Teck Resources Limited Q1 2023 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to Texas first quarter 'twenty to 'twenty three earnings release conference call.
At this time all participants are in listen only mode. Later, we will conduct a question answer session.
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This conference call is being recorded on Wednesday April 26 2023.
I would now let's turn the conference call over to Fraser Phillips, Senior Vice President Investor Relations and strategic analyst.
Please go ahead.
Thanks, Gerry and good morning, everyone and thanks for joining US this morning for our quarterly conference call.
Please note today's call contains forward looking statements various risks and uncertainties may cause actual results to vary Teck does not assume any obligation to update any forward looking statements.
Please refer to slide two for the assumptions underlying our forward looking statements. In addition, we will reference various non-GAAP measures throughout this call.
Operations and reconciliations regarding these measures can be found in our MD&A. The latest press release on our website.
Jonathan Pryce, our CEO will begin today's call with some comments on this mornings announcement.
There's still pissed tie our CFO will follow with our first quarter 2023 results.
And we will conclude the call with a question and answer period.
With that I will turn the call over to you Jonathan.
Thank you Fraser and good morning, everyone before we get into the Q1 results I want to start by speaking to our announcement. This morning that we have withdrawn the separation proposal there was to be considered by shareholders at our annual and special meeting today.
That proposal was the result of a detailed process undertaken by a special committee of the board to review all the options and identify the best path forward for our shareholders and company.
From the outset, we've been clear that the focus of that work by our board, our senior management team and myself with maximizing value for our shareholders.
And that work's family identified separating base metals in steelmaking coal was the best way to achieve that goal.
There is no doubt in my mind, all the minds of our board and management team, there is greater value and Optionality and having a standalone pure play metals business separate from the steelmaking coal business and.
We are confident from all discussions with shareholders that a substantial majority of shareholders support the strategy of separating tech metals E V O O.
At the same time, we've also had very clearly that some shareholders would prefer a more direct approach for that separation.
So our plan going forward is to evaluate alternatives for responsible separation of our businesses taking into account the feedback we've received.
Our goal will be to pursue a simpler and more direct separation, which is the best path to unlock the full value of tech for shareholders.
My job is about responsibly, creating value for our shareholders and all stakeholders.
We drive intrinsic value value organically through the development of best in class projects and executing on our growth strategy.
There is real value in being a good actor with good business practices and the approach to doing business has made check a partner of choice minimizing disruptions to our operations and creating opportunities for our business and our stakeholders.
<unk> is a fantastic company with a strong future we have the right assets the right partners and the right people to capture the opportunities created by the energy transition, which we are well positioned to realize in the near term.
And we have a number of near term value creation milestones ahead of us.
Those include the ramp up of our flagship QB two copper project demonstrating.
Demonstrating QB two the ability to operate consistently to plan is a key area of focus for us and a major value inflection point.
Importantly, even beyond QB, two we have a portfolio of high quality cornerstone assets in stable mining jurisdictions as well as the number of copper growth projects in our portfolio.
And this is a copper growth pipeline that is the envy of the industry.
In an advanced state of readiness, thanks to years of strategic and deliberate pre investment.
We will be in a position to double our copper production in the near term and double it again by the end of the decade.
At the same time, our steelmaking coal business is best in class underpinned by an extensive reserve base with high margins.
It will be positioned to capitalize on the developing global supply gap from existing mine depletion and lack of new projects coming into production.
Long term shareholder value can be created in a variety of ways and today. We are focused on a three pronged approach to value creation.
Firstly through a separation of course, the horses to unlock the value of an exceptional high growth base metals business.
Secondly, through the development of our copper portfolio of copper projects to create substantial new intrinsic value.
Thirdly on all the while retaining our focus on strong cash returns to our shareholders.
Beyond this focused approach M&A can also play a role in creating value when done at the right price with the right partner at the right times.
We have premium businesses and when it comes to M&A, we firmly believe that competition for assets drives value.
