince Rupert British Columbia Quintette ¯ Elco support the potential to produce Ridley Alberta Fording River ~27+ million tonnes for decades Terminal Prince George Edmonton • Geographically concentrated i
Slide 81: Teck's Pricing Mechanisms
Teck’s Pricing Mechanisms Coal sales book generally moves with the market Pricing Mechanisms (%) • Change in pricing methodology from April 1, 2017 − Quarterly contract sales changed from 20% Index a negotiated quarterly benchmark to Linked an index-linked pricing mechanism 80% Fixed Price • Lower g
Slide 82: Teck's Product Mix and Impact on Average Prices
Teck’s Product Mix and Impact on Average Prices Majority of production is high quality hard coking coal Steelmaking Coal Prices1 (US$/t) Steelmaking coal price has averaged US$180/t1 since January 1, 2008 PRODUCT MIX • ~75% of production is high-quality hard coking coal 300 (HCC) • ~25% is a combina
Slide 83: Simplified Annual Model - Revenue
Simplified Annual Model - Revenue 2017 2018 2019 Suggested Methodology • We provide production Assume sales = production; guidance for the following Sales (Mt) 26.5 26.0 25.0 Sales guidance given each quarter year in our Q4 report Average realized price: annually Quarterly contract price (US$/t) 210
Slide 84: Poscan Royalty Impact
Poscan Royalty Impact (C$M) 2017 2018 2019 • Royalty income in steelmaking coal relate to Greenhills Reported revenues 6,014 6,349 5,522 ‒ Teck Coal is the manager and operator of Calculated sales 5,994 6,328 5,427 Greenhills and receives 80% of all coal produced Difference is the Poscan at Greenhil
Slide 85: Simplified Annual Model - Unit Costs
Simplified Annual Model – Unit Costs (C$/tonne) 2017 2018 2019 Suggested Methodology • We provide annual guidance Unit costs1: ranges for our unit costs Adjusted site cost of sales1 52 62 65 Based on guidance • The sum of adjusted site Transportation costs 34 37 39 Based on guidance cost of sales1,
Slide 86: Simplified Annual Model - Total Costs
Simplified Annual Model – Total Costs (C$M) 2017 2018 2019 Suggested Methodology • Simply multiply each Unit costs1: category of unit cost by our Calculate: Adjusted site cost of sales1 sales and add them together Operating costs 1,377 1,587 1,622 (C$/t) x sales (Mt) Calculate: Transportation costs
Slide 87: Simplified Annual Model - Gross Profit
Simplified Annual Model – Gross Profit (C$M) 2017 2018 2019 Suggested Methodology • Take your forecasts for Calculate: Average realized price (C$/t) x revenue and total cash costs Revenue 6,014 6,349 5,522 Sales (Mt) + royalty costs (C$M) from the previous slides and Unit costs1 Calculate: Unit cost
Slide 88: Unit Costs
Unit Costs Unit Costs1 in 2019 Depreciation and Unit Cost1 Breakdown in 2019 Amortization Labour 31% 23% Contractors and Consultants 13% Royalties Operating Costs Operating Supplies 16% 1% 48% Repairs and Maintenance Parts 19% Energy 17% Transportation Other 4% 29% Total 100% 12
Slide 89: Simplified Annual Model - All-in Sustaining Cost
Simplified Annual Model - All-in Sustaining Cost (C$M) 2017 2018 2019 Suggested Methodology • Recommend ~$400 million Unit costs1 2,282 2,579 2,618 Calculate: Unit costs1 (C$/t) x sales (Mt) capitalized stripping cost Capitalized stripping 506 507 443 Assumption: based on historical − Strip ratio in
Slide 90: Other Considerations For Steelmaking Coal Modelling
Other Considerations For Steelmaking Coal Modelling • Cost Reduction Program - Target reductions of ~$100 million in steelmaking coal from 2019 • Capital (excluding water) - Long term run rate for sustaining capital is ~$6 per tonne - Average 5 year major enhancement spend is ~$145 million to ~$180
Slide 91: Other Considerations For Steelmaking Coal Modelling (cont.)
