100 slides from Teck Resources Limited Class A's conference presentation, Jun 14, 2016
Slide 1: Global Mining & Materials Conference
Global Mining & Materials Conference June 14, 2016
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 cas
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 Q1 2016 Revenue $8.3 billion $1.7 billion Assets $34.7 billion $ 33.8 billion Gross profit $2.6 billion $464 million before depreciation & amortization Profit (loss) ($2.5 billion) $94 million attributable to shareholders Adjusted EBITDA* $2.0 billion $517 million Adj
Slide 8: The Value of Our Diversified Business Model
The Value of Our Diversified Business Model Cash Operating Profit 20153 2016 Leverage to Commodities & FX Effect on Effect on Production Unit of Estimated Estimated Guidance1 Change Profit 2 EBITDA2 $C/$US C$0.01 C$21M /$.01∆ C$32M /$.01∆ Copper ~35% Coal Base Base Coal 25.5 Mt US$1/tonne C$21M /$1∆
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 Improved outlook for steelmaking coal Small surplus in copper could shift into deficit Growing deficit and shrinking inventories in zinc Oil market to rebalance 10
Slide 11: Improved Outlook for Steelmaking Coal
Improved Outlook for Steelmaking Coal Coal Price Assessments 125 120 115 • Price volatility but well off the 110 lows 105 US $ / tonne 100 95 • Demand improving 90 85 • Closures continue 80 75 70 • Supply curtailment in China Quarterly Contract Settlement Argus FOB Australia TSI Premium HCC FOB Aust
Slide 12: Small Surplus in Copper Could Shift Into Deficit
Small Surplus in Copper Could Shift Into Deficit 2007-2015 disruptions to concentrate production averaged 5.8%1 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD • Currently a slight oversupply 0 in a ~20 Mt market -200 1.2% • Additional ~2% disruption -400 could balance market Thousand ton
Slide 13: Growing Deficit & Shrinking Inventories in Zinc
Growing Deficit & Shrinking Inventories in Zinc Daily Zinc Prices & Stocks 250¢ 1,800 • Mine closures tightening 200¢ 1,600 thousand tonnes 1,400 concentrate supply 1,200 US¢/lb 150¢ 1,000 100¢ 800 600 50¢ 400 • Growing demand expected to 200 0¢ 0 outpace supply curtailments 2000 2001 2002 2003 2004
Slide 14: Oil Market to Rebalance
Oil Market to Rebalance Global Crude Oil Supply and Demand Balances Fort Hills first production may coincide with forecasted supply deficit 14 Source: Consensus Economics, May 2016
Slide 15: Agenda
Agenda Teck Overview & Strategy Commodity Market Observations Teck Update 15
Slide 16: Near-Term Priorities
Near-Term Priorities • Keeping operations cash flow positive • Funding Fort Hills from internal sources − Remaining Fort Hills capital expenditure of C$915M1 • Maintaining a strong financial position − Target for US$3B credit facility to remain undrawn in 2016 − Expect year-end cash balance of >C$50
Slide 17: Track Record of Successfully Lowering Cash Costs Over Time
Track Record of Successfully Lowering Cash Costs Over Time Steelmaking Coal Total Site Costs1 Copper Cash Costs3 Red Dog Zinc/Lead Site Costs4 90 2.50 400 80 350 2.00 US$ per tonne of production 70 300 60 250 US$/lb 1.50 50 200 C$/t 40 1.00 150 30 20 100 0.50 10 50 0 0.00 0 2012 2013 2014 2015 2016F
Slide 18: Extending Near Term Debt Maturities
Extending Near Term Debt Maturities Current Debt Maturity Profile1 Pro-Forma Debt Maturity Profile2 $3,000 $3,000 Weighted Average Maturity: 13.7 yrs Weighted Average Maturity: 14.6 yrs $2,500 $2,500 Weighted Average Coupon: 4.78% Weighted Average Coupon: 5.72% $2,000 $2,000 US$M US$M $1,500 $1,500
Slide 19: Strong Financial Position; Liquidity of >C$5.1B
Strong Financial Position; Liquidity of >C$5.1B1 • Cash balance of ~C$1.3B1 • Substantial credit facilities1: Letters of Credit Letters of Credit Total Amount ($M) Commitment Maturity Limit ($M) Issued ($M) Available ($M) US$3,000 Committed July 2020 US$1,000 Undrawn US$3,000 US$1,0002 Committed Jun
Slide 20: Summary
Summary Diversified business model Attractive portfolio of long-life assets in low risk jurisdictions Good exposure to strengthening commodities – metallurgical coal & zinc Target to keep major mines cash flow positive after sustaining capital and capitalized stripping Strong financial position, wit
Slide 21: Global Mining & Materials Conference
Global Mining & Materials Conference June 14, 2016
Slide 22: Additional Information
Additional Information 22
Slide 23: Prices Finding a Bottom?
