Q1 2025 Teck Resources Ltd Earnings Call
Yes.
Speaker Change: Ladies and gentlemen, thank you for standing by welcome to Teck's first quarter 'twenty twenty-five results release conference call.
Speaker Change: At this time all participants are in listen only mode. Later, we will conduct a question and answer session.
Speaker Change: He joined the question queue Press Star then one on your Touchtone phone should 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 April 24th 2025.
Speaker Change: I would now like to turn the conference over to Emma Chapman, Vice President Investor Relations. Please go ahead.
Thank you operate them good morning, everyone and thank you for joining us for Teck's first quarter 2025 constant scope.
Speaker Change: Today's call contains forward looking statements.
Speaker Change: Actual results may vary due to various risks and uncertainties.
Speaker Change: It does not assume the obligation to update any forward looking statements.
Speaker Change: Please refer to slide two for the assumptions underlying afford looking statements.
Speaker Change: We will reference non-GAAP measures throughout this presentation.
Speaker Change: Explanations and reconciliations are in a M DNA and the latest press release on our website.
Speaker Change: Jonathan Pryce C. I will start with an overview of our first quarter.
Speaker Change: Crystal press dye, our CFO will follow with a financial and operational review.
Speaker Change: Jonathan will conclude with closing remarks, followed by a Q&A session.
Jonathan Pryce: I will now turn the call over to Jonathan.
Jonathan Pryce: Thanks, Emma and good morning, everyone.
Jonathan Pryce: Now before we get into the quarter I want to take a moment to acknowledge the current macro environment on slide four.
Jonathan Pryce: As we all know the past few months have been marked by volatility and uncertainty.
Jonathan Pryce: Just like the threat of a global economic downturn geopolitical tensions inflation and supply chain disruptions have created an uncertain and challenging global business landscape.
Jonathan Pryce: Despite these headwinds we believe that the fundamentals for our key metals copper and zinc are robust over the medium and long term are several macro factors continue to drive demand.
Jonathan Pryce: These methods are essential for global manufacturing and development industrial policy of National security electrification infrastructure as well as the growth of the digital economy.
Jonathan Pryce: The supply side the industry continues to face constraints.
Jonathan Pryce: At the same time, new demand opportunities are emerging as many economy seek to revitalize their industrial sector.
Jonathan Pryce: For example, defense spending may be significantly broadened to include areas Central's, new economic resilience, such as upgrades to an expansion of electricity grids, which remain central to copper demand.
Jonathan Pryce: We see this providing a medium to boost to metals demand as the world enters into our state back more capital intensive phase of growth.
Jonathan Pryce: And even in the short term, we continue to see extreme tightness in the concentrate market that make up nearly 90% of our revenue with benchmark treatment charges for copper and zinc at historically low levels.
Jonathan Pryce: Okay.
Jonathan Pryce: Teck is well positioned for continued value creation, we are growing copper production and improving margins through disciplined operational performance. In addition, we have an active share buyback program.
Jonathan Pryce: Folio of value accretive growth projects, and agile commercial strategy and a strong balance sheet.
Jonathan Pryce: Together these underpin the resilience of our business, which is a competitive advantage for tech, enabling us to navigate the uncertainty while continuing to deliver value through our strategy of balancing disciplined copper grades with returns to shareholders.
Jonathan Pryce: So turning to slide five we are closely monitoring the potential impact of tariffs and retaliatory trade measures between the countries, we trade wars and the risks of wider macroeconomic uncertainty.
Jonathan Pryce: Although the situation is fluid and evolving rapidly, we do not expect announced tariffs to materially impact our business.
Jonathan Pryce: That's at a global trade war could weigh on global economic growth with potential implications for metals demand.
Jonathan Pryce: Today, we are continuing to see strong demand for our copper and zinc concentrate and we are working closely with our customers with limited impact so far.
Jonathan Pryce: Copper and zinc concentrate sales are not exposed to U S tariffs, because we primarily sell to Asia and Europe with no sales to the U S.
Jonathan Pryce: On the other hand, Chinese tariffs if maintained our expected to apply to all sales of Red dog concentrates to China, which represent less than 20% above zinc and lead concentrate sales.
Jonathan Pryce: However over past few years, we have successfully developed a regionally diverse customer base, which gives us greater optionality, while trade negotiations are ongoing.
Jonathan Pryce: Dog is a highly valued concentrating the zinc market and we have several longstanding customers for these products.
Jonathan Pryce: We also have other options available, including travel feed integration delivery outside the Red dog shipping season, and product swaps all options that support continuity of sales.
Jonathan Pryce: Turning to trial and our metal sales refined zinc lead and especially alethia metals, such as germanium indium and sulfur products also lead into the U S. But they are exempt from U S tariffs because they are compliant with the U S. M C.