Other Considerations For Steelmaking Coal Modelling (cont.) • Plant maintenance shutdowns - Cost of sales typically fluctuate and are normally higher in Q2 and Q3 • Mine life1 and Teck interest in clean coal: - Fording River: ~29 years, 265.2 million tonnes - Elkview: ~36 years, 256.4 million tonnes
Slide 92: Setting Up for Strong Long Term Cash Flows In Steelmaking Coal
Setting Up for Strong Long Term Cash Flows In Steelmaking Coal • Strip ratio decreasing over next four years Coal Clean Strip Ratio - Future strip ratio on par with historical average 13 • Strategically replacing high cost tonnes with 12 11.4 low cost tonnes 11 - Cardinal River closure offset with E
Slide 93: Appendix
Appendix Teck
Slide 94: Notes
Notes Slide 4: An Integrated Long Life Steelmaking Coal Business 1. Sites at 100% tonnes as at January 1, 2020. Source: Teck AIF. Slide 6: Teck’s Product Mix and Impact on Average Prices 1. Source: Argus, Teck. Plotted to March 5, 2020. Slide 9: Simplified Annual Model – Unit Costs 1. Steelmaking co
Slide 95: Use of Non-GAAP Financial Measures
Non-GAAP Financial Measures Use of Non-GAAP Financial Measures Our financial results are prepared in accordance with International Financial Reporting Standards (IFRS). This document refers to a number of Non-GAAP Financial Measures, which are not measures recognized under IFRS in Canada and do not
Slide 96: Reconciliation of EBITDA and Adjusted EBITDA
Non-GAAP Financial Measures Reconciliation of EBITDA (loss) and Adjusted EBITDA Three months ended Three months ended Twelve months ended Twelve months ended (C$ in millions) December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 Profit (loss) attributable to shareholders $ (1,835)
Slide 97: Reconciliation of Gross Profit Before Depreciation and Amortization
Non-GAAP Financial Measures Reconciliation of Gross Profit Before Depreciation and Amortization Three months ended Three months ended Twelve months ended Twelve months ended (C$ in millions) December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 Gross profit $ 460 $ 1,011 $ 3,340 $
Slide 98: Steelmaking Coal Unit Cost Reconciliation
Non-GAAP Financial Measures Steelmaking Coal Unit Cost Reconciliation Three months ended Three months ended Twelve months ended Twelve months ended (C$ in millions, except where noted) December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 Cost of sales as reported $ 864 $ 855 $ 3,4
Slide 99: Energy
Energy Rob Sekhon Director, Finance
Slide 100: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements 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 Securiti
Slide 101: Energy Profit & Loss
Energy Profit & Loss ($ millions) 2019 Fort Hills Gross Profit before Depreciation 2019 Revenue and Amortization1 ($ millions) Gross profit $ 10 Proprietary product revenue (FRB2) $ 961 Depreciation and amortization 134 Non-proprietary product revenue 32 Fort Hills gross profit before depreciation a
Slide 102: Operating Netback
Operating Netback • Operating netback1 is a non-GAAP financial measure, presented on a product and sales barrel basis on page 28 of the Q4 2019 news release • Derived from the Energy segmented information (P&L), after adjusting for items not directly attributable to the revenues and costs associated
Slide 103: Fort Hills Overview
Fort Hills Overview Teck Energy accountable for logistics and sales of our proprietary product Fort Hills Mine Terminal Bitumen Price Realized2 FHELP Managed1 Transportation costs Operating Costs East Tank Farm Blending Facility (-) Wood Buffalo Pipeline Norlite Pipeline (-) Wood Buffalo Pipeline Ex
