Q4 2024 Teck Resources Ltd Earnings Call
Speaker Change: At this time all participants are in listen only mode. Later, we will conduct a question and answer session.
Speaker Change: She joined the question queue Press Star then one on your Touchtone phone.
Speaker Change: Anyone need assistance during the conference call. They may signal, an operator by pressing Star then zero.
Speaker Change: This conference call is being recorded on Thursday February the 20th 2025.
Speaker Change: I would now like to turn the conference over to Emma Chapman, Vice President Investor Relations. Please go ahead.
Emma Chapman: Thank you Rachel and good morning, everyone and thank you for joining us for textbook, what's the 'twenty 'twenty four conference call.
Speaker Change: Today's call contains forward looking statements.
Emma Chapman: Actual results may vary due to various risks and uncertainties.
Speaker Change: <unk> does not assume any obligation to update any forward looking statements.
Emma Chapman: Please refer to slide three for the assumptions underlying our forward looking statements.
Emma Chapman: We will reference non-GAAP measures throughout this presentation and explanations and reconciliations are in our MD&A in the latest press release on our website.
Jonathan: Jonathan I'll see.
Jonathan: I will start with you.
Jonathan: This full year result.
Jonathan: Crystal Presto our CFO.
Jonathan: Sure.
Jonathan: No.
Jonathan: Jonathan will conclude with Crazy my mouth.
Jonathan: G&A session.
Jonathan: With that I'll hand, the call over to Jonathan.
Jonathan: Thank you Emma and good morning, everyone.
Jonathan: I'll start with highlights from 2024 on slide four.
Jonathan: Last year was a transformational year for Teck and we made significant advancements in our value creation strategy.
Jonathan: We completed the sale of our steelmaking coal business value, enabling tech to reposition as a pure play energy transition metals company focused on copper and zinc.
Jonathan: With the $8 6 billion U S dollars and proceeds from the transaction, we announced the largest cash returned to shareholders in our history, and we began executing them and me.
Jonathan: Lately.
Jonathan: In 2024, we returned $1 $8 billion in cash to shareholders, including $514 million in dividends or approximately $1 per share at 1.25 billion in share buybacks.
Jonathan: We also enhanced our resilience, while further strengthening our industry leading balance sheet.
Jonathan: Reduced our debt or $2 5 billion.
Jonathan: And retained funding for our niche.
Jonathan: Value accretive growth projects.
Jonathan: We currently have 11 3 billion liquidity, including $7 $1 billion in cash.
Jonathan: This includes all sustainability linked revolving credit facility, which we have recently reduced by $1 billion to 3 billion U S dollars and extended for a five year term to October 2029.
Jonathan: We were in a net cash position of $2 $1 billion as of December 31st.
Jonathan: In 2024, we generated $2 9 billion and adjusted EBITDA more than double the prior year.
Jonathan: We set a record for annual copper production with a 50% increase from the prior year to 446000 tons.
Jonathan: Zinc Red dog had strong performance, increasing zinc and concentrate production, while improving our net cash unit costs by 16 U S cents per pound.
Jonathan: We continue to have a strong focus on cost discipline and managing the controllable costs across our business.
Jonathan: We are starting to see the positive impact of the structural cost reductions that we have implemented across our business. Following the sale of the steelmaking coal business in July.
Jonathan: Over the full year, we've reduced our corporate costs by 21% or $88 million compared with 2023.
We did all this safely with a high potential incident frequency that remain low across the operations that we control.
Jonathan: Finally, we progressed our value accretive near term corporate growth projects, we completed.
Jonathan: Construction of QB in Chile, and ramped up the operation to design throughput by the end of the year.
Jonathan: We continue to lay the foundation for our next phase of copper growth by progressing on near term copper projects.
Jonathan: Overall, we made significant progress across the four pillars of our strategy for responsible growth and value creation.
Jonathan: Now looking at our fourth quarter highlights on slide five.
Jonathan: Strong full year results were enabled by our fourth quarter performance.
Jonathan: This was our third consecutive quarter of record copper production at QB rough Justice design throughput rates by the end of the year.
Our adjusted EBITDA increased by 160% to $835 million compared to the same period last year.
Jonathan: We reduced our debt by a further $275 million and returned $549 million in cash to shareholders through share buybacks and our base quarterly dividend.
Jonathan: And we continue to advance on the H M copper growth projects towards potential sanction decisions this year.
Jonathan: Turning now to an update on safety and sustainability on slide six.
Jonathan: We remain committed to ensuring the health and safety of our people operating responsibly and building strong relationships with communities.
Jonathan: As I mentioned earlier, we maintained a low height potential incident frequency of 0.12 across the operations that we control in 2024.
Jonathan: And with our continued focus on sustainability, we released our 2020 for climate change in nature report in December.
Jonathan: This combines the recommendations of the Tcs D and the T N S D to deliver an integrated report covering our progress on climate and nature related aspects of our business.
Jonathan: We will provide an update on all our sustainability performance and our 2020 for sustainability report, which we expect to release in March.
Jonathan: We continue to receive recognition for our sustainability leadership, most recently media call named <unk> as one of Canada's top 100 employers for the eighth consecutive year.
Jonathan: Forbes also named US one of the world's top companies for women for 2024.
Jonathan: Turning to our progress with <unk> on slide seven.
Jonathan: In Q4 to be delivered the strongest quarters sofa with mill throughput rates, increasing quarter over quarter and achieving design throughput rates.
Jonathan: It is a plant with a robust design and it continues to operate well.
Jonathan: Recoveries improved to approximately 85% in the quarter and averaged 87% in November and December as a result of our successful improvement work on the grinding and flotation circuits in Q3 early Q4.
Jonathan: Great.
Jonathan: In the quarter in line with the mine plan.
Jonathan: The improvement in our mining drivers led to copper production at QB, increasing quarter over quarter to $60 700000 tons from $52 5000 tonnes in Q3.
