Q3 2024 Teck Resources Ltd Earnings Call
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This conference call is being recorded on Thursday October 24th 2024.
Speaker Change: I would now like to turn the conference over to Fraser Phillips.
Speaker Change: And your Vice President Investor Relations Relations and strategic analysis. Please go ahead.
Fraser Phillips: Thanks, Jamie Good morning, everyone and thank you for joining us for Teck's third quarter 2024 conference call.
Fraser Phillips: 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.
Fraser Phillips: In addition, we will reference various non-GAAP measures throughout this call explanations and reconciliations regarding these measures can be found in our MD&A.
<unk> press release on our website.
Fraser Phillips: Turning to the agenda on slide three Jonathan Pryce, our CEO will begin today's call with an overview of our third quarter results Christoph <unk>, our CFO will follow with additional color on the quarter and then Jonathan will conclude today's social closing remarks, followed by a Q&A session.
Fraser Phillips: With that over to you Jonathan.
Jonathan Pryce: Thank you Fraser and good morning, everyone.
On slide five our shift to a pure play energy transition metals company was marked by the close of the sale of our remaining interest in the steelmaking coal business on July 11th.
Jonathan Pryce: At that time, we received U S $7 $3 billion in cash and the lifestyle planned use of proceeds including the largest cash returned to shareholders in the Companys history.
Jonathan Pryce: Through the remainder of the third quarter, we progressed deployments of those proceeds as we returned $720 million to shareholders through dividends and share buybacks in the quarter and over one $3 billion in returns to shareholders year to date as of yesterday.
Jonathan Pryce: Reduce debt by USD, one 5 billion, putting us in a net cash position of $1 8 billion as of September 30th.
And retained funding for a volume of three significant projects in preparation for our next phase of growth.
Jonathan Pryce: We also achieved several operational highlights in the quarter.
We continue to grow our copper production and set another consecutive record quarter copper production as <unk> continues to ramp up.
Jonathan Pryce: Our operational focus resulted in higher zinc and concentrate production a dreadful compared to the same period last year.
Jonathan Pryce: I'll now nearing the final stages of it you'd be ramp up.
We completed the <unk> two project in the quarter and demobilize the construction workforce.
Jonathan Pryce: Substantially all of our claims were closed sites and accrued for within our project capital guidance range of U S. Eight 6% to $8 8 billion.
Jonathan Pryce: At the same time, we continue to progress our wealth funded capital efficient copper growth portfolio moving on lithium projects towards potential sanction in 2025.
Jonathan Pryce: Overall, we made significant progress in the delivery of our value driven strategy.
Jonathan Pryce: On slide six we continue our focus on safety health and sustainability leadership.
Jonathan Pryce: We are deeply saddened client employee fatality at Pennsylvania jewelry container Assembly in the warehouse area on July 24th.
Jonathan Pryce: In response, the joint venture management team at anthem Neenah supported by the joint venture partners, including Tech conducted a thorough investigation to identify the causes and implement any required actions on to share learnings across the industry to help prevent future issuance.
Over the third quarter, our high potential incident frequency rate remained low at 0.10, which is a 33% reduction from the same period last year.
Jonathan Pryce: We continue to progress the rollout with mental health first aid training, but frontline leaders across our operations towards our targets of 50% completion by year end a full completion by the end of next year.
Jonathan Pryce: And earlier this month, we were recognized on the Forbes list of the world's best employers for 2024.
Jonathan Pryce: Meaningful as it's an employee driven ranking of multinational companies and institutions from over 50 countries worldwide.
Jonathan Pryce: Turning now to an update on the ramp up of <unk> operations on slide seven.
Jonathan Pryce: Copper production at QB improved quarter over quarter to $52 5000 tons from 50 135 times in Q2.
Jonathan Pryce: However, production was impacted by lower grade ore mined as expected following the geotechnical issue that restricted our access to higher grade material.
Jonathan Pryce: It's the growth has been consistent with prior quarters of zero point, 500% and based on the throughput and recoveries that we achieved our production would be 56000 tons.
The localized geotechnical issue that we had identified and disclosed last quarter as <unk> results, we have controls in place and we're continuing to advance the mine plan.
Jonathan Pryce: We expect higher grades in the fourth quarter and going forward normal grade variability is expected within any given period.
Jonathan Pryce: Mill throughput rates increased quarter over quarter, confirming the robustness of our plans defined.
Jonathan Pryce: As you can see in the chart on the less fruit books has been ramping up steadily quarter over quarter towards nameplate capacity.
Jonathan Pryce: He is currently near design throughput rates.
Jonathan Pryce: We expect to achieve design throughput rates by the end of this year.
Jonathan Pryce: We've also seen evidence of our ability to operate above design throughput rates were.
Jonathan Pryce: Working hard on mill optimization to push performance pop ninth place on all our plans for Debottlenecking.
Jonathan Pryce: Recoveries also continued to improve as shown in the chart on the right with an increased quarter over quarter and increasing stability.
Jonathan Pryce: However, our monthly copper production did decline marginally in September primarily the result of additional planned unplanned maintenance.
Jonathan Pryce: We proactively taking downtime in readiness for planned test work on the grinding and flotation circuits to ensure improved continuity during the test period.
Jonathan Pryce: The test was successful and we have seen improved growing size, coupled with selected reagents that enhance processing of all in the transition zone between the supergene in hydro <unk> mineralization, which has higher clay content.
Jonathan Pryce: As a result, we expect improved recovery going forward.
Jonathan Pryce: We also have unplanned downtime on the thickness and premature failure of the mill feed conveyor, reducing our tons milled.
Jonathan Pryce: Our focus remains on improving recoveries and increasing online time.
Jonathan Pryce: We expect to see progress following the completion of the test works along with minor equipment modifications to improve reliability scheduled for the first half of 2025.
Jonathan Pryce: This is expected to gradually improve molybdenum recovery Copa club stability on equipment reliability through the first half of 2025.
Jonathan Pryce: Overall, as we close out the <unk> project and look towards completing the ramp up of <unk> operations to design throughput rates, we expect to generate significant cash flows in 2025 and beyond.
Jonathan Pryce: Yes.
Jonathan Pryce: We have updated certain guidance targets for 2024, which is summarized on slide eight.
