Teck Resources Limited Class A · TSX:TECK.A
Teck Resources Limited Class A — 2016 Whistler Institutional Investor Conference
90 slides from Teck Resources Limited Class A's conference presentation, Jan 21, 2016
Slide 1: 2016 Whistler Institutional Investor Conference
2016 Whistler Institutional Investor Conference January 21, 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: Long-Term Strategy
Long-Term Strategy Diversification to expand opportunity set Long life assets Low half of the cost curve Appropriate scale Low risk jurisdictions 5
Slide 6: Attractive Portfolio of Long-Life Assets
Attractive Portfolio of Long-Life Assets • Headquartered in Vancouver, Canada, with operations in the Americas • Strategy focused on long life assets in stable jurisdictions • Sustainability: Key to managing risks and developing opportunities Strong Resource Position1 With Sustainable Long-Life Asse
Slide 7: The Value of Our Diversified Business Model
The Value of Our Diversified Business Model Cash Operating Profit YTD Q3 2015 2015 Leverage to Commodities & FX1 Production Unit of Estimated Estimated Guidance2 Change Profit 3 EBITDA3 Copper Coal 27 Mt US$1/tonne $21M /$1∆ $32M /$1∆ Base 55% Coal Metals 35% Copper 350 kt US$0.01/lb $5M /$.01∆ $8M
Slide 8: Agenda
Agenda Teck Overview & Strategy Commodity Market Observations Teck Update 8
Slide 9: Steelmaking Coal Price Cycles - Current Cycle Long and Deep
Steelmaking Coal Price Cycles - Current Cycle Long and Deep 250% 15 200% Peak to Trough Cycle % Change 146% 144% 150% 12 100% 68% 50% 9 13% 19% 17% -72% 1% Years 0% -2% -0.1% -12% -13% -50% -26% -25% -31% 6 -100% 4 5 3 3 3 -150% 3 2 2 2 2 -200% 1 1 1 1 1 1 -250% 0 • Up cycles in green and down cycle
Slide 10: Steelmaking Coal Will Slowly Rebalance
Steelmaking Coal Will Slowly Rebalance US Steelmaking Coal Exports (ex. Canada) Tighter Market ex-China 70 2010-2014 Looking further ahead, seaborne met. coal demand 60 average at 55Mt from China will be supportive of a market rebalancing 10 Seaborne met. coal imports change, Mt 50 5 39 Mt 40 0 2000
Slide 11: Copper Price Cycles - Current Cycle Deepest since 1920's
Copper Price Cycles – Current Cycle Deepest since 1920’s 400% 40 332.9% 284.4% 300% 35 200% 132.5% 30 115.3% Peak to Trough Cycle % Change 91.6% 97.9% 100% 72.3% 53.8% 68.2% 45.2% 50.4% 51.0% 25 0% -12.6% -11.7% -14.7% 20 -27.9% -34.5% -30.1% -26.4% Years -37.2% -45.2% -46.4% -56.7% -100% -68.4% 16
Slide 12: Copper Costs Higher than Understood
Copper Costs Higher than Understood 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 8,0
Slide 13: Zinc Price Cycles - Current Cycle Longest Since 1920's
Zinc Price Cycles – Current Cycle Longest Since 1920’s 400% 25 311% 300% 193% 188% 20 200% 168% 125% 116% Peak to Trough Cycle % Change 100% 50% 50% 42% 48% 44% 36% 12% 26% 26% 25% 26% 11% 21% 26% 8% 9% 15 0% -10% -10% -7% -20% -14% -22% -8% -20% -25% -26% -29% -24% -11% -36% -21% -31% -32% -49% -40
Slide 14: Zinc Market Poised for Change
Zinc Market Poised for Change LME Zinc Stocks – Since Dec 2012 120¢ 1,200 110¢ 1,100 100¢ 1,000 • Supply situation fundamentally thousand tonnes 90¢ 900 US¢/lb unchanged 80¢ 800 700 70¢ 600 60¢ 500 • Growth in zinc demand expected 50¢ 400 to outpace supply plotted to Stocks Price Jan. 12, 2015 • Rec
Slide 15: Agenda
Agenda Teck Overview & Strategy Commodity Market Observations Teck Update 15
Slide 16: Responding to Difficult Market Conditions
Responding to Difficult Market Conditions • Further cost reductions achieved & focus on resetting our cost base − Gross profit1 up 5% in steelmaking coal • ~C$1B in cash generated via two precious metal streaming agreements • Strong financial position, with a cash balance2 of ~$1.8B − Exceeds the ~$