Jonathan: We also achieved record daily production throughout the quarter.
Jonathan: For the full year <unk> copper production was within our revised guidance of 208000 tons.
Jonathan: Looking forward to 2025, we are well positioned for further growth in copper production at lower net cash unit costs at QB setting us up for improved margins.
Jonathan: Our 2025 guidance range of $2 30 to 270000 tons of QB represents a significant increase from 2024.
Jonathan: This guidance reflects an extended 18 down 18 day shut down in January.
Jonathan: Maintenance and reliability work and complete additional tailings lifts as part of the operational ramp up.
Jonathan: We expect to continue to have regular quarterly maintenance shutdowns here our operating plans.
Jonathan: In 2025, we expect to see an overall increase in average grade of 0.6%.
Jonathan: In line with the mine plan, we are processing more transitional list, which is lower grade material, particularly in the first quarter of the year grades.
Jonathan: Grades are expected to increase into the second half of the year.
Jonathan: Our focus is on achieving steady state operational performance with consistent online time with design recovery rates of 86% to 92% depending on ore feed material.
We expect a significant reduction in Q B net cash unit costs in 2025 to 180 to $2 15 U S dollars per pound from $2 72 U S dollars per pound in 2024.
Jonathan: Okay.
This reduction is primarily driven by a combination of higher copper production cost discipline and increased molybdenum byproduct credits as the QB molybdenum plant continues to ramp up.
Jonathan: Overall, we are pleased with the performance of Q B and we expect to see the operation generate significant cash flows in 2025.
Jonathan: Looking at our corporate segment in 2025 on slide eight.
Jonathan: We expect significant growth in our corporate production with improving margins this year.
Jonathan: Copper production is expected to continue to grow to 490 to 565000 tons from 446000 tons in 2024.
Jonathan: Due to the ongoing <unk> ramp up and improved grades at H B C.
Jonathan: We also expect a significant reduction in our corporate net cash unit costs in 2025 to 165 to 195 U S dollars per pound from 220 U S dollars per pound in 2024.
Jonathan: We already saw an increase in our corporate EBITDA margin in 2024 and expect this to continue to improve to 53% in 2025 based on consensus estimates.
Jonathan: Slide nine outlines a well funded value accretive near term copper projects, including the mine life extension at Highland Valley in British Columbia, and our low capital intensity Greenfield projects, it's that for now in Peru, and San Nicolas in Mexico.
Jonathan: These are attractive projects that are simpler and scope and complexity than our QB two projects with significantly lower capital intensity.
Jonathan: We continue our work to define the most capital efficient and value accretive path for the expansion of <unk> <unk>.
Jonathan: Through the optimization of the mill and low capital Debottlenecking opportunities, which could increase throughput by 15% to 25%.
Jonathan: Through the execution of these projects, we have a clear path to increase our annual copper production to approximately 800000 tonnes per annum before the end of the decade.
Crystal: I'll now hand, the call over to Crystal to provide further details on our fourth quarter and full year results.
Crystal: Thanks, Jonathan Good morning, everyone I will start with our financial performance in Q4 and for the full year on slide 11.
Crystal: Our adjusted EBITDA more than doubled in 2024 to $2 9 billion and increased by 160% to 835 million in the fourth quarter. We had strong cash flow generation of one 3 billion in the quarter benefiting from net working capital release at Red Dog and QB.
Crystal: Over the full year, we reduced our corporate costs by 21% or 88 million compared with 2023.
Crystal: This reflects our strong cost focus and structural cost reductions that we implemented across our business. Following the sale of the steelmaking coal business.
Crystal: We expect to reduce our corporate costs further in 2025 as reflected in our annual guidance.
Crystal: We returned a total of $1 8 billion in cash to shareholders in 2024, including 549 million in the fourth quarter.
Crystal: We also reduced start up by $2 5 billion in 2024, including $275 million in the fourth quarter with the scheduled semiannual repayments on the QB project finance facility and other got reductions.
Crystal: The chart on slide 12 summarizes the key drivers of our financial performance in the fourth quarter as compared to the same period last year.
Crystal: As a result of the completion of the sale of the steelmaking coal business last July.
Crystal: Our results are presented as discontinued operations for all periods reported in our Q4 financial statements and MD&A.
Crystal: Our adjusted EBITDA increased by 160% in the fourth quarter, driven by strong base metals prices and higher copper and zinc sales volumes, reflecting the ramp up of QB and strong sales from Red dog.
Crystal: Zinc sales volumes each increased by 24% from Q4 of 2023.
Crystal: Our strong adjusted EBITDA also reflects improved unit costs, driven by our rigorous approach to cost discipline as well as lower smelter processing charges and higher sales volumes.
Now looking at each of our reporting segments in greater detail, starting with copper on slide 13.
Crystal: In the fourth quarter gross profit before depreciation and amortization from our copper segment more than doubled to $732 million compared to the same period in 2023 <unk>.
Crystal: The increase was primarily due to strong sales volumes and copper prices.
Crystal: Q B ramp up continue to support growth in copper and we had our third consecutive record quarter of copper production in Q4.
Crystal: This was partially offset by lower production at <unk> due to a decline in grades from the same quarter last year as expected in our mine plan.
Crystal: Well Highland Valley's production was lower than the same quarter in 2023 improved quarter over quarter as expected due to increased mining in the higher grade Lawrence Ted and improved haul truck performance.
Production at Carmen de on a coil increased due to higher grades recoveries and mill throughput, reflecting our efforts to improve water availability in the quarter.
Crystal: Our net cash unit cost increased as TV continue to wrap up in Q4 2023, most of the costs associated with <unk> continue to be capitalized as ramp up cost.
Crystal: Excluding <unk>, our total net cash unit costs improved by 33 cents a pound U S compared to Q4 2023, as a result of higher copper production and substantially higher molybdenum production from both asking me now at Highland Valley and.
Crystal: And finally, we were pleased to ratify new three year collective agreements with two of the three unions at QB, representing 78% of the Labor force and for all unionized Labor I'd asked me now.
