Teck Resources Limited Class A · TSX:TECK.A
Teck Resources Limited Class A — Investor Day (April 2020)
46 slides from Teck Resources Limited Class A's investor day presentation, Apr 1, 2020
Slide 1: Investor and Analyst Day Conference Call
Investor and Analyst Day Conference Call April 1, 2020
Slide 2: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements Both these slides and the accompanying oral presentations 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 Securit
Slide 3: Business Review
Business Review Don Lindsay President and Chief Executive Officer
Slide 4: Agenda
Agenda COVID-19 Response Measures Q1 2020 Update Our Key Priorities Strong Financial Position QB2 Project Update Q&A 3
Slide 5: COVID-19 Response - Focus on Health and Safety
COVID-19 Response - Focus on Health and Safety • Senior COVID-19 Response Team coordinating action plans • Remote work implemented wherever feasible • Comprehensive preventative measures and response plans in place at all operations • Coordinating with unions on prevention and communication • Adheri
Slide 6: COVID-19 Response - Prevention Measures At all Sites
COVID-19 Response - Prevention Measures At all Sites • Reducing on-site crews at sites to support social distancing • Comprehensive measures in place at all sites: o Enhanced cleaning / disinfecting protocols Crew bus cleaning - Coal Temp screening - QB2 o Social distancing - no large group meetings
Slide 7: COVID-19 Response - Enhanced Measures For Operations
COVID-19 Response - Enhanced Measures For Operations Steelmaking Coal; Highland Valley Copper: • Reducing crews by up to 50% of regular levels • Employees will continue to be paid during this period • Expect slightly lower production of 80-85% in the short term • Will re-evaluate after initial perio
Slide 8: COVID-19 Response - Enhanced Measures For Operations (cont.)
COVID-19 Response - Enhanced Measures For Operations (cont.) QB2: • Construction suspended for initial 2 week period • Demobilization of site completed Antamina: • Continuing to operate under current government restrictions with reduced crews • Crews staying in camp for an extended period to reduce
Slide 9: COVID-19 Response - Business Continuity
COVID-19 Response - Business Continuity • Teck has suspended 2020 annual guidance; will update with Q1 2020 release • All sites continue to operate with COVID-19 response measures in place • No material impact to sales or shipments to date • Mining, smelting and suppliers designated as essential in
Slide 10: Accounting Treatment for Incremental COVID-19 Expenditures
Accounting Treatment for Incremental COVID-19 Expenditures Incremental and specific COVID-19 expenditures being identified across the company • Related to capital projects: expensed as incurred in “Other Operating Expense” • Related to production: expensed as incurred in “Cost of Sales”; Will not be
Slide 11: Q1 2020 Update
Q1 2020 Update Steelmaking Coal • Exceeded guidance for steelmaking coal sales at 5.6 million tonnes vs. 4.8 to 5.2 million tonnes • Expect adjusted site cost of sales1 to be ~$65 per tonne, well below previous expectations • Reduced finished coal inventories at the mine sites • Elkview shutdown to
Slide 12: Q1 2020 Update (cont.)
Q1 2020 Update (cont.) Steelmaking Coal Logistics The supply chain performed well in March 2020 following a difficult start to the year due to extreme winter weather and rail blockades All three ports performed well after these challenges were behind us; Westshore responded with a strong performance
Slide 13: Q1 2020 Update (cont.)
Q1 2020 Update (cont.) Base Metals • All sites continue to operate at normal production levels, except Highland Valley Copper Energy - Fort Hills • Partners reacted quickly to reduce production to one train to preserve cash • Work continues to minimize cash outflows ‒ Reduce capital and operating co
Slide 14: Our Key Priorities
Our Key Priorities • QB2 is a long-life, low-cost operation with major Cost Reduction expansion potential Program4 Neptune • Rebalances our portfolio over time • QB has potential to become a top five global copper RACE21TM 3 producer • RACE21TM is our innovation-driven business QB22 transformation p
Slide 15: Focus on Sustainability Leadership
Focus on Sustainability Leadership Teck’s performance on top ESG ratings • “A” rating since 2013 • Ranked in the • Top-ranked mining (scale of CCC – AAA) 100th percentile company 2019 World • Tied for 2nd in mining & North American Indices • Outperforming all 10 of our largest industry peers & metal
Slide 16: QB2 Value Creation
QB2 Value Creation Delivers on Copper Growth Strategy Low Strip Ratio1 • Rebalances Teck's portfolio over time to make QB2 (0.7:1)2 the contribution from copper similar to steelmaking coal • World class, low cost copper opportunity in an excellent geopolitical jurisdiction Antamina (2.9:1)3 • First
Slide 17: RACE21 EBITDA Improvements
RACE21TM Our innovation-driven business transformation program • Achieved $160 million1 in annualized EBITDA2 RACE21TM Potential Future Path to Value improvements as of the end of 2019 o Exceeded our initial target of $150 million • In the short term, reduced support from consultants EBITDA2 Improve
