Operations Forward Looking Information

Transcription

1 Operations March 30, 2016 Ian Kilgour, Executive Vice President & Chief Operating Officer Robin Sheremeta, Vice President, Coal Operations Dale Andres, Senior Vice President, Copper Rob Scott, Senior Vice President, Zinc

2 Operations Forward Looking Information Both these slides and the accompanying oral presentation contain certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of the Securities Act (Ontario) and comparable legislation in other provinces. 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. These forward-looking statements include statements relating to management's expectations with respect to the benefits of our LNG initiative, achieving further cost reductions in 2016, our targeted US$300 million in operating costs reductions in 2016, forecast 2016 capital cost guidance, the potential of Teck's growth/value pipeline and options for growth in our projects, mine reserves and resources, mine lives, projected coal cost reductions in 2016, forecast 2016 coal total cash costs, expectations regarding the timing and cost of our Elk Valley Water Quality Plan initiatives, 5 year planning objectives, forecast copper production, cost reduction, production and mine life plans for Highland Valley, forecast Antamina production, mill throughput and cathode production projections for Andacollo, estimated 2016 cash costs at Quebrada Blanca, potential reductions of capital costs at Quebrada Blanca 2 and timing of environmental submission, expectations regarding Project Corridor, projected Red Dog production, exploration potential at Red Dog, forecast 2016 production at Pend Oreille, the ability to capitalize on improving fundamentals and demand and market outlook for commodities. These forward-looking statements involve numerous assumptions, risks and uncertainties and actual results may vary materially. These statements are based on a number of assumptions, including, but not limited to, assumptions noted in the various slides and oral presentation, assumptions regarding general business and economic conditions, interest rates, the supply and demand for, inventories of, and the level and volatility of prices of coal, zinc, copper and gold and other primary metals and minerals produced by Teck as well as steel, oil, natural gas and petroleum, the outcome of engineering studies currently underway in connection with Teck's development projects, the timing of receipt of regulatory and governmental approvals for Teck's development projects and other operations, receipt of permits to mine, costs of production at our operations and production and productivity levels, as well as those of Teck's competitors, power prices, market competition, the accuracy of Teck's reserve and resource estimates (including with respect to size, grade and recoverability) and the geological, operational and price assumptions on which these are based, the resolution of environmental and other proceedings, our ongoing relations with our employees and partners and joint venturers, the availability of financing for development projects and the future operational and financial performance of the company generally. 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: unanticipated developments in business and economic conditions in the principal markets for Teck's products or in the supply, demand, and prices for metals and other commodities to be produced, changes in power prices, changes in interest or currency exchange rates, inaccurate geological or metallurgical assumptions (including with respect to the size, grade and recoverability of mineral or oil and gas reserves and resources), changes in taxation laws or tax authority assessing practices, 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), assumptions used to generate our economic analysis, decisions made by our partners or co-venturers, political events, 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. Certain of these risks are described in more detail in Teck's annual information form available at and in public filings with the SEC at Teck 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

3 Operations Agenda Overview Steelmaking Coal Copper Zinc Summary 3

4 Operations Meeting the Challenge Staying true to Teck s values Delivering results Building operational excellence Disciplined capital spending Focused growth pipeline 4

5 Operations Staying True to Teck s Values Safety Sustainability Integrity Respect Excellence Courage 5

6 Operations Safety is a Core Value Courageous Safety Leadership Visible Felt Leadership Frontline Leadership Development Incident Investigation Health & Safety Benchmarking Control Effectiveness Reviews Risk Management Standards & Best Practices Technology Enablers 6

7 Operations Managing High Potential Safety Risks Focus on High Potential Risk Controls Risk identification serious & fatal injury potential Reviewing control strategies & effectiveness Reducing high potential incidents Per 200,000 hours High Potential Incident Performance PFO SHPI HPI Work Team Risk Assessments Improved risk ownership at a team level Working on identifying solutions together Contributing to our culture of safety New fall protection tower at Trail 7

8 Operations Sustainability Incorporated in Operations Reducing GHG remissions and energy costs through haul truck efficiency Enhancing air quality in areas near our operations Strengthening diversity at operations Formalizing our commitment to working with Indigenous Peoples 8 Sustainable practices are the right thing to do and have a solid business case

9 Operations 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 application; focus is on safety, sustainability and operability Establishing reliability of the LNG systems Optimizing LNG substitution rates and monitoring GHG emissions 9

10 Operations Delivering Results in Unit Cost Management Steelmaking Coal Total Site Costs 1 Copper Cash Costs 3 Zinc Cash Costs C$/t US$/lb US$ per tonne of production F* F* Operating 2 Capitalized Stripping Before by-product credits After by-product credits Achieved significant unit cost reductions, and expect further reductions in Total site costs are site costs, inventory write-downs and capitalized stripping, excluding depreciation. 2. Operating costs include site costs and inventory write-downs. 3. By-product credits reduced cash costs by US$0.19/lb in Assumes US$0.19/lb in Zinc cash costs are Red Dog site costs per tonne of combined zinc and lead production. * 2016F based on mid-point of guidance range.