And M&A, you'll have to carefully evaluate both risks of value and timing as body. It is important to understand the consideration you would receive and the timing of when you would receive it.
All of these factors inform our thinking as to how and when.
It contemplates a transaction with anyone.
Management and the board take that U T is incredibly seriously, but will not engage on something that is a distraction from our mandates to create the greatest value with the greatest certainty for our shareholders.
I want to emphasize that we have greatly appreciated the engagement that we've had with our shareholders leading up to today and the very strong support shown for the goal of separation to unlock value.
We look forward to working to execute on our separation approach that reflects that considered feedback and ensure we maximize the value and opportunity it creates for all of our stakeholders.
So thank you and with that I will turn it over to crystal to discuss our Q1 results.
Thanks, Jonathan.
Adjusted EBITDA was $2 billion and adjusted profit attributable to shareholders was $930 million or $1 78 per share on a diluted basis.
We paid dividends of 62, and a half cents per share in the quarter, representing a quarterly base dividend of 12, and a half cents on a supplemental dividend of 50 cents per share. Additionally.
Additionally in February the board authorized the purchase of up to $250 million of outstanding class B shares.
Turning now to slide nine.
During the quarter, we significantly advanced our copper growth strategy with the production of first of all copper concentrate at QB. Two we are just getting started on unlocking the tremendous value from QB, which is truly a world class mine.
We achieved a number of significant milestones in the quarter in the QB to ramp up the desalination plant is operational and producing water, which is being delivered to the concentrator through the water pipeline.
The primary crusher and conveyors are delivering ore to the stockpile.
Commissioning of the grinding and flotation systems on line one are ongoing the.
The tailings facility has received tailings from commissioning activities and a concentrate transport system is in pre commissioning.
We continue to expect to double our consolidated copper production in 2024 as QB two is expected to reach full production rates at the end of this year.
However, the result of the delay in the start up of line, one and recent foreign exchange impacts have put pressure on our project capital cost guidance.
Significant efforts are ongoing to alleviate these cost pressures. However, total capital cost for the project could increase to U S. Eight to $8 2 billion.
Over 30% of the increase from our previously disclosed guidance relates to non controllable foreign exchange impacts.
Turning now to slide 10, with the key highlights from our first quarter. We highlight the achievements on slide 10 across all four pillars of our copper growth strategy in the first quarter.
First in addition to production our first copper at QB, two we meaningfully advanced the path to value for our other copper growth projects in our portfolio.
In particular, we successfully closed two significant transactions relating to the joint venture partnerships for new range and San Nicolas.
At the same time, we marked a step change towards the rebalancing of our portfolio of high quality assets to low carbon commodities with the closing of our previously announced sales of quintet and our interest in Fort Hills, the latter completes our successful exit from the oil business.
Third and as I mentioned previously we returned significant cash to shareholders through dividends and have authorization for $250 million of share buybacks.
This reflects the distribution of 40% of the Fort Hills proceeds received in the first quarter.
We continue to maintain a strong balance sheet with liquidity of $8 billion, including $2 6 billion of cash.
And finally, we continue to build on our strong sustainability track record we were honored to be recognized as one of the global 100, most sustainable corporations by corporate Knights for the fifth consecutive year and we are pleased to be named to the Bloomberg gender equality index for the sixth consecutive year.
We've outlined the key drivers for our profitability on slide 11.
Adjusted EBITDA was $2 billion in the quarter and lower than the same period last year as a result of lower prices for our principal products.
To a lesser extent lower sales volumes for copper and zinc and inflationary pressures on our unit costs also impacted EBITDA as compared to Q1 of last year.
Inflationary cost pressures have moderated but continue to have an impact across our business units in the quarter as we expected would be the case when developing our 2023 annual cost guidance.
Inflation impacted our operating costs by 6% when comparing to the same period last year.
It is important to note that the primary drivers of cost increases are not related to key mining drivers such as mine productivity and strip ratio, which both remain relatively stable.