Prices Finding a Bottom? Relative Price Changes 1.20 Since Since Peak 1.00 Peak January 2016 Oil $108/bbl -61% +14% 0.80 GSCI 5,185 -57% +3% 0.60 Zinc $1.10/lb -26% +16% 0.40 Copper $3.37/lb -37% +2% Gold $1,385/oz -9% +16% 0.20 Silver $22/oz -28% +14% 0.00 Steel $690/st -33% +24% Zn Cu Ag Au GSCI W
Slide 24: Canadian Dollar Impacts Stock Price
Canadian Dollar Impacts Stock Price TCK B Stock Price vs. C$/US$ Exchange Rate (2000-present) 1.2 $70 1.1 $60 $50 1.0 $40 C$/US$ Exchange Rate 0.9 C$/share $30 0.8 $20 0.7 $10 0.6 $0 Plotted to "C$ vs US$ Exchange Rate (left axis)' Teck (right axis) May 17, 2016 Canadian dollar exchange rate is high
Slide 25: Commodity Price Correlation With Stock Price
25 50 70 90 110 130 150 170 190 210 230 250 25/07/2000 25/01/2001 25/07/2001 25/01/2002 25/07/2002 25/01/2003 25/07/2003 25/01/2004 25/07/2004 25/01/2005 With Stock Price 25/07/2005 25/01/2006 25/07/2006 25/01/2007 25/07/2007 Bloomberg Commodity Price Index (Left Axis) 25/01/2008 25/07/2008 25/01/20
Slide 26: Diversified Business Mix
Diversified Business Mix Gross Profit Before Depreciation and Amortization 60% 50% 40% 30% 20% 10% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Steelmaking Coal Copper Zinc Zinc generated almost half of profit in the past and could do so again 26
Slide 27: 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% 27 Note: Teck percentage split based on 2015 revenue.
Slide 28: Consistent Delivery Against Guidance
Consistent Delivery Against Guidance In 2015, Met or Beat Guidance across Key Benchmarks 28
Slide 29: 2016 Production & Site Cost Guidance
2016 Production & Site Cost Guidance 2015 Results 2016 Guidance Steelmaking Coal Production 25.3 Mt 25-26 Mt Site costs $45/t $45-49/t Capitalized stripping $16/t $11/t1 Transportation costs $36/t $35-37/t Total cash costs2 $99/t $91-97/t US$76/t US$65-69/t Copper Production 358 kt 305-320 kt C1 uni
Slide 30: 2016 Capital Expenditures Guidance
2016 Capital Expenditures Guidance Major New Mine Capitalized ($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 31: Significant Cost Reductions
Significant Cost Reductions Unit Costs Reduced at all of our Operations in 2015, Preserving Margins in a Volatile Commodity Environment Unit Cost of Sales (US$/tonne)1 Total Cash Costs (US$/tonne)1 Steelmaking Coal1 24% 23% 84 Total 99 Unit Cost of Sales 64 Transport 76 down US$20/t 35 Capitalized 2
Slide 32: Meaningful Savings and Capital Spending Reductions Achieved
Meaningful Savings and Capital Spending Reductions Achieved Annualized 2015 Savings from Major Cost Total Capital Expenditures 2012-2016F Reduction Program Initiatives (C$M) ~C$820M of Annualized Savings in 2015, from Major New Mine Development Major Enhancements Cost Reduction Initiatives in 2013-2
Slide 33: Collective Agreements
Collective Agreements Operation Expiry Dates Elkview In Negotiations - October 31, 2015 Fording River April 30, 2016 Highland Valley Copper 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
Slide 34: Staged Growth/Value Pipeline
Staged Growth/Value Pipeline Medium-term Completed In Construction Pre-Sanction Future Options Growth Options Corridor 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) Zi
Slide 35: Credit Ratings
Credit Ratings S&P Moody’s Fitch DBRS Supported by: Investment Grade BBB- Baa3 BBB- BBB (low) • Diversified business model • Low risk jurisdictions BB (high) BB+ Ba1 BB+ negative • Low cost assets • Conservative financial policies BB Ba2 BB BB • Significant cost reductions BB- Ba3 BB- BB (low) • Cap
Slide 36: Credit Ratings Reflect Commodity Prices
Credit Ratings Reflect Commodity Prices Teck Credit Ratings vs. Bloomberg Commodity Price Index A+/A1 250 Investment Grade A/A2 A-/A3 200 BBB+/Baa1 BBB/Baa2 150 BBB-/Baa3 Non-Investment Grade BB+/Ba1 100 BB/Ba2 BB-/Ba3 50 B+/B1 B/B2 0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Ja
Slide 37: Core Business Free Cash Flow Positive; Funding Fort Hills Internally