Slide 104: Energy Financial Model
Energy Financial Model Important to distinguish between blended bitumen, diluent and bitumen barrels Pricing Operating Netback Table Blended bitumen basis Bitumen basis 57.03 (10.02) 14.77 59.97 (7.76) 52.21 (1.50) (9.62) (1.81) 45.20 (29.24) 11.85 US$/barrel FX C$/barrel Blended Realized2 Blended R
Slide 105: Revenue
Revenue Blended bitumen barrels sold x blended bitumen price realized1 = revenue Volumes assume production = sales BUT need to convert bitumen sales to blended bitumen sales to calculate revenue using the blend ratio Blend Ratio Average 2019 Barrel of bitumen (A) 1 bbl Diluent barrels sold (A) 3,7
Slide 106: Western Texas Intermediate (WTI)
Western Texas Intermediate (WTI) Pricing Blended bitumen basis • US$/barrel 57.03 (10.02) 14.77 59.97 (1.81) 45.20 • Publically available • Calendar day average • Quarterly price referenced in our US$/barrel FX C$/bbl Energy “Markets” section of quarterly Blended Realized2 Blended Realized2 Intermed
Slide 107: Teck's Weighted Average WCS Differential
Teck’s Weighted Average Western Canadian Select (WCS) Differential Pricing • Teck ships and delivers 10,000 bpd to the Blended bitumen basis U.S. Gulf Coast (USGC), with the remainder sold at Hardisty; can vary slightly 57.03 (10.02) 14.77 59.97 depending on timing of deliveries (1.81) 45.20 Volume
Slide 108: Benchmark Differentials for Canadian Heavy Blends
Benchmark Differentials for Canadian Heavy Blends at Hardisty and US Gulf Coast • Contracted Western Canadian Select (WCS) differential at Hardisty is determined monthly and is a volumetric-weighted average - Based on transactions on the Calrock (ICE), Net Energy, Murex, One Exchange trade platforms
Slide 109: Quality and Market Adjustments
Quality and Market Adjustments Pricing • US$/barrel Blended bitumen basis • Fort Hills Reduced Carbon Life Cycle Dilbit 57.03 (10.02) 14.77 59.97 Blend (FRB) trades at a quality differential (1.81) 45.20 to Western Canadian Select • Also includes adjustments for spot sales (could result in positive
Slide 110: Revenue
Revenue Pricing Blended bitumen basis Blended bitumen barrels sold 14.77 59.97 x blended bitumen price realized2 57.03 (10.02) (1.81) 45.20 = revenue 2019 Blended bitumen barrels sold 16,023 (page 59 of the Q4 2019 press release) x blended bitumen price realized2 C$ 59.97 (C$/barrel) US$/barrel C$/b
Slide 111: Diluent Cost
Diluent Cost Cost of diluent product + cost of transportation/blending = diluent cost 2019 Typical Blended Bitumen Diluent barrels sold (page 59 of the Q4 2019 press release) 3,788 (Dilbit) Barrel 12,235 bitumen barrels sold x ~31% diluent required for 1 barrel of bitumen = 3,788 barrels ~20%-25% X
Slide 112: Operating Netback
Operating Netback • Reported on a bitumen basis Operating Netback Table Bitumen basis • As disclosed in our quarterly news release (Q4 2019: page 28) 52.21 (1.50) (9.62) • Royalty calculation publically available (29.24) (pre-payout) ‒ https://open.alberta.ca/publications/alberta-oil-sands- royalty-
Slide 113: Energy Financial Model
Energy Financial Model Important to distinguish between blended bitumen, diluent and bitumen barrels Pricing Operating Netback Table Blended bitumen basis Bitumen basis 57.03 (10.02) 14.77 59.97 (7.76) 52.21 (1.50) (9.62) (1.81) 45.20 (29.24) 11.85 US$/barrel FX C$/barrel Blended Realized2 Blended R
Slide 114: Summary
Summary VOLUME UNIT RATE C$ BASIS P&L (Mbbls) (C$/bbl) MILLIONS Blended bitumen price Blended bitumen 16,023 $59.97 $961 FRB Revenue realized1 Diluent cost Diluent 3,788 $85.00 ($322) Diluent cost Bitumen price realized1 Bitumen 12.235 $52.21 $639 Crown royalties Bitumen 12,235 $1.50 ($18) Crown roy
