Teck Resources Limited Class A · TSX:TECK.A
Teck Resources Limited Class A — 2017 Whistler Institutional Investor Conference
98 slides from Teck Resources Limited Class A's conference presentation, Jan 26, 2017
Slide 1: 2017 Whistler Institutional Investor Conference
2017 Whistler Institutional Investor Conference January 26, 2017
Slide 2: Forward Looking Information
Forward Looking Information 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 Securities Act (Ontario)
Slide 3: Forward Looking Information
Forward Looking Information Factors that may cause actual results to vary materially include, but are not limited to, changes in commodity and power prices, changes in market demand for our products, changes in interest and currency exchange rates, acts of foreign governments and the outcome of lega
Slide 4: Agenda
Agenda Teck Overview & Strategy Commodity Market Observations Teck Update 4
Slide 5: Attractive Portfolio of Long-Life Assets in Low Risk Jurisdictions
Attractive Portfolio of Long-Life Assets in Low Risk Jurisdictions • Americas-centered strategy focused on long-life assets in stable jurisdictions − Canada, U.S., Peru and Chile are favorable regions in which to operate with well-known mining codes • High-quality assets: All business units are cash
Slide 6: Consistent Long-Term Strategy
Consistent Long-Term Strategy Diversified business model Attractive portfolio of long life assets Low half of the cost curve Appropriate scale Low risk jurisdictions 6
Slide 7: Financial Results Overview
Financial Results Overview 2015 Q3 2016 Revenue $8.3 billion $2.3 billion Assets $34.7 billion $34.5 billion As of December 31 As of September 30 Gross profit $2.6 billion $817 million before depreciation & amortization* Profit (loss) ($2.5 billion) $234 million attributable to shareholders Adjusted
Slide 8: The Value of Our Diversified Business Model
The Value of Our Diversified Business Model Cash Operating Profit 20151,2 2016 Leverage to Commodities & FX Effect on Effect on Production Unit of Estimated Estimated Guidance3 Change Profit4 EBITDA2,4 $C/$US C$0.01 C$22M /$.01∆ C$35M /$.01∆ Copper ~35% Coal Base Base Coal 26.5 Mt US$1/tonne5 C$20M
Slide 9: Agenda
Agenda Teck Overview & Strategy Commodity Market Observations Teck Update 9
Slide 10: Change in Direction in Key Commodity Markets
Change in Direction in Key Commodity Markets Steelmaking coal prices seeking balance Copper mine production peaking Growing deficit and shrinking inventories in zinc Oil market to rebalance 10
Slide 11: Steelmaking Coal Prices Seeking Balance
Steelmaking Coal Prices Seeking Balance • Market tightness due to: Coal Price Assessments − Global curtailments 350 − Operating day restrictions in China 325 − Weather & transportation issues 300 275 − Production interruptions 250 − Increased global demand 225 200 $ / tonne 175 • Recent supply devel
Slide 12: Copper Mine Production Peaking
Copper Mine Production Peaking >5 Mt of Uncommitted Production Mine Production Peaks in 2018 Needed by 2025 Existing and Fully Committed Mines 30,000 7,000 25,000 6,000 5,000 Thousand Tonnes 20,000 15,000 4,000 10,000 3,000 5,000 2,000 1,000 0 2010 2013 2016 2019 2022 2025 0 2017 2018 2019 2020 2021
Slide 13: Chinese Zinc Concentrate Supply Declining
Chinese Zinc Concentrate Supply Declining Concentrate Supply Shrinking Spot and Benchmark TCs Tighten 700 $300 600 $250 500 $200 400 $150 kt 300 $100 200 100 $50 Down ~75% 0 $0 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 2011 2012 2013 2014 2015 2016 Mine production Concs imports Annuali
Slide 14: Oil Market to Rebalance
Oil Market to Rebalance Global Crude Oil Supply and Demand Balances Million of barrels per day Million of barrels per day Source: Consensus Economics, December 2016 Fort Hills first production may coincide with forecasted supply deficit 14
