Q3 2015 Conference Call Presentation

Q3 2015 Conference Call Presentation

• 1.
  Third Quarter 2015Results October 22, 2015
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  Forward Looking Information Boththese 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). Forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variation of such words and phrases or state that certain actions, events or results “may”, “could”, “should”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Teck to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The forward-looking statements in these slides and the oral presentation include estimates, forecasts, and statements as to management’s expectations with respect to, production and sales guidance for or products, the anticipated benefits from Project Corridor, progress and expectations for our Fort Hills project, including capital costs and construction guidance, our expectation regarding our year-end cash balance, the expectation that we will meet our production guidance, the level of our liquidity, and demand and market outlook for commodities. These forward-looking statements involve numerous assumptions, risks and uncertainties and actual results may vary materially and these assumptions, risks and uncertainties are described in our public filings available on SEDAR at www.sedar.com and EDGAR at www.sec.gov. These forward-looking statements are also based on assumptions regarding general business and economic conditions, interest rates, the supply and demand for, inventories of, and the level and volatility of prices of zinc, copper, coal and gold and other primary metals and minerals produced by Teck as well as oil, natural gas and petroleum products, the timing of receipt of regulatory and governmental approvals for Teck’s development projects and other operations, decisions by our partners to proceed with certain of those projects, the availability of financing for Teck’s development projects on reasonable terms, Teck’s costs of production and production and productivity levels, as well as those of its competitors, power prices, market competition, the accuracy of Teck’s reserve estimates (including, with respect to size, grade and recoverability) and the geological, operational and price assumptions on which these are based, tax benefits, the resolution of environmental and other proceedings, assumptions regarding the impact of our cost reduction program on our operations, our ongoing relations with our employees and partners and joint venturers, performance by customers and counterparties of their contractual obligations, and the future operational and financial performance of the company generally. Our expectation regarding our year-end cash balance a Canadian to US dollar exchange rate of 1.31, and that we meet our 2015 guidance for production, costs and capital spending. It also assumes that we maintain our existing US debt levels and have no unusual transactions. Assumptions regarding liquidity assume that our credit facilities remain available. The foregoing list of assumptions is not exhaustive. Events or circumstances could cause actual results to differ materially. Factors that may cause actual results to vary include, but are not limited to: adverse developments in business and economic conditions in the principal markets for Teck’s products, in credit markets, or in the supply, demand, and prices for metals and other commodities to be produced, changes in interest and currency exchange rates, failure of customers or counterparties to perform their contractual obligations, inaccurate geological or metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources), changes in taxation regimes, legal disputes or unanticipated outcomes of legal proceedings, unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications or expectations, cost escalation, unavailability of materials and equipment, government action or delays in the receipt of permits or government approvals, industrial disturbances or other job action, and unanticipated events related to health, safety and environmental matters), political risk, social unrest, lack of available financing for Teck or its partners or co-venturers, and changes in general economic conditions or conditions in the financial markets. Our Fort Hills project is not controlled by us and construction and production schedules may be adjusted by our partners. Our credit rating is set by rating agencies. Certain of these risks are described in more detail in the annual information form of the company available at www.sedar.com and in public filings with the SEC at www.sec.gov. The company does not assume the obligation to revise or update these forward-looking statements after the date of this document or to revise them to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws. 2