Jonathan Pryce: Zinc, we have improved our net cash unit cost guidance range by <unk> 10 per pound to <unk> 45 to 55 cents per pound, reflecting the results of strong operational performance redbox.
Jonathan Pryce: Most of this reduction was driven by improved operating costs, which allowed us to also improve our total cash unit cost for zinc by five per pound to 65 to 75 cents per pound.
There is no change the rest of our production guidance.
Jonathan Pryce: We've lowered our volumes revised sorry refined zinc guidance for Tri operations to $2 40 to $2 55000 tons due to a localized fire at one of the units and the electrolytic zinc plant in late September.
Jonathan Pryce: We are looking at operating the other sections in a manner that would allow us to recover some of the production loss. However, this evaluation is still underway.
Jonathan Pryce: And copper.
Jonathan Pryce: Total production guidance range was lowered and narrowed with the bottom end of the range reduced by 15000 tons due to lower expected production from higher volume.
Jonathan Pryce: Our revised guidance is now $4 20 to $4 55000 tons from $4 35 to 500000 tons previously.
Jonathan Pryce: Production guidance around Savannah, and acquire a box unchanged.
Jonathan Pryce: At QB, reflecting the slower ramp up this year, we have narrowed our <unk> production guidance to 200 to 210000 tons for 2024 from 200 to 255 sizes.
Jonathan Pryce: We've revised our 2025 production guidance range for QB to 240 to 290000 tons from $290 to 310000 tonnes, reflecting planned activities to improve copper recovery and equipment reliability scheduled to run through the first half of 2025.
Jonathan Pryce: Putting production at Highland Valley is now expected to be between 97 to 105000 tons from 112 to 125000 tons due to the delay in accessing the higher grade <unk> pit in Q3.
Jonathan Pryce: For molybdenum our production guidance is reduced to three to 4000 tons from four 3% to five five tons in line with the changes to our copper production guidance.
Jonathan Pryce: We have reduced our Q be molybdenum production guidance to 0.8 to one two times in tons for 2024.
Jonathan Pryce: And the 4% to $5 5000 tons for 2025.
Jonathan Pryce: From one eight to $2 4000 tons and 5% to six four fives and sevens respectively.
Jonathan Pryce: Despite the lower total moly production guidance, our total copper unit cost guidance is unchanged demonstrating our focus on managing costs across our operations.
Speaker Change: Welcome to the Conference Center, please enter your pin, followed by a conference specialist.
Jonathan Pryce: Turning to slide nine as.
As we continue to progress on the copper projects for potential sanctioning in 2025.
Jonathan Pryce: All subject to permitting and other works.
Jonathan Pryce: TB the ramp up continues and we are progressing work on defining near term opportunities for optimization debottlenecking of the existing assays to achieve improved throughput and recovery.
Jonathan Pryce: Highland Valley, our revised environmental assessments and permit application to the mine life extension was extended in July and we continue to progress through the permitting process.
Jonathan Pryce: We expect substantial completion of engineering and project execution planning in Q2 2025.
Jonathan Pryce: On the project could be ready for a sanction decision at that time permits are received.
Jonathan Pryce: The joint venture San Nicolas continues to pay with application process and engagement with government stakeholders is ongoing.
Jonathan Pryce: Project sanction decision is anticipated to following completion of the feasibility study and receipt of necessary permits in the second half of 2025.
Jonathan Pryce: Of course, we are closely monitoring the evolving political situation in Mexico.
Jonathan Pryce: Is that for a while.
Jonathan Pryce: <unk> received the main environmental permit required we are being disciplined and advancing works and progressing detailed engineering, which gives more clarity on construction and associated capital before we sanctioned the project.
Jonathan Pryce: We continue with the construction permit application development through Q3 2025.
Jonathan Pryce: The project could be ready for sanctioning in late 2025, following receipt construction permits and completion of detailed engineering.
Jonathan Pryce: We look forward to creating a data value for our shareholders through these low capital intensity higher to any copper projects.
Speaker Change: I'll now hand over the call to Crystal to provide further details on our third quarter results.
Thanks, Tom and good morning, everyone.
Crystal: Turning on slide 11, with our financial performance in the third quarter of 2024 as Jonathan noted we began to deploy the proceeds received from the sale of our remaining interest in steelmaking coal business to shareholders through significant cash returns by reducing debt and strengthening our balance sheet.
Crystal: We returned a total of $720 million to shareholders in the quarter, including $322 million in dividends and 398 million share buybacks.
Crystal: In total we have returned over $1 3 billion to shareholders year to date as of yesterday, and we continue to execute our previously announced share buyback program of $3 <unk> 5 billion.
Crystal: As a result of the completion of the sale of our remaining interest in the steelmaking coal business on July 11.
Crystal: Our results have been presented as discontinued operations for all periods reported in our Q3 financial statements and MD&A.
Crystal: We had strong financial performance in the quarter with our adjusted EBITDA more than doubling our adjusted EPS nearly quadrupling compared to the same period in the previous year due to strong copper and zinc prices and increased copper sales volumes, reflecting the benefit of the ramp up of TV operational.
Crystal: In Q3, we had higher finance expense and depreciation and amortization expense compared to the same period last year as most of the QB assets were considered available for use at the end of 2023 and depreciation sorry in 2024.
Crystal: And we are no longer capitalizing interest on the <unk> project.
Our third quarter financial results were also impacted by a noncash after tax impairment charge of $828 million on our trail operations.
Crystal: As required under arthroscopy regularly assess whether impairment indicators are present and impairment testing is required.
Crystal: The impairment trail is a result of the challenging environment for treatment charges due to global trade.
Crystal: Concentrate.
Crystal: We continued operating losses combined with the recent fire in the electrolytic zinc plant, which is expected to affect fourth quarter operations.
Crystal: Importantly, we remain committed to our trail operations as a core part of our strategy of providing critical minerals, particularly given its strong integration with <unk>.
Trail remains an important asset in our portfolio and we remain highly focused on improving its profitability and cash generation through a range of initiatives that are currently being deployed.
Crystal: Overall, excluding the impairment charge.
Crystal: We saw significant improvement in our financial performance in the third quarter compared with the same period last year.