Slide 15: Agenda
Agenda Teck Overview & Strategy Commodity Market Observations Teck Update 15
Slide 16: Well Positioned to Capitalize on Turn in the Cycle
Well Positioned to Capitalize on Turn in the Cycle • Reduced debt by >US$1B over 12 months • Expect year-end cash balance of ~C$1B • Excellent operating execution • Increasing steelmaking coal production guidance • Continuing to deliver on cost management • Investing for growth 16
Slide 17: Track Record of Lowering Cash Costs
Track Record of Lowering Cash Costs Steelmaking Coal Total Site Costs1 Copper Cash Costs3 Red Dog Zinc/Lead Site Costs4 90 2.50 400 80 350 US$ per tonne of production 70 2.00 300 60 250 US$/lb 1.50 50 200 C$/t 40 1.00 150 30 100 20 0.50 10 50 0 0.00 0 2012 2013 2014 2015 2016F* 2012 2013 2014 2015 2
Slide 18: Expanding Coal Earnings Potential
Expanding Coal Earnings Potential Coal EBITDA & Cash Flow Potential* 8,000 7,000 6,000 5,000 C$ Million 2016 Guidance Mid-Point Upside 4,000 Coal production (Mt) 27.25 27.5 Unit Cost of Sales (C$/t): Site 44 42 3,000 Transportation 34 33 Unit Cost of Sales (C$/t) 78 75 2,000 Capitalized Stripping (C
Slide 19: Largest Global Net Zinc Mining Companies
Largest Global Net Zinc Mining Companies Teck is the Largest Net Miner Provides Increased Exposure to Zinc Price 400 350 Public Company Teck 300 Private Company Thousand tonnes 250 200 150 100 50 0 19 Source: Wood Mackenzie, 2016E
Slide 20: Acting on Debt Reduction
Acting on Debt Reduction • Repurchased public notes in September Debt Levels and October − Face value: US$759M 7.5 − Total cost: US$693M >US$1B − Total pre-tax gain: C$76M 7.0 Reduction − Tranches: 2023, 2035, 2040, 2041, 2042, 2043 6.5 US$ Billions • Annual interest savings: US$43M Current Debt Pro
Slide 21: Emerging Stronger from This Cycle
Emerging Stronger from This Cycle • Production growth from Fort Hills • No operating assets sold • No equity dilution • Maintaining strong liquidity • Reducing debt, managing maturities Result is higher production per share 21
Slide 22: Additional Information
Additional Information 22
Slide 23: Commodity Price Correlation With Stock Price
23 Bloomberg Commodity Price Index 50 1050 1550 2050 2550 3050 3550 4050 4550 5050 550 Source: Bloomberg 11/04/2001 11/10/2001 11/04/2002 11/10/2002 11/04/2003 11/10/2003 11/04/2004 11/10/2004 11/04/2005 11/10/2005 11/04/2006 11/10/2006 11/04/2007 11/10/2007 11/04/2008 LME Index (Left Axis) 11/10/20
Slide 24: Diversified Global Customer Base
Diversified Global Customer Base Exposure to Recovery in Developed Markets as well as Growing Emerging Markets Revenue Contribution from Diverse Markets* North America Europe China ~14% ~22% ~23% Asia excl. China ~40% Latin America ~2% 24 * Based on 2015 revenue.
Slide 25: Significant Cost Reductions in 2015
Significant Cost Reductions in 2015 Unit Costs Reduced at all of our Operations in 2015, Preserving Margins in a Volatile Commodity Environment Unit Cost of Sales (US$/tonne)1 Total Cash Unit Costs (US$/tonne)1,3 Steelmaking Coal1 24% 23% 84 Total 99 Unit Cost of Sales 64 Transport 76 down US$20/t 3
Slide 26: Meaningful Savings and Capital Spending Reductions Achieved
Meaningful Savings and Capital Spending Reductions Achieved Annualized 2015 Savings from Major Cost Total Capital Expenditures 2012-2016F Reduction Program Initiatives (C$M) ~C$820M of Annualized Savings in 2015, from Major New Mine Development Major Enhancements Cost Reduction Initiatives in 2013-2
Slide 27: Updated 2016 Production & Cost Guidance
Updated 2016 Production & Cost Guidance Updated 2015 Results 2016 Guidance Steelmaking Coal Production 25.3 Mt 27-27.5 Mt Site costs $45/t $42-46/t Capitalized stripping $16/t $11/t1 Transportation costs $36/t $33-35/t Total cash unit costs2,3 $99/t $86-92/t US$76/t3 US$66-71/t3 Copper Production 35