We remain highly focused on managing our controllable operating expenditures and our unit cost guidance is unchanged across our business units from our previously disclosed ranges for 2023.
Turning to <unk>.
Looking now at each of our business units in more detail and starting with copper on slide 12 copper.
Copper prices remained elevated despite the decline in the quarter, reflecting the continuing strong underlying market fundamentals copper.
Copper production was lower than the same quarter last year, primarily due to harder ore and lower grades at Highland Valley and lower grades at Antena as anticipated.
An unexpected five day suspension of operations at out to me not due to severe weather in late March impacted our Q1 production.
Overall full year production and unit cost guidance remain unchanged.
Turning to zinc slide 13 during.
During the quarter severe weather events impacted zinc concentrate production at Red dog and refined zinc production at trail is.
Additionally trail was impacted by unplanned maintenance as well as a 22 day shut down for kids that boiler repairs.
Both Red Dog and trail have returned to stable operations by the end of the quarter.
And looking forward, we expect Red dog zinc in concentrate sales of 45000 to 55000 tonnes in the second quarter, reflecting the normal seasonality of our sales.
Turning now to steelmaking coal on slide 14.
Prices remained well above historic averages. Despite the decline in the quarter sales were $6 2 million tonnes within our guidance range and above the same quarter last year.
Logistics chain performance continued to be impacted by the weather related disruptions from the fourth quarter of last year, but had substantially recovered by the end of the first quarter.
Our transportation costs in Q1 reflect higher rail rates and port costs. As a result of increased utilization of third party terminals.
We expect transportation costs to normalize throughout the balance of the year and our transportation unit cost guidance is unchanged for 2023.
Looking forward, we expect Q2 sales of six two to $6 6 million tonnes as we complete the balance of deferred sales from the fourth quarter and reduce our clean coal inventories to normal levels.
Yeah.
As illustrated on slide 15.
Our financial position remains very strong our liquidity is currently $8 billion, including $2 6 billion of cash.
In the first quarter, we returned $321 million to shareholders through dividends and we reduced our debt levels by 144 million with the redemption of notes upon maturity in February .
Our board also authorized $250 million of share buybacks in February under our normal course issuer bid.
Looking ahead in accordance with our capital allocation framework, we remain focused on balancing our investment and growth against returning capital to shareholders, while maintaining a strong balance sheet.
And with that I'll turn it back over to Jonathan.
Thanks Crystal.
Now on slide 17, I want to close by reiterating that our plan going forward is to evaluate alternatives for responsible separation of our businesses taking into account feedback we've received.
Our goal will be to pursue a simpler and more direct separation, which is the best path to unlock the full value of tech for shareholders at.
At the same time, we will continue to execute our copper growth strategy.
We will advance our copper growth portfolio, which is the envy of our peers commissioning and ramp up with QB two will of course be a key focus.
We will rebalance our portfolio to copper, while reducing the proportion of carbon in our overall business.
We will continue to follow our rigorous capital allocation framework balancing growth and cash returns to shareholders.
And at the same time, we will maintain our leadership in responsible resource development drive best practices and sustainability and share in the benefits of mining with all stakeholders overall.
Overall, <unk> is very well positioned to drive long term sustainable shareholder value.
Thank you and operator, please open the line for questions.
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The first question comes from Greg Barnes with TD Securities.
Jonathan now that you've been through this process do you think investors recognize the value in the coal business and are willing to take on a largest share individually of that coal business, rather than obviously with the complicated transition capital structure, and that's something that's cleaner and more direct.
Hopefully you've got to I guess independent valuations on that business of around 11 billion Canadian.
So that's what the market's telling you. It's worse do you think investors will be willing to accept that valuation directly.
Thanks for the question Greg.
First thing I would say, it's very clear that the <unk>.
Market recognizes the value of the businesses that comprise teck resources today, one of the benefits through the engagement we've had with investors over the last two months is it has shown a light on the quality of the business. We have today, but also the quality of the growth projects, we have before us.