Crystal: Slide 12 summarizes the key drivers of our financial performance in the third quarter.
Crystal: The increase in adjusted EBITDA in the quarter compared to the same period last year was primarily driven by strong copper and zinc pricing as well as higher copper sales volumes.
Crystal: Operating cost increased due to the inclusion of television operating costs this year.
Crystal: Q3 last year CD costs were generally included and capitalized wrap up costs.
Crystal: We continue to focus on managing our controllable costs across our business.
Crystal: Now looking at each of our reporting segments in greater detail and starting with copper on slide 13.
Our gross profit before depreciation and amortization from our copper segment more than doubled compared to the same period last year to $604 million as we realize the benefit of QB wrapping up.
Crystal: The increase was driven by higher sales volumes higher prices and an increase in byproduct credits and partially offset by the inclusion of <unk> operating cost this year.
Crystal: We have another consecutive record quarter of copper production with increased production across all of our operations.
Crystal: <unk> ramp up continues to support increased quarterly copper production.
Crystal: Higher copper production at anthem, Nino was driven by increased copper only ore as expected in the mine plan as well as higher mill recoveries.
Crystal: Water availability at <unk>, and <unk>, resulting in higher mill throughput and production.
Crystal: And while Highland Valley's production also increased it was lower than expected due to delays in accessing the <unk> pit, which has higher grades the delay was attributable to lower our haul truck availability and challenges with labor availability and the autonomous systems of new haul trucks. This has been largely resolved and we expect to process more of an effort in the fourth.
Crystal: Quarter.
Our cost of sales is higher year over year as expected and reflects the ramp up of QB and depreciation of its operating assets.
Crystal: Excluding QED, our net cash unit costs remain the same as in Q3 last year.
Crystal: $1 87 per pound.
Speaker Change: As Jonathan outlined we have updated our annual copper production guidance to 420, <unk> hundred 55000 tons from 435% to 500000 tons at our total molybdenum production guidance to three to 4.0, a thousand times from four 3% to $5 5000 trucks.
Speaker Change: Despite the reduction in our annual copper and molybdenum production guidance or copper net cash unit cost guidance remains unchanged.
Speaker Change: Turning now to our segment on slide Slide 14.
Speaker Change: Overall, our gross profit before depreciation and amortization from our <unk> segment was $358 million, an increase of 49% in the quarter compared to the same quarter last year, reflecting higher zinc prices and substantially higher silver and lead by product revenues as <unk>.
Well as lower treatment charges.
Brad Thor had another very strong quarter of operating performance.
Speaker Change: Higher zinc and lead production was driven by higher mill throughput, reflecting our operational focus to improve mill availability and minimize unplanned maintenance.
Speaker Change: Zinc sales volumes were strong and in line with our guidance despite difficult weather conditions.
Speaker Change: In September we achieved a monthly record for concentrate loaded onto vessels, reflecting the close integration between our operations and commercial teams.
Mr. Thank Steven has continued into the fourth quarter with shipments dependent upon weather conditions.
Speaker Change: We expect to complete our shipping season as planned.
Speaker Change: Our net cash unit costs with creative compared to the same period last year, reflecting strong operating performance lower smelter processing charges and higher silver and let byproduct credits.
Speaker Change: At trail operations, while we did record an impairment in the third quarter, our new chipset boiler operated well and achieved near record online time and throughput. However, our refined zinc production was impacted by the fire in the electrolytic plant in September.
Speaker Change: Looking forward, we expect zinc and concentrate sales from Red dog of 155 to 185000 tons in the fourth quarter, reflecting the normal seasonal pattern.
For the full year, we've improved our full year guidance range for zinc net cash unit costs by 10 <unk> per pound <unk> 45 to 55 cents per pound from U S 55 to 65 cents per pound.
Speaker Change: A portion of this reduction is driven by improved operating cost.
Speaker Change: As a result, we've also improved our as a total cash unit cost guidance by five U S per pound to <unk> 65 to 75 cents per pound from U S, 70% to 80 cents per pound.
Speaker Change: Our guidance for zinc in concentrate production is unchanged and our guidance for revised refined zinc production was lower to 240 to 250000 tons from 275 to 290000 tons due to the fire and electrolytic stated plant at trail.
Speaker Change: Turning now to slide 15, and our resilient balance sheet.
Since the close of the Edr transaction on July 11th.
Speaker Change: We've made significant progress in deployment of the transaction proceeds to the balance sheet and to shareholders.
We have reduced our debt by USD, one 5 billion to date, including a cash tender offer for U S. $1 4 billion of our outstanding term notes repayment of U S $120 million of short term loans at Carmen de <unk> and open market repurchases of an additional $9 million of term loans overall.
Speaker Change: Overall, we strengthened our balance sheet in the third quarter and year and a net cash position of $1 8 billion Canadian as at September 30th.
Speaker Change: Our financing from increased in the quarter due to interest earned on our higher cash balance, which is currently Canadian seven 8 billion.
Speaker Change: The quality of our balance sheet, along with confidence in our business outlook and our focus on lowering our financing costs resulted in us reducing the size of our sustainability linked revolving credit facility by $1 billion. You asked last week <unk> 3 billion.
Speaker Change: Billion.
Speaker Change: In the quarter, we returned significant cash to shareholders through the payment of our regular base quarterly dividend of 12 and half cents per share and a supplemental dividend of <unk> 50 per share for a total of $322 million and the purchase of $6 3 million class B shares for $398 million under our normal course issuer bid.
Speaker Change: We are currently have returned over $1 3 billion to shareholders year to date, including the purchase of $13 6 million class B shares.
Speaker Change: This builds on our strong track record of shareholder returns, which total over $5 billion since 2019.
Speaker Change: With our resilient balance sheet, we are strongly positioned to execute on our growth strategy and create value for our shareholders.
Speaker Change: With that I'll turn it back over to Jonathan.
Thanks Crystal.
To wrap up starting with slide 17, as we shift to a pure play energy transition metals company, we remain true to our purpose and values guided by our capital allocation framework that balances growth with cash returns to shareholders. Our strategy is focused around four key pillars, which drive office use of responsible growth with volume.
Speaker Change: On slide 18, we are delivering on our strategy.
