Q3 2019 Earnings Call

October 24, 2019

Welcome to conferencing services MSN of Hospice Veeva. Please stay on the line your call will be answered shortly revenue service the coffee homes valued emerging owning over the border Super.

Operator 1: Welcome to conferencing services. Un message en français suivra. Please stay on the line. Your call will be answered shortly. Bienvenue au service de conférence. Veuillez demeurer en ligne, on vous répondra sous peu.

Thank you for wedding, cultural which cost your Janney. Please.

Operator 2: Thank you for waiting. Bonjour. Which call is you attending, please?

Rachel Smith: That will be the Teck Resources Limited.

I'll be the Teck resources limited.

Operator 2: Is this for an earnings call or something?

As this for a an earnings call or something.

Yes, Q3 2019 earnings call.

Rachel Smith: Yes. Q3 2019 Earnings Call.

Operator 2: Thank you. That's what I need to hear. I want to be sure I joined on the right call. Thank you. Could you spell your first and last name, please?

Thank you. That's why did you hear I wanted to be sure I turn you to write call. Thank you. Good you spell your first and last saying please.

Rachel Smith: Yes. It's Rachel, R-A-C-H-E-L. Smith, S-M-I-T-H.

Yes, it's Rachel Art Ace U H E O. Smith S M I T H.

On the please.

Operator 2: One more, please. I wanna make sure I understood the spelling of your first name, if you don't mind. Rachel, you spell R-A-C-H-E-O?

Oh.

I understood. Your first name is felt that I want to make sure I understood. This buying your first if you don't mind <unk>. Rachel you spell are a C. H E. All.

Rachel Smith: Yes, H-E-L. Yes.

Yes, H E L. Yes.

Operator 2: O-E-L. Sorry. It sounded like an O to me. Thank you. Could you spell the name of your company, please?

Oh E L. Sorry, it sounds like I know what I mean, thank you could you spell the name of your company. Please.

Rachel Smith: Sure. It's A-I-E-R-A.

It's a I.E.R.A.

Hey, I.E.R.A.

Operator 2: A-I-E-R-A?

Yes.

Rachel Smith: Yes.

Thank you.

Operator 2: Thank you. I am now joining you to the Tech Resources conference call. The meeting is in progress. Please stand by.

I am now joining you to the Teck resources Conference call. The meeting is in progress. Please standby.

Rachel Smith: Thank you.

Yeah.

You're welcome.

Operator 2: You're welcome.

This conference is being recorded.

Operator 1: This conference is being recorded. Cette conférence est actuellement enregistrée.

The conference calls it actually not only this thing.

[noise].

Don Lindsay: Production in Q3 and Q4. As a result, we expect our cost of sales to be significantly higher in Q1 2020 than in Q4 2019, and then to decrease significantly in H2 2020 when we are back at full production levels. However, overall, we expect our cost of sales to be lower in 2020 than in 2019. Now, I think this is a very important point because we're moving the maintenance shutdowns to the first part of the year while the coal prices are reasonably weak, but it also accelerates our ability to increase the production at Elkview by 2 million tons, and that 2 million tons will be much lower cost than Cardinal River that will be headed towards shutdown, which is a higher cost operation.

Action in Q3 Q4.

And as a result, we expect our cost of sales to be significantly higher in Q1. 2020 . Then in Q4 29 team and then to decrease significantly in the second half of 2020. When we are back at full production levels. However, overall, we expect our cost of sales.

To be lower and 2020 and 29 team.

I think this a very important point, because we're moving the maintenance shutdowns to the first part of the year well coal prices are reasonably weak, but it also accelerates our ability to increase to production that elk few by 2 million tons and that 2 million tons will be much lower cost then Cardinal River.

That will be a headed toward shutdown, which is a higher cost operation. So there's lower production at the beginning of the year and the consequently higher costs is actually a good news stories because it means that we get to the longer term higher production lower costs sooner.

Don Lindsay: The lower, production at the beginning of the year and the consequently higher cost is actually a good news stories because it means that we get to the longer term, higher production, lower costs sooner. Turning to our copper business unit, our Q3 results are summarized on slide 7. Copper production was up 10% year over year, primarily due to higher copper grades and to mill throughput and recoveries at Highland Valley, which is in line with guidance. Total cash unit cost before byproduct credits were $62 in Q3, down from $75 a year ago. However, net cash unit costs after byproduct credits were slightly higher than last year due to the lower zinc sales volumes and zinc prices. In August, we signed a new 3-year collective agreement with the supervisory union at Carmen de Andacollo.

Turning to our copper business unit. Our Q3 results are summarized on slide seven.

Copper production was up 10% year over year, primarily due to higher copper grades and the mill throughput and recoveries at Highland Valley, which is in line with guidance.

Total cash unit costs before byproduct credits were $1.62 U.S. in Q3 down from $1.75 year ago. However, net cash unit costs. After byproduct credits were slightly higher than last year due to the lower zinc sales volumes and zinc prices.

In August we signed a new three year collective agreement with the supervisory Union at Karma doing to Kornya under coil.

Thereafter, a regulated bargaining process with the workers Union commenced in September , but even after mediation with did not result in an agreement and the workers Union commenced strike action on October 14th.

Don Lindsay: Thereafter, a regulated bargaining process with the workers' union commenced in September, but even after mediation, it did not result in an agreement, and the workers' union commenced strike action on 14 October. Going forward, we expect continued improvements in throughput, grades, and recoveries at Highland Valley. Our full year copper production guidance is unchanged despite the strike at Carmen de Andacollo. Our full year operating cost guidance is also unchanged. Moving on to slide 8. I'd like to provide a quick snapshot of our progress on QB2 over the last quarter. Construction at QB2 continues with over 5,000 people actively working across the 6 major construction areas on the project, with all major contractors mobilized. Earthworks are well advanced in all areas, including construction of the tailings dam facility.

Going forward, we expect continued improvements in throughput grades and recoveries at Highland Valley.

Our full year copper production guidance is unchanged. Despite the strike at Carmen de Andacollo you.

And our full year operating cost guidance is also on.

Moving on to slide eight I'd like to provide a quick snapshot of our progress at QB two over the last quarter.

Because construction at QB two continues with over 5000 people actively working across the six major construction areas on project with all major contractors mobilized.

Earthworks are well advanced in all areas, including construction of the tailings dam facility.

Don Lindsay: Concrete installation is progressing very well in both the concentrator and the port areas, with approximately 20,000 cubic meters placed to date. The project continues to target construction completion in Q4 2021, with ramp up to full production expected during 2022. As of the end of September, we'd expended approximately $650 million, and approximately 65% of the total budget is committed under contracts and purchase orders to date. Engineering, contracting, and procurement activities are all well over 90% complete, and a definitive capital estimate is planned for Q1 2020. The photo on the right shows progress of concrete and rebar for the mill foundations in the grinding area of the concentrator. Slide 9 shows the concentrator area.

Concrete installation is progressing very well and both the concentrator and support areas with approximately 20000 cubic meters place today.

The project continues to target construction completion in the fourth quarter 2021 with ramp up to full production expected during 2022.

As of the end of September we'd expended approximately 650 million U.S. at approximately 65% of the total budget is committed under contracts and purchase orders to date.

Engineering contracting and procurement activities are all well over 90% complete and a definitive capital estimate is planned for Q1 2020.

A follow on the right shows progress of concrete and rebar for the mill foundations in the grinding area of the concentrate or.

Slide nine shows the concentrate or area.

Don Lindsay: This photo shows the progress we've made in the grinding area of the concentrator, where we've been pouring concrete for the two SAG and four ball mills since May. The mills have arrived in country, and we will commence initial installation in Q4. In the background, you can see works related to the coarse ore stockpile and a reclaim tunnel where we are mobilized and commencing initial concrete placement. We expect to start structural steel erection in the concentrator area this quarter. Moving to the flotation area of the concentrator on slide 10, you can see the foundations for the 14 650-cubic-meter rougher flotation cells. Mechanical components are arriving at site shortly in preparation for the start of installation. We are also advancing concrete placement for the thickener tanks and other components of the mill.

This photo shows the progress we've made in the grinding area of the cost trader, where we've been pouring concrete for the two sag and ball mills since may.

The mills have arrived in country, and we will commence initial installation in the fourth quarter.

And in the background you can see works related to the coarse ore stockpile at a reclaim tunnel, where we are mobilized and commencing initial concrete placement.

And we expect to start structural steel erection and the contrary area this quarter.

Yeah.

Moving to the flotation area of the cost trader on slide 10, you can see the foundations for the 14 650 cubic meter refer flotation cells.

Cannacord components are arriving at site shortly and preparation for the start of installations.

We're also advancing concrete placement for the thickener tank and other components of the mill and on Slide 11, you can see the port site, we are progressing both onshore and offshore activities. Following some delays as we were awaiting local permits.

Don Lindsay: On slide eleven, you can see the port site where we are progressing both onshore and offshore activities following some delays as we were awaiting local permits. The area in the center of the photo shows progress in the desalination plant with rebar and concrete placement for the foundations. Overall, the project team is working effectively with the EPCM contractors and major contractors to advance construction across all areas of the project. Our zinc business unit's results are summarized on slide twelve. As a reminder, Antamina zinc-related financial results are reported in our copper business unit. Red Dog sales of zinc and concentrate were 171,000 tons, which is above the guidance of 165,000 to 170,000 tons.

The area in the center of the photo shows progress in the desalination plant with rebar in concrete placement for the foundations and overall the project team is working effectively with the PCM contractors and major contractors to advance construction across all areas of the project.

Our zinc business unit's results are summarized on slide 12.

As a reminder, add to me to zinc related financial results are reported in our copper business unit.

Red dog sales of zinc in concentrate were 171000 tons, which is above the guidance of 165 to 170000 tons.