Slide 28: 2016 Capital Expenditures Guidance
2016 Capital Expenditures Guidance Major New Mine Capitalized ($M) Sustaining Enhancement Development Sub-total Stripping Total Coal $50 $40 $ - $90 $290 $380 Copper 120 5 80 205 190 395 Zinc 130 10 - 140 60 200 Energy 5 - 1,000 1,005 - 1,005 TOTAL $305 $55 $1,080 $1,440 $540 $1,980 2015A $397 $64 $
Slide 29: Staged Growth/Value Pipeline
Staged Growth/Value Pipeline Medium-term Completed In Construction Pre-Sanction Future Options Growth Options NuevaUnión Galore/Schaft Creek Copper Mesaba Strong platform HVC Mill Optimization QB Phase 2 with substantial HVC Brownfield Zafranal growth options Antamina Brownfield San Nicolas (Cu-Zn)
Slide 30: Collective Agreements
Collective Agreements Operation Expiry Dates Highland Valley Copper In Negotiation - September 30, 2016 Trail May 31, 2017 Cardinal River June 30, 2017 October 30, 2017 Quebrada Blanca November 30, 2017 December 31, 2017 Quintette April 30, 2018 Antamina July 31, 2018 Coal Mountain December 31, 2018
Slide 31: No Substantial Bond Maturities for 5 Years
No Substantial Bond Maturities for 5 Years Debt Maturity Profile 3000 2500 Very little debt maturities while Fort Hills completes construction, 2000 commissioning, and ramps up to full production US$M 1500 1000 500 0 • No debt due until 2021 • Cost of Non-Investment Grade − Weighted average maturity
Slide 32: Credit Ratings
Credit Ratings Issuer Credit Ratings Supported by: S&P Moody’s Fitch • Diversified business model • Low risk jurisdictions BBB Baa2 BBB Investment • Low cost assets Grade BBB- Baa3 BBB- • Conservative financial policies • Significant cost reductions BB+ Ba1 BB+ • Capital discipline • Achieving produ
Slide 33: Credit Ratings Reflect Commodity Prices
Credit Ratings Reflect Commodity Prices Teck Credit Ratings vs. Bloomberg Commodity Price Index A+/A1 5,000 Investment Grade A/A2 4,500 A-/A3 4,000 BBB+/Baa1 3,500 BBB/Baa2 3,000 BBB-/Baa3 2,500 Non-Investment Grade BB+/Ba1 2,000 BB/Ba2 1,500 BB-/Ba3 1,000 B+/B1 500 B/B2 0 Jan-05 Jan-06 Jan-07 Jan-0
Slide 34: Significant Tax Pools in Canada
Significant Tax Pools in Canada1 ~$6B in Available Tax Pools, Including: • >$4B in loss carryforwards • $1.77B in Canadian Development Expenses Applies To: • Cash income taxes in Canada Does Not Apply To: • Resource taxes in Canada • Cash taxes in foreign jurisdictions Multiples should reflect tax e
Slide 35: Our Sustainability Strategy
Our Sustainability Strategy • Six focus areas • Community • Biodiversity • Our People • Water • Air • Energy and Climate Change • Achieved all 2015 goals • Set new short-term 2020 goals • Working towards long-term 2030 goals 35
Slide 36: Our External Recognition
Our External Recognition Best 50 Corporate On the Dow Jones Citizens in Canada Sustainability World Index 2016 seven years in a row One of top 100 most sustainable companies in the world and one of Canada’s most sustainable companies in 2016 Top 50 Socially Responsible Listed on FTSE4Good Corporatio
Slide 37: Steelmaking Coal Business Unit & Markets
Steelmaking Coal Business Unit & Markets
Slide 38: Steelmaking Coal Market Remains Tight
Steelmaking Coal Market Remains Tight US Steelmaking Coal Exports (ex. Canada) Tighter Market ex-China 70 Decline in China offset by growth in other markets 2010-2014 60 average at 55Mt 17 Seaborne met. coal imports change, 50 12 40 38 Mt 7 2020 vs. 2016, Mt 32Mt 2000-2009 2 30 Mt average at 23Mt -3
Slide 39: Reductions in Chinese Steel Capacity
Reductions in Chinese Steel Capacity China’s Steel Capacity Timing of Capacity Reduction Targets Announced* 80 68 Additional 70 Surplus 60 Capacity 223 Mt 50 44 Surplus 40 Capacity 40 Mt Committed 30 25 to Close Production 177 Mt 800 Mt 20 10 0 2016 2017-18 2019-20 Within 3-5 Years (No Details Annou
Slide 40: Global Hot Metal Production