Slide 17: Delivering Results in Cost Management
Delivering Results in Cost Management Coal unit costs1 US$64/t Steelmaking Coal Unit Costs1 Copper Total Cash Unit Costs1,3 (US$/tonne) (US$/lb) Reduction of US$20/t2 24% xx% 84 12% Inventory 3 64 1.64 Transport 35 2 1.44 Copper cash unit costs1,3 28 Site US$1.44/lb 46 34 Reduction of US$0.20/lb2 Q3
Slide 18: Ongoing Focus on Conserving Capital And Lowering Operating Costs
Ongoing Focus on Conserving Capital And Lowering Operating Costs • Achieved >$650M in sustainable cost reductions from 2012-2014, and targeting an additional ~$100M in 2015 • Implementing additional measures: − Cut the dividend to $0.10/share on an annualized basis − $300M of operating cost savings
Slide 19: Strong Financial Position
Strong Financial Position1 $3,000 $2,750 • ~$1B in cash generated via two precious metal $2,500 streaming agreements $2,250 • Current cash balance1 of ~$1.8B $2,000 − Exceeds the ~$1.5B of remaining Fort Hills capex $1,750 • No debt due until 2017 US$M $1,500 • Opportunities to further strengthen li
Slide 20: Credit Facilities
Credit Facilities1 Amount Letters of Credit Available Note Commitment Maturity ($M) Drawn / Limit ($M) ($M) 1 US 3,000 Committed July 2020 None / US 1,000 US 3,000 2 US 1,200 Committed June 2017 None / None US 1,200 3 C 1,500 Uncommitted n/a C 1,150 C 350 Total2 C 1,150 C 5,810 • Unsecured; any borr
Slide 21: Positioned to Weather The Market Downturn & Emerge Stronger and More Diversified
Positioned to Weather The Market Downturn & Emerge Stronger and More Diversified Attractive portfolio of long-life assets & resources Good leverage to base metals markets Attractive positions on commodity cost curves & focus on resetting our cost base <20 months from start of commissioning at Fort H
Slide 22: Teck Additional Information
Teck Additional Information
Slide 23: Our Sustainability Strategy
Our Sustainability Strategy • In 2011, we launched our formal sustainability strategy • Organized around 6 focus areas representing our most material sustainability challenges and opportunities • Set short-term (2015) and long-term (2030) goals and vision for each area • On track to achieve all of o
Slide 24: External Recognition
External Recognition Best 50 Corporate One of top 100 most On the Dow Jones Citizens in Canada sustainable companies Sustainability World Index 2015 in the world and one of six years in a row Canada’s most sustainable companies Top 50 Socially Received the PDAC Received the Globe Responsible 2014 En
Slide 25: Diversified Global Customer Base
Diversified Global Customer Base China North 26% America Europe 20% 18% Asia excl. China 33% Latin America 3% Diversified Portfolio of Key Commodities Coking coal Zinc Moly Germanium Copper Lead Silver Indium 26 Source: Teck; 2014 revenue
Slide 26: Production & Site Cost Guidance
Production & Site Cost Guidance Actual 2014 Current 2015 Guidance Steelmaking Coal Coal production 26.7 Mt 25-26 Mt Coal site costs C$54 /t1 Coal transportation costs C$38 /t Combined coal costs C$92 /t C$83-86 /t Combined coal costs US$84 ~US$64-66 /t2 Copper Copper production 333 kt 345-350 kt Cop
Slide 27: Current 2015 Capital Expenditures Guidance
Current 2015 Capital Expenditures Guidance Major New Mine Capitalized ($M) Sustaining Enhancement Development Sub-total Stripping Total Coal $75 $30 $ - $105 $395 $500 Copper 200 15 105 320 225 545 Zinc 180 - - 180 60 240 Energy - - 910 910 - 910 Corporate 10 - - 10 - 10 TOTAL $465 $45 $1,015 $1,525
Slide 28: Credit Ratings
Credit Ratings Supported by: S&P Moody’s Fitch DBRS • Diversified business model • Low risk jurisdictions Investment BBB Baa2 BBB BBB • Low cost assets Grade • Conservative financial policies BBB- Baa3 BBB- BBB (low) • Significant cost reductions • Capital discipline Ba1 BB+ BB (high) • Achieving pr