Speaker Change: <unk> assign a DVR means that we now have a portfolio that is 100% energy transition metals.
Speaker Change: We continue to focus on driving operational performance.
Speaker Change: Our copper production continues to grow.
Speaker Change: We've closed out the <unk> projects and are progressing towards the final stages of the ramp up of <unk> operations as the key drawing upon near term copper growth.
Speaker Change: And our focus on operational performance enabled a reduction in our full year guidance range for zinc net cash unit costs.
Speaker Change: We continue to balance cash returns to shareholders with a final any competitive copper growth opportunities.
Speaker Change: So far this year, we've returned over $1 3 billion to shareholders and deployed $302 million towards advancing our portfolio of growth projects.
Speaker Change: And we significantly strengthened our resilient balance sheet for the third quarter.
Speaker Change: With the <unk> sale proceeds we paid down one 5 billion use of debt and we have a net cash position of $1 8 billion as of September 30.
Jonathan Pryce: To conclude with slide 19.
Jonathan Pryce: As an energy transition metals company, our focus remains on trade in value for our shareholders.
Jonathan Pryce: We will drive strong operational and financial performance embedded by our focus on core excellence.
Jonathan Pryce: Pushing costs and what's the final stages of the <unk> run above which should set us up for strong cash generation and financial performance.
We are maintaining the balance between growth and shareholder since.
Jonathan Pryce: We continue to progress our record returns to shareholders. The three to 5 billion authorized by the board this year.
Jonathan Pryce: And with a resilient balance sheet, we are well positioned to continue to progress a well funded capital efficient near term copper projects for potential sanction in 2020 twice.
Jonathan Pryce: Thank you with that operator, please open the line for questions.
Speaker Change: Certainly can.
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Speaker Change: My first question is from Orange book at all with Scotiabank. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: Question on QB two.
Speaker Change: So second consecutive quarter of guidance cuts here for 'twenty four.
Speaker Change: You have now cut 25 by 12%.
Speaker Change: I mean at this 0.1.
Speaker Change: Can you share what gives you any confidence that these numbers are achievable and 25.
Speaker Change: Just given all the cuts we've seen this year and I'm curious also what you're anticipating in terms of that guidance range for 25, how much of that improvement over 24 is driven by throughput first grades recoveries.
Speaker Change: Okay.
Speaker Change: Yes, good morning, Laura Thanks, Thanks for the question.
Speaker Change: To start out with a bit of context around 2024, and the reduction of the guidance and then I'll go on to your question around 2025.
Speaker Change: As I said the plants designed cubie is robust and we have continued to make very good progress on mill throughput and you can see that improvement quarter over quarter.
In Q3, as we went through higher amounts of placing those transitional was between supergene and apply it to Jim.
Speaker Change: Fight that we did make some progress through higher recovery rates quarter over quarter and as I mentioned we.
Speaker Change: Have completed testing of the dosage and reagent mixes, which cover both improved recoveries and better stability in the plants.
Speaker Change: Work will be ongoing in that regard both through the fourth quarter of this year and into 2025.
Speaker Change: The other components of course aside from throughput to the summary.
Speaker Change: And we're seeing a good level of actually we're seeing the grade of material weak volume versus what we expect in our plans. We have expected loan growth in Q3, as we said and we do expect improvements in grade into Q4, and as I mentioned, if all else being equal.
If we'd had the same grade in Q3 as we have in Q1 and Q2 and we've operated with the throughput and recoveries that we did in the third quarter. We would've produced 56000 tons dropping 52, so great being the big driver of that.
Speaker Change: Lower production in Q3 relative to expectations.
Speaker Change: Also important to note because we discussed this in the last quarter that the geotechnical issue between currently is under control and it gives us confidence to revolve some mine plan.
Speaker Change: So we're happy with the progress we're making on throughput recoveries are very much a work in progress with test we're continuing to advance.
Speaker Change: And that fee stand into 2025.
Speaker Change: In 2025, some of the work we are planning to do around recovery.
Speaker Change: Orion dosing, but also some of the work that has to be done on the plant.
Speaker Change: We'll go through the first half of 2025, so that will involve some additional time selling in 2025 set to drive those improvements in the first off but we do expect that to translate into much stronger and more consistent recovery performance through the balance of the year.
Speaker Change: The throughput.
Speaker Change: All very encouraged by that and we do see periods, where we're operating above.
Speaker Change: And as I mentioned, Boston, all about driving more consistency.
Speaker Change: In the uptime and online time associated with the plant and again there are some modifications that will be made to areas of the plants through the backend of this year, but also through the first half of 2025. So we've.
Speaker Change: We've looked very hard at all the all the operational performance drivers here, we believe that the 25.
Speaker Change: Guidance that we've put forward here is it very much.
Speaker Change: Achievable when Youll notice in the range that we put a Ryan that's with the $2 40 to $2 80 is relatively broad and a doctor reflect some level of ongoing uncertainty associated with an assay that is still in the ramp up phase.
Speaker Change: And just as a follow up in your presentation Slide page seven you show design recoveries of 86% to 92%.
Is that a revised life of mine assumption or do you still think you can get to 90 192 on a consistent basis.
Speaker Change: Yeah, there's no revision that artists that has been designed and we still think that that's achievable here.
Speaker Change: However, just decided to talk about that in just a moment, but to say as we benchmark the performance of the ramp up of <unk> against all the major ramp ups if I.
Speaker Change: Could we.
Speaker Change: We are buying in line with the ramp up kits or pumps to throughput.
Speaker Change: Recovery is the area, where as I've mentioned, we have more work to do but even so we're not in countering some of the recovery issues with some other major projects have encountered over the time. So again, that's what gives us the confidence to continue to push higher but I'll hand over to our chief operating officer issues that to give a bit more color on.
Speaker Change: Recovery, specifically, because thats, a very important point thanks, Jonathan.
Speaker Change: <unk>.
Speaker Change: We have achieved pretty decent recoveries when we know what that typical ore types, but have struggled with some of the transition ores, which have the higher claims.
Speaker Change: And I think our performance has been with 83% 84% over the field.
Speaker Change: Last quarters, and we are seeing better numbers now.
Speaker Change: But the most important part is as we introduced the mortgage circuit as well that had some impact as well.