Global Hot Metal Production Monthly Hot Metal Production Traditional Steel Markets 75 65 55 • China stable 45 China • JKT slowing 15 JKT • EU stable 12 Mt 9 Europe Rest of the World 6 India • India good growth 3 Brazil • Brazil stable USA • US slowing 0 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-
Slide 41: Status of Relocation of Chinese Steel Industry To the Coast
Status of Relocation of Chinese Steel Industry To the Coast Guofeng Coastal Project • Inland plant relocates to port area • Capacity: crude steel 8 Mt, hot metal 8 Mt in two phases • Phase 1: crude steel 5 Mt, hot metal 5 Mt, coke 1.7 Mt. Start by end of 2016; completion 2020 Hegang Coastal Project
Slide 42: China Scrap Use to Increase Slowly
China Scrap Use to Increase Slowly China’s Scrap Ratio Low vs. Other Countries 100% 88% 80% 73% 60% 54% 50% 33% 36% 40% 28% 20% 11% Others 0% 15-20% United Europe Japan Turkey Russia Korea China World Auto States Average China 5-10% Construction Source: WSA, China Association of Metalscrap Utilizati
Slide 43: An Integrated Long Life Coal Business
An Integrated Long Life Coal Business • >1 billion tonnes of reserves support 27-28 Mt of production for many years • Geographically concentrated in the Elk Valley • Established infrastructure and capacity with mines, railways and terminals • Only steelmaking coal mines still operating in Canada; co
Slide 44: We Are a Leading Steelmaking Coal Supplier To Steel Producers Worldwide
We Are a Leading Steelmaking Coal Supplier To Steel Producers Worldwide High quality, consistent, reliable, long-term supply China North America Europe 2015: ~20% ~5% 2015: ~20% 2013: ~30% 2013: ~15% Asia excl. China 2015: ~50% 2013: ~45% Latin America ~5% Proactively realigning sales with changing
Slide 45: Average Realized Price in Steelmaking Coal
Average Realized Price in Steelmaking Coal Historical Average Realized Prices 88% 350 93% Average realized price relative to the benchmark price is a function of: 300 96% 94% 1. Product mix: >90% hard coking coal 250 92% 91% 2. Direction of quarterly benchmark prices 200 YTD and spot prices 98% US$
Slide 46: Steelmaking Coal Unit Costs
Steelmaking Coal Unit Costs1 Total Cash Unit Costs2,3 US$/t 2014 2015 20164 Change Site $46 $35 $34 -26% $99 Capitalized Inventory Adjustments $3 $1 $0 -100% 15 Stripping $76 $68.50 Transportation $35 $28 $26 -25% 12 Transport 35 8.50 Unit Cost of Sales (IFRS) $84 $64 $60 -29% 28 Inventory 3 26 IFRS
Slide 47: Maintaining Stripping Levels in Coal
Maintaining Stripping Levels in Coal Total Material Moved & Coal Production 90,000 8,000 80,000 7,000 70,000 Material Moved (000 BCMs) 6,000 • Maintaining material moved 60,000 5,000 relative to production Production (000 50,000 4,000 • Q3 2015 reflects production 40,000 ) 3,000 curtailments 30,000
Slide 48: Steelmaking Coal: 5 Year Planning Objectives
Steelmaking Coal: 5 Year Planning Objectives 2016 Conceptual Future Production Profile • Evaluating options to maintain annual 30 production levels − Despite the closure of CMO and CRO in the 5 year horizon 25 − Exploring lowest cost options at remaining 4 Elk Valley operations − Utilize assets avai
Slide 49: >75 Mt of West Coast Port Capacity Planned
>75 Mt of West Coast Port Capacity Planned Our Portion is 40 Mt Westshore Terminals • Teck is largest customer at 19 Mt West Coast Port Capacity • Large stockpile area • Recently expanded to 33 Mt 40 • Planned growth to 36 Mt 35 3 • Contract expires March 2021 30 Neptune Coal Terminal Million Tonnes
Slide 50: High Grade Hard Coking Coal Is A Niche Market
High Grade Hard Coking Coal Is A Niche Market Global Coal Production1: 7.9 billion tonnes Steelmaking Coal Production2: ~1,185 million tonnes Export Steelmaking Coal2: ~325 million tonnes Seaborne Steelmaking Coal2: ~290 million tonnes Our Market - Seaborne Hard Coking Coal2: ~200 Million Tonnes 1.
