Teck Resources Limited Class A · TSX:TECK.A
Teck Resources Limited Class A — Investor Day (April 2018)
44 slides from Teck Resources Limited Class A's investor day presentation, Apr 4, 2018
Slide 1: Base Metals Markets
Base Metals Markets April 4, 2018 Andrew Stonkus, Senior Vice President, Marketing and Logistics
Slide 2: Forward Looking Information
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 Act (Ontario)
Slide 3: The Future for Copper and Zinc
The Future for Copper and Zinc Copper demand boosted by new energy • Supply growth constrained due to lack of investment • Global synchronized growth today • Electric efficiency & new energy will drive future growth Zinc supply constrained • Zinc market destocked for five years • Supply growth but s
Slide 4: Copper Market Outlook
Copper Market Outlook Teck
Slide 5: Global Copper Mine Production Increasing Slowly
Global Copper Mine Production Increasing Slowly Global Copper Mine Production1 22,000 • Mine production set to increase 700 kmt by 2021, 21,000 including: Thousand tonnes contained 20,000 ‒ Glencore’s African mine restarts: 500 kmt ‒ Cobre Panama 350 kmt 19,000 ‒ Escondida 300 kmt 18,000 ‒ China (ma
Slide 6: Copper Disruptions Continue into 2018
Copper Disruptions Continue into 2018 ~6-7 Mt of copper production under labour negotiations this year Disruptions1 TC/RCs Spot and BM Falling2 2018 40¢ 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 e 0 -200 30¢ Thousand tonnes -400 In Q4 2017 ~300kmt 20¢ reduced -600 from 2018 gu
Slide 7: Copper Demand from De-Carbonization
Copper Demand from De-Carbonization Greatest demand impact from energy efficiency; Highest growth rate in EVs Energy Efficiency & EVs Strong Growth1 Copper Intensity of EVs1 • Energy efficiency: • Electric vehicles/mobility: smaller today, larger growth ‒ 4% CAGR potential; 14% CAGR ‒ 80% of tonnage
Slide 8: Planned Copper Projects Will Not Meet Demand
Planned Copper Projects Will Not Meet Demand Copper mine production peaks in 2020 Existing and Fully Committed Supply1 Highly Probable + Probable At least 4.6 Mt needed Projects Insufficient to Fill Gap1 5,000 from new projects by 2027 Low Demand (1.6%): 4.6 Mt 4,000 Gap to Base Demand (1.8%): 5.6 M
Slide 9: Zinc Market Outlook
Zinc Market Outlook Teck
Slide 10: Zinc Price Incentivizing New Mines
Zinc Price Incentivizing New Mines Global Zinc Mine Production1 16,000 15,000 • Decline in mine production in 2016 (800 kmt) 14,000 • 2018 increase brings mine production back to 2015 levels ‒ Market living off refined stocks for the past four years 13,000 kmt contained 12,000 • Mine production peak
Slide 11: Zinc Treatment Charges Falling to Record Lows
Zinc Treatment Charges Falling to Record Lows Concentrate Stocks Seasonally Low1 Not Enough to Prevent TCs Falling Further2 600 80 250 6,500 70 500 6,000 200 60 Imported TC ($/dmt) Domestic TC (RMB/dmt) 5,500 Thousand dmt 400 Days-of-use 50 150 5,000 300 40 4,500 30 100 200 20 4,000 100 50 TCs ~US$2
Slide 12: Consecutive Deficits Decreasing Zinc Inventory
Consecutive Deficits Decreasing Zinc Inventory 250¢ Daily Zinc Prices & Stocks1 4,000 3,500 Thousand Tonnes 200¢ 3,000 US¢/lb 150¢ 2,500 2,000 100¢ 1,500 1,000 50¢ 500 0¢ 0 LME Stocks SHFE Bonded Hidden Price • Global hidden stocks may have reached ~1.4 Mt in 2012, and total global stocks reached ~3
Slide 13: Chinese Zinc Demand to Remain Strong
Chinese Zinc Demand to Remain Strong If China were to galvanize crude steel at half the rate of the US using the same amount of zinc/tonne, a further 2.8 Mt would be added to global zinc consumption1 China Zinc Demand Galvanized Steel as % Crude Production Other 20% 5% USA Construction Infrastructur
Slide 14: Defending / Expanding The Zinc Market
Defending / Expanding The Zinc Market Giga Steel (+380 kmt) Zinc Thermal Spray (New) Ultrahigh-strength & galvanizable competes Portable technology to spray molten zinc well with aluminum. onto a steel surface . Continuous Galv. Rebar (+132 kmt) Zinc Micro-Nutrient (+400 kmt) High productivity proce
Slide 15: Zinc Gap Forecast to Continue
Zinc Gap Forecast to Continue Zinc mine production peaks in 2020 Existing and Fully Committed Supply1 Uncommitted Projects At least 3.4 Mt needed Insufficient to Fill Gap1 from new projects by 2027 18,000 5,000 Low Demand (1.8%): 5.0 Mt Gap High Demand (2.0%): 5.5 Mt to low 17,000 4,000 demand scena
Slide 16: The Future for Copper and Zinc