Crystal: Looking forward in the first quarter of this year, we expect <unk> production to reflect the extended 18 day shut down in January as well as processing lower grade material in the quarter as Jonathan outlined earlier.
Now moving to a forward look at 2025, and our copper segment on slide 14.
Crystal: Our copper production is expected to continue to grow to 490 to 565000 tons from 446000 tons in 2020 for.
Crystal: This increase is primarily due to the ramp up of QB as well as a significant increase in production from Highland Valley.
Crystal: Highland Valley copper production is expected to increase as we continue to mine more ore from the <unk> pit, which is both higher grade and softer leading to increased throughput fees.
Crystal: These factors combined should more than offset lower recovery rates expected from the Lauren X or.
Crystal: We also expect production at Carmen de <unk> increased reflecting improved water availability through the year.
Crystal: We expect a significant reduction in our copper not cash unit cost in 2025 to USD 165 to 195 per pound from you asked 220 per pound in 2024.
Crystal: This reduction reflects an increase in copper and molybdenum production as well as continued cost discipline across our operations.
Crystal: We expect our molybdenum production to increase to $5 one to 7.4 thousand tons from 3.3 thousand tons last year.
Crystal: This is based on the continued ramp up of the molybdenum plant at QB and increased molybdenum production at Highland Valley as we mined in the Lord <unk> Taylor.
Crystal: Turning now to I think segment on slide 15.
Crystal: Our gross profit before depreciation and amortization from our saying segment more than doubled from the same quarter last year to $320 million.
Crystal: This was driven by higher zinc prices as well as strong red dog sales volumes due to the timing of sales.
Crystal: Lower treatment charges and higher byproduct revenues.
Crystal: This was partially offset by higher net of royalty expense as a result of red dog strong profitability.
Crystal: As expected in our mine plant and our annual guidance Red dog zinc production decline in Q4 due to lower.
Crystal:
Crystal: Costs improved significantly from Q4 of 2023, reflecting lower smelter processing charges the effect of higher sales and an increase in silver byproduct credits.
Crystal: At trail operations, our refined zinc production was impacted by the localized fire and electrolytic plant in September 2024, as previously disclosed.
Crystal: The repair of one out of four sections of the electrolytic plant continues to progress and is scheduled to be completed by the end of the first quarter of the year.
Crystal: And finally as we progressed the work required to extend the life of Red Dog, we successfully obtain a permit for construction of an all season exploration access road, which will enable us to progress the next phase of exploration and resource assessment.
Crystal: Looking forward to Q1, we expect zinc and concentrate sales from Red dog 75 to 90000 tonnes, reflecting the normal seasonality of sales.
Crystal: Turning to 2025 outlook for zinc segment on slide 16.
Crystal: Our guidance for zinc in concentrate production is 525 to 575000 times a decrease from 616000 tons produced in 2024.
Crystal: <unk> production guidance for 2025, and the following years reflects expected grade decline as the mine life advances.
Crystal: <unk> zinc production is expected to increase as we mine a higher proportion of copper zinc ore relative to copper only ore in 2025.
Crystal: We are focused on maximizing profitability and cash generation from trail operations in light of current tightness of the zinc concentrate market. We expect to operate trail at lower production rates in 2025 with guidance for refined zinc production of 190 to 230000 tons compared to 256000 tons in 2002.
Crystal: For trail remains a strategically important asset providing critical and strategic minerals, such as germanium in India as well as its valuable integration with Red dog.
Crystal: Our net cash unit costs for the segment in 2025 are expected to be between <unk> 45, and 55 cents per pound compared with U S 39 cents per pound in 2020 for.
Crystal: The expected increase is due to lower zinc production and higher labor and consumable costs, partly offset by lower zinc treatment charges higher byproduct credits and a continued focus on cost discipline across our operations.
Crystal: Turning now to slide 17.
Crystal: We remain committed to our capital allocation framework, which balances investment and value accretive growth with returns to shareholders, while maintaining a strong balance sheet through the cycle.
Crystal: Our capital allocation framework commits us to return between 30 and 100% of available cash flows to our shareholders.
Crystal: In 2024, we deployed the proceeds received from the sale of the steelmaking coal business across the pillars of our capital allocation framework balancing returns to shareholders with debt reductions and earmarking cash for our near term value accretive growth projects.
Crystal: Looking at our balance sheet now on slide 18.
Crystal: We currently have one of the strongest balance sheets in the sector and we continue to maintain investment grade credit ratings.
Crystal: In 2024, our cash balance increased significantly as a result of the proceeds received from the sale of the steelmaking coal business.
Crystal: It also resulted in higher finance income as we earn interest on the higher cash balance.
Crystal: With the proceeds we reduced our debt by $2 5 billion Canadian.
Crystal: We currently have liquidity of $11 3 billion, including $7 1 billion in cash.
Crystal: We were in a net cash position of $2 1 billion as at December 31st and our remaining outstanding term notes of U S 1 billion are long dated.
Crystal: We will continue to deleverage as we make semiannual repayments on the QB project finance facilities through 2031.
Crystal: Our industry, leading balance sheet is a competitive advantage for Tac, providing us with resilience to navigate current market conditions, and allowing us to execute on our copper growth strategy, while returning cash to shareholders, ensuring we create value for our shareholders.
Crystal: Turning to slide 19, and our track record of returning cash to shareholders.
Crystal: We continue to balance our investment growth with returns to shareholders and in 2024, we returned $1 8 billion to shareholders through share buybacks and dividends.
Crystal: This builds on our strong history of cash returns to shareholders, which total approximately $5 1 billion since 2020.
Crystal: We retain our annual base dividend of <unk> 50 per share and in each of the past two years, we have paid a supplemental dividend of <unk> 50 per share, bringing total dividends to $1 per share in 2023 and 2024.
Crystal: And we continue to be in the market daily actively buying back our shares with $3. Two 5 billion in share buybacks authorized last year.