Slide 51: Coking Coal Strength
Coking Coal Strength High Quality Hard Coking Coal U.S.A. 80 Canada Other Australia Teck HCC (hard coking) Australia • Around the world, and especially in 70 and Canada Japan China, blast furnaces are getting South Africa Teck HCC larger and increasing PCI rates 60 Japan U.S.A. • Coke requirements f
Slide 52: Copper Business Unit & Markets
Copper Business Unit & Markets
Slide 53: Copper Metal Prices & Stocks
Copper Metal Prices & Stocks Daily Copper Prices & Stocks 500¢ 1,400 450¢ 1,200 400¢ thousand tonnes 350¢ 1,000 US¢/lb 300¢ 800 250¢ 600 200¢ 150¢ 400 100¢ 200 50¢ 0¢ 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 LME Stocks Comex SHFE Price Source: LME, ICSG, ILZSG Plotted to December. 31, 2016 53
Slide 54: Copper Surplus Could Shift Into Deficit
Copper Surplus Could Shift Into Deficit Disruptions to Concentrate Production Averaged 6.3% in 2007-20151 • Currently a marginal 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD oversupply in a ~20 Mt market 0 -200 • Additional ~2% disruption -400 could balance market Thousand tonnes -600
Slide 55: CRU Sees Concentrate Surplus Short Lived
CRU Sees Concentrate Surplus Short Lived 55
Slide 56: Copper Mine Production Forecasts Continue to Decline
Copper Mine Production Forecasts Continue to Decline 2016 2017 2018 18,500 18,500 18,500 18,000 18,000 18,000 17,500 thousand tonnes contained copper thousand tonnes contained copper thousand tonnes contained copper 17,500 17,500 17,000 16,500 17,000 17,000 16,000 16,500 16,500 15,500 15,000 16,000
Slide 57: Copper Concentrate TC/RCs
Copper Concentrate TC/RCs Copper Concentrate TC/RCs 60¢ 50¢ 40¢ 30¢ 20¢ 10¢ 0¢ 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Standard Spot High Grade Spot Realised TC/RC Source: Teck, CRU Plotted to December 2016 57
Slide 58: Copper Costs Higher Than Understood
Copper Costs Higher Than Understood GFMS Net Cash and Total Cost Curves 10000 9000 8000 2013 Price 7000 2014 Price 2015 Price 6000 Current Price (1/6/2017) $/tonne 5000 4000 3000 2000 1000 0 0 10 20 30 40 50 60 70 80 90 100 Cumulative Production % 2013 Cash Costs 2013 Total Costs 2014 Cash Costs 201
Slide 59: Copper Margin Curve
Copper Margin Curve Bernstein Estimated Margin After Sustaining Capex 6,000 5,000 4,000 At US$2.00 At US$2.40 4,270 kt 6,239 kt 3,000 49th Percentile 72nd Percentile 2,000 1,000 Margin (US$/tonne) - (1,000) (2,000) (3,000) (4,000) (5,000) - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Cumul
Slide 60: China Switching to Copper Concentrates
China Switching to Copper Concentrates Net Copper Imports 1,200 1,000 800 000’s tonnes (content) 600 400 200 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Cathode Concs Scrap Blister/Semis Source: NBS Plotted to November 2016 Total copper unit imports continue to climb; Up ~5% i
Slide 61: Significant Chinese Copper Demand Remains
Significant Chinese Copper Demand Remains Annual Growth Rate of Chinese Copper …But Will Add Significantly Consumption to Slow Dramatically… in Additional Tonnage Terms 30% 1,400 Annual Avg. 25% 11.9% 1,200 1,000 20% Annual Avg. Growth Thousand tonnes 356 Mt/yr 800 Annual Avg. Growth 15% 325 Mt/yr 6
Slide 62: Global Copper Cathode Balances
Global Copper Cathode Balances Wood Mackenzie’s Outlook is Trending Down 2016 2017 2018 800 800 800 700 700 700 600 600 thousand tonnes contained copper thousand tonnes contained copper 600 thousand tonnes contained copper 500 500 500 400 400 400 300 300 200 200 300 100 100 200 0 0 100 -100 -100 -20
Slide 63: Long-Term Copper Mine Production Still Needed
Long-Term Copper Mine Production Still Needed Forecast Copper Refined Balance • At 1.8% global demand growth, 470 kt 1,000 of new supply needed annually • Structural deficits start in 2018-2019 500 • Projects delayed today will not be 0 Thousand tonnes available to the market by 2019 • Market finely