Slide 115: Key Drivers for Energy Modelling
Key Drivers for Energy Modelling Bitumen production Guidance provided by Teck Sales (blended bitumen) Assume production = sales but need to convert to blended bitumen (using blend ratio) Assume 10,000 bpd of blended bitumen sold at USGC and remaining at Hardisty WTI Publically available WCS Differen
Slide 116: Other Considerations for Energy Modelling
Other Considerations for Energy Modelling • Government of Alberta curtailment extended through 2020 (with an option to end early) • Major turnarounds every ~5 years (~5-8% production impact) • Long term guidance: - Nameplate capacity: 194,000 bpd (Teck’s share is 38,500 bpd after adjusting for utili
Slide 117: Appendix
Appendix Teck
Slide 118: Alberta Oil Sands Royalties
Alberta Oil Sands Royalties Fort Hills currently in pre-payout period • In pre-payout, royalty based on a percentage of Oil Sands Royalty Rates (Gross) gross revenue, ranging from 1% to 9%, depending on the price of oil • Gross revenue – can deduct diluent expense and transportation • Royalty rates
Slide 119: Notes
Notes Slide 3: Energy Profit and Loss 1. Adjusted operating costs and gross profit before depreciation and amortization are non-GAAP financial measures. See “Non-GAAP Financial Measures” slides and “Use of Non-GAAP Financial Measures” section of the Q4 2019 news release for further information. 2. F
Slide 120: Notes
Notes Slide 12: Revenue 1. USGC is US Gulf Coast. WCS is Western Canadian Select. 2. Blended bitumen price realized is a non-GAAP financial measure. See “Non-GAAP Financial Measures” slides and “Use of Non-GAAP Financial Measures” section of the Q4 2019 news release for further information. Slide 14
Slide 121: Use of Non-GAAP Financial Measures
Non-GAAP Financial Measures Use of Non-GAAP Financial Measures Our financial results are prepared in accordance with International Financial Reporting Standards (IFRS). This document refers to a number of Non-GAAP Financial Measures, which are not measures recognized under IFRS in Canada and do not
Slide 122: Reconciliation of Gross Profit Before Depreciation and Amortization
Non-GAAP Financial Measures Reconciliation of Gross Profit Before Depreciation and Amortization Three months ended Three months ended Twelve months ended Twelve months ended (C$ in millions) December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 Gross profit $ 460 $ 1,011 $ 3,340 $
Slide 123: Energy Operating Netback Reconciliations
Non-GAAP Financial Measures Energy Operating Netback, Bitumen & Blended Bitumen Price Realized Reconciliations1 Three months ended Three months ended Twelve months ended Twelve months ended (C$ in millions, except where noted) December 31, 2019 December 31, 2018 December 31, 2019 December 31, 2018 R
Slide 124: Energy Operating Netback Reconciliations - Continued
Non-GAAP Financial Measures Energy Operating Netback, Bitumen & Blended Bitumen Price Realized Reconciliations1 - Continued Three months ended Three months ended Twelve months ended Twelve months ended (C$ in millions, except where noted) December 31, 2019 December 31, 2018 December 31, 2019 Decembe
Slide 125: Corporate Income Statement and Balance Sheet Items
Corporate Income Statement and Balance Sheet Items Crystal Prystai, Vice President and Corporate Controller
Slide 126: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements 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 Securiti
Slide 127: Agenda