Jonathan Pryce: Overall tech has a strong business with diversified products and operations and auto commercial strategy and strong logistics capabilities.
Jonathan Pryce: This enables us to quickly adapt and respond to changing market conditions to mitigate any potential impact on our business.
Jonathan Pryce: Turning now to highlights from the first quarter of 2025 on slide six.
Jonathan Pryce: Profitability improved significantly compared to last year, driven by higher commodity prices and copper sales volumes, our adjusted EBITDA more than doubled to $927 million.
Jonathan Pryce: The ramp up of QB operations continues and we are seeing performance improvements in key areas such as average daily mill throughput.
Jonathan Pryce: Production was impacted in the quarter by additional shutdowns I will provide more detail on this later in the presentation.
Jonathan Pryce: During the quarter to be successfully achieved the completion testing requirements under the $2 5 billion U S dollar project finance facility.
Jonathan Pryce: This is a significant milestone that provides independent verification confirming the robustness of the disruption and the capacity of the assay to operate at designed levels, providing further confidence in the ramp up to steady state by the end of the year.
Jonathan Pryce: In the first quarter, we had strong operational performance across our established operations, particularly Highland Valley and comment on the call here.
Jonathan Pryce: Trail operations generated strong profit in the quarter. Following the successful implementation of a range of initiatives to improve profitability and cash flow generation.
Jonathan Pryce: Our annual guidance is unchanged across all operations.
Jonathan Pryce: Our balance sheet remains strong and resilient we ended the quarter in a net cash position of $764 million and as of yesterday, our liquidity is $10 billion.
Jonathan Pryce: Finally, we continue to return cash to shareholders through share buybacks and dividends totaling $568 million year to date.
Jonathan Pryce: So turning to our ongoing commitment to safety and sustainability on slide seven.
Jonathan Pryce: Our safety performance was strong in the first quarter.
Jonathan Pryce: High potential incident frequency rates across the operations, we control remained low and 0.05.
Jonathan Pryce: I would like to take a moment to acknowledge the fatality that occurred Olanzapine and which tech holds a nonoperating interest earlier this week.
Jonathan Pryce: We are deeply saddened by this event and we offer our condolences to the family friends and colleagues of the deceased.
Jonathan Pryce: We will support the answer I mean, it seem with the investigation and ensure that lessons learned and shared.
Jonathan Pryce: In March we released our 24th annual sustainability report, which details last year's environmental and social performance, including key areas, such as health and safety support for communities indigenous peoples diversity and climate.
Jonathan Pryce: Copies of the report is available on our website.
Jonathan Pryce: So coming back to Q b ramp up on slide eight.
Jonathan Pryce: I just mentioned the successful achievement of completion testing under the QB project Finance facility is a significant milestone.
Jonathan Pryce: It comprised several independently verify operational and technical tests that validate the robustness of the design construction and operational performance of QB. This demonstrates <unk> ability to generate strong cash flows.
Jonathan Pryce: We've made significant progress in the ramp up of QB as you can see on the left hand side of the slide.
Jonathan Pryce: We have a plan to consistently achieve design throughput and recoveries and have several data points showing that we can and have already operated at these levels.
Jonathan Pryce: That said first quarter production was impacted for two reasons first the previously disclosed 18 day extended shutdown to conduct maintenance and reliability work and progress tailings development and second external factors that included a nationwide power outage in Chile in February, leaving the site without power, which affected production for seven.
Jonathan Pryce: Days and challenging weather.
Jonathan Pryce: In particular challenging weather impacted the rate of material movement for tailings lifts required for the development of the tailings management facility, which was also impacted by slower than expected some drainage times.
The result of the slower than planned TNF development is that additional mechanical movement is required prior to installation of the permanent infrastructure and we expect to extend planned maintenance shutdowns in Q2 and Q3 to complete this work.
Jonathan Pryce: This is expected to impact production in the short to only and there are no issues with diamond Tegra fee.
Jonathan Pryce: Once this phase of Tms development is complete we will be on track for full production ramp up by year end and steady state operation into the future.
Jonathan Pryce: Moving to slide nine.
Jonathan Pryce: <unk> cloud performance continues to improve in the first quarter. The average daily throughput, excluding the extended unplanned shutdowns increased compared to the fourth quarter demonstrating continued improvement in operational stability.
Jonathan Pryce: High levels of transitional with mine, leading to lower recovery as expected a higher grade ore mined in March increased the average grade for the quarter.
Jonathan Pryce: For the remainder of the year, we will continue to drive operational performance and expect to achieve higher throughput rates and higher recoveries in line with design.
Jonathan Pryce: We continue to expect to achieve our production guidance for QB, albeit at the lower end of our previously disclosed range of 230 to 270000 tons.