Core Business Free Cash Flow Positive1; Funding Fort Hills From Internal Resources Fort Hills’ capital expenditures Cost management delivering improvements in are fully funded2 Free Cash Flow1, despite weakening prices Free Cash Flow, Teck’s total share of capital C$2.94B Before Fort Hills Capex 400
Slide 38: 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 38
Slide 39: Our External Recognition
Our External Recognition Best 50 Corporate On the Dow Jones Citizens in Canada Sustainability World Index 2015 six years in a row One of top 100 most sustainable companies in the world and one of Canada’s most sustainable companies Top 50 Socially Responsible Listed on FTSE4Good Corporations in Inde
Slide 40: Steelmaking Coal Business Unit & Markets
Steelmaking Coal Business Unit & Markets
Slide 41: Steelmaking Coal Will Slowly Rebalance
Steelmaking Coal Will Slowly Rebalance US Steelmaking Coal Exports (ex. Canada) Tighter Market ex-China 70 2010-2014 Decline in China offset by growth in average at 55 Mt other Asian countries and Latin America 60 10 Seaborne met. coal imports 50 change, 2020 vs. 2015, Mt 40 38 Mt 5 2000-2009 averag
Slide 42: Global Hot Metal Production
Global Hot Metal Production Monthly Hot Metal Production Traditional Steel Markets 75 65 • China slowing 55 45 China • JKT slowing 15 • EU stable JKT 12 Mt 9 Europe Rest of the World • India good growth 6 India • Brazil stable 3 Brazil • US slowing USA 0 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan
Slide 43: Status of Relocation of Chinese Steel Industry To the Coast
Status of Relocation of Chinese Steel Industry To the Coast Ansteel Bayuquan Project • Phase 1 (~ 5.4 Mt pig iron, 5.2 Mt crude steel and 5 Mt steel products) in 2013 • Phase 2 (5.4 Mt BF) planned but no progress yet Capital Steel Caofeidian Project Heilongjiang • Phase 1 (10 Mt) completed in 2010.
Slide 44: Growing Share of Chinese Steel Industry Production on the Coast
Growing Share of Chinese Steel Industry Production on the Coast Chinese Steel Industry Production 900 68% 800 66% 700 64% 600 62% 500 60% 400 58% 300 56% 200 54% 100 52% 0 50% 2000 2003 2006 2009 2012 2015 Non-coastal (Mt, lhs) Coastal (Mt, lhs) Coastal share (%, rhs) 44 Sources: NBS, CISA
Slide 45: 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% 0% United Europe Japan Turkey Russia Korea China World States Average China Steel Use Crude Steel and Hot Metal Production By Sector (2000-14) 1000 Crude Steel 800 Hot
Slide 46: Dalian Coking Coal Futures Follow Seaborne Prices and Fundamentals
Dalian Coking Coal Futures Follow Seaborne Prices and Fundamentals 200 105 180 100 160 95 90 140 US$/tonne US$/tonne 85 120 80 100 75 80 70 60 65 DCE’s coking coal price Platts Premium LV CFR DCE’s coking coal price Platts Premium LV CFR Argus Premium HCC CFR China's Liulin #4 CFR Argus Premium HCC
Slide 47: An Integrated Long Life Coal Business
An Integrated Long Life Coal Business • >1 billion tonnes of reserves support 26 Mt of production for many years • Geographically concentrated in the Elk Valley • Established infrastructure and capacity with mines, railways and terminals • Only steelmaking coal mines still operating in Canada; compe
Slide 48: We Are a Leading Steelmaking Coal Supplier To Steel Producers Worldwide
We Are a Leading Steelmaking Coal Supplier To Steel Producers Worldwide High quality, consistency, reliability, long-term supply Asia excl. China North ~50% America Europe China ~5% ~20% ~20% Latin America ~5% Proactively realigning sales with changing market 48 Source: Teck, based on 2015 sales vol
Slide 49: Average Realized Price in Steelmaking Coal
Average Realized Price in Steelmaking Coal Historical Average Realized Prices 88% Average realized price discount: ~8-9% 350 93% 300 96% 94% Discount to the benchmark price 250 92% is a function of: 91% 200 1. Product mix: >90% hard coking coal US$ / tonne 150 93% 2. Direction of quarterly benchmark