Don Lindsay: Our net cash unit costs in the quarter reflect the benefit of lead and concentrate sales from Red Dog, partially offset by the higher 2019 benchmark terms for treatment and refining charges. Looking forward, we have lowered our full year guidance for refined zinc production at Trail Operations to 275,000 to 285,000 tons. We expect Red Dog shipping season to be complete in early November, with all available concentrates shipped from site. In Q4, we expect Red Dog's contained zinc sales to be 160 to 165 thousand tons, reflecting the normal seasonal pattern. Our energy business unit results are summarized on slide 13. Gross profit declined in Q3 from Q2, primarily reflecting the decline in the West Texas Intermediate price and the widening of heavy differentials.

Our net cash unit costs in the quarter reflect the benefit of leaden concentrate sales from Red dog, partially offset by the higher 2019 benchmark terms for treatment and refining charges.

Looking forward, we have lowered our full year guidance for brick designed for refined zinc production that trail operations to 275000 285000 tons.

We expect Red dog shipping season to be complete in early November with all available concentrate ship from site and in Q4, we expect Red Doug's contained zinc sales to be 160 to 165000 tons, reflecting the normal seasonal pattern.

Our energy business unit results are summarized on slide 13.

Gross profit declined in Q3 from Q2, primarily reflecting the decline in the West, Texas intermediate price and the widening of heavy differentials.

Production in unit operating costs continue to reflect the government of Alberta is production curtailments, partially offset through our purchase of curtailment credits.

Don Lindsay: Production and unit operating costs continue to reflect the government of Alberta's production curtailments, partially offset through our purchase of curtailment credits. The production curtailments have been extended through December 2020, with an option to terminate earlier. Despite the announced extension of curtailments, we continue to expect to be at the low end of our annual production guidance and the high end of our unit operating cost guidance for the full year. With that, I'll pass it over to Ron for some comments on our financial results.

The production curtailments have been extended through December 2020, with an option determinate earlier and despite the announced extension of curtailments. We continue to expect to be at the low end of our annual production guidance and the high end of our unit operating cost guidance for the full year.

With that I'll pass it over to Ron for some comments on our financial results. Thanks, Don I'll start with a summary of changes on our cash position during the third quarter disclosed on slide 14. So we generated approximately 1.1 billion in cash flow from operations and we also received 406 million Canadian and.

Ron Mills: Thanks, Don. I'll start with a summary of changes in our cash position during the third quarter, disclosed on slide 14. We generated approximately CAD 1.1 billion in cash flow from operations, and we also received CAD 406 million in equity contributions from Sumitomo Metal Mining and Sumitomo Corporation in the quarter. That was the final payment of their $1.2 billion investment in QB2. We spent CAD 824 million on capital projects, and we purchased CAD 180 million in Class B shares, which were canceled. Our capitalized stripping costs were CAD 159 million, and we paid CAD 104 million in interest and finance charges. We also paid CAD 28 million in our regular base dividends during the quarter.

And from Sumitomo metal mining and Sumatomo Corporation in the quarter and that was the final payment of their use 1.2 billion investment in QB. Two we spent 824 million on capital projects and we purchased 180 million and class B shares which were cancelled are capitalized stripping costs were 159 million and we.

Paid 104 million in interest and finance charges and we also paid 28 million in our regular based dividends during the quarter. After these and other minor items, we ended the quarter with cash and short term investments of about $1.6 billion.

Ron Mills: After these and other minor items, we ended the quarter with cash and short-term investments of about $1.6 billion. Turning to slide 15, our financial position remains strong with around CAD 6.8 billion of liquidity currently, and that includes $1.6 billion in cash. One billion of that is in Chile for the development of QB2. On Tuesday, as Don mentioned, we extended the maturity by one year on our $4 billion uncommitted credit facility out to November 2024. We have no significant debt maturities prior to 2035, and we have investment-grade credit ratings from the four major credit rating agencies.

Turning to slide 15, our financial position remained strong with around Canadian 6.8 billion of liquidity currently and that includes 1.6 billion in cash 1 billion of that is in Chile for the development of up QB, two and on Tuesday, as Don mentioned, we extended the maturity by one year on our US 4 billion uncommitted deck.

Credit facility to November 2024.

We have no significant debt maturities prior to 2035, and we have investment grade credit rating from the four major credit rating agencies.

We expect to close the U.S. 2.5 billion limited recourse project financing facility to fund the development. The QB two in the fourth quarter with first borrowing not expected until early 2020 and as we've mentioned many times the QB two partnering transaction and the financing plan dramatically reduce our funding requirements for the project to a proxy.

Ron Mills: We expect to close the $2.5 billion limited recourse project financing facility to fund the development of QB2 in Q4, with first borrowing not expected until early 2020. As we've mentioned many times, the QB2 partnering transaction and the financing plan dramatically reduce our funding requirements for the project to approximately $700 million, excluding escalation. No cash contributions are expected from Teck until early 2021. Moving on to the next slide. As Don mentioned earlier, we have implemented a company-wide cost reduction program to reduce our spending on capital and operating costs through 2020. As detailed on slide 16, we are targeting total reductions of approximately $500 million from previously planned spending through to the end of 2020.

Currently use 700 million, excluding FX escalation and no cash contributions are expected from tech until early 2021.

Moving onto the next slide as Don mentioned earlier, we have implemented a companywide cost reduction program to reduce our spending on capital and operating costs through 2020 as detailed on slide 16, we are targeting total reductions of approximately 500 million from previously planned spending through to the end of 2020.

The target for the balance of 2019 is 170 million and that includes 120 million in capital reductions and deferrals and 50 million in various other costs for 2020, we are targeting 330 million that includes a 130 million and planned capital spending reductions and deferrals and 200 million in our.

Ron Mills: The target for the balance of 2019 is CAD 170 million, and that includes CAD 120 million in capital reductions and deferrals, and CAD 50 million in various other costs. For 2020, we are targeting CAD 330 million. That includes CAD 130 million in planned capital spending reductions and deferrals, and CAD 200 million in our other costs. Of the CAD 500 million total, approximately 30% relates to the deferral of capital projects, which will be required sometime after 2020. The targeted reductions for the remainder of 2019 are included in our updated 2019 guidance, and the reductions in 2020 will be included in our 2020 guidance when we release our Q4 results in February.

Other costs.

The 500 million total approximately 30% relates to the deferral of capital projects, which will we required sometime after 2020 the targeted reductions for the remainder of 2019 are included in our updated 2019 guidance and the reductions in 2020 will when we will be included in our 2020 guidance when we.

He leaves our Q4 results in February and to achieve our targeted cost reductions, we expect to eliminate approximately 500 full time equivalent positions.

Ron Mills: To achieve our targeted cost reductions, we expect to eliminate approximately 500 full-time equivalent positions. Some of those are expected to come from attrition, the expiry of temporary and contract positions, and current job vacancies. As Don stated up front, our target cost reductions do not include initiatives that would result in a reduction in the production volumes of our commodities or that would adversely affect the health and safety of our people, including our contractors working on sites. With that, I'll turn it back over to Don for his closing comments.

Some of those are expected to come from attrition, the expiry of temporary and contract positions and current job vacancies.

And as Don stated upfront our target cost reductions do not include initiatives that would result in a reduction in the production volumes of our model these or that would adversely affect the health and safety of our people, including our contractors working on sites with that ill turn it back over to Don for his closing comments and thank you Ron.

Don Lindsay: Thank you, Ron. As I said at the outset, given the current global economic uncertainty, we are focusing our attention on our RACE21 program to improve efficiency and productivity across all our business. We're also focused on the execution of our priority project at Neptune Terminals and, of course, the development of the QB2 project, which is a key component of Teck's future growth. While our financial position remains strong, we have implemented a company-wide cost reduction program to reduce spending, targeting approximately CAD 500 million in reductions through the end of 2020. These actions are consistent with executing our straightforward strategy of running our operations safely, efficiently, and sustainably to generate cash, successfully executing our QB2 project, and returning additional cash to shareholders. With that, we would be happy to answer your questions.

As I sit at the outset, given the current global economic uncertainty, we are focusing our attention on erased 21 program to improve efficiency and productivity across all our business. We're also focused on the execution of our priority project at Neptune terminals and of course, the development of the QB two project, which is a key component of text future.

Our growth.

While our financial position remained strong we have implemented a companywide cost reduction program to reduce spending targeting approximately $500 million and reductions through the end of 2020.

These actions are consistent with executing our straight forward strategy of running our operations safely efficiently and sustainably to generate cash successfully executing our QB two project and returning additional cash to shareholders.

And with that we'd be happy to answer your questions and I should note as some of our management team members are calling in from different locations are there may be a brief pause. After you ask your question, while we sort out these can be answering it from one month, so back to you operator.

Don Lindsay: I should note that some of our management team members are calling in from different locations, so there may be a brief pause after you ask your question while we sort out who's going to be answering it from what line. Back to you, operator.

Thank you.

Operator 3: Thank you. We will now take questions from the telephone lines. We ask that you please limit yourself to one question and one follow-up question. Please press star one at this time if you have a question. There will be a brief pause while the participants register. Thank you for your patience. The first question is from Matthew Korn with Goldman Sachs. Please go ahead.

Operator: Thank you. We will now take questions from the telephone lines. We ask that you please limit yourself to one question and one follow-up question. Please press star one at this time if you have a question. There will be a brief pause while the participants register. Thank you for your patience. The first question is from Matthew Korn with Goldman Sachs. Please go ahead.

We'll take questions from the telephone line.

We ask that you please limit yourself to one question and one follow up question.

Please press star one at this time, if you have a question there will be a brief talks about the participants Manchester. Thank you for your patience.

The first question is from Matthew Korn with Goldman Sachs. Please go ahead.

Hi, good morning, everyone. Thanks for taking my questions.

Matthew Korn: Hi. Good morning, everyone. Thanks for taking my questions. First, I just want to understand a little bit more the spending and the cost reduction program. As I see it, and please correct me if I'm wrong, but this is essentially comprising CAD 250 million reductions in capital, CAD 150 million of that is deferred. Another CAD 250 million of this is OpEx. It's permanent, and it's largely headcount. You expect to reach that OpEx run rate improvement by the end of 2020. Is that, am I understanding you correctly?