The other thing we heard clearly from a shareholders through this process is they do see the value in a separation of Elk Valley resources and tech metals as being the the most value creative path.
In terms of shareholder value, but what we've what we've heard as you've just referenced is that they would like to see a simpler and more direct sep.
Separation and that's exactly what we will not go away.
Study will look at a range of alternatives there with a focus on maximizing shareholder value and work through those details.
I think theres no doubt Greg that through this process the quality of our techs steelmaking coal business or all value resources has been very very well recognized in terms of the quality of the products that we produce in terms of the the high margins.
At which that business operates on the cash flow. That's generated so yes. There is there is clearly no a far enhanced understanding of the value of that business.
Great. Thank you Jonathan that's it for me.
Thanks, Greg.
Okay.
And the next question comes from our work it out with Scotiabank.
Please go ahead.
Hi, Good morning, Jonathan just following up on Greg's questions in terms of separating the business.
You run through the possible alternatives that you're considering and would they include.
Potentially a full spin out of the coal business to shareholders or is it.
Another alternative a sale of the business.
Thanks for that question already so I won't run through all of the options available to us today, but suffice to say we will look very broadly are the full suite of options that would satisfy both a simpler and more direct separation of these businesses of course, you know that that work has to be undertaken.
Oh Boy the management team and with the board and that is the focus as I've said now going forward.
And of course when that work is is advanced and concluded.
We will say more about that.
But what's really important to note is that we will continue to work with our shareholders.
Their perspectives and understand their feedback as that work progresses.
Can you just as a follow up can you give us an expected timeline on how long you think the board and management needs to review and come up with a new separation strategy.
Because as I said as I said, we will look at a range of alternatives a resi I wont put a fixed date on that right now in terms of when we will communicate more about that as you can imagine this work will be a priority for us, but we need to ensure we take the time to engage with shareholders to understand their perspectives and come come back with it.
Reposal that's that meets those needs are and is focused on maximizing shareholder value through you know through unlocking that value with the separation of DVR and tech metals.
Okay, and just one more if I could just given the public separation plan, but that's been in front of shareholders have you been approached at all by another party to buy the coal assets can you give us any sort of color. There has there been interest in the market.
So look I don't know.
I won't speculate in any detail on that or as you would expect but again suffice to say that the the process. We've been through over the last two months, which of course has been a very public one.
And there's significant interest in both businesses E V R and tech metals, and it's very clear that the value of those businesses is well recognized and hence the value of Teck resources is very well recognized. So you know we've been greatly encouraged by that are on it and it really has shown a spotlight on.
The quality of the business that we have here as well as the growth options that we have ahead of us.
Thank you Jonathan.
Thanks, Chris.
The next question comes from Emily Chang with Goldman Sachs. Please go ahead.
Thanks, Jonathan and Crystal.
My question is around a follow up on the separation that has been proposed I.
I guess is there a sense of urgency in getting a separation done. This scenario could you wait until QB two becomes more free cash flow generative and you've got further deleveraging at the corporate level before you could approach that that next our restructuring process.
Yeah. Thanks for that question Emily you know as we look through the alternatives here that we will have for a simpler and more direct separation of course, one of the things. We will consider is timing as part of lots at a proposal in terms of what would be optimal.
And maximize shareholder value.
Again as I as I mentioned with respect to <unk> question.
Give any more details now on exactly what that timing would look like but you know to your point, we will consider timing is a key factor here in terms of how to maximize value for our shareholders.
Great and then I'll follow up on QB, two actually I was curious around the update around the jetty construction and when we should expect to see that come online and therefore, when we would expect our logistical costs to start ticking down for that asset. Thank you.
Yeah. Thanks, Emily <unk> on that point, so I'll hand over to to Red Conger, our chief operating officer to make some comments.
Yeah, Thanks suddenly the jetty.
The jetty itself as long as critical path will be completed later this year, our logistics team has come up with a real.
Really.