Jonathan Pryce: And we continue to expect to be net cash unit costs to be between 180, and 215 U S dollars per pound for the full year, although commensurate with production. We expect this to be towards the higher end of guidance.
Jonathan Pryce: Turning to slide 10.
Jonathan Pryce: We expect significant growth in our copper production with improving margins this year.
Jonathan Pryce: Our EBITDA margin increased last year from 33% to 42%.
Jonathan Pryce: This year current consensus estimates show further improvement to 51%.
Jonathan Pryce: We continue to expect our copper production to grow to between 490 to 565000 tons for the full year from 446000 tons in 2024, reflecting the ongoing ramp up of QB and improved grades and throughput at Highland Valley.
Jonathan Pryce: We also expect a significant reduction in our copper net cash unit costs to $1 65 to 195 U S dollars a pound from 220 U S dollars per pound in 2024, reflecting an increase in copper and molybdenum production as well as continued cost discipline across our operations.
Jonathan Pryce: Slide 11 outlines our ongoing growth trajectory underpinned by our existing portfolio of operating mines, coupled with a well funded value accretive near term copper projects, including the mine life extension at Highland Valley in British Columbia on a high returning greenfield projects at Zephyr now in Peru, and San Nicolas.
Jonathan Pryce: In Mexico.
Jonathan Pryce: Compared to Q B. These greenfield projects are significantly less complex and smaller in scope with lower capital intensity.
Jonathan Pryce: We are also working to define the most capital efficient and value accretive path for further growth of TV through optimization of the mill and low capital debottlenecking opportunities that could increase throughput by 50% to 25%.
Jonathan Pryce: With these projects, we have a clear path to increase our annual copper production to approximately 800000 tons before the end of the decade.
Jonathan Pryce: Now on slide 12, I will cover the key progress updates in major future milestones as we work to bring these near term projects potential sanctioning this year.
Jonathan Pryce: An independent review of the mine life extension project to Highland Valley was completed in the first quarter and confirmed construction readiness of the project.
Jonathan Pryce: This means we should be positioned for a potential sanction decision. After we received the necessary permits which potentially could be in maybe 2025.
Jonathan Pryce: It is that for now the project is progressing as scheduled and we received the advanced works permit on April 10th.
Jonathan Pryce: We anticipate the construction permits in Q2 and the project could be ready for a potential sanction decision in late 2025.
Nicholas: So nicholas engagement with governmental authorities and other stakeholders is ongoing to support our permit application.
Nicholas: We expect to complete the feasibility study in the second half of 2025 positioning the project for a potential sanction decision following the receipt of necessary permits.
Nicholas: Our Q B, our focus is to ramp up to steady state at the same time optimization is progressing and detailed planning for Debottlenecking is underway, which should enable us to submit the declaration of environmental impact or D. S permit application in the second half of the year.
Nicholas: We look forward to progressing these well funded near term projects are sanctioned and launching the next phase of teck's copper growth.
Crystal: I'll now hand over to Crystal to provide further details on our first quarter results.
Crystal: Thanks, Jonathan and good morning, everyone.
Crystal: Start with our first quarter 2025 financial performance on Slide 14.
Crystal: We more than doubled our adjusted EBITDA in the quarter compared to a year ago to 927 million.
Crystal: This was primarily driven by higher copper and zinc prices increased copper sales volume due to strong production performance across our established operations.
Crystal: We generated increased revenue and profit from byproduct, including Melissa down from Q V at Highland Valley, as well as silver germanium and other critical battle on trail.
Crystal: We also benefited from a weaker Canadian dollar as we converted U S dollar denominated revenue in Canadian dollars.
Crystal: Our results reflect positive pricing adjustments of $106 million, primarily as a result of higher copper prices.
Crystal: Our finance income increased significantly to 91 million compared with $27 million a year ago as our investment income increased due to our elevated.
Crystal: Since the sale of the steelmaking coal business last year.
Crystal: In February we paid a final 2024 Canadian income taxes.
Crystal: 30 million.
Crystal: Primarily related to earnings and the proceeds from the sale of the steelmaking coal business.
Crystal: And importantly, we continued to return cash to shareholders throughout the quarter with 568 million returned year to date.
Crystal: Turning to slide 15, which summarizes the key drivers of our financial performance in the first quarter compared to the same period in 2024.
Crystal: Our adjusted EBITDA increased by 127% in the first quarter as a result of strong base metal prices higher copper and zinc in concentrate sales volumes and the positive impact of a weaker Canadian dollar.
Crystal: Copper sales volume increased by 11% from Q1 of last year, reflecting higher volumes from Highland Valley Carmen to antique layout.
Crystal: Zinc in concentrate sales volumes increased by 10% due to the timing of sales for Red dog and increased volumes from Anthony.
Crystal: Our strong adjusted EBITDA also reflects improved copper unit costs, reflecting cost.