First I just want to understand a little bit more spending in the cost reduction program.

As I see it and please correct me if I'm wrong, but this is essentially comprising 250 million production capital 150 million of that as deferred and another 250 million of this is opex permanent in this largely headcount and you expect to reach that Opex run rate improvement by the end of your 2020 is that am I understanding you correctly.

That that sounds generally in line there yet.

Don Lindsay: That sounds generally in line there, yeah.

Okay all right.

Matthew Korn: Okay. All right. On the operational side, in coal in particular, could you explain the material handling problems a little bit more there, why they've proven to be so persistent, what you're doing now to help solve them? You know, should we expect this to persist really until Neptune reduces pressure? Or are there other variables here that we're not appreciating?

On the operational side.

In coal in particular could you explain the material handling problems a little bit more there why they have proven to be so persistent what you're doing now to help solve them and should we expect us to persist really until till Neptune reduced pressure are there other very variables here that we're not appreciated.

It just before I turn it over to Robin share Mehta on that question I, just want to add one comment.

Don Lindsay: Just before I turn it over to Robin Sheremeta on that question, I just want to add one comment. In your summary of the cost reduction program, it implied that the timeline for getting to the lower operating costs goes right to the end of the year. In fact, the OpEx will have achieved quite soon. We are implementing the CRP immediately, and we'll get a lot of the operating costs out quite quickly.

In years summary of.

The cost reduction program.

Implied that the timeline for getting to the low lower operating as this goes right to the ended the year in fact, the Opex will achieve quite soon we are implementing these CRP immediately and we'll get a lot of the operating cost so quite quickly.

GAAP revenue.

Matthew Korn: Got it. Thank you.

Don Lindsay: Robin over to you.

You bet.

Robin Sheremeta: You bet. I'll start off by saying we don't expect this to persist any longer, and I'll kind of give you a bit of an explanation of why that is. We discovered at one of the sites we were experiencing longer than average train dump times, and we did have intermittent excessive train dump times associated with coal coming from that particular site. We had a task force that looked into this from a number of different perspectives, both from the material handling at port and site. Really, what they discovered was a process condition at the plant at that site that was introducing higher moisture levels in small parcels into the product. When we understood what that process condition was, we were able to address it.

I'll start off by saying, we don't expect us to persist any longer and I'll kind of give you a bit of an explanation of why that is.

We discovered that one of the sites, we are experiencing longer than average train dump times and we did have intermittent excessive trade downtimes associated with coal coming from that particular site.

We had a task force that.

We will see into this from a number of different perspectives, both from the material, having a port and site.

And really what they discovered was a process.

Condition not the at the plant at that site that was introducing higher moisture levels in small parcels into the product and so when we understood what that pulls US condition was we were able to address it and what we've seen sense addressing it now is that we're having much much more consistent trade off loading at.

Robin Sheremeta: What we've seen since addressing it now is that we're having much more consistent train offloading at all port facilities. I'm pretty confident, I guess, at this stage, certainly that we've addressed the particular issue that was affecting us. We did isolate it to a particular process within one site, so I think that's behind us now.

All port facility. So so I'm pretty confident I guess at this stage certainly that Weve addressed particular issue that was affecting us we did isolated to a particular process within one site. So I think thats behind us now.

Great. Thanks, I'll pass it on.

Matthew Korn: Great. Thanks. I'll pass it on.

Thank you.

Operator 3: Thank you. The next question is from Orest Wowkodaw with Scotiabank. Please go ahead.

Operator: Thank you. The next question is from Orest Wowkodaw with Scotiabank. Please go ahead.

Next question is from Auris Orest Wowkodaw with Scotia Bank. Please go ahead.

Hi, good morning.

Orest Wowkodaw: Hi. Good morning. Just, you know, pressing a bit more on the cost reductions. You disclosed that you expect operating costs in coal to be lower next year versus this year. Is the right way to sort of think about the potential magnitude here? I think I heard you say this could potentially be CAD 200 million of OpEx savings. I assume most of that's in the coal division, and so that could be kind of $7, $8 a ton, plus you should be saving, I think, on a lower strip ratio next year. I'm just curious if you can magnitude or give us some kind of order of magnitude of how much lower coal cost could be next year versus this year.

Pressing a bit more on the cost reductions.

Disclose that you expect to operating cough and cold to be lower next year versus this year.

Is the right way to sort of think about the potential magnitude here I think I heard you say theres could potentially be 200 million of Opex savings I assume most of that's in the coal division and.

So that could be kind of seven eight bucks a ton plus you should be saving I think on a lower strip ratio next year I'm. Just curious if you can magnitude or give us some kind of order of magnitude of how much lower coal coal costs could be next year versus this year.

Over to Rob ill.

Don Lindsay: Over to Robin.

Robin Sheremeta: Yeah. You know, I'd like to walk you through just some of the factors because the cost reduction program is one aspect of it, and you touched on another pretty key one, which was the strip ratio. I know we've talked about this in the past a few times, but we have been mining at a higher strip ratio for the last couple of years. This is really to get our operations aligned after Coal Mountain closure and in anticipation of the Cardinal River operation closing down here later in 2020. If you look back in 2018, our strip ratio was around 11.1 to 1. It's now peaking at about 11.4 to 1. In 2020, our strip ratio is gonna be close to about 10.5 to 1.

To walk you through just some of the factors because the cost reduction program is one aspect of it and you touched on another pretty key one which was the strip ratio.

I know we've talked about this in the past a few times, but we havent mining a higher strip ratio for the last couple of years and this is really.

To to get our operations aligned after coal mountain closure and in anticipation of the Cardinal River operation closing down here later in 2020. So if you look back in 2018 or strip ratio was around 11.1 to one it's now, peaking at about 11.4 to one and in 2020, our strip ratio is going to be closer.

To about 10.5 to one so that's a substantial decline from what we've had in the last couple of years and our strip ratio over the next five years goals from that 10, five in 2020 down to both the long term run average of 10 to one.

Robin Sheremeta: That's a substantial decline from what we've had in the last couple of years. Our strip ratio over the next five years goes from that 10:5 in 2020 down to about the long term run average of 10 to 1. That's a major, obviously, cost factor in the coal operations, and it's one that's improving both next year and forward into 2020. The other piece around costs, and it does slip into CRP to some extent, but Q1, Q2, and Q3 of this year, we focused a lot, obviously, on producing as much coal as we could into a market that was paying, you know, substantial amount for it. We did incur additional costs.

So that's a major obviously.

Cost stock during the call operations and it's one that's improving next year end forward into 2020.

Other piece wrong cost and it does slip into CRP to some extent, but the first three quarters of this year, we focus a lot obviously on producing as much calls we could into a market that was paying.

Substantial amount for it so we did incur additional costs and I use. This example, several times, where we would hold coal from the Ofyou operation, where we add additional raw coal.

Robin Sheremeta: I used this example several times where we would haul coal from the Elkview operation where we had additional rock haul available. We hauled it all the way to our Coal Mountain operation, which is 30km south, that had the plant available to us. That cost more money. It increased our operating costs, but we gained by far on the revenue side. We obviously will not be doing that going into a more constrained cost environment. There are dollars to be saved just in terms of our operating strategy in this kind of market. Again, the third factor is really that's affected our costs over the last year, particularly, and as much as the last two years is Cardinal River. It is a high cost operation. We did choose to not advance Redcap for that reason.

Available when we hold it all the way to our coal mountain operation, which is 30 kilometers sell that had the plant available to us so that cost more money and increased our operating costs, but we gained by far on the on the revenue side.

We obviously will not be doing going into more constrained cost environment. So there are dollars to be saved.

Just in terms of our operating strategy in this kind of market.

And again, the third factors really that's affected our costs over the last year, particularly and as much in the last two years is Cardinal River. It is a high cost operation, we did choose to not advanced Red Kap for that reason and as we closed down Cardinal through 2020 and replace it with tonnage out of one of our lowest cost operations.

Robin Sheremeta: As we close down Cardinal through 2020 and replace it with tonnage out of one of our lowest cost operations, as Don mentioned, at Elkview, that's gonna essentially bring our costs down, both from a strip ratio point of view and purely from an operating point of view. Elkview is a very strong operation with a very low cost base. Then there are a few costs that have been out of our control, like price of gas, things like that. If you layer all those things together, as Don mentioned, and certainly we have to go through the work of pulling together the budget and getting all our work done ahead of that into Q1. We do anticipate our costs in 2020 to be lower than they've been in 2019.

John mentioned in Bellevue.

That is going to that's been essentially bring our cost down all from a strip ratio point of view impurity from an operating point of view LP is very strong operation with the variable cost base and then there are few costs that have been out of our controlling pricing gas things like that so.

So if you layer all those things together as Don mentioned and certainly we have to go through the work of pulling together the budget and getting our our work done ahead of the odds into Q1, we do anticipate our costs in 2020 to be lower than they've been in 2019, you just unfortunately with the timing around plant outages.

Robin Sheremeta: It just unfortunately with the timing around plant outages, we're going to take those outages early in the year, take advantage of where we sit in the market right now, and be well set up for H2.

We're going to take those outages early in the year take advantage of where we sit in the market right now and be well set up for the for the second half of the year.

Orest Wowkodaw: Okay. Do all those components.

Okay, but do although engine components.

Robin Sheremeta: Go ahead.

Orest Wowkodaw: Sorry, go ahead, Don.

Sorry go ahead Don.

Oh you go ahead.

Don Lindsay: No, you go ahead.

Orest Wowkodaw: I was gonna say, do all those components kind of add up to a ballpark number that could be in the order of $10 a ton? Is that what we're talking about here?

I was going to do all those components kind of add up to a ballpark number that could be in the order of 10 Bucks a ton as it is that we're talking about here.

I Wouldnt speculate on it on a.