Crystal: As of yesterday, we had executed $1 four a $5 billion of the three to 5 billion authorization under our normal course issuer bid representing approximately $22 7 million class B shares.
Crystal: We used approximately $1 8 billion of our authorized share buyback remaining to further improve our per share value.
Crystal: And with the strong cash flow generation and potential of our business. We could see further cash returns to shareholders in line with our capital allocation framework, we remain committed to returning between 30 and 100% of future available cash flows to our shareholders.
Crystal: Turning to our capital expenditure guidance for 2025 on slide 20.
Crystal: We are focused on investing in our value accretive near term copper growth projects as we progress towards potential sanction decision in 2025.
Crystal: Our guidance for 2025, sustaining capital and capitalized stripping remains within our expected range of one to one 2 billion Canadian.
Crystal: Sustaining capital will remain relatively flat at between 750 and $845 million from $836 million in 2024, and capitalized stripping is expected to decline to between 260 to 300 million from $373 million in 2024, as we have largely completed the required.
Crystal: <unk> waste stripping in the Lauren ex pit at Highland Valley.
Crystal: Our growth capital is expected to be between $875 million to $980 million.
Crystal: Or around USD $625 million to $700 million in 2025.
Crystal: This growth capital is for multiple projects across our portfolio with our focus on advancing our value accretive near term copper projects to potential sanction decision in 2025.
Crystal: On an attributable basis, we anticipate pre sanctioned copper gross capital of approximately USD $430 million to $485 million in 2025.
Crystal: This includes approximately 100 to 110 million U S for the mine life extension at Highland Valley and U S 220 to 240 million first off for now.
Crystal: Both projects are currently focused on advanced and vast and detailed engineering design and project execution planning, which are critical steps in meeting our investment requirements for potential project sanctioning zafar.
Crystal: <unk> already has its mean permit and we are therefore proceeding with advanced early works in 2025 to enable construction to start when the project is sanctioned.
Crystal: We also expect to spend U S, 25% to 39 progressed Ub QB Debottlenecking this year.
Crystal: The remaining copper growth capital expenditures are focused on advancing studies for our pipeline of medium to long term projects, including Galore Creek shaft Creek, he range and new wave of Union.
Crystal: These investments ensure that we are well positioned to advance these growth projects efficiently, while remaining disciplined with our capital allocation.
With that I'll turn it back to Jonathan.
Jonathan: Thanks Crystal.
Jonathan: So as we look forward I wanted to take a moment to acknowledge the economic and political backdrop in which we are operating on slide 22.
Jonathan: Globally, we are witnessing a period of significant economic uncertainty and change that will also trade flows can potentially impact global supply chains and market dynamics.
Jonathan: In this context the outlook for our commodities remains robust driven by the underlying demand factors economic growth and urbanization electrification to ensure energy security and growth in the digital economy.
Jonathan: The secular tailwind underpinning significant demand for both copper and zinc and when coupled with supply side constraints underlying the strength of our strategy as a pure play base metals company with a deep pipeline of copper growth opportunities.
Jonathan: Turning to slide 23.
Jonathan: We are closely monitoring the potential impact of tariffs and other restrictions between the U S and Canada, which is a fluid and rapidly evolving situation.
Jonathan: Teck has a resilient business driven by the diversification of our products and operations, coupled with an agile and sophisticated commercial strategy and a very strong balance sheet.
Jonathan: To put the potential tariffs into context any imposed tariffs by the U S are not expected to have a material impact on our business.
Jonathan: Our copper and zinc concentrate sales would not be impacted as we primarily sell to Asia, and Europe and north into the U S.
Jonathan: <unk> refined zinc lead and speciality metals, such as germanium indium and sulfur products are sold into the U S. But in the event. The tariffs are imposed we expect trade flows to adjust.
Jonathan: While type produces a large proportion of the ex China supply for this diverse group of metals, they comprise less than 15% of our revenues.
Jonathan: Arguably monitor and respond to the situations.
Jonathan: Any potential impacts to our business.
Jonathan: We have a strong commercial strategy and logistics.
Jonathan: It will just to quickly pivot and respond to changing market conditions.
Jonathan: We are closely watching and engaging with our customers and we remain resilient in the current environment.
Jonathan: So to conclude on slide 24.
Jonathan: Our focus at Tek is to create value for our shareholders on our priorities are focused on doing just that in 2025 and beyond.
Jonathan: We've entered the year with QB operating at design throughput capacity rights on our primary focus is to complete the QB ramp up to steady state.
Jonathan: We will continue to drive operational excellence across our portfolio of high quality copper and zinc operations and projects with a strong focus on cost discipline.
Jonathan: This will ensure that we not only increase our copper production, but also increase our margins in.
Jonathan: Importantly, we remain committed to returning cash to our shareholders through the execution of our authorized share buyback program and annual base dividend.
Jonathan: We are progressing on the assumed copper projects to possible sanction decisions in 2025 positioning us for our next phase of copper growth.
Jonathan: And I feel confident that we have the resilience to navigate uncertainty and create value through our strong financial position and agile commercial strategy.
Jonathan: Overall I'm very excited about the opportunities ahead of us to continue to drive value creation.
Jonathan: Thank you with that operator, please open the line for questions.
Jonathan: Certainly.
Jonathan: To join the question queue. Please press Star then one on your Touchtone telephone you'll hear tone acknowledging your request, we ask that you limit yourself to one question and one follow up if you're using a speaker phone. Please ensure you lift your handset before pressing any keys, if you wish to withdraw your question.
Jonathan: Press Star then two.
Speaker Change: The first question is from Aurist Walkabout with Scotiabank. Please go ahead.
Aurist Walkabout: Hi, Good morning, I'm wondering if you can get a bit more color on the QB two ramp obviously really strong performance in November December January impacted by the extended 18 months 18 day shut down what's the performance been like since it restarted and do you think <unk> is on track to.