Crystal: Discipline across our business.
Crystal: This was partially offset by an increase in royalties primarily as a result of increased profitability at Red dog.
Crystal: Now looking at each of our reporting segments in greater detail, starting with copper on slide 16.
Crystal: In Q1 2025 gross profit of 40.
Crystal: Pardon me, we seem to have lost the connection with the presenters.
Speaker Change: Let's switch to the backup line please.
Crystal: Okay.
Crystal: Just a moment I'm going to turn the hold music on for just a moment and check the volume with the backup line.
Crystal: Please standby thank you for your patience.
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Crystal: Yeah.
Crystal: Thank you for your patience, we have reconnected with the presenters.
Crystal: Hi, everyone I'm, sorry about the technical difficulties I'm gonna start back at the beginning of slide 16.
Crystal: And get going again.
Crystal: In Q4, Q1, 2025 gross profit before depreciation and amortization from our copper segment increased 90% to $704 million compared with the same period last year, primarily due to higher copper prices and sales volumes and increased byproduct revenues from molybdenum and zinc.
Crystal: This reflects strong performance across our established copper operation cop.
Crystal: Copper production increased by 7% to 106000 tons, driven by increased grades and mill throughput at Highland Valley, and Carmen de <unk> <unk>.
Crystal: Production significantly improved at Highland Valley, as we advance mining in higher grade Lorne ex pit, which has softer or leading to increased mill throughput.
Crystal: Carmen to and the coil also had improved mill throughput as a result of increased water availability compared to the same period last year, which was affected by drought conditions.
Crystal: And to me not performed in line with expectations.
Crystal: Our net cash unit costs improved by 32 cents, you asked per pound to $2 and four U S per pound as a result of higher copper production increased byproduct credits reduced smelter processing charges and lower transportation costs at QB the.
This strong performance led to an improvement in our gross profit margin before depreciation and amortization of 13% to 47% compared to the same period last year.
Crystal: On April 9th QB third and final Labor Union ratified a new three year collective bargaining agreement. This completes all labor negotiations for Kiwis workforce with labor agreements now in place through 2028.
Crystal: Looking forward to the rest of this year, we expect to see <unk> continue to ramp up to steady state by year end as well as increased quarterly copper production at Highland Valley, as we process, increasing proportion of higher grade Laurent or through 2025.
Jonathan Pryce: For the full year as Jonathan mentioned, we continue to expect growth in our copper production with improving margins in line with our guidance of 490 to 565000 tons at a net cash unit costs of between $1 65, U S and $1 95 per pound.
Crystal: Turning now to our zinc segment on slide 17.
Crystal: Our profitability and zinc increased significantly in the first quarter with a 79% increase in gross profit before depreciation and amortization to $225 million.
Crystal: This increase was due to higher zinc prices strong sales volumes at Red dog and improved profitability at our trail operations.
Crystal: Red dog zinc in concentrate sales of 91000 tons were higher than our guidance range for the quarter of 75 to 90000 tonnes due to the timing of sales.
Crystal: Red Dog production was impacted by lower grades as expected in the mine plan.
Crystal: Our net cash unit costs improved to 59 cents U S per pound from 67 U S per pound in the same period last year, driven by reduced smelter processing charges, and partially offset by the impact of lower production levels.
Crystal: At trail operations, we generated strong profitability in the quarter, reflecting increased production of byproducts, such as silver germanium and other critical metals as well as the successful implementation of initiatives to improve profitability and cash flow generation at trail.
Looking forward to the second quarter, we expect zinc and concentrate sales from Red dog are 25 to 35000 tonnes, reflecting the normal seasonality of sales.
Crystal: Our full year production and unit cost guidance for zinc segment is unchanged.
Crystal: Our guidance for zinc in concentrate production remains at 525 to 575 times.
Crystal: And we continue to expect refined zinc production of 190 to 230000 tons for the year net.
Crystal: Net cash unit costs are expected to be between 45 and 55 since you asked per pound.
Crystal: Turning to our balance sheet on slide 18.
Crystal: Our balance sheet remains strong and resilient we were in a net cash position of 764 million at March 31, and as of yesterday, our liquidity was $10 billion, including $5 8 billion of cash.
Our cash balance decreased in the first quarter, primarily due to continued returns to shareholders through dividends and share buybacks. The final 2020 for tax payment relating to the earnings and sale of the steelmaking coal business.
Crystal: And the seasonally larger royalty payments humana and respective Red dog's strong Q4 2020 for our performance.
Crystal: Our remaining outstanding term.
If you ask our long dated we will continue to deleverage as we make semiannual repayments on the QB project finance facility through 2031.
Crystal: With the human as at QB project financing completion testing requirements tacked on the other sponsor guarantees of the project finance facility have been released.