Slide 29: Collective Agreements
Collective Agreements Operation Expiry Dates Coal Mountain In Negotiations - December 31, 2014 Antamina In Negotiations - July 23, 2015 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 Oc
Slide 30: Commodity Prices Impact Stock Price
Commodity Prices Impact Stock Price Teck Stock Price vs. Bloomberg Commodity Price Index (2000-present) 260 $70 240 $60 220 $50 200 180 $40 160 $30 140 $20 120 $10 100 80 $0 Bloomberg Commodity Price Index (Left Axis) Teck (Right Axis) Plotted to January 12, 2016 31
Slide 31: Steelmaking Coal Business Unit & Markets
Steelmaking Coal Business Unit & Markets
Slide 32: Met Coal Market Slowly Rebalancing; FX Assisting Producers Outside USA
Met Coal Market Slowly Rebalancing; FX Assisting Producers Outside USA Coal Prices By Currency Argus FOB Australia 150 • >50 Mt cutbacks announced with over 60% expected to be 140 implemented by the end of 2015 130 120 $ / tonne AUS$ • Require additional cutbacks to 110 achieve market balance 100 CD
Slide 33: Global Hot Metal Production
Global Hot Metal Production Monthly Hot Metal Production Traditional Steel Markets 75 65 • China slowing 55 45 China • JKT stable 15 • EU stable JKT 12 Mt 9 Rest of the World Europe • India good growth 6 India • Brazil stable 3 Brazil • US declining USA 0 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Ja
Slide 34: Crude Steel Production Continues to Grow
Crude Steel Production Continues to Grow Crude Steel 2014 2015 Nov YTD Crude Steel Production 2014-2020 Production (Mt) annualized Global* 1,647 (+1.2% YoY) 1,606 (-2.5% YoY) China 823 (+0.9% YoY) 805 (-2.2% YoY) Global, ex-China* 825 (+1.5% YoY) 801 (-2.8% YoY) JKT 205 (+3% YoY) 197 (-3.9% YoY) Eur
Slide 35: Production Cuts Offset by China's Imports
Production Cuts Offset by China’s Imports US Steelmaking Coal Exports • Minimal export growth from Australia 45 while others pull back 40 - Australian and Canadian imports to 35 Mt Europe pushing out US supplies 30 - Exports to China reduced from all 3 25 supply areas 20 Nov-14 EU & CIS China S.Amer
Slide 36: Steelmaking Coal Market Curtailments
Steelmaking Coal Market Curtailments Curtailments Production Curtailments Cumulative Production Curtailments By Region Mt 60 0 10 20 30 50 Australia 40 USA Mt 30 Canada 20 New 10 Zealand Period Cuts/Guidance Adj 0 Others 2014 2015 2016 2017 2018+ Sustaining Cuts • >50 Mt cutbacks announced with over
Slide 37: Chinese Steel Industry Moving to the Coast
Chinese Steel Industry Moving to the Coast 900 70% 800 65% 700 Million tonnes 600 60% Heilongjiang 500 Ansteel Baiyunquan Project 55% • Phase 1 (~ 5.4 Mt pig iron, 5.2 Mt crude 400 Jilin steel and 5 Mt steel products) in 2013. 300 50% Xinjiang • Phase 2 (5.4 Mt BF) planned but no 200 progress yet. 4
Slide 38: 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% ~15% ~25% Latin America ~5% Proactively realigning sales with changing market 39 Source: Teck; 2014
Slide 39: Average Realized Price in Steelmaking Coal
Average Realized Price in Steelmaking Coal Historical Average Realized Prices 88% 350 Discount to the benchmark price 96% 93% 300 is a function of: 250 94% 1. Product mix: >90% hard coking coal 92% YTD 200 91% 2. Direction of quarterly benchmark US$ / tonne 150 prices and spot prices 100 - Q4 2015 b
Slide 40: Teck Response to Coal Market Conditions
Teck Response to Coal Market Conditions Quarterly Benchmark vs. Argus Spot Price • Temporary closures in Q3 2015 of ~3 350 weeks at all 6 mines to align production and inventories with market conditions 325 300 • Quarterly production reduced ~1.5 Mt 275 250 $ / tonne • Annual cost guidance lowered 2
Slide 41: Steelmaking Coal Costs