Create a way to sell our concentrate up until that.
Construction is completed so we will be able to ship them. So concentrate are starting later this quarter for the remainder of the year until the journey is completed.
Okay.
Great. Thank you.
The next question comes from Carlos de Alba with Morgan Stanley .
Please go ahead.
Yeah. Thank you good morning, everyone.
The question I had is you saw on QB two capex increase.
Just wanted to go back and check what are the FX assumptions that are.
Underneath the the original Capex I thought he was 775 G.
Julian pesos per dollar we have been above that level and my understanding was that a weaker peso would favor them.
The company. So yeah, if you could provide maybe a little bit more color around that that'd be great.
Thanks for the question card also hand, you over to Crystal for that one.
Hi, Carlos Thanks for the question.
Just in relation to the 775 that you're referencing that that wasn't all that FX assumption when we updated our guidance in the third quarter. We used a range of 900 to 975 and the new estimate of Capex is based on an 800 to 850, so you're seeing actually a strengthening them.
Of the peso not not a weakening and and that's the result of the impact is that is the capex increase.
That's very clear and just a follow up any any color on the timing of the remaining disbursements.
Yeah, I mean, it'll be spent over over the remainder of the year that and and probably a little bit into the next year. The to go capital based on that updated guidance range is U S $800 billion to $1 billion. So you can expect that to be spent over the rest of the year in and probably some of them.
That will move into 2024.
Thank you very much.
Got it thank you.
The next question comes from Brian Macarthur with Raymond James.
Please go ahead.
Hi, Good morning, as you look at potential options going forward for the coal obviously shareholder opinion very important but you also have partners at the end of the day is there anything and I'm one of the unique things about <unk> is you kind of restructured to coal.
And made it a lot simpler.
Is there anything you see that'll be a challenge going forward your partners. They should go down down. This route I mean, you talked about shareholders want a clean split do you do your partners want a clean split two or can you comment on that.
Yeah. Thanks. Thanks for the question, Brian You know we have a very good relationship with both Posco on NSE and of course worked with them for many years, including recently through the through the recent proposal that we put to the shareholders. We will continue to engage with them and have been doing so of course we.
We expect them to remain very supportive of the business and of course, we'd like to have them remain involved going forward, then and those conversations of course will evolve as we work our way through the the range of alternatives for the separation of steelmaking coal from from base metals.
Great. Thanks very much.
And the next question comes from Shane Nagel with National Bank Financial. Please go ahead.
Thanks, Tim.
And put them on the QB two with the capital cost increase now that the concentrate.
Is.
It's up and running is there any other further delays or cost creep into the classified under owned or operated from this point or can you provide any color on maybe where things are at with the commission in the second line.
We anticipate.
Those costs going forward.
Thanks Shane.
A good question for Crystal.
I will probably pass the line to ramp up to ride, but I'll I'll take your first the first part of your of your question. We do have to continue to consider our cost says whether they are operating costs versus versus capital cost project capital guidance is based on what we've disclosed.
And the operating cost will just you know it depends on how that how the ramp up goes and and our allocation of those costs due to the inventory that's being sold and we haven't provided guidance on that but maybe I'll turn it to read to give you an update on the line to ramp up tiny yes.
Yes, Shane so so where we're at right now we've just completed.
Ron.
While no two now.
<unk> re <unk> four for it to be ready to run long term so that.
He is going to entail coal project shut down here to do that we're in.
Various other maintenance things.
We've identified running line one so when that comes up.
Weaker so wide one is ready to run both pulp mills or are commissioned and running will be going into cleaner flotation.
Essentially movie that construction workforce awesome blood, one substantially and all the line two and it will be working diligently completing to the remainder of this quarter.
Okay, great. Thanks, and then just one more maybe just on the on.
On the separation.
The.
The vote too.
Fuel class Sunset I, just want to confirm that that's going to be disclosed a little bit as well.
So yeah that vote will will proceed and then will be considered at today's annual general and specialty.