Slide 18: Neptune Facility Upgrade
Neptune Facility Upgrade • Continue to advance the facility upgrade project; major equipment deliveries remain on track • To date, COVID-19 related issues have not substantially impacted works on the critical path • Expect the new ship loader, stacker / reclaimer and single dumper replacement to be
Slide 19: Dumper Centre Cell
Dumper Centre Cell Rebar Installation March 2020
Slide 20: Double Dumper
Double Dumper Second Barrel Offload March 2020
Slide 21: Double Dumper
Double Dumper Cage Assembly March 2020
Slide 22: Quadrant Beam Ship Loader
Quadrant Beam Ship Loader Assembly March 2020
Slide 23: Cost Reduction Program
Cost Reduction Program • In Q4 2019: - Achieved ~$210 million of capital and operating reductions, exceeding our target of $170 million - Increased our total targeted reductions to ~$610 million of previously planned spending through the end of 2020, vs. the previous target of $500 million • Further
Slide 24: Strong Financial Position
Strong Financial Position Solid Liquidity No Significant Note Maturities until 2035 • ~C$5.8 billion1 of liquidity as of March 31, 2020 • Notes outstanding reduced from US$7.2 billion • US$4.0 billion committed revolving credit facility in September 2015 to US$3.2 billion2 recently extended to Novem
Slide 25: QB2 Project Update
QB2 Project Update Alex Christopher Senior Vice President Exploration, Projects and Technical Services
Slide 26: QB2 Execution Update
QB2 Execution Update Progress1 Workforce1,4 29% ~7,800 Overall Overall Safety2 Expenditures3 29.6mil hrs 0.05 0.17 LTIF TRIF US$1.3 billion Concrete1 Earthworks1 +30% +50% 25
Slide 27: QB2 Updated Capital Estimate
QB2 Updated Capital Estimate Sanction Case Sanction Case1 Capital Cost (inc. escalation) US$ 5.2B Expenditures2 US$ 1.3B Exchange Rate 625 CLP:USD Contingency (incl.) ~US$500M 1st Production Q4 2021 26
Slide 28: QB2 Updated Capital Estimate
QB2 Updated Capital Estimate Updated Estimate Updated Estimate1 Capital Cost (inc. escalation) US$5.2B To-go April 1, 2020 US$3.9B Exchange Rate 775 CLP:USD • Engineering, Contract Formation and Procurement approaching 100% and Contingency (incl.) in close out ~US$400M • Includes actual contract and
Slide 29: QB2 Updated Capital Estimate
QB2 Updated Capital Estimate Exchange Rate, Permitting and Social Unrest Key Drivers Key Change Drivers - Exchange rate - Permitting delays - Social unrest - Road maintenance - Schedule extension - Design modifications - Contractor performance 28
Slide 30: QB2 Updated Capital Estimate: Exchange rate sensitivity and funding
QB2 Updated Capital Estimate Exchange rate sensitivity and funding Capital Sensitivity to Exchange Rate Teck's Equity Contributions • Exposure to CLP on ‘to go’ capital is ~69%1 • Teck's equity contributions are ~US$880 million4 • FX has ranged from 726 to 879 since Oct 20192 going forward with no c
Slide 31: Potential Impact of COVID-19
Potential Impact of COVID-19 Project construction activities remain on hold - Maintaining limited workforce - Advancing procurement, manufacturing & other activities Extensive planning continues for remobilization Not currently possible to predict a remobilization date Cost/schedule impact depend on
Slide 32: Mine Area
Mine Area Primary Crusher Teck
Slide 33: Concentrator
Concentrator Grinding Area Teck
Slide 34: Concentrator
Concentrator SAG1 Mill Shell
Slide 35: Tailings Management Facility
Tailings Management Facility Coffer dam
Slide 36: Pipelines
Pipelines Pipe Welding Teck
Slide 37: Port Area
Port Area Desalination Plant
Slide 38: Closing Remarks
Closing Remarks Teck
Slide 39: Q1 2020 Highlights
Q1 2020 Highlights • All of our operations are currently running • Steelmaking coal sales exceeded guidance • Steelmaking coal adjusted site cost of sales1 are expected to be well below previous expectations • Steelmaking coal logistics supply chain performed well in March 2020 • Elkview expansion p
Slide 40: Looking Forward
Looking Forward • Focused on managing the risks around COVID-19 • Continuing to advance our key priorities to generate long term value for shareholders: 1. QB2 Project 2. RACE21TM 3. Neptune Facility Upgrade 4. Cost Reduction Program • Strong financial position 39
Slide 41: Appendix
Appendix Teck
Slide 42: Notes
Notes Slide 9: Accounting Treatment for Incremental COVID-19 Expenses 1. EBITDA and Adjusted EBITDA are non-GAAP financial measures. See “Non-GAAP Financial Measures” slides. Slide 14: Q1 2020 Update 1. Steelmaking coal unit costs are reported in Canadian dollars per tonne. Adjusted site cost of sal
Slide 43: Notes
Notes Slide 29: QB2 Updated Capital Estimate, Exchange rate sensitivity and funding 1. Based on existing exposure and assuming CLP:USD exchange rate of 775. 2. FX range based on Chilean Peso spot data published by Bloomberg.com. 3. Committed and Incurred expenditures as at end of February 2020. 4. O
Slide 44: Non-GAAP Financial Measures
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 45: Non-GAAP Financial Measures
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 46: Investor and Analyst Day Conference Call
Investor and Analyst Day Conference Call April 1, 2020