Steelmaking Coal Costs Total Cash Cost Reductions YTD 2015 120 105 YTD YTD 100 US$/t Q3 2015 Q3 2015 (C$1.26 (C$1.36 80 75 / US$) / US$) Site1 $39 $35 US$/t 60 a Transportation $29 $26 40 IFRS IFRS Total $67 $62 Costs Capitalized Stripping $12 $11 20 Full Cash Cost $79 $73 0 Sustaining Capex $2 $2 2
Slide 42: Significant Long-Term Coal Growth Potential
Significant Long-Term Coal Growth Potential Potential Production Increase Scenarios Teck’s large resource base 50 supports several options for growth: 40 • Quintette restart (up to 4 Mtpa) fully permitted Production (Mt) 30 • Brownfields expansions 20 - Elkview expansion - Fording River expansion -
Slide 43: >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 40 • Recently expanded to 33 Mt • Planned growth to 36 Mt 35 3 30 Neptune Coal Terminal Million Tonnes (Nominal) 25 • Exclusive to
Slide 44: LNG for Haul Trucks Project
LNG for Haul Trucks Project • Pilot project underway to evaluate running Teck haul trucks on a blend of diesel and LNG - Six haul trucks at Fording River - First use of LNG as a haul truck fuel at a Canadian mine site • Has the potential to eliminate ~35,000 tonnes of CO2 emissions annually at our s
Slide 45: 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 46: Copper Business Unit & Markets
Copper Business Unit & Markets
Slide 47: Base Metal Stocks Low on Days Consumption
Base Metal Stocks Low on Days Consumption 48 Source: LME, ICSG, ILZSG * Charts as of January 12, 2016
Slide 48: Historic Copper Metal Prices & Stocks
Historic 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 Jan. 12, 2016 49
Slide 49: 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 50: Disruptions Continue in Copper
Disruptions Continue in Copper Significant Copper Concentrate Disruptions Breakdown of Disruptions including SXEW 2015 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD 0 -200 0 Thousand tonnes -400 (50) Thous. Mt -600 -584 (100) -800 -776 (150) -831 -859 -851 -839 -1,000 -950 -945 -968 -973 (20
Slide 51: 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 plotted to Standard Spot High Grade Spot Realised TC/RC December 2015 52 Source: Teck, CRU
Slide 52: Ore Grade Trends
Ore Grade Trends Ongoing decline will put upward pressure on unit costs 53 Source: Wood Mackenzie
Slide 53: Margin Compression at Its Lowest Point
Margin Compression at Its Lowest Point Worse than During the Global Financial Crisis 54 Source: Wood Mackenzie
Slide 54: Wood Mac Still Forecasting Demand Growth
Wood Mac Still Forecasting Demand Growth 55
Slide 55: Chinese Copper Imports
Chinese Copper Imports Switch from Cathode to Concentrates Net Copper Imports Down 9% in Q1 2015; YTD Nov Up 2.1% 1,000 900 800 000’s tonnes (content) 700 600 500 400 300 200 100 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Updated to Cathode Concs Scrap Blister/Semis November 2015
Slide 56: 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 57: Chinese Copper Demand Indicators
Chinese Copper Demand Indicators Mostly Negative – But Some Bright Spots China Power Grid Spending Down on China Floor Space Under Construction Down & Anti Corruption Campaign – Starting to Improve Sales Up, as Lower Interest Rates Take Effect 60,000 80 50,000 60 40,000 40 %, YoY RMB mn 30,000 20 20
Slide 58: Copper Scrap Supply
Copper Scrap Supply Copper Scrap Supply vs. LME Price $4.50 26% 25% $4.00 24% 23% $3.50 22% 21% $3.00 20% $2.50 19% 18% $2.00 17% 16% $1.50 15% 14% $1.00 13% $0.50 12% 11% $- 10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Copper Price (USD/lb) Scrap as a % Consumption
Slide 59: 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 60: Global Refined Copper Balances