11 Operations Embedding Sustainable, Ongoing Operating Cost Reductions in the Organization Annualized 2015 Savings from Major Cost Reduction Program Initiatives ~$820M of Annualized Savings in 2015, from Major Cost Reduction Initiatives in Mining Productivity - Throughput ($215M) Contractors/Consultants Reduction ($160M) Employee Cost Reduction ($134M) Consumables ($64M) Idling & Energy Savings ($64M) Admin savings ($55M) Mining Productivity - Availability ($23M) Equipment Rental Savings ($20M) Pricing Improvements ($20M) Plan optimization ($21M) Productivity - Enablers, multiple levers ($16M) Over time reduction ($12M) Freight savings ($7M) Components (life/cost) ($7M) Productivity - Utilization (e.g Op Delays) ($5M) Other ($1M) - $50 $100 $150 $200 $250 $300 CAD$ millions (all USD savings translated using CAD/USD rate of 1.384) 2013 Initiatives 2014 Initiatives 2015 Initiatives Targeting an additional $300M in operating cost reductions in 2016; A total of >$1B of annualized savings identified and included in 2016 plan 11

12 Operations One Teck: Mine to Mill Optimization Sharing Best Practices Increased Margin Lower Unit Costs Loading and Hauling Crushing Stockpiling Grinding More Product Planning Blasting Geology and Metallurgy 12 Optimizing value across the production process to breakdown silos and drive continuous improvement

13 Operations Disciplined Project Execution West Line Creek Water Treatment Plant Teck Project Delivery Framework Significant progress in permitting practices Tight alignment between permitting and engineering Integrating sustainability into project framework Highland Valley Crusher Relocation Project Pend Oreille Restart Our project delivery framework strengthens our ability to deliver projects on time and on budget 13

14 Operations People Achieve Excellence Robust People Development Systems are Key Performance management systems that align organizational goals and objectives with personal goals Company-wide development programs for all levels of supervision and management, including operational based leadership development - To address the demand on increasing leadership competence to drive business results Internal career opportunities - Ensuring the best people in the right jobs at the right time Leading for the Future (LFF) Leading for Excellence (LFX) Program Began # of Cohorts # of Participants 844 ~70% of eligible population 462 ~70% of eligible population; Includes 30 senior leaders The Leadership Challenge (LC) ~15% of eligible population 14 We attract, engage and develop people whose passion, skills and motivation lead our journey in safety, sustainability and productivity

15 Operations Disciplined Capital Allocation Sustaining Capital Growth Capital $M $M F F Steelmaking Coal Copper Zinc Corporate Steelmaking Coal Copper Zinc Energy Reductions in sustaining capex have been possible in the medium term, due to significant past investments Growth capital is major enhancement capital and new mine development, including Fort Hills.

16 Operations Staged Growth/Value Pipeline Completed In Construction Pre-Sanction Medium-term Growth Options Future Options Copper Strong platform with substantial growth options HVC Mill Optimization QB Phase 2 Corridor HVC Brownfield Galore/Schaft Creek Mesaba Zafranal Antamina Brownfield San Nicolas (Cu-Zn) Zinc World-class resource combined with integrated assets Trail #1 Acid Plant Pend Oreille Restart Red Dog Satellite Deposit Anarraaq Trail #2 Acid Plant Red Dog Satellite Deposits Cirque Coal Well established with capital efficient growth options Elk Valley Brownfield (4 Mpta) Elk Valley Brownfield (Replacement 4Mpta) Neptune Terminals to 18Mtpa Quintette/Mt. Duke Elk Valley Brownfield Energy Building a new business through partnership 16 Fort Hills Strong platform combined with diverse portfolio of options allows us to be selective in terms of commodity and timing Frontier Lease 421

17 Operations Meeting the Challenge Staying true to Teck s values Delivering results Building operational excellence Disciplined capital spending Focused growth pipeline 17

18 Operations Agenda Overview Steelmaking Coal Copper Zinc Summary 18

19 Steelmaking Coal Focused on Today; Prepared for Tomorrow Improving efficiency Continuing to lower costs Maintaining future potential 19