Okay, great. Thank you.
Thanks. Our next question comes from Lawson Winder with Bank of America Securities.
Please go ahead.
Thank you operator, good morning, Jonathan and Crystal.
I just wanted to follow up on some comments you made in your prepared remarks Jonathan.
Coming from a competitive process and clearly you indicated that you would prefer that process to come after our spin, but then I guess I would just ask you the question Mike.
Is.
Why couldnt that process create the most value prior to a coal separation.
Potentially there's a buyer that could actually address the coal separation more effectively.
Okay.
Yeah. Thanks, Thanks for the question listen I mean, I think we've always been clear here that there will be more options to create value post the separation and then pre and that is a function of competition.
You know as we see the situation today of course, we have had one proposal.
We have considered that we've considered to be a flawed with material execution risks for shareholders.
That doesn't represent the competitive environments and that doesn't of course, therefore, it represents an opportunity to create the most value for our shareholders.
As I said, we continue to believe there will be more options to enhance value post separation.
That's why we continue to look through the range of alternatives to conduct a separation in a simpler and more direct fashion.
Okay. Yeah. Thanks, Thanks for that and maybe I'll, just sort of follow up on that and not get one sort of a different way which is.
Is it the case that there was only one.
Proposal.
That.
On the table prior to the coal spin.
As you've seen.
Seen in all our communications. There is there is one proposal that we have received evaluated and rejected juices. The flaws contained in that proposal.
As we have discussed previously we expect there would be significantly more interest in the businesses on a standalone basis than than ours combined today and that is one of the reasons. We continue to believe that separation is the right path forward here you know more importantly, we think there is value.
To be created through the separation as we can unlock the full potential of <unk> metals in particular with respect to the pipeline of copper growth projects that that business contains.
Fantastic that's super helpful and if I could just ask one simple sort of like.
Accounting question, what is the C. L. P assumption on Opex for the QB two guidance for for long term, thanks very much.
A loss and we will have to follow up with you separately on that one I don't have that one at my fingertips.
Okay. Thank you.
Thanks Wilson.
The next question comes from Lucas pipes B.
Riley Securities.
Please go ahead Sir.
Thank you very much operator, and good morning, everyone.
Jonathan My first question is also on on the separation I'm sure that.
Before you went down the path with the Tcs and <unk>.
You had proposed you carefully evaluate it.
Call it like a claim spend where you would.
Separate the coal business without cash flow ROI.
Royalty preferred equity structures et cetera.
What were the reasons you choose not to do that at that time would really appreciate your perspective on that.
Yeah. Thanks, Lukas I mean, I think as we've communicated over over the past couple of months since announcing the proposed separation we were trying to balance a number of competing factors here, which included are the the resilience of the valuation of the of the coal business and ensuring that was reflected in protected.
Looking for mechanisms to fund a the the very exciting pipeline of copper growth projects that we have in the base metals business.
Undertaking a separation in a responsible way and of course, all the time with a focus on maximizing value creation for our shareholders.
You know when we looked at that proposal, we believe the separation.
As we as we propose back on the 25th February provided a an optimal balance those competing factors too.
To to you know to unlock that value long term now clearly in the engagement, we've had with our shareholders and in listening to our shareholders.
Have been strongly supportive of the path forwards two separate E V O O from tech metals, but they have told us that they would like to see a simpler and more direct structure to achieve that so we take that feedback onboard and we will work that through to come forward with alternative proposals in due course.
That's that's very helpful. Thank you and then turning to operations for a moment you mentioned in the release that the work force them to out valleys.
This is still a priority and I wonder if you could touch a little bit on the staffing levels today and what has been an impediment to reach full staffing levels to date. Thank you very much for your perspective.
Thanks, Lucas I'll hand, you over to Robyn Chair of me to the SVP of our coal business.
Thanks <unk>.
<unk>.
We've been actually on a pretty good track two to bring our operating workforce back up to the full complement so we've got enough operators.