The test work that Jonathan mentioned.
Speaker Change: Given this good resolution on what.
Speaker Change: Reagents to use and that is being implemented here in late October early November.
Speaker Change: And we will then fine tune that.
Speaker Change: Well into the into the first half of 2025.
Speaker Change: And the range that you mentioned of 86 to 92.
Speaker Change: It depends on what ore types are being set and and we do expect some transition or as well into the first half of 2025, So we won't get to those numbers of 92% in the first half and hence.
Speaker Change: The impact on the 2025 on the 2025 guidance.
Speaker Change: And of.
Speaker Change: Of course.
Speaker Change: The 86 to 92 is over longer term periods on them in any quarter or any year. So over the life of mine, you'll see variability on that swap.
Speaker Change: Thank you.
Speaker Change: The next question is from Bryce Adams with CIBC. Please go ahead.
Bryce Adams: Thanks, Bill I appreciate the presentation.
Bryce Adams: I wanted to ask on San Nicolas.
Speaker Change: Good morning, and Mexico, Jonathan I think you had mentioned in the comments that you are monitoring the situation.
Bryce Adams: Is there anything that you can add to that.
Speaker Change: It looks like the current has shifted towards being more positive.
Would you agree with that and could that be reconsidered as an underground operation is that something that's being evaluated.
Speaker Change: Okay.
Speaker Change: Thanks very much for the question.
Speaker Change: As mentioned, we are still monitoring the situation in Mexico, I think it's fair to say, there's still a level of uncertainty there, but I would agree with your assertion that the the tone as move to a slightly more positive physician or alternatively, a slightly less negative position depending on how you look at that.
Speaker Change: We've done a lot of work on what is the optimal powerful development of this asset I think your question is geared around trying to avoid the the open cost issue.
Speaker Change: Still think that the open cut mine is going to deliver the best for tunes associated without assets. We continue on the permitting process on that basis and we continue on a feasibility study in engineered wood on that basis, and we are hopeful of a resolution.
Speaker Change: For open cut mining, particularly in the context of San Nicolas in due course, but I think we have to be realistic enough that there is uncertainty in regards to that.
Still in the environment today.
Speaker Change: Okay. Thanks, that's all for me appreciate that and then the extra color on Q. They just in the last few minutes. Thank you.
Speaker Change: Thanks Brooks.
Speaker Change: The next question is from Carlos de Alba with Morgan Stanley. Please go ahead.
Speaker Change: Yes. Thank you very much good morning.
Speaker Change: Two questions one on semi class and an eye on QB cynical as maybe just a follow up Jonathan.
Speaker Change: Can you remind us if you already have a open pit mining concession.
Speaker Change: The project or do you have only an exploration license what exactly do you have yesterday.
Speaker Change: One of the biggest local corporate users mention that for one of their projects. They are not worried about any changes in the legislation because they already have.
Speaker Change: The concession so I just wanted to understand exactly what do you have.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: We believe that we do have protection under the concession that we all costs associated with San Nicolas.
Speaker Change: Whether one off through this consideration around the future of open kind of mining that converts into appendix of development is really the open question.
Speaker Change: So the extent to which there was a grandfathering of those prior rights into the into the current situation is something we still have to work our way through.
Speaker Change: Good evening, guys me by the San Nicolas JV, and then also both partners ourselves from Agnieszka rebuild with the with the Mexican authorities as we tried to figure out the appropriate path forward a handful of projects.
Alright that makes that makes total sense and then on QB.
Speaker Change: Okay, how much how many days in September.
Speaker Change: It was the operation down for the maintenance that you mentioned in the release.
Speaker Change: That was taken and I think I heard you mention that in the first half of next year, there's going to be also some downtime can you maybe provided a bit more color what months.
Speaker Change: A sense of how many days are in those months the operation will be down.
Speaker Change: Yes.
Speaker Change: Policy to tissues that math as you know we've heard that cadence of major.
Speaker Change: Schuff diagnose if you like every quarter and then in addition to that there have been some additional more opportunistic shutdowns that we've taken on specific areas as long equipment, such as that if maybe you can share.
Speaker Change: Comment on September and then broadly speaking on next year.
Speaker Change: Carlos in September we took an extra three days to do some of the work.
Speaker Change: Changes in some of the minor changes, where we needed to do ahead of that test work.
Speaker Change: And then also as Johnson mentioned of technical issues that we had where we were at the mills were down but they were running at limit limited rates because of salt because of water ratios recovery from the taken there. So it's not just a matter of downtime at some of the.
Speaker Change: Patients with those issues have been resolved.
Speaker Change: In the <unk>.
Speaker Change: And we continue to address issues as an example on.
Speaker Change: We found that a follow on on our mills Werent.
Speaker Change: Having the lives that we that we were expecting so we went around change the design changes in material and those have been installed some of our belt the pelting.
Pelting itself did not last but we changed the material and the design of that to get so these are the types of things that you encounter in the startup that.
Speaker Change: We are addressing and Q1.
Speaker Change: Downtime, the extra downtime real needs to address.
Speaker Change: Other items that we've identified just didn't increase.
Speaker Change: The design life.
Speaker Change: Those components of the equipment, so non fatal flaw at all it's just a matter of improving the reliability of some of the components.
Speaker Change: So the Q1 numbers are a few percentage points below our target on availability and then some in Q2 as well.
Speaker Change: Forms the guidance for 2025.
Speaker Change: Alright, Okay. Thank you very much I'll follow up with more questions later, thank you.
Speaker Change: Thanks, Joe.
Speaker Change: Yeah.
Speaker Change: The next question is from.
Speaker Change: Chris <unk> with Jefferies. Please go ahead.
Chris: Thanks, Operator, hi, it's crystal feminine and thank you all for taking my question and thanks for the additional insight so far in the Q&A.
Speaker Change: Just had some follow up on on the QB ramped and how we should think about incremental costs and how that's going to flow through the P&L and the cash flow statement in 2025. So I think Jonathan you said that project Capex is basically done.
Speaker Change: But with production guidance now for 2025 being lower you talked about will be additional work that you need to do to get to full capacity when I hear work in mining I think costs. So.
Speaker Change: How do we think about the kind of the cost impact in 2025.