Slide 50: Steelmaking Coal Costs
Steelmaking Coal Costs1 Total Cash Costs2 US$/t 2014 2015 20163 Change Site $46 $35 $34 -26% $99 Capitalized Inventory Adjustments $3 $1 $0 -100% 15 Stripping $76 $68 Transportation $35 $28 $26 -25% 12 Transport 35 8 Unit Cost of Sales (IFRS) $84 $64 $60 -28% 28 Inventory 3 26 IFRS Capitalized Strip
Slide 51: Steelmaking Coal: Year Planning Objectives 2016
Steelmaking Coal: 5 Year Planning Objectives 2016 Conceptual Future Production Profile • Evaluating options to maintain 26 Mt of 30 annual production − 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 av
Slide 52: >75 Mt of West Coast Port Capacity Planned
>75 Mt of West Coast Port Capacity Planned Teck Portion at 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 Tonne
Slide 53: LNG Haul Trucks – Status Update
LNG Haul Trucks – Status Update • Six pilot trucks have been converted to “dual-fuel” - LNG and diesel (four 830E’s, two 930E’s); first in Canada • Current substitution rates achieved: 25 – 40% (target >35%) • Pilot objective is to confirm the business case (cost and sustainability) for a Teck wide
Slide 54: 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 55: Coking Coal Strength
Coking Coal Strength High Quality Hard Coking Coal 80 U.S.A. • Around the world, and Canada Other Australia Teck HCC (hard coking) especially in China, blast 70 Australia Japan and Canada furnaces are getting larger South Africa Teck HCC and increasing PCI rates 60 Japan U.S.A. • Coke requirements f
Slide 56: Copper Business Unit & Markets
Copper Business Unit & Markets
Slide 57: Copper Metal Prices & Stocks
Copper Metal Prices & Stocks Daily Copper Prices & Stocks 500¢ 1400 450¢ 1200 400¢ thousand tonnes 350¢ 1000 US¢/lb 300¢ 800 250¢ 600 200¢ 150¢ 400 100¢ 200 50¢ 0¢ 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 plotted to LME Stocks Comex SHFE Price April. 19, 2016 57 Source
Slide 58: Copper Mine Production Forecasts Continue to Decline
Copper Mine Production Forecasts Continue to Decline 2015 2016 2017 17,500 18,500 18,500 18,000 17,000 18,000 thousand tonnes contained copper thousand tonnes contained copper thousand tonnes contained copper 17,500 16,500 17,000 17,500 16,500 16,000 17,000 16,000 15,500 16,500 15,500 15,000 15,000
Slide 59: 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 6000 2015 Price $/tonne 5000 Current Price (4/19/2016) 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 20
Slide 60: Copper Margin Curve
Copper Margin Curve Bernstein Estimated Margin After Sustaining Capex 6,000 5,000 4,000 At US$2.00 At US$2.40 4,270kt 6,239kt 3,000 49th Percentile 72nd Percentile 2,000 1,000 Margin (US$/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 Cumulat
Slide 61: Copper Growth Set to Decline
Copper Growth Set to Decline Annual Change to Mine Production Las Bambas Escondida Cerro Verde Sentinel Grasberg Buenavista Other Mines Mount Isa Cu Spence SxEw Chuquicamata Escondida SxEw Radomiro SxEw 1,500 1,000 500 Thousand tonnes 0 -500 -1,000 -1,500 2016 2017 2018 2019 2020 2021 2022 2023 2024
Slide 62: 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 63: Copper Concentrate TC/RCs
Copper Concentrate TC/RCs Copper Concentrate TC/RC 60¢ 50¢ 40¢ 30¢ 20¢ 10¢ 0¢ 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 plotted to Standard Spot High Grade Spot Realised TC/RC February 2016 63 Source: Teck, CRU
Slide 64: Wood Mac Still Forecasting Chinese Demand Growth
Wood Mac Still Forecasting Chinese Demand Growth Non-Residential Buildings Copper Intensity Generation/Transmission Drive Copper Demand Near Term Increasing green electricity consumption to drive copper demand; Non-residential construction has higher intensity of use 64 Source: Wood Mackenzie, Teck
Slide 65: China Switching to Copper Concentrates
China Switching to Copper Concentrates Net Copper Imports up ~5% in 2015 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 Updated to Cathode Concs Scrap Blister/Semis February 2016 Total copper unit imports continue to climb 65 Sou