Agenda 1. Other Operating Expenses 1 2. Finance Expense 3. Non-Operating Expenses 4. Quebrada Blanca Phase 2 2 (QB2) Accounting 3 3
Slide 128: Other Operating Expenses - Overview and General Items
Other Operating Expenses – Overview and General Items Next slide GENERAL ITEMS 2019 2018 2017 2016 2015 AVERAGE General and administration 161 142 116 99 108 125 Exploration 67 69 58 51 76 64 Research and innovation 67 35 55 30 47 47 Asset impairments 2,690 41 (163) 294 3,631 N/A 4
Slide 129: Other Operating Expenses - Other Operating Income (Expense)
Other Operating Expenses - Other Operating Income (Expense) 9. Other Operating Income (Expense) Settlement adjustments Share-based compensation General items 5
Slide 130: Other Operating Income (Expense) - Settlement Pricing Adjustments
Other Operating Income (Expense) - Settlement Pricing Adjustments Simplified Settlement Pricing Adjustment Model (Pre-tax settlement pricing adjustment in C$M) QUARTERLY OUTSTANDING AT OUTSTANDING AT PRICING SEPTEMBER 30, 2019 DECEMBER 31, 2019 ADJUSTMENTS Mlbs US$/lb Mlbs US$/lb C$M Copper 105 2.61
Slide 131: Other Operating Income (Expense) - Share-based Compensation
Other Operating Income (Expense) - Share-based Compensation Simplified Compensation Expense Model (Pre-tax share-based compensation income / expense in C$M) QUARTERLY QUARTERLY SEPTEMBER 30, DECEMBER 31, COMPENSATION PRICE 2019 2019 INCOME CHANGE (EXPENSE) C$/share C$/share C$/share C$M Teck B 21.67
Slide 132: Other Operating Income (Expense) - General Items
Other Operating Income (Expense) - General Items GENERAL ITEMS 2019 2018 2017 2016 2015 DRIVER Environmental and discount Environmental costs 197 20 175 134 30 rate Care and maintenance costs 36 11 11 10 19 Steady from 2020 Social responsibility and donations 18 18 7 25 10 Steady Loss (gain) on sale
Slide 133: Finance Expense - Overview
Finance Expense - Overview 1 Interest on borrowings General items Capitalized borrowing costs 9
Slide 134: Finance Expense - Interest on Borrowings
Finance Expense - Interest on Borrowings LINE ITEM DRIVER SOURCE Debt interest Debt outstanding x rate Debt note Interest on advance from SMM/SC1 Debt outstanding x rate Balance sheet / finance expense Interest on lease liabilities Balance outstanding x rate Lease note • QB2 Project financing draw s
Slide 135: Finance Expense - General Items
Finance Expense - General Items Line Item Driver Source Letters of credit and standby fees Credit rating / other Generally steady Net interest expense on retirement benefit plans Immaterial Immaterial Accretion on DRP Discount rate on DRP Provisions note Other Immaterial Immaterial 11
Slide 136: Finance Expense - Capitalized Borrowing Costs
Finance Expense - Capitalized Borrowing Costs • Will continue to increase from continuing Historical Capitalized Borrowing Costs (Capitalized borrowings C$ million) QB2 construction 100 • Net finance expense relatively steady 90 until completion of QB2 80 70 60 50 (Total capitalized amount for QB2)
Slide 137: Non-Operating Income (Expense)
Non-Operating Income (Expense) 11. Non-Operating Income (Expense) Largely eliminated in adjusted earnings 13
Slide 138: Quebrada Blanca
Quebrada Blanca Photo: Concentrator Grinding Area
Slide 139: QB2 Accounting - Balance Sheet - 2019
QB2 Accounting - Balance Sheet –2019 (C$M) Assets 100% project spend in PP&E Liabilities and Equity 100% project financing in debt 1 Sumitomo advances separated Teck contributions eliminated Cumulative Sumitomo interest 15
Slide 140: QB2 Accounting - Income Statement - 2019