Speaker Change: And just also wanted to confirm its project Capex now done with everything just kind of flowing through.
Speaker Change: Kind of asset level.
Speaker Change: Operating expenses in Capex or.
Speaker Change: And you're saying that earlier thank you.
Speaker Change: Sure.
Speaker Change: For the the question that Chris So the first bought yesterday the project Capex is down non U S.
Speaker Change: $8 $6 eight weeks fallen and not ratings and as said well there are some claims outstanding but they've been accrued for and are captured in that range and we fully demobilised. So when you consider the project to be done and in the rearview mirror now to your points on some of the works we're talking about doing next year.
Speaker Change: These things are.
Minor in the scheme of things and so small you know youre unlikely to see it in the tool showing up in our costs.
Speaker Change: This is essentially it's a.
Speaker Change: Full of preventative maintenance or minor improvement work, we'll be doing around the sites. So don't see losses any significant additional capex capital cost burden.
Speaker Change: And to your final point.
Yes, essentially with the with the project close all of these expenditures now will will run through the the operation of course, where there's capital being spent on sustaining work those things will be capitalized, but other operating costs in the normal course will run through the P&L.
Speaker Change: First of all if there's anything you wanted to do lots of luck no I think the only thing I guess, I would say and reiterate guidance or for the copper business as well as for QB for for 2024, despite seeing some reduction in our <unk>.
Speaker Change: Our production guidance I think that just really reiterate the point about our focus on our cost and we're working to demobilize contractors and we've seen some success in that as well.
Speaker Change: Alright, alright, so the 2025 reduction in production will will be associated with an increase in cost right. So we should expect all else equal your unit costs and <unk> will be higher for 2025, because your volumes are lower at the very least.
Speaker Change: That additional kind of clear what we have is that correct.
Speaker Change: Yes, well, we haven't guided yet Chris but for 2025, obviously, if you assume that operating costs are the same as you apply a lower production cost a lot then all else being equal to get a higher operating cost of course, but we need to assess what those costs are for.
For next year guidance <unk> growth.
Speaker Change: And I guess the key Jonathan like you said I mean, it's not like there's a lot of additional capex just as a matter of ramping this thing up.
Speaker Change: The operating question I might be a bit higher in the first half of the year, but there is nothing else that we have to really worry about it I mean I guess the second the follow up to that is you've talked in the past about kind.
Speaker Change: Kind of waiting until 2025 before sanctioning new projects and I think part of the reason for that was we wanted to get <unk> up to full capacity.
Speaker Change: To the extent that this is being delayed in terms of the ramp does that push back timing on kind of sanctioning of other projects or is it still possibly see.
Speaker Change: Some of those sanctioned projects come through in the second half of next year. Thank you.
So let me let me come to that in a second Chris Chris.
Speaker Change: Crystal was there anything else you wanted to say on the unit cost base just to close out.
Correct.
Speaker Change: Sure.
Speaker Change: Really confirm we haven't put out our guidance for unit cost for 2025, I would expect them to be lower than 2024, because we had.
Speaker Change: Obviously factors with the ramp up with using alternative.
Speaker Change: Shifting arrangements, we've had lower moly production, which has an impact on our net cash unit costs, because we don't get the.
Speaker Change: The moly credits for those things.
We should see those resolve in 2025, and we'll put out our guidance as we normally do in January restaurant.
Speaker Change: Understood. Thank you Crystal and then just.
Speaker Change: And the project sanction.
Speaker Change: The remaining work we have to do on QB.
Speaker Change: Just I've mentioned is very much in the first half of next year as we look to optimize.
Speaker Change: Conditions, the circuit reagents for better online time and improve recoveries instead, the two things we're focused on we expect to have that starting in the first half.
Speaker Change: Even if we achieve all of the permits on the timeline, we're working to complete our studies and I'll have.
Speaker Change: Positive economics associated with the capital cost of these projects, we wouldn't be sanctioning anything before <unk>.
Speaker Change: Second half of next year and in any event.
So we remain.
Confidence in sort of the full ramp up of QB, a nice one and we'll look at we're looking at other projects and I'm talking about the Greenfield projects in the second half of the year HSBC mine life extension being a Brian field of course is one that we will.
Speaker Change: You as quickly as possible, but again I think that relative to the fifth third bank David any of it.
Great. Thanks again good luck.
Speaker Change: Thanks, Chris.
Speaker Change: The next question is from Liam Fitzpatrick with Deutsche Bank. Please go ahead.
Speaker Change: Okay.
Liam Fitzpatrick: Good morning, Jonathan first one just on production guidance I wanted to clarify whether.
Speaker Change: The update today.
Liam Fitzpatrick: Updates for your other assets in terms of 2025 guidance or will we be getting further revisions to those in in November or January.
Jonathan Pryce: Yes, so the only updates we've made for 2025 are the ones. We've communicated today and of course that just relates to QB.
Jonathan Pryce: So the issues.
Jonathan Pryce: We've identified we understood clearly today, who will never be a change too.
Jonathan Pryce: The prior guidance for next year all.
Jonathan Pryce: All other assets as we work through the planning process and their associated guidance will be updated in the normal course of January.
Speaker Change: And then on the on the growth strategy.
Speaker Change: I mean, you're clearly not alone in terms of the the challenges in building and ramping up copper assets are you still convinced.
Speaker Change: Getting ahead with other Greenfields further down the line is the right strategy for Teck.
Liam Fitzpatrick: We are Liam for for a number of reasons I mean, firstly the projects that we have in the in the pipelines are ahead of us significantly smaller in scale and scope.
Not much lower complexity and acuity.
Liam Fitzpatrick: So.
Liam Fitzpatrick: We're also doing significantly more work around derisking projects prior to prior to sanction here in terms of the the level of engineering that will be undertaking for example, which will give us greater certainty as to capital spend schedule.
Liam Fitzpatrick: And execution.
Liam Fitzpatrick: Execution pathways.
Liam Fitzpatrick: And we believe that the low capital relatively low capital intensity of these greenfield projects will offer very good returns to shareholders.
Liam Fitzpatrick: Analyst.
Speaker Change: To us it certainly looks like a more attractive strategies and M&A.