Crystal: Our balance sheet strength and investment grade credit.
Crystal:
Crystal: We remain committed to our disciplined capital allocation framework, which balances investment and value accretive growth with returns to shareholders, while maintaining a strong balance sheet through the cycle.
Our capital allocation framework and project sanctioning requirements ensure the prudent deployment of capital all growth projects must meet stringent criteria delivering attractive risk adjusted returns and competing for capital.
Crystal: We are continuing to execute on our $3 billion to $5 billion authorized share buyback and we are committed to returning between 30 and 100% of available cash flows to our shareholders.
Crystal: Looking at our cash returns now on spot.
Crystal: Okay.
Crystal: Yes.
Crystal: Correct.
Crystal: $5 4 billion since 2020.
Crystal: Perfect.
Crystal: Absolutely.
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Crystal: Right.
Crystal: Last year.
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Crystal: Yes.
Speaker Change: Pardon the interruption pardon the interruption. This is the operator the quality of your backup line has deteriorated to the point, where we're not really able to hear you.
Crystal: I'd like to suggest that we.
Crystal: <unk> for a moment and reconnect your mainline and Ah I will quit hold music on again.
Crystal: I apologize I think I really don't think that we should proceed when we can't hear what's being said.
Crystal: Put the hold music back on.
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Speaker Change: Pardon me, we have reconnected with the presenters. Please proceed.
Crystal: Sorry, everyone.
Speaker Change: Jump back in here still on slide 20.
Speaker Change: As of yesterday, we've executed $1 75 billion of the 3.25 billion authorization under our normal course issuer bid, including over $500 million year to date. This leaves approximately $1 5 billion of our authorized share buyback remaining to further improve our per share value.
Speaker Change: And with the strong cash flow generation potential of our business, we could see further cash returns to shareholders in line with our capital allocation framework.
Speaker Change: Turning to our near term growth now on slide 21.
Speaker Change: Our value accretive near term copper projects are well funded.
Speaker Change: While the project capital attributable to these growth projects remains unsanctioned an uncommitted, we continue to expect to deploy between three two and $3 9 billion U S. Over the next four years for our near term copper projects and we will continue to be disciplined in our assessment and progression of these projects to ensure value accrete.
Speaker Change: Growth.
Speaker Change: As we continue to balance our growth in copper with cash returns to shareholders. We can continue to significantly impact the accretive growth potential of our metrics on a per share basis as shown on slide 22.
Speaker Change: Last year with the ramp up at QB and with a significant portion of our $3 5 billion share buyback completed we increased our copper production per share by 54% compared to the prior year.
Speaker Change: And by 2026, as we stabilize cubie at full production and complete the remaining authorized share buyback our copper production per share could increase by a further 34% to 51%.
Speaker Change: Beyond that our copper production per share could increase substantially as we bring our near term value accretive growth projects online.
Speaker Change: And this does not consider the impact of any further share buybacks that could be authorized under our capital allocation framework as a result of the strong cash flow generation potential of our business through the end of the decade, our copper production has the potential to increase rapidly on a per share basis with that I'll now turn it back over to Jonathan Thanks Chrystal.
Speaker Change: Turning to slide 24, we remain focused on our priorities to create value for our shareholders complete.
Speaker Change: Completing the QB ramp up to steady state operations, continuing to drive operational excellence across our portfolio of high quality copper and zinc operations and projects growing our copper production and improving our margins remaining committed to returning cash to our shareholders by continuing to execute our authorized share buyback program.
Speaker Change: Paying our base dividend progressing our value accretive near term copper projects to possible sanction decisions in 2025 positioning us for our next phase of copper growth and maintaining the resilience of our business to navigate uncertainty and create value leveraging our agile commercial strategy and strong balance sheet.
Speaker Change: So to wrap up on slide 25, our strategy remains delivering growth and creating value in a responsible and disciplined way. We will continue to balance investments in growth with returns to shareholders. We have the resilience to successfully navigate the current environment as well as potentially exploring evolve.
Speaker Change: Opportunities as a pure play entities transition metals company Te is uniquely positioned to deliver significant value to shareholders through the execution of our copper growth strategy.
Speaker Change: Apologies again for the disruption on the line during that portion of the call hopefully you can hear us clearly now.
Operator, please open the lines for questions.
Speaker Change: Thank you to join the question queue. Please press Star then one on there you touched on phone you'll hear a tone acknowledging your request if you wish to.
Speaker Change: Your question. Please press Star then two we ask that you limit yourself to one question and one follow up.
Speaker Change: The first question is from Aurist Walkabout with Scotiabank. Please go ahead.
Aurist Walkabout: Hi, good morning questions on QB, two it sounds like you're pushing back the target for sustainable.
Aurist Walkabout: Full production at the operation for mid year, two and dip year, yet the guidance is unchanged.