Robin Sheremeta: I wouldn't speculate on a ballpark number at this stage. I'd like to see us pull together the budget, all the different components into a plan that we would be able to speak to in terms of guidance.

On a ballpark number at this stage I'd like to see us pull together the budget all the different components into a plan that we would be able to speak to in terms of guide. So just to remind everybody we will be giving our year of full year guidance in the February .

Don Lindsay: Yeah, just to remind everybody, we will be giving our full year guidance in the February quarterly call, after we release our annual results, and that would give you a better answer, Urs, at that time. Urs, just for you, we noted in your report this morning that you referred to the CRP as deferrals. While there are some deferrals that may come in after 2021, most of the program is actual cost reductions that will be in place soon.

Quarterly call. After we release for annual results and that would give you better answer or so at that time and then or is just for you. We noted in the fourth this morning that you referred to the CRP as deferrals. While there are some deferrals that may come in after 2021. Most of the program is actual cost reductions that will be in place soon.

Okay. Thank you very much.

Orest Wowkodaw: Okay. Thank you very much.

Thank you.

Operator 3: Thank you. The next question is from Jackie Przybylowski with BMO Capital Markets. Please go ahead.

Operator: Thank you. The next question is from Jackie Przybylowski with BMO Capital Markets. Please go ahead.

Next question is from Jackie further Delaski with BMO capital markets. Please go ahead, alright. Thanks, very much I was just want to start maybe circling back to two what you're talking about earlier the civil unrest.

Jackie Przybylowski: All right. Thanks very much. I just want to start maybe by circling back to what you were talking about earlier, the civil unrest that is being experienced in Chile right now, recognizing that you are in the midst of negotiations with your workers at Andacollo. I was wondering if there's any sort of impact of the unrest and the local dissatisfaction with wages, working conditions, and the things that have been protested against, and if there's any kind of trickle into your union negotiations there.

They experience in Chile, right now recognizing that you are.

In the midst of negotiations with your workers at Andacollo and so I was wondering if there's any so.

Impact of of the unrest and so the the.

The local.

Dissatisfaction with.

Wages and working conditions and the things that have been protested against and if there's any kind of trickle into your union negotiations there.

Okay, I'm going to turn that went over to deal lenders, who is just returned from Chile few hours ago.

Don Lindsay: Okay. I'm going to turn that one over to Dale Andres, who's just returned from Chile a few hours ago.

Yes Jackie.

Dale Andres: Yeah. Hi, Jackie. Just to reiterate what Don said, we haven't had any material impacts on our operations or projects. Our QB cathode operation is continuing. As you pointed out, CDA remains on strike, and that operation was suspended before these protests started. Our QB2 project remains in full construction, and we do have still 5,000 people working on the site. We're basically managing some minor impacts around logistics and shift changes, and we're really focused on the safety and security of all our employees and contractors. We do have curfews in place. Obviously the situation we're monitoring very closely. It is quite dynamic and volatile. To date, we've had no major or material impacts.

Just to reiterate reiterate what Don said, we haven't had any material impacts on our operations are projects or QB cathode operation is continuing.

As you pointed out CDAV remains on strike and that operation was suspended before these protests started.

And our QB two project.

Remains in full construction and we do have still 5000 people working on the site.

We are basically managing some minor impacts around logistics and shift changes and we're really focused on the safety and security of all our employees and contractors, we do have curfews in place.

Obviously the situation.

We are monitoring very closely it is quite dynamic and volatile.

But to date, we've had no major or material impacts.

Dale Andres: I don't really want to get into any details on comments on the negotiations specifically with CDA. All our employees and contractors are accounted for and safe.

I don't really want to get into any details on comments from a negotiation specifically with CDAV.

Dale Andres: I don't really want to get into any details on comments on the negotiations specifically with CDA. All our employees and contractors are accounted for and safe.

But all our employees and contractors are accounted for and safe.

Okay, that's fair and maybe if I could ask about.

Jackie Przybylowski: All right. That's fair. Maybe if I could ask about the NCIB that you announced a couple of days ago. When we were at site at the Highland Vale Tour, I know you guys made the point that the existing or the previous, I guess, NCIB sort of satisfied at least the minimum obligation or commitment that you had made to capital returns under the capital allocation framework that you rolled out in the summer.

The NCB, though.

Announced a couple of days ago.

When we were when we were at site at the Highland Valley Tour.

I know you guys made the point that.

The existing or the previous I guess NCB.

Satisfied at least the the minimum.

Obligation or a commitment that you'd made to.

Capital returns under the capital allocation framework that you rolled out in the summer. So it was a little bit surprised to see.

Jackie Przybylowski: I was a little bit surprised to see this new NCIB, and I was wondering if you could maybe speak a little bit to your strategy for how you're going to be buying back shares maybe for the rest of this year, if you are going to be buying back shares, or if this is more in place as something that is a longer-term program that you're thinking of maybe more for 2020.

New Entebbe and I was wondering if you could maybe speak a little bit to your strategy for how youre going to be buying back shares maybe for the rest of this year. If you are going to be buying back shares.

Or or if this is more in place.

As something that is a longer term program that you're thinking of maybe more for 2020.

No. So the announcement that came out just recently is a normal regulatory announcement once a year, we have to formally renew the program can get approval from the regulators. So thats all that announcement was the NC I'd be that we discussed before is still in place that we will continue with that.

Don Lindsay: No. The announcement that came out just recently is a normal regulatory announcement. Once a year, we have to formally renew the program and get approval from the regulators. That's all that announcement was. The NCIB that we had discussed before is still in place, and we will continue with it, watching market conditions as we go.

Watching market conditions as we go.

Jackie Przybylowski: Got it. Okay. Thanks very much. That's clear. Thank you.

Thanks, very much that's clear thank you.

Thank you and the next question is from Craig Barnes with TD Securities. Please go ahead.

Operator 3: Thank you. The next question is from Greg Barnes with TD Securities. Please go ahead.

Operator: Thank you. The next question is from Greg Barnes with TD Securities. Please go ahead.

Hi, there thanks, Don I, just want to investigate the the planned outages in half 120 20, the coal operations LTC lower production.

Greg Barnes: Hi there. Thanks. Don, I just want to investigate the planned outages in H1 2020, the coal operations, obviously lower production.

He said demand in Q3 remains strong I don't know what conditions look like in Q4, I know prices a week.

Greg Barnes: You said demand in Q3 remains strong. I don't know what conditions look like in Q4. I know prices are weak, but is this purely just a reflection of your expectation of a weaker coal market through at least H1 2020?

But is it purely just a reflection of your expectation of a weaker coal markets or at least the first off of 2020.

No as this is a operating strategy I'll go back to Robin on this yes, we plan to take the Army plan every year to take the plants down for maintenance outages that that combined with upgrades that we're doing it the healthy plant we've chosen to two schedules earlier in the year simply to take advantage of what potential.

Don Lindsay: No, this is an operating strategy. I'll go back to Robin on this.

Robin Sheremeta: Yeah. We plan every year to take the plants down for maintenance outages. That combined with upgrades that we're doing at the Elkview plant, we've chosen to schedule those earlier in the year simply to take advantage of what potentially might be a weaker market. The other side of it is, as we do the upgrades at Elkview, the sooner we can do those upgrades, the better. Because every day after the upgrades, obviously we're able to produce more coal. It really is just a timing issue around that.

It might be a weaker market. The other side of it is as we do the upgrades at out for you. The sooner we can do those upgrades to better because every day. After the upgrades, obviously, we're able to produce more coal. So it really is just a timing issue around that.

And in terms of production next year, you can you give us some idea for the softness the second half percentage wise.

Greg Barnes: In terms of production next year, can you give us some idea H1 versus H2 percentage-wise?

I really I'd like to you guys weight certainly forget you yes.

Robin Sheremeta: Really, I'd like you guys to wait certainly for the Q1.

Don Lindsay: Yeah, we're gonna.

Robin Sheremeta: It'll be roughly the same as.

The the same is we're going to do that with the guide I mean, you know.

Don Lindsay: We're gonna do that with the guide. I mean, you know, I know, Greg, you know this, these are very short-term questions. We're doing something that's a net positive, gets us to a stronger coal division sooner at lower cost. We're able to get it done a little sooner, so we're gonna do that. To sort of really focus on this quarter or next quarter, I think that's premature.

Greg you know this that these are very short term questions. So we're doing something thats, a net positive gets us to.

A stronger coal division sooner at lower cost and.

We are able to get it done a little sooner. So we're going to do that but to sort of really focus on this quarter next quarter.

I think thats premature.

Okay. Thank you.

Greg Barnes: Okay. Thank you.

Thank you.

Operator 3: Thank you. The next question is from Chris Terry with Deutsche Bank. Please go ahead.

Operator: Thank you. The next question is from Chris Terry with Deutsche Bank. Please go ahead.

The next question is from Chris Terry with Deutsche Bank. Please go ahead.

Hi, guys.

Christopher M. Terry: Hi, guys. Thanks for taking my question. In terms of the coal congestion at port, I just wondered if you could talk specifically around when the Neptune will be complete and also, in the answer to it, if you could just make clear the CapEx remaining and your share of that and just what's been spent to date and whether there's any significant scope changes. Thanks.

Chris Terry: Hi, guys. Thanks for taking my question. In terms of the coal congestion at port, I just wondered if you could talk specifically around when the Neptune will be complete and also, in the answer to it, if you could just make clear the CapEx remaining and your share of that and just what's been spent to date and whether there's any significant scope changes. Thanks.

Hi, guys. Thanks for taking my question.

In terms in terms of the coal congestion at Puerto just wondering if you could talk specifically around when the Neptune.

We'll be complete and also just.

In the answer to it it could just Mike CLIA, the capex remaining and you'll share of that and just.

It just what's been spent to date and whether there's any significant scope changes. Thanks.

Okay, just before I turn it over to Alex the.

Don Lindsay: Okay. Just before I turn it over to Alex, the construction completion is scheduled for Q1 of 2021. I think over to you, Alex, on the percent of capital still to go.