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  Responding to DifficultMarket 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 current cash balance2 of ~$1.8B − Exceeds the ~$1.5B of remaining Fort Hills capex • $2.9B in asset impairment charges3 • Recognized once again for sustainability 1. Before depreciation and amortization. 2. As at October 21, 2015. 3. Before tax. 3
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  Quarterly Results Q32015 4 * Non-GAAP financial measure. See ‘Use of Non-GAAP Financial Measures’ in news release for additional information. Revenue $ 2.1 Billion Gross profit (before depreciation & amortization) $ 670 Million Adjusted EBITDA* $ 389 Million Adjusted profit* (attributable to shareholders) $ 29 Million $0.05/share
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  46 34 35 28 3 2 Q3 2014 Q32015 Q3 2015 Operational Highlights Production Q3 2015 Change To Q3 2014 Steelmaking coal (Mt) 5.5 ▼ 1.3 Copper (kt) 88 ▲ 10 Zinc in concentrate4 (kt) 155 ▼ 14 Zinc – refined (kt) 78 ▲ 8 5 1. Does not include deferred stripping or capital expenditures. 2. As compared with Q3 2014. 3. After by-product credits. 4. Includes co-product zinc production in our copper business unit. 24% Steelmaking Coal Unit Costs1 (US$/tonne) 64 84 Site Transport Inventory Q3 2014 Q3 2015 1.64 1.44 Copper Total Cash Unit Costs1,3 (US$/lb) xx% 12% Coal unit costs1 US$64/t Reduction of US$20/t2 Copper cash unit costs1,3 US$1.44/lb Reduction of US$0.20/lb2
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  Q3 2014 Q32015 50 45 38 36 3 3 Q3 2014 Q3 2015 Q3 2014 Q3 2015 Q3 2014 Q3 2015 Q3 2014 Q3 2015 Q3 2014 Q3 2015 8% Steelmaking Coal Realized Price (C$/tonne) 116119 Revenue (C$M) 719 798 Gross Profit2 (C$M) 189 199 Production (Mt) 5.5 6.8 Sales (Mt) 6.2 6.7 Unit Costs1 (C$/tonne) 84 91 Site Transport Inventory 6 1. Does not include deferred stripping or capital expenditures. 2. Before depreciation and amortization. Gross profit2 up 5% 1.3 3% 10% 5% 0.5
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  Q3 2014 Q32015 Q3 2014 Q3 2015 1.64 1.44 Q3 2014 Q3 2015 Q3 2014 Q3 2015 Q3 2014 Q3 2015 Q3 2014 Q3 2015 Copper 7 Realized Price (US$/lb) Revenue (C$M) Gross Profit2 (C$M)Production (kt) Sales (kt) Total Cash Unit Costs1 (US$/lb) Total cash unit costs1 down US$0.20/lb 88 78 201 292 10 xx% 8482 2.42 3.17 2 24% 576 628 8% 1. After by-product credits. Does not include deferred stripping or capital expenditures. 2. Before depreciation and amortization. 31% 12%
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  Q3 2014 Q32015 Q3 2014 Q3 2015 Q3 2014 Q3 2015Q3 2014 Q3 2015 Q3 2014 Q3 2015Q3 2014 Q3 2015 Q3 2014 Q3 2015Q3 2014 Q3 2015Q3 2014 Q3 2015 Zinc 8 Zinc Realized Price (US$/lb) Revenue (C$M) Gross Profit2 (C$M)Zinc Production (kt) Zinc Sales (kt) Lead Production (kt) Sales up by 11 kt for zinc in concentrate1 and 8 kt for refined zinc 1. Represents production and sales from Red Dog and Pend Oreille, and excludes co-product zinc production from our copper business unit. 2. Before depreciation and amortization. 0.88 1.04 805823 RefinedConc1 183 194 70 78 15% 2% 11 8 RefinedConc1 270270 148 138 RefinedConc1 78 70 29 28 22 2410 1 flat 8 2
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  94% Engineering complete approximateas at October 2015 43% Construction complete approximate as at October 2015 Project Progress continues to track positively within schedule expectations Fort Hills Project Status & Progress Capital Expenditures1 continues to track positively within project sanction cost Teck’s sanction capital$2.94B Global fabrication, module and logistics program performing well to date, delivering positive results All critical schedule milestones have been achieved to date supporting target 2017 first oil 9 Less: Invested to date approximate as at October 21, 2015 $1.44B Remaining capital investment approximate as at October 21, 2015 $1.50B 1. Based on Suncor’s planned project spending. Sanction capital is the go-forward amount from the date of the Fort Hills sanction decision (October 30, 2013), denominated in Canadian dollars and on a fully-escalated basis.