Aurist Walkabout: What can you give us a sense of how long these extended maintenance outages related to the tailings facility are supposed to impact Q2, Q3, and I'm curious like what gives you confidence at this point.
Aurist Walkabout: Given the pretty weak Q1, you can still make even the low end of the range for the year.
Aurist Walkabout: Thank you for the questions look we'd always expected 2025 to be a build up production throughout the year and achieving steady state operations towards the end of the year rather than in the first part of the year.
Aurist Walkabout: And I think that's no different with what we've what we've guided to today, we still expect to deliver the guidance of $2 30 to 270000 tons. This year, albeit now towards the bottom end.
Aurist Walkabout: That range.
Aurist Walkabout: And yes, there's some additional work we have to do here around the tailings facility, we're making good progress with implementing measures to complete that work quickly and that includes initiatives, which will allow us to speed up some drainage and deposition is material at the dam.
Aurist Walkabout: Look as we've said completing this work will require some additional downtime in Q2 and Q3.
Aurist Walkabout: Which is why we anticipate being at the lower end, but once we get through this phase of the transition from the starter dam to regular ongoing sand lifts, which is essentially a one time event.
Aurist Walkabout: We can then operate at steady state for the life of the facility. So so that's the phase of work we're going through this quarter next quarter. That's why we have confidence that we can end the year running at steady state and that's why we believe that.
Aurist Walkabout: We will continue to deliver.
Aurist Walkabout: The guidance range that we've set out for 2025.
Aurist Walkabout: Knowing that this was a ramp up year for the operation we reflected in that guidance range.
Aurist Walkabout: Uncertainty.
Aurist Walkabout: With operations in this phase of the life of the project and that's what you're seeing in our disclosures today, but I think you know critical that we remain confident of delivering production within that range.
Speaker Change: And sorry can you give us detail how long are they expected outages in total for Q3 now.
Speaker Change: That will be a function of the work that needs to be done or is which will be determined by the operations team and will be a function of the improvements that we make in some drainage and the improvements that we make in the pace of material deposition of the dam. So it's it's not possible to be precise on what those the number.
Speaker Change: Of days that we will need to achieve that this year at this point in time, but I can tell you that the range of outcomes that we expect to.
Speaker Change: Two to be likely in terms of the number of days that we will take all reflected in the guidance and are reflected in the fact that we continue.
Speaker Change: So it's a whole lot guidance, yes, we are pointing towards the lower end of that range.
Speaker Change: Okay, and finally do you see anything at this point that could impact the guidance range for 2006, the $2 80 to three.
Speaker Change: I think it's 310 based on what you are seeing or all of these issues is expected to be solved by year end.
Speaker Change: Yeah. So the short answer is no. Obviously, we don't expect to see any change due to the guidance for 2026 or beyond.
Speaker Change: The works is required here on the tailings to transition into steady state. We expect to be finished in the third quarter of this year. So therefore, as we move into 2026 and beyond we don't see any ongoing impact of the work that we're undertaking today.
Speaker Change: Okay. Thank you.
Speaker Change: I'm sorry.
Speaker Change: The next question is from Liam Fitzpatrick with Deutsche Bank.
Speaker Change: Please go ahead.
Pardon me.
Speaker Change: If I can take control of the.
Speaker Change: The next question is from Liam Fitzpatrick with Deutsche Bank. Please go ahead.
Liam Fitzpatrick: Can you hear me okay.
Liam Fitzpatrick: Yeah go ahead regarding you there okay.
Liam Fitzpatrick: Okay Alright.
Liam Fitzpatrick: Yes. My question is just around the next.
Liam Fitzpatrick: Crop of projects that Youll youre, highlighting now first of all would you realistically approved something like Zephyr now in the current macro environment.
Liam Fitzpatrick: Or would you wait for greater clarity around U S trade policies and the general macro and so on.
Liam Fitzpatrick: And then it also seems to three or four of the projects are all converging towards a decision within the next.
Liam Fitzpatrick: Six to 12 months or so can you talk about management bandwidth to manage multiple projects, particularly well cubie is still ramping up and how you're thinking about.
Liam Fitzpatrick: Project, citing with all of these options ahead of us. Thank you.
Liam Fitzpatrick: Yeah. Thanks for the question no.
Speaker Change: No of course, you know as we look at the projects that we have in the portfolio here. What we're focused on is the long term perspective.
Liam Fitzpatrick: But the fundamentals of the commodities associated with those projects and we see nothing at this point in time.
Liam Fitzpatrick: That changes our view or our conviction on the the long term fundamentals for both copper and zinc being the you know the key the key components of growth now with copper being the primary target. So there's nothing in that respect that causes us to to sort of take a pause in that regard.
Liam Fitzpatrick: The.