Enough staff.
I think the area that we're probably the most exposed right now is on the heavy duty mechanics to a very specific trade area and we're working hard on that and making some progress, but that's probably the biggest risk we have right.
It just simply the heavy duty mechanic side.
To production in the future. So we supplement that with contractors. So we have some options, but that's really our biggest risk right now.
Thank you very much for all the color and again that continued best of luck.
Thanks, Lucas so much appreciate it.
And the next question comes from Alex <unk> with Stifel.
All I had.
Hi, everyone.
I just wanted to go back to the separation question once more in maybe just housekeeping.
A different way here now that you've gone through this process.
Really what what are your.
I understand maximizing shareholder value was keep it.
With that in mind, what are your objectives for separation I mean, obviously the past plans still had 90% of free cash flows from the coal business going to the Tcs and that was going to be there to fund the growth.
Copper business I'm, just trying to think of going forward. What is the kind of the main objective that you and the key shareholders that you've spoken to have.
We have.
Decided upon would be a better alternative and the second question you know with with the.
Separation now off the table the S T or the original plan off the table the environmental stewardship Trust that was in the prior plan, which was up to $2 billion or so in payments over the next many years and the Nippon investment are those.
Want to confirm you know where those stand.
Yeah. Thanks, Alex for those questions. So to your first point with respect to the objectives here boy.
Boils down to maximizing shareholder value and there are of course, you know as I mentioned before a number of competing factors with respect to that and it's about reevaluating that balance to ensure that any separating these progressed in a more simple and direct manner. The other thing of course that will always factor into two are considered.
Orion destructive separation will be to do that in a responsible way.
It is taking care of all stakeholders associated.
With our business. So so they will they will remain front and center and we will look broadly at a range of alternatives that meet those criteria.
To the the NIM on investments and the creation of the ESG. They were specific components of the proposal that we put forward on February the 21st.
As we undertake a review of a simpler and more direct approach to a separation here then of course, we will have to take those factors into account and determine what is most appropriate in a future separation.
Okay, and then just I'm going to ask this question and see if I can get an answer but.
You you noted at the beginning as you know it is substantially a majority of the shareholders voted you are sorry.
We're in favor of a separation.
Any are you willing to kind of give us a few details on what the.
<unk> was looking like obviously you know that.
It is now not going to be completed but I'm. Just curious if there's any indication you can give us kind of what shareholders, where it works, saying before today.
Look so we you know we didn't proceed with the vote. So we won't have final numbers on the voting result, but our tracking showed that we weren't going to achieve the 66 and two thirds percent threshold that we needed for approval in this instance of.
Of course, I won't comment on the you know the voting positions of individual shareholders through this process.
However, overwhelmingly the feedback that we've received is a separation of E V. R and tech metals was favorite as a mechanism to create value for shareholders and hence why we've elected to to go back and figure out the best way to do that through a lens of doing this in a simpler and more direct way.
That's great. Thank you.
Thanks, Alex.
The next question comes from Timna Tanners with Wolfe Research. Please go ahead.
Thank you and good morning, I wanted to ask regarding the discussion of new mining laws in Mexico. The implications for suddenly collapses you go through your copper growth portfolio.
<unk> version I saw had it you know first in line. So we would love to hear you know the implications of your thoughts on any any factor there.
Thanks, Tim Neuro I'm going to pass you over to Tyler Johnson, who is our SVP of copper growth to address that.
Good morning. Thank you look we continue to review the proposed legislation right now it has gone through the lower house and Theres been a number of changes from the original proposal right now based on our preliminary estimates, it's not going to have a material impact on the development of San Nicolas <unk>.
But we continue to work through the details to understand what the implications could be.
So sorry did I understand not expecting it to change your pipeline on your timing, but maybe that the returns might be or I'm, sorry, if I didn't understand your answer.
No.
Right now, we don't anticipate it changing any of the timing or the impacts of the returns there still financial implications to the to the proposed changes in the legislation and we believe the fact that we've got a concession already.