20 Steelmaking Coal 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; competitive globally Prince Rupert Ridley Terminal British Columbia Quintette Alberta Elk Valley Elco Fording River Prince George Edmonton Cardinal River Elkford Greenhills 1,150 km Calgary Line Creek Neptune Terminal Vancouver Westshore Terminal Kamloops Elk Valley Sparwood Elkview Seattle Fernie Hosmer Coal Mountain Phase Coal Mountain

21 Steelmaking Coal Continued Operational Excellence Ongoing improvement in safety performance Achieving top quartile truck and shovel productivities Maintaining cash positive operations Targeting opportunities to lower maintenance and procurement costs All-in Sustaining Costs Transport Coal Price 100% Teck Coal Truck Productivities 97% $/tonne (CDN) % cost reduction from 2012 to 2016 % of Benchmark 90% 80% 70% 60% 80% 87% 88% 75 50% F 40% Cost management delivers positive cash margin despite weakening Significant annualized value in truck productivity improvements 21 i 1. All-in sustaining costs are in inclusive of cost of sales, capitalized stripping and sustaining capital expenditures.

22 Steelmaking Coal Cost Reduction & Workforce Total Annualized Savings ~$400M 81 5,000 7,000 $ (millions) # Employees 4,600 4,200 3,800 3,400 3,000 4,711 4,463 Coal Hiring Freeze 4,124 4,025 Dec-13 Dec-14 Dec ,600 6,200 5,800 5,400 5,000 Tonnes/Employee 2013 Savings 2014 Savings 2015 Savings 2016 Target Workforce Productivity Highlights: Truck productivity improvements achieved $145M in sustainable savings Labour improvements resulted in $90M savings $74M savings in contractor management initiatives ~$400M of sustainable annual cost reductions to date; targeting >$81M of additional savings in 2016 Highlights: Reduction of 587 employees since December 2013 Reduction of 360 employees since the May 2015 hiring freeze Additional planned reduction of 99 employees in 2016 Achieving balanced workforce profile to manage production to market conditions 22

23 Steelmaking Coal Highly Competitive Costs 1 Total Cash Costs 2 US$/t F 4 Change Capitalized Stripping Transport Inventory Site $ $76 12 IFRS 28 1 $ IFRS IFRS Site $56 $35 $34-39% Inventory Adjustments $0 $1 $0 n/a Transportation $37 $28 $26-29% Unit Cost of Sales (IFRS) $93 $64 $60-35% Capitalized Stripping $21 $12 $8 4-61% Total Cash Costs 2 $114 $76 $68-40% F Sustaining Capital $14 $2 $1 5-90% All In Sustaining Costs $128 $78 $69-45% Total cash costs down US$46/t from 2012 to 2016F In US dollars per tonne. Assumes a Canadian dollar to US dollar exchange rate of 1.00 in 2012, 1.28 in 2015 and 1.38 in Steelmaking coal unit cost of sales include site costs, inventory adjustments and transport costs. Total cash costs are unit cost of sales plus capitalized stripping. All in sustaining costs are total cash costs plus sustaining capital. 3. Assumes that capitalized stripping was reported from January 1, Based on the mid-point of guidance ranges. 5. Approximate, based on capital expenditures guidance and mid-point of production guidance ranges.

24 Steelmaking Coal Achieving the Elk Valley Water Quality Plan West Line Creek Treatment Plant First of the water treatment facilities planned for the Elk Valley; total cost $120M Operating at design flowrate (7,500 m 3 per day) and achieving design selenium and nitrate reductions Fording River South Treatment Plant Facility to be operational by 2019, using learnings from West Line Creek Project capital estimate of <$150M Elk Valley Water Quality Plan Costs Capex as per previous guidance for both plants, and expectation that this will continue as design and construction improvements are incorporated Costs included in sustaining capital Continuing research and development into alternative processes which have potential to further reduce costs Overview of FROAWTF-S Location and Streams 24

25 Steelmaking Coal 5 Year Planning Objectives 2016 Evaluating options to maintain 26 Mt of annual production Despite the closure of CMO and CRO in the 5 year horizon Exploring lowest cost options at remaining 4 Elk Valley operations Utilize assets available from closed operations Maintain all operations cash positive throughout the plan Embed continuous cost improvement in each year Ensure plans meet short term goals without sacrificing the long term viability of the operations Production (millions tonnes) Conceptual Future Production Profile Future growth options remain available but dependent on stronger coal prices F 2018F 2019F 2020F 2021F 25 FRO GHO (80%) EVO LCO CRO CMO Added Elk Valley