Liam Fitzpatrick: Growth projects that we have in the portfolio are critical to the long term strategy as I've mentioned in the call. These all.
Liam Fitzpatrick: Next that are smaller in scope lowering complexity for them.
Liam Fitzpatrick: In Q B for example, with low capital intensity, we should be very competitive projects and should deliver strong returns. So so from that perspective, no change of course, we always continue to evaluate those things and when we take a project forward for sanction we always look at a range of forward pricing scenarios to ensure that though.
Liam Fitzpatrick: Economics and returns will be robust.
Liam Fitzpatrick: In terms of your comment on organizational bandwidth just to put these projects into into context.
Liam Fitzpatrick: So Highland Valley mine life extension.
Liam Fitzpatrick: Brian Field project at our sites, where we've been operating since the sixties and we've undertaken numerous previous Brian field expansions of that site.
Liam Fitzpatrick: You know the the team is all in place is ready to go and as I mentioned, you know we had a very positive independent review of our construction readiness for that project. So we've got a good level of confidence moving forward with us.
Liam Fitzpatrick: The other.
Liam Fitzpatrick: Greenfield project that we would deliver inland Teck would take the lead on these zaffar now because of course, we are 80% of that project. So that's where we would be delivering and again, we've been building a very strong team over an extended period of time now coupled with our EPC partners. So we're well set up.
Liam Fitzpatrick: Object to sanction and permits of course for construction and delivery of that project. Some Nicholas is somewhat different because of course that is unincorporated joint venture with agnico, which doesn't mean tech is taking the lead on delivering that project, it's actually the joint venture.
Liam Fitzpatrick: It does not work so of course, we'll be very closely involved in in a range of ways in support of that project and in particular really taking a lead on the commercial aspects of that project when it comes to the marketing and sales of copper and zinc.
Liam Fitzpatrick: But vance necessarily by virtue of the way that that's been setup is a lower list on the organization here. So so we do believe that this is a manageable Liam we've been preparing for this for a number of years in terms of you know systems processes procedures etcetera, but most importantly bring.
Liam Fitzpatrick: Bringing in the talent developing the teams and getting ourselves set up for success in execution.
Liam Fitzpatrick: Alright, thank you.
Liam Fitzpatrick: Yes.
Liam Fitzpatrick: Thanks Liam.
Liam Fitzpatrick: Yeah.
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, I would like to see checking is that if you received any feedback or suggestions for potential improvement.
Speaker Change: On the complete at QB independent testing that you successfully did recently, which are again congratulations on that but I'm interested to know if there was any any suggest jumps me potentially improvements and that they provided.
Speaker Change: Look I think in short answer is no.
Speaker Change: Not really the way that process works, there's a series of tests are that.
Speaker Change: It has to be achieved.
Speaker Change: Based on performance in those tests were achieved and independently validated and certified but it's not really an improvement an improvement focused process Carlos.
Speaker Change: Alright, Thanks, and just maybe a follow up.
Speaker Change: Can you mention how many days.
Speaker Change: <unk> shut down as a result of the power outages I think it's a little bit to what several days, but it will help us for the analyses that you we had a little bit of a more precise number of days.
Speaker Change: Yeah. So it's the call offs, we were sort of directly shut down for a couple of days and then it took US a couple of days to get back up and running to full rates again. So you know broadly speaking.
Speaker Change: Four days.
Speaker Change: Half of which was with no downtime in the half of which was recovery of course is the first time at QB that we've had to deal with one of these events and then get the sites back up and running to full capacity. So that's a learning experience perhaps in future, we'll be able to come back online more quickly, but we have to be prudent first time dealing with an event like this.
Speaker Change: At that site.
Jonathan Pryce: Fair enough. Thank you very much Jonathan.
Speaker Change: Thanks Carlos.
Speaker Change: The next question is from Craig.
Speaker Change: The next question is from Craig Hutchinson with TD Colin. Please go ahead.
Craig Hutchinson: Hi, there good morning.
Craig Hutchinson: Just wanted to ask about the zinc business I think in your opening remarks, he said that about 20%.
Speaker Change: Sales from Red dog is going to China could be subject to tariffs if they remain in place just any indications of whether theres concerns about those those sales right now whether you have to redirect to material.
Speaker Change: And then I guess just on the flip side are you purchasing materials for Red dog from China that are subject to tariffs and that could could that be a potential risk on costs.
Yeah. Thanks, Craig So those those questions look I'll look on Mi band as you know as I.
Speaker Change: And given the the levels of tariffs being placed on imports from the U S into China that creates challenges with with supply at the moment. Unfortunately at this time of the year.
Speaker Change: Given the shipping season, the Red dog, where we're not moving material from the psyche in any event, so we're pretty well covered.