Slide 66: 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 Annual Avg. Growth 325 Mt/yr 1,000 20% Annual Avg. Growth Thousand tonnes 800 356 Mt/yr 15% 6
Slide 67: Global Copper Cathode Balances
Global Copper Cathode Balances Wood Mackenzie’s Outlook is Trending Down 2015 2016 2017 800 800 800 700 700 700 thousand tonnes contained copper thousand tonnes contained copper thousand tonnes contained copper 600 600 600 500 500 500 400 400 400 300 300 300 200 200 200 100 100 100 0 0 0 -100 Feb-13
Slide 68: Long-Term Copper Mine Production Still Needed
Long-Term Copper Mine Production Still Needed Forecast Copper Refined Balance 500 • At 2.3% global demand growth, 480 kt of new supply needed annually 0 • Post 2016, mine production falls ~260 kt per year Thousand tonnes • Structural deficit starts 2018 (500) • Projects delayed today will not be ava
Slide 69: Building Partnerships: Corridor Project
Building Partnerships: Corridor Project Teck and Goldcorp have combined Relincho and El Morro projects and formed a 50/50 joint venture company • Committed to building strong, mutually beneficial relationships with stakeholders and communities Capital smart partnership • Shared capital, common infra
Slide 70: Corridor Project Summary
Corridor Project 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
Slide 71: Copper Development Projects in the Americas
Copper Development Projects in the Americas Corridor 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 Equiv
Slide 72: Zinc Business Unit & Markets
Zinc Teck Business Unit & Markets
Slide 73: 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 plotted to 73 Source: LME/SHFE April 15, 2016
Slide 74: Zinc Mine Production Undersupplied, Even With Lower Growth
Zinc Mine Production Undersupplied, Even With Lower Growth LME Zinc Stocks 120¢ 1,200 • Metal market in deficit 110¢ 1,000 100¢ thousand tonnes 90¢ 800 • LME stocks down >810 kt over 27 US¢/lb 80¢ 600 months; sub-500 kt recently for the 70¢ 400 first time since 2010 60¢ 50¢ 200 • ‘Off-market’ invent
Slide 75: Zinc Mine Production: Wood Mackenzie 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 76: Significant Zinc Mine Reductions
76 0 -500 -400 -300 -200 -100 Century Lisheen Skorpion Red Dog Rosebery Bracemac-McLeod Rapura Agucha 2014-2020 Pomorzany-Olkusz (incl Bulk) Jaguar Mid-Tennessee Mae Sod Endeavor Source: ICSG, Wood Mackenzie Teck, Company Reports 100 200 300 400 500 0 Gamsberg Large Short-Term Losses, More Long Term
Slide 77: Zinc Inventories Declining
Zinc Inventories Declining LME Zinc Stocks - 11 Years LME Zinc Stocks – Since Dec 2012 120¢ 250¢ 1,400 1,200 110¢ 1,200 200¢ 1,000 100¢ 1,000 thousand tonnes 150¢ thousand tonnes 800 90¢ 800 US¢/lb US¢/lb 600 80¢ 100¢ 600 400 70¢ 50¢ 400 200 60¢ 0¢ 0 50¢ 200 2003 2004 2005 2006 2007 2008 2009 2010 2
Slide 78: Zinc Concentrate Balances
Zinc Concentrate Balances Wood Mackenzie’s 2015 - 2017 Outlooks Trending Down 2015 2016 2017 400 400 400 300 200 thousand tonnes contained zinc thousand tonnes contained zinc thousand tonnes contained zinc 300 200 0 200 100 (200) 100 0 (400) (100) 0 (600) (200) (100) (300) (800) (200) (400) (1,000)
Slide 79: Zinc Metal Market Mostly in Deficit Since 2013
Zinc Metal Market Mostly in Deficit Since 2013 Zinc Metal Balance Market View – Wood Mackenzie & CRU 600 • Zinc metal deficit forecasted for 2016 and 2017 400 200 • Mine production increases of -3.5% and 7.6% respectively expected for 2016 and 0 2017. The closure of Century and Lisheen, as well as p
Slide 80: Chinese Zinc Demand to Outpace Supply
Chinese Zinc Demand to Outpace Supply China Zinc Demand Galvanized Steel as % Crude Production USA 20% 19% Other 18% 5% 16% Construction Infrastructure 14% 15% 30% 12% 10% Transportation 8% 20% 6% Consumer Goods 4% China 30% 6% 2% 0% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 If China were to galv