26 Steelmaking Coal Focused on Today; Prepared for Tomorrow Improving efficiency Continuing to lower costs Maintaining future potential 26

27 Operations Agenda Overview Steelmaking Coal Copper Zinc Summary 27

28 Copper Finding Opportunity in Challenges Solid assets in low-risk jurisdictions Cost reduction Productivity and throughput improvements Advancing best project opportunities 28

29 Copper Long-Life Assets Focused on the Americas Operating assets with long lives capable of multiple price cycles Strong resource base to leverage - Opportunities at existing operations to extend mine lives significantly - Disciplined approach to greenfield project portfolio 500 Copper Production Tonnes (000 s) E* E Cu Cathode Cu in Concentrate 29 * 2016E represents the mid-point of 2016 guidance.

30 Copper Highland Valley Grade Decline in the Short-Term Lower Near-Term Copper Production Tonnes per day (000 s) E* E Grade (%) High-grade phase ends late-2016 Aggressive cost reduction plans Options to expand production & mine life Mill Throughput Copper Grade R&R Grade Focusing on sustainable cost reduction strategies to unlock potential expansion and extension options 30 * 2016E represents the mid-point of 2016 guidance.

31 Copper Antamina s Resources Support a Long Mine Life New three-year collective agreement signed Increasing zinc production over the next 5 years Copper and zinc grades rising Strong cost position; driving further improvements Strong Cost Position Record Throughput in Antamina Tonnes per day (000s) Grade (%) E* E Mill Throughput Copper Grade * 2016E represents the mid-point of 2016 guidance.

32 Copper Removing Barriers to Unlocking Value at Andacollo Throughput Offsets Grade Decline 1 Extending Cathode Production Creates Value Tonnes per day (000 s) E* E Mill Throughput Copper Grade Grade (%) Copper production, t (000 s) E* E Copper in Concentrate Copper Cathode Four-year labour agreements settled Throughput improvement projects underway Further cost reductions in progress Extending cathode production to Grade represents total copper grade of ore sent to the mill only, excluding the cathode operation. * 2016E represents the mid-point of 2016 guidance.

33 Copper Cutting Costs & Evaluating Options at Quebrada Blanca Labour agreements settled through 2017 Geotechnical issues mitigated Implementing aggressive cost reduction initiatives Evaluating options to supplement production DUMP RIPIOS Cash Costs Maintained Against Declining Production 80 Tonnes (000 s) Unit Costs ($/lb) E* Cu Production Unit Costs * 2016E represents the mid-point of 2016 guidance. RIPIOS

34 Copper Reducing Capital Costs at Quebrada Blanca 2 Focus on advancing permitting of the right project Concentrator Aggressive capex reduction targets Compressed layout with reduced earthworks, concrete & steel New tailings location to significantly reduce capex 25 year initial development plan due to tailings capacity, but no change in reserves Preparing for environmental permit submission in 2H2016 Cyclone Station New Tailings Site Existing Operation 34

35 Copper Building Partnerships: Project Corridor Before: Duplicate Infrastructure Committed to building strong, mutually beneficial relationships with stakeholders and communities Capital smart partnership - Common infrastructure - Longer mine life - Reduced environmental footprint - Enhanced community benefits Short term priorities - Community engagement & participatory planning - Evaluate strategic options & prefeasibility study After: Common Infrastructure 35

36 Copper Intense Focus on Costs & Productivity Absolute cost reduction Productivity improvements Labour force reduction Contractor reduction Managing supply contracts and usage 36

37 Copper Finding Opportunity in Challenges Solid assets in low-risk jurisdictions Cost reduction Productivity and throughput improvements Advancing best project opportunities 37

38 Operations Agenda Overview Steelmaking Coal Copper Zinc Summary 38

39 Zinc Poised to Capitalize on Improving Fundamentals 39 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 stability of a new acid plant Value creating roadmaps for Red Dog and Pend Oreille

40 Zinc Red Dog: Maintaining Zinc Metal Production Declining zinc grade offset by increasing mill throughput Increasing mill throughput has resulted in reduced unit cost Exploring opportunities to further increase mill throughput Expected Production Mill Throughput (kt) 5,000 4,500 4,000 3,500 3,000 2,500 Mill Throughput vs. Grade Grade Throughput Grade % 500, ,000 tonnes of zinc 100, ,000 tonnes of lead 2, Stable zinc metal production despite declining grade 40