Slide 64: Ore Grade Trends
Ore Grade Trends Ongoing Decline will put Upward Pressure on Unit Costs Industry Head Grade Trends (Weighted by Paid Copper) 1.7 2.6 1.6 2.4 1.5 2.2 Copper Grade Cu % 1.4 2.0 1.3 1.8 1.2 1.6 1.1 1.4 1.0 1.2 0.9 1.0 0.8 0.8 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 All Operations Pr
Slide 65: Building Partnerships: NuevaUnión
Building Partnerships: NuevaUnión Teck and Goldcorp have combined Relincho and El Morro projects and formed a 50/50 joint venture company called NuevaUnión • Committed to building strong, mutually beneficial relationships with stakeholders and communities Capital smart partnership • Shared capital,
Slide 66: NuevaUnión Summary
NuevaUnión Summary Initial Capital Copper Production1 Gold Production1 $3.0 - $3.5 190,000 315,000 billion tonnes per year ounces per year Mine Life Copper in Reserves2 Gold in Reserves2 32+ 16.6 8.9 years billion pounds million ounces Note: Conceptual based on preliminary design from the PEA 1. Ave
Slide 67: Copper Development Projects in the Americas
Copper Development Projects in the Americas NuevaUnión is one of the largest open pit copper development projects in the Americas on the basis of copper contained in Proven and Probable Reserves 25,000 Copper-equivalent contained in Reserves (Mlbs) (North & South American Copper Projects) Copper Equ
Slide 68: Zinc Business Unit & Markets
Zinc Teck Business Unit & Markets
Slide 69: Zinc Metal Prices & Stocks
Zinc Metal Prices & Stocks Daily Zinc Prices & Stocks 250¢ 1,800 1,600 200¢ 1,400 1,200 150¢ 1,000 US¢/lb 800 100¢ 600 400 50¢ 200 0¢ 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 LME Stocks SHFE Price Source: LME/SHFE Plotted to December 31, 2016 69
Slide 70: Zinc Mine Production Undersupplied, Even With Lower Growth
Zinc Mine Production Undersupplied, Even With Lower Growth LME Zinc Stocks 150¢ 1,200 130¢ 1,000 thousand tonnes • Metal market in deficit 110¢ 800 US¢/lb 90¢ 600 • LME stocks down >790 kt over 48 70¢ 400 months 50¢ 200 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Oct-13 Oct-14 Oct-15 Oct
Slide 71: Zinc Mine Production: Wood Mackenzie's Outlook Trending Down
Zinc Mine Production Wood Mackenzie’s Outlook is Trending Down 2015 2016 2017 15,000 15,000 15,000 14,500 14,500 14,500 thousand tonnes contained zinc thousand tonnes contained zinc thousand tonnes contained zinc 14,000 14,000 14,000 13,500 13,500 13,500 13,000 13,000 13,000 12,500 12,500 12,500 12,
Slide 72: Chinese Zinc Concentrate Production
Chinese Zinc Concentrate Production Provincial Zinc Mine Production Zinc Mine Production in Regions with Many Small Mines 1,800 1,600 1,400 Kt, metal content 1,200 1,000 800 600 400 200 0 Shaanxi Guangxi Sichuan Inner Mongolia Yunnan Hunan Gansu Guangdong Fujian Jan-Oct 2013 Jan-Oct 2014 Jan-Oct 201
Slide 73: Significant Zinc Mine Reductions
73 0 -500 -400 -300 -200 -100 Century Lisheen Skorpion Red Dog Bracemac-McLeod Rapura Agucha Source: ICSG, Wood Mackenzie Teck, Company Reports 2014-2020 Pomorzany-Olkusz (incl Bulk) Jaguar Mid-Tennessee Mae Sod Endeavor 100 200 300 400 500 0 Gamsberg Large Short-Term Losses, More Long Term Antamina
Slide 74: Zinc Inventories Declining
Zinc Inventories Declining LME Zinc Stocks - 11 Years LME Zinc Stocks – Since Dec 2012 140¢ 250¢ 1,400 1,200 130¢ 1,200 120¢ 200¢ 1,000 1,000 110¢ thousand tonnes 150¢ 800 100¢ 800 thousand tonnes 90¢ US¢/lb 600 US¢/lb 100¢ 600 80¢ 400 50¢ 70¢ 400 200 60¢ 0¢ 0 50¢ 200 2003 2004 2005 2006 2007 2008 2
Slide 75: Chinese Mined Zinc Production
Chinese Mined Zinc Production Seasonality is a Potential Catalyst for Market Inflection Monthly Chinese Mined Zinc Production Declining ~10% annually 600 since peak in late 2013 500 Thousands DMT 400 300 200 100 0 May-06 Sep-06 May-07 Sep-07 May-08 Sep-08 May-09 Sep-09 May-10 Sep-10 May-11 Sep-11 Ma