Speaker Change: Reach that sort of steady state full nameplate by mid year I'm wondering if.
Speaker Change: Things come out of the shutdown that they perhaps either advance that or delay that.
Speaker Change: <unk>. Thank you very much for the question look overall I would say the ramp up is progressing well and it's you know continues to be in line with what we would call normal course or benchmark ramp up timetables.
Speaker Change: We have planned quarterly shutdowns other embedded in our operating plans and we've communicated that.
Speaker Change: Previously and as you highlighted we did have an extended shutdown for 18 days in January to conduct maintenance reliability work and to complete some tailings lifts as part of the operational ramp up.
Speaker Change: 18 day shut DIONE is fully reflected.
Speaker Change: And the guidance ranges of $2 30 to 270000 tons.
Speaker Change: For 2025 and posts not shut down the plant and the operation more generally has been running very much in line with our underlying operational plans. So we do have good confidence in the and achieving the guidance range that we've set out.
Speaker Change: As you've seen we've you know we've mentioned a few things for example, having you know lower grades towards the start of the year and higher grades towards the back end of the year and processing some more transitional ores at the front ended the year, which as you know can lead to lower recoveries, but all of his life. He is fully accounted for in the guidance range that we put forward and we.
Speaker Change: We are we are very pleased with the way that the plants in the operation as a whole is operating today.
Speaker Change: Thanks, and just as a follow up what is the planned cadence for future.
Speaker Change: Maintenance shutdowns at <unk> for the rest of the year like is it sort of like a week a quarter now starting with Q2 or just whats plan.
Speaker Change: Yeah look that's a reasonable assumption in our as you know over all of the the old law.
<unk> time for the plant is expected to be around 92% that does imply a shutdown of around seven days in every quarter as we did last year. We've we've typically been having those shutdowns in the first month of each quarter and going forward in 2025, we expect to maintain a similar cadence.
Speaker Change: Okay. So nothing.
Speaker Change: No longer shutdowns currently planned beyond what we saw in January.
Speaker Change: That's correct.
Speaker Change: Thank you very much.
Speaker Change: Thanks, Chris.
Speaker Change: The next question is from Carlos de Alba with Morgan Stanley. Please go ahead.
Speaker Change: Yes, Thank you and good morning, everyone.
Speaker Change: The balance sheet is undeniably strong.
Speaker Change: And so there is a how should we reconcile Jonathan.
Speaker Change: Capital allocation framework, the fact that our estimates and consensus sell side estimates youre going to generate anywhere between 1 billion 2 billion yen or more per year in the coming years of free cash flow.
Speaker Change: How do we reconcile these are strong balance sheet.
Speaker Change: The location of framework of returning money to shareholders and the potential M&A, where that goes and buys it.
Speaker Change: Smaller <unk> always wanted to companies and even though it does have a very robust pipeline of projects.
Speaker Change: Or maybe we just see more outsized returns to shareholders that you have done in the last few.
Yes. This is Mike.
A key question that we are discussing with investors.
Speaker Change: Clearly as you know.
Speaker Change: For M&A.
Speaker Change: Say Lee Skeena away, you see something that.
Speaker Change: Yes, we would like to see how do you how do you from your perspective on the Board's perspective Youre looking at these.
Speaker Change: Yeah, Carlos Thanks, very much for that question. It was a fairly broad one look you know that the capital allocation approach that we take here in the business is very much focused on value creation for our shareholders. We do have a very strong balance sheets as crystal lifelines, we reduced debt quite significantly last year.
Speaker Change: Yes, and we are currently running a net cash position on our balance sheet.
Speaker Change: So we do still have a very significant.
Speaker Change: Outstanding authorization of share buybacks.
Speaker Change: We will continue to execute through the course of this year you know as I said in the range of $1.8 billion of cash still to be deployed through the buyback of our shares and as Christal mentioned, we're in the market executing on that every day in addition to.
Speaker Change: So the bank dividend that we have and we've maintained.
Through through this year.
Speaker Change: We've always said that if we continue to generate cash in excess of the needs of the business that will make its way through the capital allocation framework and under that framework, we do have the potential to.
Speaker Change: Return, a further 30% or 100% of cash that's in excess of our needs.
Speaker Change: As you know we also have a stable of projects in the portfolio and when we went through the use of proceeds from the sale of <unk> last year. One of the things. We said we would do is reserved some cash for the development of what we consider to be low capital intensity and high returning projects that we have in the portfolio.
Speaker Change: You know one of those being the the Highland Valley Copper mine life extension here in British Columbia, another being the Safran our project in Peru, and the other Greenfield being the son Nicholas project and in Mexico, We continue to focus on the organic growth in the business, because we see that as being the most value of <unk>.
Speaker Change: <unk> path for our shareholders. We are of course very aware of the M&A activity in the in the sector that has spoken about.
Speaker Change: But from tax perspective, you know our focus remains creating as much value as we can for our shareholders and we believe that the projects. We have in the portfolio are a great way to achieve loss. So it's a good position to be in it gives us resilience. It gives us options, but we will maintain our focus on creating value for shareholders.
Speaker Change: And executing on the plans, but I think we've clearly set out.
Speaker Change: Great. Thank you and just very short follow up is suffering arguably the greenfield project debt as of now will be next.
Speaker Change: So we are quite advanced on Zephyr now as you know in terms of having the environmental permits associated with that and as you see from our disclosures around our copper growth spend this.
Speaker Change: This year we.
Speaker Change: We are increasing the spend there you know reflective of a project, but as a close to a sanction decision.
Speaker Change: We continue to work very hard on San Nicolas as well, we see that as a very attractive very attractive auction and ultimately you know the.
Speaker Change: The economics of those projects the progress of the other permits that are required to actually take a project through into execution and the completion of the the right level of engineering work that needs to be done price of sanction will determine which of those projects is you know he's up for sanction first but I think you can see from our disclosures the zapper.