QB2 Accounting - Income Statement – 2019 (C$M) Statement of Income 100% of QB revenues and expenses included in operations Sumitomo and ENAMI profit shares shown as non-controlling interest 16
Slide 141: QB2 Accounting - Cash Flow - 2019
QB2 Accounting - Cash Flow – 2019 (C$M) 100% of project income profit 100% of project depreciation 100% project spend in investing activities 100% of funding draws and repayments in financing activities 17
Slide 142: QB2 Accounting - ENAMI Interest in QB
QB2 Accounting - ENAMI Interest in QB • The government of Chile owns a 10% non-funding Organizational Chart interest in Compañía Minera Teck Quebrada Blanca S.A. (CMTQB) through its state-run minerals company, Empresa Nacional de Minería (ENAMI) Teck SMM SC • ENAMI has been a partner at QB since 198
Slide 143: Appendix
Appendix Teck
Slide 144: Notes
Notes Slide 9: Finance Expense – Overview 1. SMM/SC means Sumitomo Metal Mining Co. Ltd. and Sumitomo Corporation, which are collectively referred to as Sumitomo. Slide 10: Finance Expense – Interest on Borrowings 1. SMM/SC means Sumitomo Metal Mining Co. Ltd. and Sumitomo Corporation, which are col
Slide 145: Income and Resource Taxes
Income and Resource Taxes Thomas Cheung, Director, Tax
Slide 146: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements 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 Securiti
Slide 147: Statutory and Effective Tax Rates
Income and Resources Taxes - Statutory and Effective Tax Rates Basic Overview of Tax Regimes by Jurisdiction • Canada • Peru • Chile • US Main Influences on Overall Effective Tax Rate • Effective tax rate in each jurisdiction we operate • Distribution of operating profit by jurisdiction • Relative l
Slide 148: Canadian Tax in 2020
Canadian Tax in 2020 BC MINING CAPITAL (COAL & ENERGY GAINS HIGHLAND & TRAIL (HALF IS VALLEY) TAXABLE) Income before taxes $ 1,000 $ 1,000 $ 1,000 Deduct: BC Mineral Tax (13%) (130) - - Net income $ 870 $ 1,000 $ 1,000 Deduct: Non-taxable portion of capital gains - - (500) Taxable income $ 870 $ 1,0
Slide 149: Teck's Canadian Income Tax Pools
Teck’s Canadian Income Tax Pools Applies to cash income taxes in Canada Net Operating Losses Canadian Development Expense • $2.6 billion at December 31, 2019 • $0.5 billion at December 31, 2019 • Expire between 2029 and 2039 • 30% declining balance write-off • 100% write off • No expiry • Deductions
Slide 150: British Columbia Mineral Tax (BCMT)
British Columbia Mineral Tax (BCMT) • Mine-by-mine • Two-tiered tax system: - Minimum 2% of Net Current Proceeds - Maximum 13% of Cumulative Net Revenues • Tax on Net Revenues allows immediate write-off of all operating and capital costs • Finance and other non-operating expenses are not deductible
Slide 151: Alberta Oil Sands Royalty
Alberta Oil Sands Royalty Deductible for income tax purposes and netted against revenue for accounting purposes1 Pre-Payout Phase Post-Payout Phase • Minimum royalty at 1% to 9% of • Post-payout royalty at greater of gross revenue base / pre-payout royalty and • Linear scale based on West Texas 25%
Slide 152: Peruvian Tax in 2020
Peruvian Tax in 2020 Corporate Income Tax Special Mining Tax And Withholding Tax Rates And Modified Mining Royalty TAX • Sliding scale on operating margin RATE between 3% and 20.4% Corporate1 29.5% • Deductible for income tax purposes Withholding tax on dividends • Accounting treatment: Income taxes
Slide 153: Chilean Tax in 2020
Chilean Tax in 2020 Corporate Income Tax Rates Specific Mining Royalty TAX RATE • Sliding scale on operating margin First Level - On taxable income 27% between 5% and 34.5% Plus: Second Level – Withholding tax • Maximum effective rate is 14% on dividends paid out of Chile 8% • Deductible for income