The Future for Copper and Zinc Copper demand boosted by new energy • Copper supply peaks in 2020, while current market is trending to deficit • Copper limited supply response at current prices will likely lead to structural deficits • Significant new metal demand growth for energy efficiency and EV
Slide 17: Notes
Notes Slide 5: Global Copper Mine Production Increasing Slowly 1. Source: Wood Mackenzie, AME, Teck. Slide 6: Copper Disruptions Continue into 2018 1. Source: Wood Mackenzie, AME, Teck, Company Reports. 2. Source: Wood Mackenzie, CRU, Metal Bulletin. Slide 7: Copper Demand from De-Carbonization 1. S
Slide 18: Steelmaking Coal Market
Steelmaking Coal Market April 4, 2018 Réal Foley, Vice President, Coal Marketing
Slide 19: Forward Looking Information
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 Act (Ontario)
Slide 20: Demand Supporting Steelmaking Coal Prices
Demand Supporting Steelmaking Coal Prices Synchronized global economic growth • Supports steel demand and pricing Healthy steel industry • Stimulates global demand for seaborne coal Capacity reductions in China continue • Steel: Improves financial condition and reduces exports • Coal: Restricts dome
Slide 21: Synchronized Global Growth
Synchronized Global Growth Strong steel production and improved steel pricing Crude Steel Production1 Solid 2017 Growth2 2,000 Crude Steel Global 2017 YoY Growth 1,500 Production 1,000 Global 5.5% China 5.7% 500 Ex. China 4.9% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 202
Slide 22: Strong Demand Fundamentals ex. China
Strong Demand Fundamentals ex. China Seaborne Steelmaking Coal Imports1 (Change 2022 vs. 2017) 325 ~320 315 ~305 305 295 Mt 285 ~280 275 265 2017 India JKTV Brazil Europe Others 2022, ex- China 2022 China Includes: • India: Urbanization, steel capacity expansion • Europe: Domestic coal supply issues
Slide 23: Growing India Steelmaking Coal Imports
Growing India Steelmaking Coal Imports India plans to achieve 300 Mt of crude steel capacity by 2030-2031 Seaborne Steelmaking Coal Imports India’s Hot Metal Capacity; Forecasted to increase by >25%1 Projects and Operations2 90 Hot Metal Production 80 Seaborne Steelmaking Coal Imports 70 60 Mt 50 40
Slide 24: Capacity Reductions in China Support Pricing
Capacity Reductions in China Support Pricing Steel Capacity Reduction Target1 Coal Capacity Reduction Target1 160 900 Coking coal2 140 800 Thermal coal 120 700 100 600 500 Mt 80 Mt 140 400 800 60 300 40 65 200 20 50 290 250 30 100 ~60 ~40 0 ~90 0 ~70 0 2016-2020 2016 2017 2018 2019-2020 2016-2020 20
Slide 25: Seaborne Steelmaking Coal Exports
Seaborne Steelmaking Coal Exports Coal gap developing and market could be short due to typical disruptions Supply & Demand from Existing Mines1 Possible Restarts ~5-20 Mt needed from and Projects1 325 restarts and projects by 2022 25 315 Additional gap 20 Additional to high case gap to 305 15 high c
Slide 26: Teck’s Pricing Mechanisms
Teck’s Pricing Mechanisms Coal sales book generally moves with the market Sales Mix Key Factors Impacting Teck’s Average Realized Prices • ~40% quarterly contract price • Variations in our product mix • ~60% shorter than quarterly pricing • Timing of sales mechanisms (including “spot”) • Direction a
Slide 27: Quality and Basis Spreads
Quality and Basis Spreads Impact Teck’s average realized steelmaking coal prices HCC / SHCC Prices and Spread1 HCC FOB / CFR Prices and Spread2 350 100 350 20 300 300 75 0 250 250 US$/t US$/t US$/t US$/t 200 200 -20 50 150 150 100 100 -40 25 50 50 0 -60 0 0 HCC (LHS) HCC FOB Australia (LHS) SHCC (LH
Slide 28: 2nd Largest Seaborne Steelmaking Coal Supplier
2nd Largest Seaborne Steelmaking Coal Supplier Competitively positioned to supply steel producers worldwide Sales Distribution China 2013: ~ 30% North America Europe 2015: ~20% ~5% 2013: ~15% India 2017: ~15% 2015: ~20% 2013: ~ 5% 2017: ~20% 2015: ~ 5% 2017: ~10% Asia excl. China & India 2013: ~40%
Slide 29: Demand Supporting Steelmaking Coal Prices
Demand Supporting Steelmaking Coal Prices Synchronized global economic growth • Supports steel demand and pricing Healthy steel industry • Stimulates global demand for seaborne coal Capacity reductions in China continue • Steel: Improves financial condition and reduces exports • Coal: Restricts dome
Slide 30: Notes:
Notes: Slide 21: Synchronized Global Growth 1. Source: WSA, CRU. 2. Source: WSA, NBS. Slide 22: Strong Demand Fundamentals ex. China 1. Source: CRU. Slide 23: Growing India Steelmaking Coal Imports 1. Source: WSA, Global Trade Atlas, Wood Mackenzie, CRU. 2. Source: Wood Mackenzie Slide 24: Capacity