Speaker Change: <unk> today is in a very strong position.
Jonathan: Thank you Jonathan.
Jonathan: Thanks Carlos.
Speaker Change: The next question is from Liam Fitzpatrick with Deutsche Bank. Please go ahead.
Hi, Jonathan two questions for me.
Speaker Change: On QB.
Speaker Change: The first one is on the topic of a potential tie up with some sort of JV with Colo I see we've seen an interesting deal announced today by Anglo Gabel code. It would seem that from a value unlocked perspective. This is a.
Speaker Change: A fairly obvious area Phil for Tech and the other companies involved can you give any color on where the discussions all.
Speaker Change: Reasons why this is being looked at opus shoot more aggressive.
Speaker Change: And my second question is on QB costs, just looking at the absolute costs in Q4.
Speaker Change: They did go up quite significantly is there anything in there that you could talk to that shoot on void because looking at it. It seems like there's a lot of cost that has to come out through 2025 for you to hit the unit cost guidance. Thank you.
Speaker Change: Thank you for those questions all in a moment and the second question over to Crystal, but just starting with your question on QB, a cardiomyopathy and you know as we've discussed before we do recognize the potential value.
Speaker Change: Some form of tie up between those two operations and it's something that we've done a good deal of work all to understand the various ways in which that value can be unlocked.
Speaker Change: As we've also consistently said you know our number one focus remains on optimizing value for Teck shareholders and we look at all the decisions we make through that lens.
Speaker Change: Right now our focus remains on the the ramp up of QB Smith of full production and steady state and as we've spoken about previously the optimization and debottlenecking of that plant, which will be some of the most capital efficient Ah unlock of tonnes.
Speaker Change: We have anywhere in the portfolio so that remains key focus for us.
Speaker Change: We have as you would expect had a level of engagement around.
Speaker Change: Brian the opportunities suites with QB cardiomyopathy with the partners on the other side, but as you would appreciate those.
Speaker Change: Those discussions are confidential in nature and of course, we can't say anything more.
Speaker Change: Those are at this point in time other than to reaffirm that we recognize the value potential there and we will always act in the best interest of Tech shareholders in terms of how we maximize value from the portfolio that we have.
Speaker Change: And with that I'll hand over to Crystal on the on the cost question Hi, Liana. Thanks for your question I think.
Crystal: You've thrown out the key point just in the context of as we look for and expecting a significant reduction in TV costs. As we made two more stabilized production levels through through 2025, and we complete the demobilization of of contractors that supported the ramp up through 2024 in the fourth quarter.
Crystal: Of course, we saw an increase in volume that does drive a modest increase in operating costs. As we have you know higher electricity on supplies and when you balance that over a higher production that should normalize. There were also some one time cost that we incurred in the fourth quarter.
Crystal: Mentioned that the settlement of two or three of our labor contracts, which were of course, a good outcome on those lead to two bonuses paid to those.
Crystal: Those unions as we as we resolve those contracts. So we do continue to expect a decline in our unit cost for TV and for the copper business as they move into a into 2025, and we see an uptick in our production levels as well as at night and molybdenum credits, we expect in 2025.
Beth: Okay. Thank you Beth.
Speaker Change: Thanks Liam.
Speaker Change: The next question is from Craig Hutchinson with TD Colin. Please go ahead.
Craig Hutchinson: Hi, good morning, guys.
Craig Hutchinson: Just a question on the Highland Valley Life extension Theres a note in your MD&A you just.
Craig Hutchinson: Saying that there is.
Craig Hutchinson: It's been a challenged probably one of the indigenous government organizations delayed the approval process of the EIA.
Craig Hutchinson: Does that have to be resolved before the year can be can it be issued or can you get the EIA then resolve these issues. After the fact and I guess, just maybe as a follow up.
Do you have for anticipated timeline for I guess solving or getting any additional impact benefit agreements with those who don't have them already.
Craig Hutchinson: Yeah.
Craig Hutchinson: Yeah, great. Thank you for that question. It's a good one as you can imagine it's a file we are working very hard on at the moment.
Craig Hutchinson: We are in the final phases of Z a process for the for the mine life extension project.
Craig Hutchinson: And the dispute process that we've referenced is a you know a formal established path of that environmental assessment process, which is designed to resolve issues.
Craig Hutchinson: Yeah. It was.
Craig Hutchinson: We have secured agreements with other indigenous government organizations that are involved in the in the approval process for Highland Valley.
Craig Hutchinson: Mine life extension and then we got those coming through in December and January and we do continue to engage with S. S N who all the party that has disputed the approval of this project.
Craig Hutchinson: Look we have a very long track record of working successfully with with indigenous nations and sharing the benefits of our of the operation and all future growth with those nations and we do remain confident in our ability to move forward successfully.
We also have a good track record of permitting here, specifically in British Columbia, and its worth noting that the province of British Columbia recently announced that they would be working to fast track permitting on these projects. So we do have.
Craig Hutchinson: A lot of support with respect to this and we remain confident in getting this done and getting the approvals we need. It's a project that we believe has compelling returns and we do expect to be in a position to sanction. It later this year.
Craig Hutchinson: Yeah.
Speaker Change: Okay, Great and maybe just a pause.
Speaker Change: A question you guys mentioned, you've got the permit for the road preparation Red dog.
Speaker Change: Step up in growth capital this year versus loss does that include spending on the road this year or is that a separate line item.
Craig Hutchinson: Yes. It does include that Craig Youre exactly right.
Speaker Change: Okay, great. Thanks, Thanks, guys.
Craig Hutchinson: Thank you.
Craig Hutchinson: The next question is from Lawson Winder with Bank of America Securities. Please go ahead.
Thank you operator, good morning, Jonathan Crystal Thanks for the update.
Craig Hutchinson: I wanted to.
Craig Hutchinson: Ask about.
Craig Hutchinson: Capital allocation and zinc and so so.
Craig Hutchinson: So just pointing to zinc showing some signs of life in 'twenty, four and tech having a range of projects in zinc.