Global Refined Copper Balances Wood Mackenzie’s Outlook is Trending Down Wood Mackenzie 2015F Refined Surplus Wood Mackenzie 2016F Refined Surplus 900 Surplus only 2% of 900 Surplus only 0.9% of 800 Global Demand 800 Global Demand 700 700 ‘000s tonnes copper 600 600 ‘000s tonnes copper 500 500 400 4
Slide 61: Long-Term Copper Mine Production Still Needed
Long-Term Copper Mine Production Still Needed Forecast Copper Refined Balance 1,000 500 • At 2% global demand growth, 400 kt of new supply needed annually 0 Thousand tonnes • Structural deficit starts in 2018 (500) • Project developments slowed due to lower prices, higher capex, corporate (1,000) au
Slide 62: 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 63: 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 64: 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 65: Zinc Business Unit & Markets
Zinc Teck Business Unit & Markets
Slide 66: Historic Zinc Metal Prices & Stocks
Historic Zinc Metal Prices & Stocks Daily Zinc Prices & Stocks 250¢ 1,800 1,600 200¢ 1,400 thousand tonnes 1,200 US¢/lb 150¢ 1,000 800 100¢ 600 400 50¢ 200 0¢ 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 plotted to LME SHFE Price January 12, 2015 67 Source: LME, SHFE
Slide 67: 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¢ 1,100 100¢ 1,000 thousand tonnes 90¢ 900 • LME stocks down >775 kt over 27 US¢/lb 800 80¢ months; sub-500 kt recently for the 70¢ 700 600 first time since 2010 60¢ 500 50¢ 400 • ‘Off-
Slide 68: Zinc Mine Production: Wood Mackenzie's Outlook is 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 69: Significant Zinc Mine Reductions
70 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 70: 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 1,100 200¢ 100¢ 1,000 1,000 thousand tonnes 150¢ 900 thousand tonnes 800 90¢ US¢/lb 800 US¢/lb 600 80¢ 100¢ 700 400 70¢ 50¢ 600 200 60¢ 500 0¢ 0 50¢ 400 2003 2004 2005 2006 2007 20
Slide 71: Zinc Concentrate Balances
Zinc Concentrate Balances Wood Mackenzie’s 2015 and 2015 Outlooks Trending Down 2015 2016 2017 400 400 400 300 200 thousand tonnes contained zinc thousand tonnes contained zinc thousand tonnes contained zinc 300 200 200 0 100 100 0 (200) (100) 0 (400) (200) (100) (600) (300) (200) (400) (800) May-14
Slide 72: Zinc Metal Market Mostly in Deficit Since 2013
Zinc Metal Market Mostly in Deficit Since 2013 Zinc Metal Balance Market View – Wood Mackenzie & CRU 400 • Zinc metal deficit forecasted for 2016 and 2017 200 • Mine production increases of -2.5% and 8.0% respectively expected for 2016 and 0 2017. The closure of Century and Lisheen, as well as produ
Slide 73: 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 74: Imports Affecting US Refined Zinc Demand
Imports Affecting US Refined Zinc Demand Galvanized Sheet US Imports • Cheaper imports of HDG have subdued 450 demand growth for zinc in the US 400 • US Sheet Mills filed a petition with the 350 Department of Commerce in June 2015. 300 We have seen imports decrease since the primary ruling. Especial
Slide 75: 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) thousand tonnes thousand tonnes (150) (200) (200) (200) (250) (250) (250) (300) (300) (350) (300) (350) (400) (350) (400) (450) (400) (450)
Slide 76: Committed Supply Insufficient for Demand
Committed Supply Insufficient for Demand Forecast Zinc Refined Balance • We expect insufficient mine supply to constrain refined production, allowing 500 a refined metal supply increases of only 792 kt between 2014 and 2020 0 • Over this same period we expect (500) refined demand to increase 2.8 Mt
Slide 77: Energy Business Unit & Markets
Energy Business Unit & Markets
Slide 78: 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’ 79
Slide 79: Global Oil Market to Rebalance