Slide 154: U.S. Tax in 2020
U.S. Tax in 2020 Corporate Income Tax Rates Alaska Mining License Tax (AMLT) TAX RATE • 7% on operating profit - eligible for % depletion allowance at 15% of net revenues, capped at Federal 21% 50% of taxable income State 4% • Deductible for income tax purposes Total tax rate 25% • Accounting treatm
Slide 155: Simplified Illustration of U.S. Tax in 2020
Simplified Illustration of U.S. Tax in 2020 EFFECTIVE TAX RATE Revenue $ 1,000 Less: Cost of sales, transportation (480) Net income before AMLT $ 520 Less: AMLT (30) 4% Less: FDII (70) Net income before % depletion 420 Less: % depletion (160) Taxable income $ 260 Income taxes (25%) 65 14% Plus: With
Slide 156: Effective Tax Rate on Operating Profit
Effective Tax Rate on Operating Profit Assumes full repatriation of earnings to Canada Effective Tax Rate on Operating Profit in 2020 CANADA ENERGY1 MINING AND TRAIL PERU CHILE US2 CONSOLIDATED3 OPERATIONS Income tax 27% 27% 29.5% 27% 14% Plus: Mining tax, net of income 9.5% - 6% 3% 4% tax deductibi
Slide 157: Impact of Jurisdictional Distribution of Operating Profit
Impact of Jurisdictional Distribution of Operating Profit On Consolidated Effective Tax Rate Weighted Average Effective Tax Rate on Operating Profit CANADA ENERGY MINING AND TRAIL PERU CHILE US CONSOLIDATED OPERATIONS Statutory tax rate (A) 36.5% 27% 39% 38% 22% 34% to 36% Illustrative Scenario 1 As
Slide 158: Overall Effective Tax Rate Rises as Operating Profit Falls
Overall Effective Tax Rate on Net Profit Rises as Operating Profit Falls TAX PROFIT EFFECTIVE Expected Effective Tax Rate EXPENSE (LOSS) TAX RATE ($ million) (RECOVERY) (ETR) Illustrative Scenario 1 70% Operating profit $ 2,000 35% $ 700 Less: Finance & non- 60% Illustrative Scenario 3: operating ex
Slide 159: Current Tax Rate vs. Overall Effective Tax Rate
Current Tax Rate vs. Overall Effective Tax Rate On Normalized Net Profit 40% 35% 36% 30% 25% 20% 15% 10% 5% 0% 2016 2017 2018 2019 2016-19 Excluding Waneta Excluding Average transaction1 Impairments Current Tax Rate Deferred Tax Rate 15
Slide 160: Appendix
Appendix Teck
Slide 161: Peruvian Specific Mining Tax And Modified Mining Royalty
Peruvian Specific Mining Tax And Modified Mining Royalty in 2020 OPERATING PROFIT MARGIN SCALE # COMBINED MARGINAL RATES LOWER LIMIT UPPER LIMIT 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% 11.05% 9 45% 50% 12.20% 10 50% 55%
Slide 162: Chilean Specific Mining Royalty in 2020
Chilean Specific Mining Royalty in 2020 OPERATING PROFIT MARGIN MARGINAL BRACKET LOWER LIMIT UPPER LIMIT RATES 1 0% 35% 5.0% 2 35% 40% 8.0% 3 40% 45% 10.5% 4 45% 50% 13.0% 5 50% 55% 15.5% 6 55% 60% 18.0% 7 60% 65% 21.0% 8 65% 70% 24.0% 9 70% 75% 27.5% 10 75% 80% 31.0% 11 80% 85% 34.5% 12 >85% 14.0%
Slide 163: Teck's Overall Effective Tax Rate vs Current Tax Rate
Teck’s Overall Effective Tax Rate vs Current Tax Rate On Normalized Profits (2016-2019) Overall Effective Tax Rate Q1 Q2 Q3 Q4 YEAR CUMULATIVE 2016 21% 80% 34% 36% 36% 36% 2017 37% 36% 37% 35% 36% 36% 20181 35% 36% 35% 37% 36% 36% 20192 35% 34% 31% 37% 34% 36% Current Tax Rate Q1 Q2 Q3 Q4 YEAR CUMUL
Slide 164: Notes
Notes Slide 7: Alberta Oil Sands Royalty 1. Consistent with industry practice, AB OSR’s are netted against revenues for accounting purposes. Slide 8: Peruvian Tax in 2020 1. If a company enters into a Legal or Mining Stability Agreement with the Peruvian government, a stabilized corporate rate based
Slide 165: Modelling Workshop
Modelling Workshop April 2, 2020