Speaker Change: A great deal of those the upside can be paid away through premiums to acquire assets. So we do think it's the right strategy of course through going through something like <unk> in terms of the nature of construction and development effort that and then the ramp up process that we're working through yes, we take significant Luna.
<unk> from glass and build enormous organizational capability that we can take forward onto on future projects. So we do think it's the right way forward.
Speaker Change: Projects are not simple they never are but we're working very hard on building that capability capacity systems processes inside the organization.
Speaker Change: Two underwriting success of future product development.
Speaker Change: Thank you and my last quick one if I may just on working capital. So there was a reasonably big build in Q3 about half a billion any color on.
Speaker Change: Guidance on how and when that will.
Speaker Change: Unwind in the quarters ahead.
Speaker Change: Yeah.
Speaker Change: Yes, Thanks, Dan.
That Osama.
Speaker Change: Some of that at least relates to <unk>. So I'll pass over to <unk>, Our chief commercial officer, who can explain a little bit about the production versus sales profile that we've seen in the operation.
Speaker Change: Yes. Thank you very much for the question Liam maybe important just to say at the beginning but of course sales and production don't always match and that could occur for a variety of reasons, including cut offs, where the reporting period in system and in transit inventory vessel scheduling loading windows things like that.
Speaker Change: So for example, we're currently have just a couple of holds of cargo with the port and.
Speaker Change: Those are scheduled to load imminently and Theres really no excess inventory there in terms of the working capital question, though the difference that you see.
Speaker Change: In the disclosure is attributable to material. This at the mine and that built up during the transition kind of claim materials channels that we referred to and disclosure.
Speaker Change: This material is being transferred now at its filtration plants into the courts and we will go out for loading in for sales and we expect a good portion of that to occur in Q4, and the remainder expected Q1, so on that basis. The volumes will reconcile overtime, but important just to come back to the fact that core sales and production will always patch.
Speaker Change: And then I am sorry, Lena Praful I would just add in relation to timing of sales. We did have very strong both copper and zinc sales in the month of September until you see some of that built into the into the <unk>, which will be collected in the normal course I think okay.
Speaker Change: Into Q4.
Okay. Thank you.
Speaker Change: Yeah.
Speaker Change: Thanks Lee.
Speaker Change: The next question is from Myles Allsop UBS. Please go ahead.
Speaker Change: Thanks for the opportunity. So first of all maybe on the buyback could you just give us a sense are you maxing out with the buyback during Q3 should we assume that a similar rate can be achieved in Q4 and during 2025 around 400 million.
Speaker Change: A quarter.
Speaker Change: Sure.
Speaker Change: I'll just say on that models were not black stars are not being valued prudent in the way we execute against that buyback so with at lower share prices. We are buying back more shares of higher share prices when we're buying back less.
Speaker Change: There's nothing that is also in the case that we cant continue running at the same rate in Q4 that we did in Q3 in fact would be somewhat accelerated because in July due to a blackout period, we wouldn't buying back shares. So we would expect.
Again, all else being equal to buyback more shares in Q4, we did in Q3.
Speaker Change: Okay that makes sense.
Speaker Change: And then just going back to <unk> I am sorry, it's obviously the key question.
Speaker Change: Obviously, we've talked a bit about optimizing all optimization and debottlenecking, which is not in the guidance, but yes. Some.
Speaker Change: Some of that upside medium term.
Speaker Change: When would we get more clarity on this when will you stop building into guidance is this going to be end of next year. Once you hit steady state tool.
Speaker Change: How should we think about that should we start factoring in throughput above 143000 tonnes a day or so.
Speaker Change: Should we just stick 143, given the track record over recent quarters.
Speaker Change: Yes. Good question Myles I mean first of all say that are on our Investor day, a couple of weeks from now we'll talk about this off forward for the QB ASIC in some more detail.
I think for the time being best to stick with the the nameplate capacity because our focus is on improving that consistently by getting the online time, where it needs to date, we have communicated that we think there is an opportunity to optimize above Boston than we talked about that optimization being up to 10% increase in <unk>.
Speaker Change: Throughput, which can be accommodated by our existing permits beyond the box.
Speaker Change: Any any additional upside in the plant would really come through more of a debottlenecking.
Approach, which would require some minor modifications that upgrading certain plants and equipment and that could potentially deliver another 15%.
Speaker Change: All upside in terms of throughput.
But the the studies associated with that work are underway, we expect to have a much better line of sight into the path forward by the end of the year, but we will.
Speaker Change: Communicate more somebody who can talk about this in some more detail in a couple of weeks' time in the Investor day.
Speaker Change: Okay. Thanks.
Speaker Change: The next question is from Lucas pipes with B Riley Securities. Please go ahead.
Lucas Pipes: Thank you very much operator, thank you very much for taking my question Jonathan.
Jonathan Pryce: When you have decided to at Highland Valley on November 5th and still have labor needs I might be tempted to fill out a job application seller. So please remind me of that.
Jonathan Pryce: But all all are all joking aside I wanted to touch on on trail for four for a moment you mentioned a range of initiatives that youre looking at.
Jonathan Pryce: To improve the operational stability at that asset what will it take capex wise time wise too.
Jonathan Pryce: Two to improve D.
Jonathan Pryce: Four months there. Thank you.
It's been removed.
Jonathan Pryce: Yes.
Speaker Change: Thinking of processing Youre drove up the case scenario, we missed the asset you were referring Jay could you just repeat that please.
Speaker Change: That is a trail.
Speaker Change: Trial, Okay banking philosophy, yes, we are and we've seen a recent improvement in performance that trial, absolutely. We brought the chipset oil back online is performing.
Speaker Change: It very well and we are looking at cost reduction approaches that to further improve but I'll just skip shows ought to give you a little bit more color on some of the work that we're doing.
Speaker Change: Doing it right.
Speaker Change: So Lucas.
Lucas Pipes: We've made some recent leadership changes there as well and with a renewed focus on cash generation as Christopher mentioned earlier.
Speaker Change: Maximizing.
Speaker Change: Product margins and cost reductions and particularly in the maintenance and non routine work area.
Speaker Change: We.
Speaker Change: We are going through.
Speaker Change: A lot of metallurgical work as well in order to improve recoveries from the rest of the user.
Really good success right now.
Speaker Change: That will help us.