Construction completion scheduled for Q1, 2021, and I think over to you I also on the percentage of capital still to go yes. So.

Andrew Stankiewicz: Yeah. We've provided some new guidance here in the release here. As we work towards our definitive cost estimate, we see costs increasing to just around under $800 million. Right now we've spent slightly over $200 million to date, and have about a little over $300 million committed under contract.

Alex Christopher: Yeah. We've provided some new guidance here in the release here. As we work towards our definitive cost estimate, we see costs increasing to just around under $800 million. Right now we've spent slightly over $200 million to date, and have about a little over $300 million committed under contract.

For provides new guidance hearings in the release here as we work towards our definitive cost estimate, we see costs, increasing to adjust or under under $800 million right. Now we've spent slightly over $200 million to date incurred and have about little over $300 million committed to undercut.

Right.

Okay. Thanks, Thanks, very much and then maybe one for you don't just overall as you've looked at QB three and now that QB. Two construction is actually started.

Christopher M. Terry: Okay. Thanks very much. Maybe one for you, Don, just overall, as you've looked at QB3 and now that QB2 construction's actually started, perhaps you can give an update on that, the bridging and your latest thinking on how QB3 fits in with QB2. Thanks.

Chris Terry: Okay. Thanks very much. Maybe one for you, Don, just overall, as you've looked at QB3 and now that QB2 construction's actually started, perhaps you can give an update on that, the bridging and your latest thinking on how QB3 fits in with QB2. Thanks.

Perhaps you can give an update on that the bridging and the latest thinking on how QB three fits in with QB two thanks.

Yes, so we're working on the scoping study for cube, three looking at a number of different development models ranging from.

Don Lindsay: Yeah. We're working on the scoping study for QB3, looking at a number of different development models, ranging from an increase in capacity of QB2 of about 50% in one version, which would be sort of a Phase 2, all the way to a triple or even quadruple because there's clearly such a vast resource there. We will finish that scoping study this quarter, and then take a hard look at it and probably move into pre-feasibility quite quickly. It is very promising, and has a number of advantages over QB2, just benefiting from QB2's infrastructure and so on. When we get to that point, we'll release more details about it at that time.

An increase in capacity of QB two of about 50% in one version, which would be sort of the phase two all the way to a triple or even quadruple because there's clearly such a vast resource there.

We will finish that scoping study this quarter.

And then take a hard look at it and probably move into Prefeasibility quite quickly. It is very promising and has a number of advantages over QB two just benefiting from Q2 s infrastructure and so on.

And when we get to that point tell will release more details about it at that time.

Thank you.

Operator 3: Thank you. The next question is from Timna Tanners with Bank of America. Please go ahead.

Operator: Thank you. The next question is from Timna Tanners with Bank of America. Please go ahead.

The next question is from Tim Tim now Tanners with Bank of America. Please go ahead.

Yes, good morning.

Timna Tanners: Yeah. Hey, good morning. I really just wanted to take a step back and ask Don the high-level question about country risk, given that, you've touted your company's focus on areas with less country risk. Then I just wanted to ask if that impression is changing at all with some of the recent uprisings in Chile and also some of the maybe company-specific project challenges in Peru.

Just wanted to take a step back and asked on the high level question about country risk given that you've kept at your.

The company is focus on areas with less country risk and then I just wanted to ask if that impression is changing at all with some other recent uprisings in Chile and also some of that maybe company specific project challenges in Peru.

No I think Thats a fair question.

Don Lindsay: Yeah, no, I think that's a fair question. I think until a week ago, Chile was still thought of as the, probably the leading country in South America in which to invest, and has had a great track record the last, 20 to 30 years, and obviously attracted major investment from our industry, which has been, by and large, very successful. We believe and have faith that, Chile will remain that, in the long term. We're encouraged that, for example, our employees are back in the office, yesterday, working as normal, and, we've had no effects on, any of the, operations in the country, to speak of.

I think until a week ago, Chile was still thought of as the the.

Probably the leading country is south American which to invest.

And as had a great tracker to last 20 to 30 years, and obviously attracted major investment from our industry, which has been buying large very successful so and we believe and have faith that Chile will remain that in the long term. We're encouraged that for example, our employees are back in the office so yesterday.

Working as normal and we've had no effects on.

Any of the operations in the country.

Speak up so.

Don Lindsay: Until you see some longer term evidence that something has significantly changed, then I think that's the position that we take. Likewise, Peru, of course, geologically is a tremendous country for lots of opportunity. We have you know one of the best mines in the world there in Antamina and a really good development project in Zafranal. We've had a good experience there. While we see stress and strain from time to time in different communities, just as we're seeing now in Chile, and by the way, which we see in Canada, different provinces from time to time, I think at this point, there's nothing to change our perspective that those are two very good countries to invest in.

Until you see some longer term evidenced that.

Something has significantly changed.

Then I think thats the position that we take.

Likewise proof of course, G. I mean, geologically is tremendously opera trust country for lots of opportunity. We have one of the best mines in the world There an end to Mina and a really good development project and so for now we've had a good experience there and while we see stress and strain from time to time in different communities just as we.

We're seeing now in Chile, and by the way, which we see in Canada different provinces from time to time.

I think at this point.

Theres nothing to to change our perspective that those are two very good countries to invest in.

Don Lindsay: If you compare the current challenges that those countries are facing to challenges that are happening elsewhere in the world, this helps bring things into perspective. We won't be changing our position quickly, but we will watch it closely. Yes, the recent developments are a concern.

If you compare the current challenges that those countries are facing two challenges that are happening elsewhere in the world as helps bring things into perspective and.

We won't be changing our position quickly, but we will watch it closely and yes. The recent developments are concerned.

Okay Super helpful. Thanks, Anna inside of me, a broken record of but I keep asking about some of these copper projects that project satellite I think I'm. Just wondering if you can give us any updated thoughts on the emphasis or the timing, if they're getting pushed out any or or back burnered or if you're continuing to move ahead with some of that prefeasibility stage. It. Thanks.

Timna Tanners: Okay, super helpful. Thanks. I'm sorry to be a broken record, but I keep asking about some of these copper projects, like Project Satellite, I think. Just wondering if you can give us any updated thoughts on the emphasis or the timing if they're, you know, getting pushed out any or back burnered, or if you're continuing to move ahead with some of the pre-feasibility stages. Thanks.

We're continuing to advance those projects toward different milestones such as pre feasibility and feasibility and we are receiving calls of other.

Don Lindsay: We're continuing to advance those projects towards different milestones, such as pre-feasibility and feasibility. We are receiving calls from other companies that are interested in either buying or partnering or co-developing and that sort of thing. Those conversations are ongoing. Nothing's really changed. We have reduced the budgets for next year, consistent with our cost reduction program, but we're still advancing it to get to those milestones. There's some pretty positive results in cases such as Frobisher and San Nicolás that are near term. Steady as she goes.

Companies that are interested neither buying or partnering or co developing and thats, where things. So those conversations are ongoing so nothings nothing's really changed though we have reduced the budgets for next year consistent with our cost reduction program, but we're still so advancing it to get to those milestones.

And there's some pretty pretty positive results in.

In cases, such as everyone else in eclipse that are there are near term so steady as she goes.

Thanks again.

Timna Tanners: Thanks again.

Thank you. The next question is from Lucas pipes with Ryan the FBR. Please go ahead.

Operator 3: Thank you. The next question is from Lucas Pipes with B. Riley FBR. Please go ahead.

Operator: Thank you. The next question is from Lucas Pipes with B. Riley FBR. Please go ahead.

Hey, good morning, everyone.

Lucas Pipes: Hey, good morning, everyone. I wanted to revisit the strip ratio comments for the coal segment, and I believe you were referring to a clean coal strip ratio. I was wondering to what extent the improvement in the strip ratio is driven by better yields at the wash plant versus geology. Would appreciate your thoughts. Thank you.

I wanted to revisit the strip ratio common for the coal segment and I believe you are referring to clean coal strip ratio. So I was wondering to what extent the improvement in the strip ratio is driven by better yields at the wash plant versus geology I would appreciate your thoughts. Thank you.

I think Thats first time, we've ever.

Don Lindsay: I think that's the first time we've ever been asked that question. Very good, Lucas.

Very good.

Yeah, I know what if side the short answer is geology the yields at the plants are pretty much where they are we do expect some improvement in yields we've got a number of different projects with raised 21 him.

Robin Sheremeta: Yeah. No. It's the short answer is geology. The yields at the plants are pretty much where they are. We do expect some improvement in yields. We've got a number of different projects with RACE21 and some of the upgrades at Elkview certainly will help improve yield. The bulk of that change in strip ratio is really around just the less waste move per ton of coal we produce.

And some of the upgraded LT certainly will help improve yield but the bulk of that change in strip ratio is really around just.

Less waste move per ton of coal we produce yes, I'd encourage you to ask that question Lucas a year from no interest.

Don Lindsay: Yeah. I'd encourage you to ask that question, Lucas, a year from now. It'll be interesting.

I hope I will see it and the results before then so thank you very much but but by that answer.

Lucas Pipes: I hope I will see it in the results before then. Thank you very much for that answer. Just to turn it maybe to the broader met coal market, I don't think there have been many questions on that. Maybe, Réal, could you comment what you're seeing? Obviously, it's been really volatile over the summer, and be curious what do you see as the next year, what could be a catalyst? Thank you.

Okay.

Just to just to turn it maybe to the broader met coal market I don't think AD in many questions on on that that maybe it well.

Could you comment what you're seeing obviously, it's been really volatile over the over the summer and I'd be curious what do you see it the next.

What can be a catalyst thank you.

Alright Lucas.