There won't be any implications going forward.
Got it. Thank you I just wanted to ask kind of a simple high level question on the coal split.
Really unfortunate timing with regard to what the coal price was doing well you were in negotiations or toward pitching that the split them. How much do you think that was a factor and you know what what coal price do you think investors are looking at relative to where it's been in a historically thank you.
Timna based on the feedback we've received I don't think the the coal prices had any has had any impact on those discussions the the focus as I've said has been around supporting our separation, but a desire to see that done in a simpler and more direct manner.
Coal prices are as we know it will move up and down and indeed, it hasn't been part of the conversation that we've had here.
Weeks or months.
Okay, great. Thanks again.
Thanks Timna.
The next question comes from Dalton Barreto with Canaccord Genuity.
Please go ahead.
Thanks, Good morning, Jonathan.
Wanted to start again by asking about the separation this range of alternatives that you're going to work through is this a subset.
The range, you've already looked at or did something fall through the cracks that youre going to start evaluating right now.
Yeah.
But we you know we we looked extensively our rivals the best mechanism to to optimize the portfolio and to create value for shareholders and that was work done with the money when the board over the last two to three years. You know there were a number of options evaluate it there we will re look at those options again to see if.
As they meet the criteria of doing this in a simpler and more direct manner. We will also look to see if there are other opportunities that would considered previously perhaps in light of you know a change in market conditions or whatever that might be but that's the key drive adult can be behind this evaluation and the work that we will do is the feedback that we've reached.
<unk> here from our shareholders and we look forward to continuing to engage with all shareholders. Here, we will continue to listen to that feedback and we will incorporate that into the work that we have ahead of us.
Okay.
Okay. Thanks, and then maybe just following up on a previous question, there and kind of in the same vein here.
How important now is managing tech metals balance sheet and capital allocation framework as you work through this a range of criteria.
Okay, I mean I.
I think it's always always importance of cool right balance sheets.
To underpin a growth portfolio and it's always important to make sure. We can continue chair to return cash to shareholders on an ongoing basis to to reward them for their ownership in the company. So those things will remain a priority for us here as we looked at it build outs.
Don't realize substantial intrinsic value from the <unk>.
Pipeline of projects that we have in the portfolio.
Thank you and maybe just one last one from me on the assumption that you've come up with a structure.
That passes it's a vote can you maybe speak to the appetite of the board and the class A's to look at bids immediately post separation versus kind of waiting for a period until your growth pipeline.
Pipeline progresses.
Yeah, I'm not going to speculate on that Dalton you know our focus is to find a way to to work through a separation here that will maximize value for all shareholders as I've mentioned before the priority with tech metals is the development of that unrivaled suite with copper projects that we have with QB two ramping up to full capacity this year.
Year, doubling all copper output and then a range of projects, including the QB mill expansion San Nicolas Safra now hot on the heels of that.
Two to allow for investments in high return growth projects. So so that's the focus in adults and I don't know I can't speculate on what may or may not happen beyond that.
Thanks, Jonathan that's all for me.
Thanks Dalton much appreciated.
I will now hand, the call back over to Mr price for closing remarks.
Thank you very much so I'm just going to make a few brief closing comments yeah. This process. We've undertaken over over recent months is really shine a bright light on the tremendous value of tech.
For our shareholders and other stakeholders.
It's shown a light on world class operations and industry, leading copper growth pipeline and our focus on responsible and ethical ESG performance all of which contribute to an incredible value proposition and a bright future ahead.
No I will just close then by reiterating that our plan forward is to evaluate alternatives for responsible separation of the business taking into account. The extensive feedback that we've received from our investors and feedback that we are very appreciative of them all.
Our goal will be to do this in a simpler and more direct way, which we believe is the best path to unlock full value protects shareholders. Thank you very much.
Mhm concludes today conference call.
May disconnect your lines.
Thank you for participating and have a pleasant day.
Yes.
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Yeah.
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