Slide 81: Refined Zinc Balances
Refined Zinc Balances Wood Mackenzie’s Outlook is Trending Down 2015 2016 2017 0 0 0 (50) (50) (50) thousand tonnes contained zinc (100) (100) (100) (150) (150) (150) thousand tonnes thousand tonnes (200) (200) (200) (250) (250) (250) (300) (300) (300) (350) (350) (350) (400) (400) (400) (450) (450)
Slide 82: Committed Zinc Supply Insufficient for Demand
Committed Zinc Supply Insufficient for Demand Forecast Zinc Refined Balance 500 • We expect insufficient mine supply to constrain refined production − From 2014-2020, refined metal supply 0 increase of only 792 kt − Over the same period, refined demand (500) increase of 2.8 Mt Thousand tonnes • Mark
Slide 83: 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 84: Energy Business Unit & Markets
Energy Business Unit & Markets
Slide 85: North American Rig Counts Down Sharply
North American Rig Counts Down Sharply North American Rig Count & US Production 2,000 10,000 1,800 9,500 1,600 9,000 8,500 1,400 Rig Count Units Thousand bpd 8,000 1,200 7,500 1,000 7,000 800 6,500 600 6,000 400 5,500 200 5,000 1/7/11 1/7/12 1/7/13 1/7/14 1/7/15 1/7/16 As of 4/18/16 US Rig Count CAD
Slide 86: 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) Enough oil has been discovered to meet production in only 4 of the past 30 years 86 Source: Rystad Energy, Morgan Stanley
Slide 87: World Oil Demand Expected to Grow
World Oil Demand Expected to Grow PIRA Forecasted World Oil Demand By Sector (2000-2040) 120 100 80 Million bpd 60 40 20 0 2000 2014 2020 2025 2030 2035 2040 Transport Petrochemicals Other** Buildings Other Industry Power Generation 87 Source: PIRA Scenario Planning Annual Guidebook: February 2015
Slide 88: Oil Sands Mining Costs Lower Than Understood
Oil Sands Mining Costs Lower Than Understood 88 Source: BMO Capital Markets, May 2016
Slide 89: Sufficient Western Canadian Takeaway Capacity Expected
Sufficient Western Canadian Takeaway Capacity Expected Western Canadian Supply and Takeaway Capacity 7,000 TMX & Energy East 6,000 Fort Hills’ First Oil Sufficient takeaway capacity Enbridge Expansions expected for forecast growth 5,000 • 2011–2014 − Rapid production growth resulted in kbbls/day 4,0
Slide 90: 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’ 90
Slide 91: 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 92: Fort Hills Project Status & Progress
Fort Hills Project Status & Progress • Project Progress: Construction has surpassed the midway point and project continues to track positively Fort Hills Key Numbers2 within schedule expectations • >95% Engineering complete (approximate as at April 2016) Teck’s Sanction Capital3 ~C$2.94B • >55% Cons
Slide 93: Fort Hills Key Numbers
Fort Hills Key Numbers1 Teck’s Sanction Capital2 Teck’s Estimated 2016 Spend Teck’s Remaining Capital3 ~$2.94 $960 ~$915 billion million million Operating & Sustaining Costs4 Sustaining Capital4 Teck’s Share of Production $25-28 $3-5 13,000,000 per barrel of bitumen per barrel of bitumen bitumen bar
Slide 94: 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 95: 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 $- Royalties based on pre-capital payout. * WTI/WCS Differential based on Lee & Doma 2016-2020
Slide 96: 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 $- Royalties based on pre-capital payout. * WTI/WCS Differential based on Lee & Doma 2021-2030 f
Slide 97: Western Canadian Select (WCS)
Western Canadian Select (WCS) Average Monthly WTI-WCS Differential Western Canadian Select (WCS) Is The Benchmark $45 $23.12 Price For Canadian Heavy Oil At Hardisty, Alberta $40 2012-2013 $35 $16.45 WCS differential to West Texas Intermediate (WTI) $30 $15.69 2014-2015 2010-2011 • Contract settled
Slide 98: 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 99: 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 100: 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