Slide 31: Energy Marketing
Energy Marketing April 4, 2018 Glenn Burchnall, Director, Energy Marketing and Logistics
Slide 32: Forward Looking Information
Forward Looking Information Both these slides and the accompanying oral presentation contain certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of the Securities Act (Ontario)
Slide 33: Oil Prices Improving
Oil Prices Improving Benchmark Prices (US$/bbl) World Liquid Fuels Production & Consumption2 $80 102 6 $60 US$/bbl $40 101 5 $20 100 4 $0 99 3 MM bpd MM bod WTI Brent 98 2 North American Rig Count & US Production1 97 1 11,000 800 96 0 Rig count Units Thousand bpd 600 10,000 95 -1 400 9,000 94 -2 200
Slide 34: Heavy Oil Benchmark Differentials
Heavy Oil Benchmark Differentials WTI - Western Canadian Select (WCS) Differential1 • Wider differentials in short term Sufficient Export ‒ Constrained pipeline capacity Constrained Export Capacity Capacity* ‒ Change in bunker fuel oil $45 specifications $40 $35 US $/bbl $30 • Pipeline/rail capacity
Slide 35: Pipeline Development Constructive
Pipeline Development Constructive WTI-WCS differentials forecast to improve with export pipeline capacity Western Canada Heavy Supply/Demand Balance1 Potential For Incremental 1.5M Barrels Per Day Export Pipeline Capacity 5,500 5,500 5,250 5,000 5,000 4,750 Keystone XL 4,500 4,500 4,250 TransMountai
Slide 36: Lower Carbon Intensity Product
Lower Carbon Intensity Product PFT Diluted Bitumen has a Lower Carbon Intensity Than Around Half of the Barrels of Oil Refined in the US, on a Wells-to-Wheels Basis1 Total carbon intensity (kgCO2e per barrel of refined products) 600 Carbon intensity of average 550 barrel refined in the US = 502 500
Slide 37: Fort Hills Diluted Bitumen (FRB) Sales
Fort Hills Diluted Bitumen (FRB) Sales • First oil: January 27, 2018 • Facility and pipeline commissioning in February 2018 • First sales: March 2018 Teck’s Commercial Activities1 • Strong customer demand for FRB Bitumen production 38.3 kbpd +Diluent acquisition 11.2 kbpd =Bitumen blend sales 49.5 k
Slide 38: Hardisty Is A Major Heavy Oil Market Hub
Hardisty Is A Major Heavy Oil Market Hub • Terminal storage1: – 34 million barrels – 425 kbbls contracted by Teck • Export pipeline capacity: 3.7 mbpd – Enbridge common carrier – Keystone & Express pipelines – Origination point for Keystone XL • Rail car loading capability: 120 kbpd 38 Source: Gibso
Slide 39: Energy Sales & Logistics Strategy
Energy Sales & Logistics Strategy Based on diverse market access & risk mitigation Sales Mix Market Profile Long term Pipelines: Monthly basis 10 kbpd Contracted capacity on existing Keystone pipeline contracts at at Hardisty to the US Gulf Coast Hardisty +12 kbpd Contracted capacity on proposed Tra
Slide 40: US Midwest/Gulf Coast Key Markets
US Midwest/Gulf Coast Key Markets Blended Bitumen Pipelines • US Midwest largest existing market Edmonton Hardisty • US Gulf Coast exceptional growth opportunity Asia Vancouver Superior Montreal • Deep water port access via proposed TransMountain & Keystone XL pipelines Steele City Flanagan Californ
Slide 41: Illustrative Bitumen Netback At Mine Site
Illustrative Bitumen Netback At Mine Site Assuming steady state operations (2019-2022)1 US$/bbl C$/bbl $100 $90 $80 $70 $60 $/bbl $50 $40 $30 $20 $10 $0 NYMEX WTI WTI-WCS Exchange Rate Fort Hills Diluted Diluent Blending Fort Hills Bitumen Differential & Bitumen (FRB) And Transportation Netback (Min
Slide 42: Summary
Summary • First sales in March • Strong market acceptance of our high quality dilbit blend • Well positioned with contracted storage at Hardisty market hub • Developing a portfolio of market access opportunities to diversified markets1 • Long life stable production to generate significant cashflow 4
Slide 43: Notes
Notes Slide 33: Oil Prices Improving 1. Source: Baker Hughes, EIA. As at March, 2018. 2. Source: Energy Aspects market Fundamentals, EIA, OPEC, IEA Short Term Outlooks March 2018. Slide 34: Heavy Oil Benchmark Differentials 1. Export capacity includes pipeline and rail loading capacity. Actuals plot
Slide 44: The Right Commodities at the Right Time
The Right Commodities at the Right Time April 4, 2018 Andrew Stonkus, Senior Vice President, Marketing and Logistics Réal Foley, Vice President, Coal Marketing Glenn Burchnall, Director, Energy Marketing and Logistics