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  0 500 1000 1500 2000 2500 Cash - startof quarter Cash flow from operations & working capital PP&E, incl. Fort Hills Capitalized stripping Proceeds from sale of investments and other assets Debt interest, principal & issuance Dividends paid Distributions to non-controlling interests, FX, expenditures on financial investments Cash - quarter end Antamina silver stream sale Debt repayment Other Cash - October 21, 2015 Cash Changes1 Cash Flow 10 $201$560 $146 $349 1. Assumes C$/US$ exchange rate of 1.31. 2. Assumes current commodity prices, C$/US$ exchange rate of 1.33 ,Teck’s 2015 guidance for production, costs and capital expenditures., existing US$ debt levels and no unusual transactions. $Millions $1,327 $1,487 ~$1,850 $86 $400 $327 $789 $55 Expect to achieve year-end cash balance of ~$1.8B2 $26
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  Outstanding at Jun. 30,2015 Outstanding at Sept. 30, 2015 Quarterly Price Change Pricing Adjustments Mlbs US$/lb Mlbs US$/lb US$/lb C$M Copper 251 2.60 189 2.30 (0.30) (98) Zinc 103 0.90 220 0.76 (0.14) (34) Other (9) TOTAL (141) • Negative pricing adjustments of $141M in Q3 2015 • Driven by quarterly change in key commodity prices • Weighted to larger volumes for most of the quarter Simplified Pricing Adjustment Model Pricing Adjustments 11 Q1 2011 Q2 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 -150 -100 -50 0 50 100 -$0.75 -$0.25 $0.25 $0.75 Pre-taxSettlementAdjustment(C$M) Change in Copper & Zinc Price (C$/lbs)
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  Steelmaking Coal Operations Energy- Fort Hills Copper - Andacollo Zinc - Pend Oreille Asset Impairment Charges 12 Robust process to reflect market conditions Key Assumptions 2016 2020 (Real) Steelmaking coal price (US$/tonne) 96 130 Copper price (US$/lb) 2.50 3.00 Zinc price (US$/lb) 0.85 1.00 Oil price – WTI (US$/bbl) 75.00 Exchange rate (C$/US$) 1.34 1.25 $ 413 $ 464 $ 31 $ 1,987 Total Asset Impairment Charges (Before Tax) : ~$2.9B
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  Credit Ratings 13 S&P Moody’sFitch DBRS BBB+ Baa1 BBB+ BBB (high) BBB Baa2 BBB BBB negative BBB- Baa3 BBB- BBB (low) BB+ Ba1 negative BB+ negative BB (high) BB negative Ba2 BB BB Investment Grade Non-Investment Grade Supported by: • Diversified business model • Low risk jurisdictions • Low cost assets • Conservative financial policies • Significant cost reductions • Capital discipline • Achieving production guidance • Production curtailments in coal • Dividend cut • Streaming transactions Constrained by: • Debt-to-EBITDA metric, due to weak prices Ratings reflect the current economic environment As at October 21, 2015.
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  Credit Facilities 14 Note Amount ($M) Commitment Maturity Lettersof Credit Drawn / Limit ($M) Available ($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 Total1 C 1,150 C 5,810 • Unsecured; any borrowings rank pari passu with outstanding public notes • Only financial covenant is debt to debt-plus-equity of <50% • Availability not affected by commodity price changes • No requirement to maintain a particular credit rating Available for general corporate purposes 1. Assumes C$/US$ exchange rate of 1.30.
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  Letter of CreditRequirements 15 Intend to issue any additional letters of credit under our US$1.2B committed credit facility • Required to deliver additional letters of credit pursuant to long-term power purchase agreements for QB2, and pipeline and storage agreements for Fort Hills • Under discussion with counterparties • Amounts up to: − US$672M for Quebrada Blanca Phase 2 − C$425M on Fort Hills (increasing to C$650M in 2017) • Issued letters of credit would not constitute debt for the purpose of our debt to debt-plus-equity covenant in our bank credit agreements • Obligation would be terminated if and when we regain investment grade credit ratings
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  $0 $250 $500 $750 $1,000 $1,250 $1,500 $1,750 $2,000 $2,250 $2,500 $2,750 $3,000 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 US$M 16 As at October21, 2015. 1. Giving effect to repayment of US$300 notes on October 1, 2015 and the receipt of cash in the Antamina silver stream transaction. Non-GAAP financial measure. See ‘Use of Non-GAAP Financial Measures’ in news release for additional information. Long-Dated Debt Maturity Profile • No debt due until 2017 − Weighted average maturity ~14.5 years − Weighted average coupon (interest rate) ~4.8% − Average maturity <US$600M • Pro-forma debt to debt-plus-equity ratio 35%1 • Pro-forma net debt to net debt-plus-equity ratio 30%1 2017 Q1: US$300M Q3: US$300M
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  Near-Term Priorities • Focuson resetting our cost base • Expect to achieve year-end cash balance of ~$1.8B1 • Opportunities to further strengthen liquidity 17 1. Assumes current commodity prices, C$/US$ exchange rate of 1.31 ,Teck’s 2015 guidance for production, costs and capital expenditures., existing US$ debt levels and no unusual transactions.
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  Third Quarter 2015Results October 22, 2015