Craig Hutchinson: And also noting that to maintain the current zinc business. It will require significant investment when you think about allocating capital to the various projects are the zinc and copper segment separate buckets or could there be a situation where zinc prices point to higher IRR.
And as a result, he emphasized cover growth.
Craig Hutchinson: Look I think.
Craig Hutchinson: We look at our capital allocation holistically across the entire organization, where we're not contemplating that separately for copper and zinc everything has to compete for the capital we have and and competes on you know on the range of metrics that we've spoken about before and particularly returns on this growth.
Craig Hutchinson: I think we see the fundamentals for zinc to be attractive there is strong demand for zinc and perhaps the demand growth outlook is not as compelling as it is for copper, but we've seen a dearth of new supply in zinc for many many years no major zinc projects coming through.
Craig Hutchinson: And at Red Dog of course, we have a world class tier one operation and wildlife comes to end of current life around 'twenty Susie one we have a couple of very high quality ore bodies nearby and that is where the spending is being directed today to understand the potential future of red dog and the potential.
Craig Hutchinson: For a significant life extension there.
Craig Hutchinson: So based on those fundamentals based on the quality of the project we have at Red Dog, we continue to see that as a core part of the portfolio of course. In addition to Red Dog you know, we do get zinc concentrate from Fremont Amina <unk> and in future in the event, we sanctioned San Nicolas that will be a further source of zinc concentrates.
Craig Hutchinson: For us So you know we hold a strong position in that market right now.
Craig Hutchinson: Provided the fundamentals remain intact, we would continue to want to maintain a strong position in that market into the future.
Speaker Change: Okay. Thanks, Jonathan and then.
Speaker Change: Just looking at another asset that has a significant zinc complaining.
Speaker Change: Your Mexican asset has the political situation in Mexico a ball.
Speaker Change: Any more favorably at this point and what what's your thinking in terms of actually making a decision to invest capital into sandvik.
Speaker Change: <unk>. Thank you.
Speaker Change: Yes. So we you know we remain highly interested in the disarm Nicholas a project. It's it's a it's a relatively small simple flow. She will have a low capital intensity is very high grade, which means it will deliver strong margins through its life.
Speaker Change: We are closely monitoring the the mining environment in Mexico, and I was in Mexico City in January and had an opportunity to meet with president showing by him and told to her.
Speaker Change: <unk> San Nicolas on about mining more generally.
Speaker Change: While at the present time, it doesn't appear to be a priority for the administered.
Speaker Change: It's legislation on on mining given it has its hands full with its with its neighbor to the north.
Speaker Change: We do see a longer term a focus there on foreign direct investments are focused on building critical minerals supply chain and capability and I would say the you know the signals we get from the administration are encouraging, particularly given the commodities that San Nicolas will be.
Speaker Change: Producing and particularly given the track record of.
Speaker Change: Being responsible in our approach to developing operating mines.
Speaker Change: With both ourselves with agnico Eagle bring to the table.
Speaker Change: Now, we don't see any negatives immediate impact in relation to San Nicolas. So we continue to do all study work, but it would be fair to say of course, we won't make a sanction decision and we won't commit significant dollars to.
Speaker Change: Further investments on the ground in Mexico until such time, as we have certainty of permitting and the support of the government, but we remain optimistic.
Speaker Change: Fantastic Thanks, Jonathan.
Speaker Change: Thank you Melissa.
Speaker Change: The next question is from Myles Allsop with UBS. Please go ahead.
Speaker Change: Great Yeah, maybe just on QB could you remind us how much you you had mentioned like capitalizing costs, how much you're capitalizing at the moment is it just interest or is it means although like cost as well and when will you stop capitalizing those and then maybe second on on trial, yeah, it's going to be free cash flow negative.
Speaker Change: Last year, it is likely to be more cash flow negative.
Speaker Change: This year I mean.
Speaker Change: What does it take to decide to close trial.
Speaker Change: No you said strategically important.
Speaker Change: No.
Speaker Change: When he's burning cash how long do you maintain that view of strategic importance.
Speaker Change: I'll come back to your second question on trial in a moment.
Speaker Change: Due to crystal for the for the first question on Cubicles, Yeah. Thank you and maybe just a bit of a clarification.
Speaker Change: Clarification, there when I.
Speaker Change: Mentioned that we were capitalizing ramp up costs associated with TV and I always say in Q4 of 2023.
Speaker Change: In through 2024.
Speaker Change: Then we have not been capitalizing interest on that on the project of course construction with complete in the first quarter with the port and a molybdenum plant in the in the second quarter. So no longer capitalizing interest depreciating the assets there and we are we haven't been capitalizing wrap up costs in 2024, so that's the only.
Speaker Change: Capitalization youre seeing at QB as in relation to sustaining capital cost and to a very minor extent to Aercap Western bank.
Speaker Change: Thanks, Crystal and then moving on to trial miles a couple of comments that you know we've been very focused on.
Speaker Change: Profitability and cash generation at trial, and we've made a number of changes to support loss, we've implemented cost reductions at the site in relation to maintenance and normal non routine work, we've reduced head count at the sites and with new leadership that works on a whole series of cost reduction opportunities.
Speaker Change: Across the operation, we have reduced our refined zinc production. This year in the context of the TC environment and that again will directly improve trials profitability and cash generation.
Speaker Change: The kids set plants that we did a significant amount of maintenance on these now operating very well and our production of late in particular is very strong and we do also have the option trial to sell excess power to generate cash flows as needed. So we've taken a very commercial focus.
Speaker Change: To the way that we were operating trial right now I'm very pleased with the early results that we are seeing that and I think trial is doing the things that needs to do to continue to earn its place in the portfolio.
Speaker Change: From a profitability and cash flow generation perspective, the other comments I would make on trial, but it really is particularly in the current context quite as strategic assets, it's key to our portfolio, particularly that integration with the the Red Dog mine and gives us a optimal market access for the Red dog concentrates.