Global Oil Market to Rebalance West Texas Intermediate (WTI) Price $120 2014-2015: Price drop due market imbalance $100 • Supply growing $80 − OPEC: highest ever production at 31.7 MMbpd; $60 US$/bbl more supply from Iran & Iraq $40 − Non-OPEC: production growing faster than global $20 demand; abnor
Slide 80: 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 81: Fort Hills Is One of the Best Undeveloped Oil Sands Mining Leases
Fort Hills Is One of the Best Undeveloped Oil Sands Mining Leases Strip Ratio vs. Ore Grade • >3 billion bbls of proven plus probable 12 reserves of bitumen - Production 180,000 barrels per day 11.5 (bpd) of bitumen Fort Hills - Teck’s share is significant at 36,000 Ore Grade (wt% bitumen) bpd; equi
Slide 82: Minimizing Execution Risk In The Fort Hills Project
Minimizing Execution Risk In The Fort Hills Project • Cost-driven schedule - “Cheaper rather than sooner” • Disciplined engineering approach • “Shovel Ready” • Global sourcing of engineering and module fabrication Suncor has completed 4 • Balanced manpower profile projects of ~$20 billion over last
Slide 83: Lower Oil Price Environment Provides Opportunities for the Fort Hills Project
Lower Oil Price Environment Provides Opportunities for the Fort Hills Project “Major projects in construction such as Fort Hills…will move forward as planned and take full advantage of the current economic environment. These are long-term growth projects that are expected to provide strong returns w
Slide 84: Fort Hills By The Numbers
Fort Hills By The Numbers1 Teck’s Sanction Capital2 Teck’s Estimated 2015 Spend Teck’s Remaining Capital3 ~$2.94 $850 ~$1.5 billion million billion Operating & Sustaining Costs3 Sustaining Capital3 Teck’s Share of Production $25-28 $3-5 13,000,000 per barrel of bitumen per barrel of bitumen bitumen
Slide 85: Fort Hills Bitumen Netback Calculation Model
Fort Hills Bitumen Netback Calculation Model Cash Margin1 Calculation Example: Prior to Capital Recovery $70 $15.50 $60 $1.25 $11 $7-9 $60 $55.50 $10 $50 $22 $40 $37 $30 $3 $1-2 $2-3 $20 $13 $10-$11 $10 $- Teck seeks to secure dedicated transportation capacity for Fort Hills volumes to key markets t
Slide 86: Western Canadian Select (WCS)
Western Canadian Select (WCS) Average Monthly WTI-WCS Differential $45 Western Canadian Select (WCS) Is The Benchmark $40 $23.12 Price For Canadian Heavy Oil At Hardisty, Alberta $35 $15.69 $16.46 WCS differential to West Texas Intermediate (WTI) $30 • Contract settled monthly as differential to Nym
Slide 87: 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) US/bbl $5 • Contract settled monthly as differential to Nymex WTI • Bas
Slide 88: Diversified Market Access Strategy
Diversified Market Access Strategy Teck Marketing Plan for 50 kbpd Diluted Bitumen Blend Sufficient Export Capacity In Place • Includes Pipeline And Rail Capability • No shut in risk, but price risk likely Kitimat Edmonton Targeting Long Term Market Access Hardisty • US Gulf Coast And Deep Water Por
Slide 89: Sufficient Transportation Capacity In Western Canada
Sufficient Transportation Capacity In Western Canada Western Canadian Transport Supply & Demand 8,000 2 New Pipelines 7,000 Assumptions Fort Hills’ First Oil 6,000 • Fort Hills first oil late 2017 Enbridge Expansions 5,000 • Enbridge mainline capacity expansions 4,000 kbbls/day move forward 3,000 2,
Slide 90: Committed Logistics Solutions in Alberta
Committed Logistics Solutions in Alberta Nominal Bitumen & Blend Logistics Operator Capacity Status (kbpd) Northern Courier Hot Bitumen TransCanada 202 Construction: ~30% complete East Tank Farm - Blending Suncor 292 Construction: ~25% complete Fort Hills Mine Terminal Wood Buffalo Blend Pipeline En
Teck Resources — 2016 Whistler Institutional Investor Conference on 6ix