Réal Foley: All right, Lucas. Thanks for that. I guess what we're seeing broadly in the market, yes, sure, the prices have corrected, but I would not say it's a weak market for coal. The pricing is still just under $150, which is, by all measures, still a decent price. We've seen demand quite resilient, and hot metal production is up just under 4% year to date August. We're continuing to see demand from our customer base. If we look at the various markets, that hot metal production is especially strong in India, Southeast Asia, and China, which is more than offsetting the reductions that we've seen in Europe, Japan, and the Americas.

Thanks for that.

I guess, what we're seeing broadly in the market, yes, sure the prices of corrected, but I wouldn't say did see weak market for coal pricing is still just under 150, which is by by all measures is still a decent primes.

And we've seen demand quite resilient and hot metal production is up just under 4% year to date August .

So we're we're continuing to see.

Demand from from our customer base, if we look at the various markets that hot metal production is especially strong in India Southeast Asia in China, which is more than offsetting the reductions that we've seen in Europe , Japan in the Americas.

If we look into 2020 compared to 2019.

Réal Foley: If we look into 2020 compared to 2019, the World Steel Association is forecasting steel demand to grow 2.9% in 2019, 1.7% in 2020. The interesting point in the number for 2020 is that growth outside of China is expected to still be 2.5% in 2020, and most of that is coming from India and Southeast Asia. We've also seen reduced steel exports from China, so that is supporting domestic production in the other countries. All in all, you know, we see demand for our products continuing to be fairly strong, and customers are continuing to nominate vessels in line with our contractual commitments.

So the World Steel Association is forecasting steel demand to grow like 9% in 2019.

1.7% in 2020.

But the interesting point in the number for 2020 is that growth outside of China is expected to still be two and half percent in 2020.

And most of that is coming from India and Southeast Asia.

We've also seen reduce steel exports from China, So that is supporting.

Domestic production in the other countries so all in all.

We see.

Demand for products continuing to be fairly strong.

And customers are continuing to nominate vessels inline with our contractual commitments.

That's very helpful. I appreciate all that all the color and continued best of luck. Thank you.

Lucas Pipes: That's very helpful. I appreciate all the color and continued best of luck. Thank you.

Thank you Keith.

Don Lindsay: Thank you.

Operator 3: Thank you. The next question is from Oscar Cabrera with CIBC. Please go ahead.

Operator: Thank you. The next question is from Oscar Cabrera with CIBC. Please go ahead.

My next question is from Oscar Cabrera with CNBC. Please go ahead.

Thank you operator, and good morning, everyone.

Oscar Cabrera: Thank you, operator, and good morning, everyone. I was wondering if I could just, you know, given the fact that you seem to be a lot more cautious with your cost reduction programs, how are you thinking about your capital allocation with regards to returning capital to shareholders now as we move into 2020?

Well Im wondering because again.

Given the flag that.

Slide you seem to be a lot more cautious with the cost reduction programs.

Hi, how are you thinking about capital allocation.

Birth to return to shareholders long.

Moving to 2000.

I'm not so nothing has changed with regards to the capital allocation model that we laid out.

Don Lindsay: Nothing has changed with regards to the capital allocation model that we laid out in detail, I guess, four or five months ago. You can run your models and come up with whatever available for return to shareholders based on what we disclosed previously. In terms of cost reduction program, I mean, we saw a pretty steep decline from $210 down to a low of $128 before bouncing back to $150 or so. In that kind of environment and with you know, trade wars, Brexit issues, all sorts of global stress and strain, it seemed prudent that we should initiate a cost reduction program and do it quickly, get on with it, get it done. That's what we did.

In detail I guess.

Four or five months ago.

And so you can run your models and come up with whatever available for returned to shareholders based on what we disclosed previously in terms of cost reduction program. I mean, we saw pretty steep decline from $210 U.S. down to a low of 128 before bouncing back to 150 or so.

So in that kind of environment and with the trade wars Brexit issues all sorts of.

Global stress and strain it seem prudent that we should.

Initiated cost reduction program and do it quickly get on with that get it done. So that's what we did.

Great.

Oscar Cabrera: Okay. If I may, just a follow-up on that. In terms of the RACE21, we're expecting, you know, almost completed here, CAD 150 million in 2019. Is that number for 2020 an additional CAD 250 million?

Just a follow on that in terms of their rates 21.

We're expecting well almost completed 250 million.

2019 that number.

For 2001.

Additional 216.

Oh, sorry, Oscar you're coming through in a very mindful of manner, but I think I got the question on one 150 path to value that we've disclosed on reached 21, so foreign investment onetime investment of $45 million, we will improve various aspects of the operations such that EBITDA of 150.

Don Lindsay: I'm sorry, Oscar, you're coming through in a very muffled manner, but I think I got the question on the 150 path to value that we disclosed on RACE21. For an investment, one-time investment of $45 million, we will improve various aspects of the operation such that EBITDA of $150 million or greater on an annualized basis will be in place by 31 December this year. For next year, in February, we will disclose the target for the end of 2020, and we'll do the same for 2021, and those numbers will be substantially larger than the 150. The 150 is the first go at this. We're right in the midst of implementing some of the things on the process side of the flow sheet.

Nine or greater on an annualized basis will be in place by December 31. This year for next year in February we will disclose the target for the end of 2020, and we'll do the same for 2021 and they those numbers will be substantially larger than the 150 150 is the first to go with this.

We're right in the midst of.

Of implementing some of the things on the process side of the Flowsheet usually results are very exciting. So so we're very pleased with the targets, we're obviously going to try and exceed them.

Don Lindsay: The early results are very exciting, so we're very pleased with the targets. We're obviously gonna try and exceed them, but we'll be able to report in detail on those results at the February investor call.

But we'll be able to report in detail on those results at the February .

Investor call.

Now looking towards the line Don.

Oscar Cabrera: Apologies for the line, Don. Is the additional RACE21 for 2020 included in the disclosed CAD 500 million that you have in your release today?

So as the additional rates 21 for 2020 included.

They disclose $500 million that you haven't you released today.

No no need to emphasize this once again and I'm pretty sure. We made a very clear in the release CRP of $500 million is entirely separate from raised 21 will be reported on separately completely different actions that we're taking raised 21 is all about innovation and doing things differently.

Don Lindsay: No, no. I need to emphasize this once again, and I'm pretty sure we made it very clear in the release. CRP of CAD 500 million is entirely separate from RACE21, will be reported on separately, completely different actions that we're taking. RACE21 is all about, innovation and doing things differently in different aspects of our operations. We will report the results of the two programs separately and, there's no overlap, no double counting.

In different aspects of our operations. We will report the results of the two program separately and Theres no overlap no double counting.

But.

Oscar Cabrera: Mm-hmm.

Thank you. The next question is from John Tumazos with John Tumazos very independent research. Please go ahead.

Operator 3: Thank you. The next question is from John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Operator: Thank you. The next question is from John Tumazos with John Tumazos Very Independent Research. Please go ahead.

Thank you very much.

Rachel Smith: Thank you very much. I don't wanna ask the same question the same way over again, but in terms of the met coal price decline, is there new supply or restarted mines producing in China? Is there higher output in Australia? We know Mozambique has been poor and the US is about the same. Or are the steel companies just asking for price relief because they don't think they're making enough profits in China?

John Tumazos: Thank you very much. I don't wanna ask the same question the same way over again, but in terms of the met coal price decline, is there new supply or restarted mines producing in China? Is there higher output in Australia? We know Mozambique has been poor and the US is about the same. Or are the steel companies just asking for price relief because they don't think they're making enough profits in China?

I don't want to ask the same question same way over again, but in terms of the met coal price decline.

Is there new supply or restarted mines producing in China.

Is there higher output in Australia, we know Mozambique has been for US is about the same.

There are the steel companies just asking for price relief.

Because they announced banks are making enough profits in China.

Yeah.

Don Lindsay: Yeah. A good question. The US is in decline, to make that clear, but over to Réal for more details.

Good question to us is in decline to make that clear, but over to rail for more detail.

Thanks, Don.

Réal Foley: Yeah.

Réal Foley: Thanks, Don. Yeah, John, there is a number of factors at play. First of all, you talked about domestic production in China. Domestic coking coal production in China is down again in 2019, and that trend is continuing. With respect to the market and the steel makers, you will have seen that the iron ore price has been quite high. It's come down recently, but it is still at a level that is putting pressure on steel makers' margins, and at the same time, steel prices have also come down. Steel makers are looking for relief where they possibly can get it. To your point on overall supply, Australian supply is up around 6 million tons year to date. They are still not back to pre-Debbie levels.

Yeah, John there is.

The number of factors at play.

First of all of you talked about domestic production in China.

Domestic coal production coking coal production in China is down again.

In 2019 and that trend is continuing.

With respect to the market.

Steelmakers and you will have seen that the iron ore price has been quite high.

It's come down recently, but it is still at a level that is putting pressure on steelmakers margins and at the same time steel prices have also will come down.

And so.

Steelmakers are looking for.

Relief, where they possibly can get it and to your point on.

Overall supply.

Australian supply is up around 6 million tons year to date.

They are still not back to pre Debbie levels forecast is for somewhere around 183 million tons production this year compared to 189.

Réal Foley: Forecast is for somewhere around 183 million tons production this year compared to 189 pre-Cyclone Debbie. When you look at other markets, you're right, Mozambique is down. They're down, Vale is down somewhere around 30% year over year at the end of Q3, so that's 1 million tons lower. In the States, the exports have declined somewhere between 1 million and 4 million tons, depending on which source you use. Wood Mackenzie is forecasting that they could be down as much as 7 million tons this year. There's a few mines that have actually been idled so far, hard coking coal mines.

Hi, CLO debt.

When you look at other markets.

You're right Mozambique is down they are down valley is down somewhere around 30% year over year at the end of Q3, so thats a million tons lower.

In the states the exports.

Decline somewhere between a million and 4 million tons, depending on which source you use.

And woodmac is forecasting the could be down as much as 7 million tons. This year.

And there's a few months that.

I've actually been idled.

So far hard coking coal mines.

Total of somewhere around one 1.5 in terms of production or sold in 2018 from those mines that I've been sounds to be idle this year.