Speaker Change: Importantly, though it produces a number of metals, which have become quite strategic and important in the in the current the current context of the relationship between Canada and the U S. We estimate the trial would be the fourth largest producer of germanium in the world and the only primary producer of germanium in north.
Speaker Change: America and this is the time, where where China is.
Speaker Change: Got all four restricted supply of germanium.
Speaker Change: The U S and it's a critical component for our for defense spending for example, and goes directly to that National security agenda. So.
Speaker Change: Foundation Lee is absolutely critical that we achieve profitability and cash flow generation from trial and I'm confident that we're on the right path. There and then secondly, there's a there's a compelling.
Speaker Change: The strategic overlay with trial being part of an integrated flow sheet that we have with Red dog.
Speaker Change: How much revenue you get from germanium and the smaller muscles as is that becoming a meaningful stream that will surprise to the upside given what's happening.
Speaker Change: Yes, so it's it's relatively small in terms of the in terms of the direct revenue items and cash flow and profitability impact on the business. What it has I think there's a lot of ancillary strategic benefits.
Speaker Change: A relationship perspective in a period of time, where trade relations are strained.
Speaker Change: And that flows all the way back upstream to the outlook for the Red Dog mine, which of course is in the U S. In Alaska and as we look forward to the future expansions of Red dog.
Speaker Change: Proportion of speciality metals and that concentrate will actually increase so we think it's interesting for a number of reasons, but the again just on trial of a core focus there is on profitability and cash generation and we are in good shape. There was a number of the changes that have recently been made and the new operating strategy that that team has put in place for 2025.
Speaker Change: Great. Thank you.
Speaker Change: Yeah.
Speaker Change: Thanks miles.
Speaker Change: The next question is from Bill Peterson with Jpmorgan. Please go ahead.
Bill Peterson: Yes, hi, good morning, Thanks for taking the questions maybe on the on the growth projects you spoke to.
Speaker Change: The assessment of the Highland Valley, and a little bit on Mexico, but if we think about higher level I guess at this stage for 2025 can you go through each project in terms of what's in your control versus local authorities, what should we be looking out for next steps.
Speaker Change: And I guess, how does amphenol in particular, you discussed the potential sanction decision what are the key requirements, they're looking for whether it be market related or expectations on costs or are you looking for to potentially sanction by year end.
Speaker Change: Okay, I mean, I think the things that are in our control will remain the remains of studies and the completion of those studies there remain the engineering work that we're undertaking and of course. They remain you know the engagement with our with vendors and contractors that ultimately will will support the project as is the case with any.
Speaker Change: Project to a certain extent.
Speaker Change: Permitting is beyond our control but of course, it's something that we we engage them very heavily on.
Speaker Change: And it's something we work very closely with the with the regulators in a collaborative fashion through.
Speaker Change: Through that process, you know I think all of these projects will have to earn that place in the portfolio and the other than the place in terms of capital allocation of.
Speaker Change: Of course, we have a view that that is the case, which is why we are pursuing them as near term priorities and the economics that we see associated with these projects are all compelling offering a combination of strong IRR strong cash flow generation strong EBITDA contribution to the group and a meaningful contribution.
Speaker Change: <unk> to our through our product base.
Speaker Change: So all of those things must be true ultimately for a project to be sanctioned and for the risks to be appropriately manage so so we're comfortable with the portfolio that we have you know H B C being a brownfield mine life extension here in D. C. And then two greenfield projects with Zephyr and I'll in Peru, being one that tech.
Speaker Change: Will construct and operate and then San Nicolas in Mexico under that 50, 50 joint venture with Agnico Eagle, which will be constructed and ultimately operated by the joint venture company. So we're very happy with the shape of our portfolio will continue to progress these projects to sanction decisions and as I said.
Speaker Change: Provided the the financial metrics are that we expect to sanction them and see them in their place in our portfolio going forward.
Speaker Change: Yes.
Speaker Change: Yes, thanks for that and then wanted to ask about costs, maybe in a slightly different way than their prior question first.
Speaker Change: First you talked about the union two out of three.
Speaker Change: Be a negotiated one more to go I guess, how should we think about a run rate impact to the model and costs and then I guess kind of one step further on the cost trajectory for QB two how should we think about the exit rate cost per pound given the expected output increases throughout the year.
Speaker Change: Crystal over to you. Please yeah, I mean, I think in the context of sort of run rate cost of course and on the team can take you through more of the details, but I think in terms of <unk>.
Speaker Change: Labor cost you can continue to assume sort of lower single digit inflation here and I'll I'll get and then a follow up with you offline and then in terms of sort of run rate.
Speaker Change: I think in the way that we've talked about production.
Speaker Change: Escalating as we go through the year and a more stable run rates that TV I think you can think about the cost in the same way as we've established our guidance with a lower end and the higher end and we've continued to disclose that.
Speaker Change: Unit costs for QB to give you that indication. So I think I would I would see that as sort of a tale of two halves to the year similar to production.
Speaker Change: Okay.
Jonathan Crystal: Thank you Jonathan Crystal.
Speaker Change: Thanks for those questions Bill.
Speaker Change: That's all the time, we have for questions today, I will now hand, the call back over to Jonathan price for closing remarks.
Jonathan Price: Thank you operator, and thanks again to everyone for joining us today before.
Speaker Change: Before we sign off I did want to note that it is Fraser Phillips last quarterly conference call with Tech before his retirement I would like to sincerely. Thank Fraser for his many contributions to tech over the past eight years and wish him and his wife, Kimberly all the very best for the next chapter.
Speaker Change: Meanwhile, we look forward to seeing many of you in person at our major mining conference in Florida next week. If you have any further questions. Please reach out to Emmet Chapman and to our IR team enjoy the rest of your day.
Speaker Change: This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change:
Speaker Change: Hum.
Hum.
Hum.
Speaker Change: [music].
Speaker Change: Okay.