Speaker Change: To be able to take different fees, while maintaining the margins from those feeds with improved recoveries.
And of course, coupled that with the with a strong focus on cost reductions to get us back to profitability.
Thank you and Capex wise any any any ballpark figures to think about.
Speaker Change: Okay.
The only major capex associated with these changes.
Speaker Change: Thank you very much for that and I wanted to touch on the balance sheet really quickly.
Speaker Change: Krystal can you remind us how much more you're you're looking to allocate towards capital returns how much more you're looking to allocate towards debt reduction from here going forward and just kind of bigger.
Bigger picture.
Speaker Change: What do you think.
Speaker Change: Do you need in terms of cash to run the business and also be prepared for.
Speaker Change: For growth.
Speaker Change: If you could comment on that I would I would appreciate the color. Thank you.
Speaker Change: Yes, no problem. Thanks, Lucas I think in terms of maybe I'll start with that reduction.
Speaker Change: A piece of it when we announced the use of proceeds we had allocated $2 billion to that.
Speaker Change: And to date.
Speaker Change: We've completed over one 5 billion with the combination of the.
Speaker Change: On the buyback.
Speaker Change: Of our notes as well as B.
Speaker Change: The reduction in the CBA short term loans. So I think we have around 80 $400 million you asked remaining earmarked for debt reduction and we're continuing to review how we may deploy that the options obviously related to the project financing for TV.
Speaker Change: As well as some some leasing that we have on the balance sheet. So we're exploring those I think they will take a little bit more time for us to execute because we obviously have partners.
Speaker Change: And thanks.
Speaker Change: To resolve in that regard.
Speaker Change: And then in terms of the of the shareholder return.
Speaker Change: So we've obviously, we pay the supplemental dividend for 50 cents per share in September.
Speaker Change: Board had authorized 325 billion of buybacks. If you also include the 500 million from.
Speaker Change: From earlier in the year through yesterday, we had executed $882 million of that so we'll have the remainder.
Speaker Change: So I think it will take us.
Speaker Change: Sort of 12 to 18 months longer to conclude that it is as Jonathan noted that will depend on obviously the price of our shares in <unk>.
Speaker Change: Consideration of value. So that's on the buyback and then in terms of the growth projects. We had when we issued the use of proceeds again, we had disclosed a range of capital for those projects.
Speaker Change: Our exposure from July and we are we're continuing to review those capex numbers and SaaS those as we go through the detailed engineering work and conclude the studies until we will provide updates in due course as needed, but I think you can refer back I don't have the number at hand UFC three to.
Speaker Change: Three six to $4 three you can double check in July on Fraser can follow up with you offline but.
Speaker Change: So that's that's in regard to growth and we've earmarked proceeds for that and we're holding it as cash we expect TV to generate significant cash flow as we get up to the full production and into 2025, and we as per our capital allocation framework, if we generate cash in excess of our needs.
Would return that to shareholders and our capital allocation framework enables us to do that without minimum 30% of available cash returned a return to.
Speaker Change: Shareholders. So that's generally how we think about it.
Speaker Change: And if you have I guess follow up questions happy to take that.
Speaker Change: Thank you very much for all the color and I look forward to seeing you in November.
Speaker Change: Thanks, So I guess, we'll see you then.
Speaker Change: The next question is from Timna Tanners with Wolfe Research. Please go ahead.
Timna Tanners: Hey, good morning, Thanks for squeezing us in that different Q that I hadn't heard addressed if I missed them. One is just on the.
Timna Tanners: Updated economics.
Timna Tanners: So for now it's been awhile since I've seen at least a C. One cost estimate.
Timna Tanners: The COVID-19 and the size of the asset and all that will that be something we can hear about in November can you just remind us on the timing of any update there.
Speaker Change: Yes. Thanks for the question Timna, Yes, we will provide more updates on those projects in in November.
Speaker Change: Alright lets stay tuned and then my other question I, just thought it'd be appropriate to paying you on the zinc market because as much as we all talk about copper and other commodities zinc has been one of the biggest high Flyers that we've followed I know one article I read attributed the Cal fire maybe to some of this bank, but anything you could provide for us in terms of color on your in your <unk>.
Outlook of how sticky that some strength might be would be great. Thanks.
And timna. Thanks, Thanks for off Indian OTT, yes. Thank you for the question Timna interesting that in both the zinc and copper concentrate markets youre seeing structural deficits and concentrate I would differentiate those two and in zinc what we see is actually a chronic shortage and an investment.
In terms of mice and then challenged of course, both by disruptions that have occurred within the last couple of years and shutdowns as a result of the previously low price. So looking forward you really relying on three mines coming online in order to improve that concentrate picture Capuche ozone Orient Tara.
Speaker Change: Capuche you of course has been a bit slow to ramp up they've been shipping over quarter, three and have revised our guidance ozone or uncertain of the condition of that in the future and not material of course, because its Russia would go to China, and then Bill Evens Tara began in Q3 and have begun with a smaller staff complement.
Speaker Change: Likely not to return to the same production levels that they had previously so all of that speaks to us about a chronic shortage of concentrate youre seeing that reflected in the record low tcs that are occurring and certainly in the major reach research houses.
Speaker Change: We're looking forward to that PC in 2025, I'm expecting it to be a significant low as possible you can record lows. So I think that's why you're seeing our zinc responding the way that it has in terms of finished metal price finished metal prices in North America at least have come up a little bit in the last in the last while and that's positive.
Speaker Change: So we are looking to sink for a bright future in 2020 rod thanks for the question.
Speaker Change: Thank you thanks Timna.
Speaker Change: Yes.
Speaker Change: I will now hand, the call back over to Jonathan Pryce for closing remark.
Speaker Change: Okay.
Jonathan Pryce: Thank you operator, and thanks again to everyone for joining US today, we look forward to seeing many of you in person in Vancouver, and a couple of weeks for our strategy day on the Highland Valley site visits.
Jonathan Pryce: All of those presentations will be posted to our website detect dot com. Shortly after the event. So thank you once again and as ever if you have any further questions. Please reach out to Fraser on our IRC.
Jonathan Pryce: Enjoy the rest of your day.
Jonathan Pryce: Yeah.
Speaker Change: This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.