41 Zinc Red Dog: Significant Exploration Potential 350 km 2 of highly prospective NANA and State lands with identified exploration targets Ongoing drilling programs to enhance resource certainty and define future developments Red Dog District Drilling Su-Lik 100% Teck Aktigiruk Anarraaq NANA Lease Red Dog Mine 35,000 30,000 25,000 20,000 15,000 10,000 5, Mine Regional Exploration Significant regional land position

42 Zinc Red Dog: Mine Area Deposits 1980 Red Dog Main and Qanaiyaq drilled 1989 First ore from Main 1995 Aqqaluk and Paalaaq discovered First ore from Aqqaluk 2016 First ore from Qanaiyaq 35 years of discovery and development 42

43 Zinc Red Dog: Regional Exploration Discoveries 1999 Discovery: Anarraaq 2001 Discovery: Aktigiruk Underground targets Plan & section at same scale as previous slide 43 Anarraaq Aktigiruk corridor

44 Zinc Red Dog: Anarraaq High Grade Intercepts Demonstrate Significant Resource Potential 1 High Grade Anarraaq Intercepts Industry Average Zinc Grades Falling % Zn, 14.7 % Pb, 558g/t Ag Red Dog 2cm Grade % Weighted Average Industry Grade DDH %Zn, 4.0% Pb, 106g/t Ag Incl. 34.2% Zn, 11.5% Pb, 382g/t Ag % Zn, 6.3 % Pb, 53g/t Ag Red Dog zinc grades are much higher than industry average 2cm The scientific and technical information disclosed has been reviewed and approved by Rodrigo Marinho, P.Geo., Technical Director, Reserve Evaluation, Teck who is a Qualified Person under NI For further information, please see Teck s most recent Annual Information Form. DDH % Zn, 4.5% Pb, 82g/t Ag Incl. 23.2% Zn, 5.2% Pb, 74g/t Ag

45 Zinc Red Dog: Value Creating Road Map Legend Components Opportunities Challenges Current Life of Mine Plan Mill Throughput Increase SAG motor upgrades Fine grinding Additional flotation Lower ore cut-off Further throughput increase Mill space Generator capacity Ore Sorting Crushing & sorting equipment Reactive ore Higher metal recovery Lower cut-off Increase throughput Screening technology Anarraaq Underground Underground mine Road access Power generation Access to Aktigurik Resource upside Resource drilling Development schedule and capital Aktigiruk Underground Underground mine Access from Anarraaq Resource upside Resource drilling Development schedule and capital 45 Creating value through long-term planning

46 Zinc Pend Oreille: Increasing Secondary Mining Ore Production from Secondary Mining Room and pillar stopes developed by drift mining Initial ore supply entirely from primary mining of stopes limited broken ore inventory Secondary mining increases as stopes established and pillars can be removed as the mining front retreats larger broken inventory Ore Mined (ooo s tonnes) Secondary Mining (Pillar) Primary Mining (Drift) F Stabilizes ore production, which will result in reduced unit costs 46

47 Zinc Pend Oreille: Value Creating Road Map Legend Components Opportunities Challenges Current Life of Mine Plan Possible Life Extension to 2028 Dry stack tailings Resources in YH1 Higher grades and recovery Additional mine life Drilling required Permitting of tailings Ore Sorting Ongoing Exploration to Define Future Resources Tailings back fill Resource in adjacent to existing workings Higher grades Additional life Resource drilling Development schedule and capital 47 Creating value through long-term planning

48 Zinc Trail: More Reliable Acid Plant Acid Plant Reliability Unplanned Downtime and Refined Zinc Production Unplanned Downtime (%) 8% 7% 6% 5% 4% 3% 2% 1% 0% Unplanned Downtime Refined Zinc Production (000's t) New Acid Plant Commissioned May 2014; first full year 2015 Removes SO 2 gas created from roasting sulphide concentrates. Replaced unreliable 40-year old acid plants Focus on Cost Reduction Personnel utilization Zinc production 48 Increased refined zinc production with enhanced process stability of a new acid plant

49 Zinc Poised to Capitalize on Improving Fundamentals 49 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 stability of a new acid plant Value creating roadmaps for Red Dog and Pend Oreille

50 Operations Agenda Overview Steelmaking Coal Copper Zinc Summary 50

51 Operations Meeting the Challenge Staying true to Teck s values Delivering results Building operational excellence Disciplined capital spending Focused growth pipeline 51

52 Operations March 30, 2016 Ian Kilgour, Executive Vice President & Chief Operating Officer Robin Sheremeta, Vice President, Coal Operations Dale Andres, Senior Vice President, Copper Rob Scott, Senior Vice President, Zinc