Réal Foley: A total of somewhere around 1.5 million tons of production or so in 2018 from those mines that have been announced to be idled this year. It's a number of factors that have impacted the coal price. Maybe one of the last one is every time we see a quick correction in the coal price, there is a dramatic increase in the number of transactions that we see reported by the assessment providers. That is probably a result of traders offloading positions and maybe to a lesser extent, some opportunistic purchasing from some steel mills. That's what we're seeing out there.

So it's a number of factors.

But I have impacted the coal price and maybe one of the last one is every time, we see a quick correction in the coal price. There is a dramatic increase in the number of transactions that we see reported by the assessment provider.

That is probably.

Dissolve traders offloading positions and maybe to a lesser extend some opportunistic purchasing from from some steel mills.

So.

So thats what were seeing out there.

So if steel output is up 8% to 9% in China.

Rachel Smith: If steel output is up 8% to 9% in China, but the coal supply is not up, is it reasonable to infer that the Chinese steel mills must have liquidated a half a month or more of met coal inventories? Iron ore, the iron ore output looks to be down 6%, and it appears that the steel mills have liquidated about one month of iron ore-

John Tumazos: If steel output is up 8% to 9% in China, but the coal supply is not up, is it reasonable to infer that the Chinese steel mills must have liquidated a half a month or more of met coal inventories? Iron ore, the iron ore output looks to be down 6%, and it appears that the steel mills have liquidated about one month of iron ore-

But to coal supply is not up.

Is it reasonable to one for.

The Chinese steel mills must have liquidated.

Half a month.

Or more.

I have met coal inventories.

And iron ore.

Our output it looks to be down 6%.

And it appears that steel mills of liquidated about one month of iron ore.

Supply inventories in process.

John Tumazos: Supply inventories in process?

Yeah, so well it's difficult to to get precise numbers on on China.

Réal Foley: It's difficult to get precise numbers on China. What we know for sure is that seaborne imports year to date at the end of August are up over 3 million tons. They are still continuing to purchase coal from the seaborne market, and that's also helped by the arbitrage. The domestic coal is actually around $30 or so a ton more expensive than the seaborne.

But what we know for sure is that.

Seaborne endpoints here today.

At the end of August are up over 3 million tons. So they are still continuing to purchase coal from from the seaborne market and that's also helped by the arbitrage the domestic the domestic coal is actually around $30 or so.

And Tom more expensive and see more.

Thank you very much.

John Tumazos: Thank you very much.

Thank you.

Operator 3: Thank you. The next question is a follow-up question from Greg Barnes with TD Securities. Please go ahead.

Operator: Thank you. The next question is a follow-up question from Greg Barnes with TD Securities. Please go ahead.

Next question is a follow up question from Greg Burns with TD Securities. Please go ahead.

I'm a the active water treatment facilities is noted that looked at least today that you expect fording river to be the loss when you build.

Greg Barnes: Yeah, thanks. On the active water treatment facilities, you've noted in the release today that you expect Fording River to be the last one you build to be replaced, I assume, by SRF or something else. When do you think you're gonna be able to get in a position to give us a clearer view on what the strategy will be in terms of CapEx and OpEx profiles going forward?

To be replaced I assume bias RF or something else.

When do you think you're going to be able to in a in a position to give us a clear view on on the strategy will be.

Capex and Opex profiles going forward.

Okay.

Robin will fill in some details but.

Don Lindsay: Robin will fill in some details, but nothing really has changed from what we announced last quarter. The government has endorsed saturated rock fills, and we are building the Elkview facility. It'll be in place by the end of 2020 and presumably will operate very well as it has so far to date for some time. That will then give the government confidence to continue to allow us to substitute saturated rock fill for water treatment plants in the overall plan that we have with the government. Looks very good from here, and that's how we're thinking about it, which is why we have that disclosure in this quarter. Robin, do you have anything else to add on that or is it?

Nothing really has changed from what we announced last quarter.

The government has endorsed a set trade rock fills and.

We are building the few facility it will be.

In place by the end of 2020, and presumably will operate very well as it has so far to date or for some time.

And that that will then give the government confidence to continue to allow us to substitute sentry Rockville for water treatment plants.

In the overall plan that we have with the government so.

Looks looks very good from here and that's how we're thinking about which is why we have that disclosure and this quarter revenue you anything else to add on that or not really I'd, maybe just add the we're already in the process of of designing and initiating early early works on the next saturate a rock fill out fording River, which would.

Robin Sheremeta: Not really. I'd maybe just add that, you know, we're already in the process of designing and initiating early works on the next saturated rock fill at Fording River, which will extend the water treatment required, in addition to what we're building at Fording River South as was the plan before. So our strategy is very much linked to saturated rock fills now as the best-

Which will extend the water treatment required in addition to what we are building it for yourself as was the plan before so our strategy is very much linked to saturated rock those now as the best.

Don Lindsay: Yeah

In fact, we down tools on engineering for the water treatment plant that the other part of it for quite some time ago, three or four months ago. So yeah, we're proceeding on that basis Greg.

Robin Sheremeta: available technology.

Robin Sheremeta: In fact, we downed tools on engineering for the water treatment plant at the other part of it quite some time ago, three or four months ago. Yeah, we're proceeding on that basis, Greg.

Plays if there was some big capex numbers associated with active water treatment in the guidance you've given us before.

Greg Barnes: Okay. There were some big CapEx numbers associated with active water treatment in the guidance you've given us before. I'm just trying to get a sense of when we can get some update on those numbers now that SRF looks like it's the way you're gonna go.

I'm just trying to get a sense of when we can get some update on those numbers now that Srs looks like it's the way you're going to go.

Well I think the update is the same that we've said that the capex for sidewalk Bill is around 20.

Don Lindsay: Well, I think the update is the same, that we've said that the CapEx for saturated rock fill is around 20, maybe 25% of what an active water treatment plant would be, and the OpEx is about half. That remains the same. We're proceeding with saturated rock fills. We can't give you like a five-year forecast without having had government approvals, of course. They're gonna do it one at a time until they've really seen it running for some time, and we respect that. I think you have the information already. It's a question of whether you choose to use it.

Maybe 25% of what our active water treatment plant would be and the opex is about half.

That remains the same and we're proceeding with saturated rock feels we can't give you like.

Five year forecast without having a government approvals of course, and they're going to do one at a time until they really seen seen at running for sometime and we expect that so I think you have the information already has a question whether you you choose to use it.

Okay fair enough.

Greg Barnes: Okay. Fair enough.

Thank you.

Operator 3: Thank you. The next question is from Mark Levin with Seaport Global. Please go ahead.

Operator: Thank you. The next question is from Mark Levin with Seaport Global. Please go ahead.

The next question is from Mark Levin with Seaport Global Please go ahead.

Great. Thanks so.

Mark Levin: Great. Thanks. Going back to Neptune or just circling back to Neptune in the comments that you made in the report about the increase in CapEx, can you maybe provide some more color as to what's behind that increase? Is there going to be an increase in the amount of capacity available to you? I think that you had mentioned before that you would be going from, you know, current capacity of 12.5 million up to 18.5 million. Does that change with this increase in CapEx, or is there something else behind it?

Going back to next June or just circling back to Neptune in the comments that you made in the and the report about the increase in Capex can you maybe provide some more color as to as to what's behind that increase.

Is there going to be an increase in the amount of capacity available to you I think you had mentioned before.

That you would be going from current capacity of 12, and a half million up to 18 and a half million does that change with this increase in capex or is there something else behind it.

We have stayed with the ATM half million public target.

Don Lindsay: We have stayed with the 18.5 million public target. We certainly believe, as we have said before, that we will do much more. I'll turn over to Alex for the specifics of what's behind the increases.

We certainly believe as we've said before that we will do much more.

But I will turn it over to Alex for the specifics of what's behind increases.

Okay. Thanks, Mark So Neptune right now were 80, just little Reighty present, engineered and 30% construction and just in the process of completing a.

Andrew Stankiewicz: Yeah. Okay. Thanks, Mark. Neptune right now we're just a little over 80% engineered and 30% construction, and just in the process of completing a definitive capital cost estimate, which we expect to have finished here in Q4. The initial indications coming out of that cost estimate are that the costs are gonna increase to just under CAD 800 million. There's a number of factors really that have driven these increases. The first and foremost is really site-specific conditions. As we were working on the site, there's been some challenging subsurface geotechnical conditions. As we get out of the ground, those end up getting behind us. We also have some productivity impacts of constructing within an operating terminal.

Alex Christopher: Yeah. Okay. Thanks, Mark. Neptune right now we're just a little over 80% engineered and 30% construction, and just in the process of completing a definitive capital cost estimate, which we expect to have finished here in Q4. The initial indications coming out of that cost estimate are that the costs are gonna increase to just under CAD 800 million. There's a number of factors really that have driven these increases. The first and foremost is really site-specific conditions. As we were working on the site, there's been some challenging subsurface geotechnical conditions. As we get out of the ground, those end up getting behind us. We also have some productivity impacts of constructing within an operating terminal.

Definitive comp capital cost estimate, which we expect to have finished here in the fourth quarter. So the initial indications coming out of that cost estimate our that thick in costs are going to increase to just under $800 million and there's number of factors radius of driven these increases the first and foremost is really.

Specific conditions, so as we as we were working on on the site Theres been some challenging subsurface Geo technical conditions as we get our the ground those those end up getting behind US. We also have some productivity impacts of constructing within an operating terminal. So I really with respect to access to work fronts.

Andrew Stankiewicz: Really with respect to access to work fronts, ability to have laydown and then just worker productivity in a congested site. We have some costs for additional project scope and some additions that weren't included in the original estimate. We sanctioned the project back in 2017 at about 5% engineered. We've had quite a bit of engineering design evolution and change, and costs associated with those as we progress from that basic engineering level to our current 80%. We have seen some costs related to some of the schedule changes over the last year, as well as some of them. We're putting some costs into to continue to maintain an accelerated schedule. That includes things like night shift, longer weeks, etc.