Slide 76: Zinc Concentrate Stocks at Chinese Ports Declining
Zinc Concentrate Stocks at Chinese Ports Declining Monthly Stocks of Zinc Concentrate 500 450 400 Huangpu port: Zhanjiang port: 350 Beihai port: Yunyuejiang port Thousand Tonnes 300 Fangcheng port: 250 Nanjing port: Qinzhou port: 200 Dalian port: 150 BaYuQuan port: QHD port: 100 Jinzhou port: 50 Yan
Slide 77: Zinc Metal Market Mostly in Deficit Since 2013
Zinc Metal Market Mostly in Deficit Since 2013 Zinc Metal Balance 600 Market View – Wood Mackenzie & CRU 400 • Zinc metal deficit forecasted for 2016 and 2017 thousand tonnes contained zinc 200 • Mine production increases of -5.2% and 10.2% 0 respectively expected for 2016 and 2017 − Closure of Cent
Slide 78: Chinese Zinc Demand to Outpace Supply
Chinese Zinc Demand to Outpace Supply China Zinc Demand Galvanized Steel as % Crude Production USA 20% 20% Other 18% 5% 16% Construction Infrastructure 14% 15% 30% 12% 10% Transportation 8% 20% 6% Consumer Goods 4% 30% China 2% 5% 0% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Source: Teck Sourc
Slide 79: Committed Zinc Supply Insufficient for Demand
Committed Zinc Supply Insufficient for Demand Forecast Zinc Refined Balance 200 • We expect insufficient mine supply to constrain refined production 0 − From 2015-2020, refined metal supply increase of only 355 kt (200) − Over the same period, refined demand Thousand tonnes increase of 2.2 Mt (400)
Slide 80: Poised to Capitalize on Improving Zinc Fundamentals
Poised to Capitalize on Improving Zinc Fundamentals • Red Dog has stable zinc production despite declining grade • Pend Oreille moving to a higher proportion of secondary mining, which improves selectivity and ore availability • Increased refined zinc production at Trail with enhanced process stabil
Slide 81: Red Dog: Anarraaq High Grade Intercepts Demonstrate Significant Resource Potential
Red Dog: Anarraaq High Grade Intercepts Demonstrate Significant Resource Potential1 High Grade Anarraaq Intercepts 1.1 m @ 42.2% Zn, 14.7 % Pb, 558g/t Ag Industry Average Zinc Grades Falling 25 20 Red Dog 2cm 15 DDH1718 Grade % 54.7m @ 15.7%Zn, 4.0% Pb, 106g/t Ag 10 Weighted Average Incl. 11.2m @ 34
Slide 82: Teena/Reward Zinc Project
Teena/Reward Zinc Project TNDD019 38.8 @ 14.7/2.3 3.0 @ 4.6/2.9 6.7 @ 8.2/1.4 TNDD021 19.7 @ 12.9/2.0 7.2 @ 8.0/1.2 Teena 4/Teena 4A 4.8 @ 5.5/2.7 (4) 8.4 @ 12.9/0.2 (4) TNDD009 8.6 @ 7.1/2.7 (4A) 31.9 @ 9.9/1.5 5.0 @ 9.5/1.2 TNDD011 20.4 @ 11.6/1.8 4.7 @ 8.5/1.2 Teena 8 NR Teena 7 NR TNDD010 20.1 @
Slide 83: Energy Business Unit & Markets
Energy Business Unit & Markets
Slide 84: North American Rig Counts Down Sharply
North American Rig Counts Down Sharply North American Rig Count & US Production 2,000 10000 1,800 9500 1,600 9000 8500 1,400 Rig count Units Thousand bpd 8000 1,200 7500 1,000 7000 800 6500 600 6000 400 5500 200 5000 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 US Rig Count CAD Rig Count US 4-week Prod
Slide 85: Oil Exploration Success Fell To a Post-1952 Low in 2015
Oil Exploration Success Fell To a Post-1952 Low in 2015 Oil Liquids – Discovered Resources & Production (Billion bbl) Source: Rystad Energy, Morgan Stanley Enough oil has been discovered to meet production in only four of the past 30 years 85
Slide 86: World Oil Demand Still Growing
World Oil Demand Still Growing Wood Mackenzie Forecasted Global Oil Demand By Sector (2010-2035) 86 Source: Wood Mackenzie Global Macro Oils Long Term Outlook Nov 2016
Slide 87: Oil Sands Mining Costs Lower Than Understood
Oil Sands Mining Costs Lower Than Understood $/bbl Phase 2: Stabilized Market 60 Where we are now 50 40 30 20 10 0 Cash Cost Royalty Cash Tax Sustaining Capex 87 Source: BMO Capital Markets, May 2016
Slide 88: Sufficient Western Canadian Takeaway Capacity Expected
Sufficient Western Canadian Takeaway Capacity Expected Western Canadian Supply and Takeaway Capacity 7,000 TMX & KXL 6,000 Sufficient takeaway capacity Fort Hills’ First Oil expected for forecast growth 5,000 • 2011–2014 4,000 − Rapid production growth resulted in takeaway capacity challenges kbpd 3
Slide 89: Building An Energy Business
Building An Energy Business Strategic diversification Large truck & shovel mining projects World-class resources Long-life assets Mining-friendly jurisdiction Competitive margins Minimizing execution risk Tax effective Mined bitumen is in Teck’s ‘sweet spot’ 89
Slide 90: The Real Value of Long-Life Assets
The Real Value of Long-Life Assets Fort Hills Project Indicative Rolling NPV1 • Significant value created over long term • 60% of PV of cash flows beyond year 5 • IRR of 50-year project is only ~1% higher than a 20- year project • Options for debottlenecking and expansion 50-year assets provide for
Slide 91: Fort Hills Key Numbers
Fort Hills Key Numbers1 Teck’s Sanction Capital2 Teck’s Estimated 2016 Spend Teck’s Share of Production ~$2.94 $960 36,000 billion million bitumen barrels per day Operating & Sustaining Costs1 Sustaining Capital1,3 Teck’s Share of Production $25-28 $3-5 13,000,000 per barrel of bitumen per barrel of
Slide 92: Fort Hills Project Economics Are Robust
Fort Hills Project Economics Are Robust1 US$60 WTI US$75 WTI Fort Hills Free Cash Flow Yield4 Potential Contribution & $1.30 & $1.20 from Fort Hills USD/CAD USD/CAD Sensitivity to WTI Price 25% Pre-Payout Post-Payout Teck’s share of annual production 13 Mbpa 13 Mbpa 20% (36,000 bpd) Estimated netbac
Slide 93: Fort Hills Bitumen Netback Calculation Model
Fort Hills Bitumen Netback Calculation Model Cash Margin1 Calculation Example: Prior to Capital Recovery $70 $14.75 $13.50 $1.25 $7-9 $60 $58.75 $60 $10 $50 $40 $22 $40 $30 $3 $1.50 $1-2 $20 $13.50 $15 $10 $- Source: Alberta Energy bitumen valuation methodology (http://www.energy.alberta.ca/OilSands
Slide 94: Fort Hills Bitumen Netback Calculation Model
Fort Hills Bitumen Netback Calculation Model Cash Margin1 Calculation Example: Post Capital Recovery $13.25 $1.25 $7-9 $80 $75 $12.35 $74 $10 $70 $22 $60 $55.50 $50 $3 $40 $10 $1-2 $30 $22 $20.50 $20 $10 $- Source: Alberta Energy bitumen valuation methodology (http://www.energy.alberta.ca/OilSands/1
Slide 95: Western Canadian Select (WCS)
Western Canadian Select (WCS) Average Monthly WTI-WCS Differential $45 Western Canadian Select (WCS) Is The Benchmark $23.12 $40 2012-2013 Price For Canadian Heavy Oil At Hardisty, Alberta $35 $16.45 $15.69 2014-2015 WCS differential to West Texas Intermediate (WTI) $30 2010-2011 $25 $13.96 • Contra
Slide 96: Diluent (C5+) Pricing
Diluent (C5+) Pricing Average Monthly WTI/Diluent (C5+) Differential $20 Diluent (C5+) at Edmonton, Alberta Is the benchmark $15 contract for diluent supply for oil sands $10 Diluent differential to West Texas Intermediate (WTI) $5 • Contract settled monthly as differential to Nymex WTI • Based on s
Slide 97: Progress in Implementing Our Diversified Marketing Strategy
Progress in Implementing Our Diversified Marketing Strategy Market Access Options for Teck’s 50 kbbls/day of Fort Hills Diluted Bitumen Blend Agreements for pipelines to Hardisty in place Kitimat Agreement for Hardisty product storage in place Edmonton Hardisty Asia Vancouver Monitoring production v
Slide 98: Intra Alberta Logistics On Schedule For Fort Hills Commissioning
Intra Alberta Logistics On Schedule For Fort Hills Commissioning Fort Hills Mine Terminal Pipeline Legend Northern Courier Bitumen Blend Hot Bitumen Pipeline Diluent East Tank Farm Existing Blending w/Condensate Wood Buffalo New Pipeline Wood Buffalo Cheecham Extension Terminal Athabasca Twin Kirby
Teck Resources — 2017 Whistler Institutional Investor Conference on 6ix