Alex Christopher: Really with respect to access to work fronts, ability to have laydown and then just worker productivity in a congested site. We have some costs for additional project scope and some additions that weren't included in the original estimate. We sanctioned the project back in 2017 at about 5% engineered. We've had quite a bit of engineering design evolution and change, and costs associated with those as we progress from that basic engineering level to our current 80%. We have seen some costs related to some of the schedule changes over the last year, as well as some of them. We're putting some costs into to continue to maintain an accelerated schedule. That includes things like night shift, longer weeks, etc.

Really to have lead down and then just worker productivity in it can just congested site.

We have some costs for additional project will some admissions that weren't included in the original estimate.

We sanctioned the project back in 2017 at about 5% engineered so we've had quite a bit of engineering design evolution and change.

Cost associated with those as we progressed from that basic engineering leveled or current 80%.

We have seen some cost related to some of the schedule changes over the last year as well as some of that so we're putting some costs into go to continue to maintain and accelerate schedule that includes things like night shift longer weeks et cetera, and then we have some additional cost related to escalation as you bring that to the dollars forward to the just the current year as well as some.

Andrew Stankiewicz: We have some additional costs related to escalation as we bring the dollars forward to the current year as well as the actual pricing out from contracts and materials. All those are included in this definitive estimate, which was currently underway, and we should be able to confirm these when that's complete.

Alex Christopher: We have some additional costs related to escalation as we bring the dollars forward to the current year as well as the actual pricing out from contracts and materials. All those are included in this definitive estimate, which was currently underway, and we should be able to confirm these when that's complete.

We are actual pricing up from contracts and materials. All those are included in this.

Definitive estimate, which which was currently underway and we should be able to confirm these.

That is complete and maybe just to refresh the real value. What we're doing this this will be enormously valuable well to tech for three main reasons first the operating costs.

Don Lindsay: Maybe just to refresh the real value of what we're doing. This will be enormously valuable to Teck for three main reasons. I mean, first, the operating cost will be significantly lower and much closer to our competitors in Australia. That will be an enormous ongoing savings for, you know, the length of the mine life decades. Net present value of that in itself is huge. Second, and just as important, maybe even more valuable, is that we will then have consistency of delivery. When coal prices are high, we won't be put at the back of the line and watch thermal coal go ahead of us. We'll be able to deliver our product and capture the high margins when they're available.

We will be significantly lower and much closer to our competitors in Australia and that will be an enormous ongoing savings.

For the length of the mine like decades, so net present value that in itself is huge second and just as important maybe even more valuable is that we will then have consistency of delivery and when coal prices are high we won't be put at the back of the line and watch thermal coal go ahead of US we'll be able to deliver.

Product and capture the high margins when they're available and so that that will be worth hundreds of millions of dollars to us in some years because it has cost us under $1 million and in recent years, and then third will be able to deliver the consistent quality our high quality hard coking coal will not be contaminated and that is very important to our customers.

Don Lindsay: That will be worth hundreds of millions of dollars to us in some years, because it has cost us hundreds of millions dollars in recent years. Then third, we'll be able to deliver the consistent quality. Our high quality hard coking coal will not be contaminated. That is very important to our customers. As you know, everywhere in the world, customers are getting more demanding in terms of quality, and that's just something that we have to keep up with, and it'll be much easier to do at Neptune. We look forward to getting-

As you know everywhere in the world customers are.

Getting more demanding in terms of quality and that's just something that we have to.

Keep up with than it will be much easier to do at Neptune. So we don't see.

Yeah that makes it all that stuff all that makes it makes perfect sense. Don So is there any reason why you wouldn't shift the lions share of your cold away from West shore to Neptune, given all of those factors or is there a reason why you would want to keep your keep it diversified among different pores.

Mark Levin: No, that makes sense. All that stuff. All that makes perfect sense, Don. Is there any reason why you wouldn't shift the lion's share of your coal away from Westshore to Neptune, given all of those factors? Or is there a reason why you would wanna keep your, you know, keep it diversified among different ports?

Well you've seen the scope of the project. The we've announced 18 ethane tons. We think we'll do a lot more so you can assume we will be moving the lion's share I think you want to diversify risk in some form between other ports that are available and so.

Don Lindsay: Well, you've seen the scope of the project. We've announced 18.5 million tons. We think we'll do a lot more. You can assume we will be moving the lion's share. I think you want to diversify risk in some form, between other ports that are available. We'd probably do some, but that remains to be seen. Those decisions will be made sometime in the future.

We'd probably do some but that remains to be seen those decisions will be made some sometime in the future.

Got it let last question too I just to make just a clarification one on QB. Two I think you mentioned in your remarks that you would expect to have an updated capital estimate in February was that correct.

Mark Levin: Got it. Last question to you. Just to make a clarification, one on QB2. I think you mentioned in your remarks that you would expect to have an updated capital estimate in February. Was that correct?

In Q1, Weve on Q1, I'm sorry, when you report when you report earnings next my apology, yes. So.

Don Lindsay: In Q1 we've said.

Mark Levin: Oh, in Q1. I'm sorry. When you report earnings next. My apology.

Don Lindsay: Yeah. Yeah, I'm not sure exactly when in Q1, whether it's February or later, but why don't we just say Q1?

I'm not sure exactly when in Q1, whether its February or later, but why would you say Q1.

Fair enough. Thank you very much for the time.

Mark Levin: Okay, fair enough. Thank you very much for the time.

Thank you. The next question is any follow up question from Orest Wowkodaw with Scotiabank. Please go ahead.

Operator 3: Thank you. The next question is a follow-up question from Orest Wowkodaw with Scotiabank. Please go ahead.

Operator: Thank you. The next question is a follow-up question from Orest Wowkodaw with Scotiabank. Please go ahead.

Hi, Thanks for taking my follow up I'm, just thinking about the potential capex spending for next year and it seems like there's a lot of moving parts with the deferrals on one hand saving capital, but then higher capital related to Neptune coming into the budget next year I'm.

Orest Wowkodaw: Hi. Thanks for taking my follow-up. I'm just, you know, thinking about the potential CapEx spending for next year, and it seems like there's a lot of moving parts with the deferrals on one hand, saving capital, but then higher capital related to Neptune coming into the budget next year. Like, outside of QB2 spending, which is obviously ramping up, should the rest of the business, we think about it as largely kind of flat from a CapEx perspective because there's a lot of offsetting components next year?

Like outside of QB, two spending which is obviously ramping up.

Sure the rest of the business should we think about it is largely kind of flat from a capex perspective, because there's a lot offsetting components next year.

I just want to repeat again, while there are some capex deferrals. The bulk of things are our cuts actual cut some capex that won't recur so Ron mills over too yes.

Don Lindsay: I just want to repeat again. While there are some CapEx deferrals, the bulk of things are cuts, actual cuts in CapEx that won't recur. Ron Mills, over to you.

Ron Mills: You know, it's We're in the middle of the budgeting process, Orest, so it's hard to really comment on exactly what's gonna come out. Order of magnitude, the sustaining and the deferred stripping, which is the main capital buckets, before some of the odd items have been historically about CAD 1.2 billion a year. They go up and down at any given year, depending on the nature of the projects. I think it's probably best to wait until we give the guidance in Q1.

You know, it's we're in the middle of the budgeting process or a so it's hard to really comment on exactly what's going to come out, but the order of magnitude the sustaining and the apps deferred stripping, which is the main capital buckets before some of the ought items have been historically about $1.2 billion a year and they.

Go up and down in any given year, depending on the nature of the projects but.

I think it's probably best to wait until we give the guidance in Q.

Q1.

Okay. Thanks very much.

Orest Wowkodaw: Okay, thanks very much.

So operator Atlanta.

Ron Mills: Operator Elena, I think we're coming to the end of our time, and maybe we'll turn this back over to Don for some closing remarks now. Okay. Just before we wrap it up, I would note that when we get together next in February, one of our key executives will have retired by then, and that's Andrew Stankiewicz, our Senior Vice President of Marketing, Sales, and Logistics. I just want to publicly thank Andrew for a tremendous career with Teck over 30 years. He's made a wonderful contribution, and for many years, he has been the lead guy in the world in setting the benchmark treatment charges in the zinc industry. Certainly, he can retire with great pride and tremendous accomplishments and contribution to Teck.

We're coming to the end of our time, maybe we'll turn this back over to dawn for some closing remarks down Okay. Just before we wrap it up I would note that when we get together next in February one of our key executives will have retired by then and that's Andrew Stonkus, Our senior Vice President of marketing sales and logistics I just want to publicly thank Andrew for true.

Amanda's career with tech over 30 years, He's made a wonderful contribution and for many years. He has been the lead guy in the world and setting the benchmark treatment charges in the zinc industry and.

Certainly he can retire out with a great pride and tremendous accomplishments and contribution detect and succeeding Andrew will be our own rail fully who of course, many of you have and asking him questions on this call and frankly using dominating the conversation for many years on the price recall he is widely respected in them.

Don Lindsay: Succeeding Andrew will be our own Réal Foley, who of course many of you have been asking him questions on this call, and frankly, he's been dominating the conversation for many years on the price of coal. He is widely respected in the market by the customers and competitors as well, as was Andrew in zinc. We are very fortunate to announce his promotion to senior vice president of marketing, sales, and logistics. Congratulations, Réal, and we're counting on you.

Market by the customers and competitors as well.

As was Andrew in zinc and so we're very fortunate to announce his promotion to senior Vice President marketing sales and logistics and so congratulations rail and we're counting on you.

And with that thank you all for joining US today, we'll look forward to talking to in February .

Réal Foley: Thank you.

Réal Foley: With that, thank you all for joining us today. We'll look forward to talking to you in February.

Don Lindsay: With that, thank you all for joining us today. We'll look forward to talking to you in February.

It's Tom Thanks.

Ron Mills: Thanks, Don.

Thank you I come from has now ended.

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