Speaker Change: At present, our commercial team is working very hard as I mentioned on the call is a range of options and alternatives here, which could see us placing material elsewhere through this period of time. The bottom line is Craig that we don't expect to face an material impact here as the result of tariffs beats.
Speaker Change: In China, and the U S and <unk>.
Speaker Change: As I said, we've got you know a number of months up our sleeve here to resolve any issues that might arise and there is no risk. The other way round, you know where we're not exposed on the inbound here in terms of imports of goods from China into into U S or into Red dog. So so no risk there.
Speaker Change: Okay, and just you said on to meet our obviously sorry to hear about the vitality is there any updates on that operation as it still halted or is it.
Speaker Change: Back online thanks.
Speaker Change: As I've said you know tragic event, we will work very closely as we always do with the <unk> team here to understand what happened and if you look at learnings for the future and learning is not just for I'm familiar of course, but for the industry more generally.
Our understanding is that the site will be returning to operations today.
Speaker Change: So so getting back up and running.
Speaker Change: Thanks, guys.
Speaker Change: Thank you Greg.
Speaker Change: The next question is from Myles Allsop with UBS. Please go ahead.
Myles Allsop: Great. Thanks.
Myles Allsop: Maybe just one on QB and D D. I E. In the second half I mean, if all goes to plan when should you get the licenses to be able to lift throughput above the 143000 tonnes. A day, just how do we model kind of optimization debottlenecking.
Myles Allsop: Yeah, I mean, I think there's a level of optimization that's allowed under the current miles as we as we have it today, which is essentially a 10% allowance from from nameplate. So so that's something we already have in hand in terms of the submission of the the deal let's say that goes into July of this year, we would expect to have an.
Myles Allsop: <unk> 12 months subsequent so that would be July.
Myles Allsop: Over the following year, which which fits very well with the timeframe. We hit we have for the debottlenecking. So the existing to them. It really allows for the for.
Myles Allsop: So the optimization that we've been talking about in this deal or amendment to the permit allows for the Debottlenecking. So we can get the optimization with what we have now and with the Dia, we can unlock the debottlenecking.
Speaker Change: Okay. Thank you and then with the Hudson Valley are I think it was still a dispute to be resolved.
Speaker Change: Before you could kind of push ahead with the life extension project where are you.
Myles Allsop: With us I mean does that potentially can be.
Speaker Change: Pushback approval midyear.
Speaker Change: Yeah look so so we are going through our engagements with with various of the indigenous government organizations are surrounding Highland valley in those a number of those parties two of those policies effective initiated dispute resolution processes under the environmental Assessment Act that's not unusual for these sorts of <unk>.
Speaker Change: This is it's the the way in which they engage with the province essentially around the the terms of the pyramid ultimately.
Speaker Change: We stay very close to this of course as you can imagine we're very close with the indigenous government organizations, we're very close with the programs here in British Columbia, who have this as a priority project.
Speaker Change: For them so they're working very hard on this of course, you know we continue to assess the the project plan and schedule as these processes.
Speaker Change: Bold and while we can't guarantee time for permitting you'd never count with any project. We are optimistic that we will have a resolution in the middle of this year. So we'll continue to progress the project as I said the the work we've done on construction readiness looks very good that's been independently verified.
Speaker Change: And we will continue to move the move the project forward. This year. So yes, we've got to get through.
Speaker Change: To get through those engagements and ultimately get the tumor tissue, but we're hopeful that in the middle of this year is still the time frame that we're working to.
Speaker Change: Okay. Thank you and maybe just on.
Speaker Change: On QB due he come from now we're not going to see any more downgrades to production guidance of 25.
Speaker Change: Yes look.
Speaker Change: What we know about the site what we see in the operation of the of the mind of the concentrate or of the ports and our view now on the work that is required to progress the tailings facility.
Speaker Change: From today into steady state operations all of those factors are considered in the in the guidance range. So of course, you know we are looking at guidance all the time to ensure it's appropriate and represents representative of what we expect to do that the assets and we've communicated too.
Speaker Change: 30 to $2 70, again today, because we have confidence in delivering within that range, albeit at the lower end.
Speaker Change: Good luck.
Speaker Change: Thanks miles.
Speaker Change: The next question is from Matthew Murphy with BMO capital markets. Please go ahead.
Speaker Change: Hi, Jonathan.
Speaker Change: Just.
Speaker Change: I'd like to dig a little deeper on the understanding the tailings issue is sand drainage is that referring to like how wet the sand is.
Speaker Change: Well, it's essentially referring to how long, it's taking that time to dry might be a better way of thinking about it but yes. It has to do with the moisture in the sand and the time that it's taking for those moisture levels to reduce.
Okay and is that connected to challenging weather or it's a separate issue.
Speaker Change: No. It's really a separate issue there I mean, ultimately what you need to be able to do is to compact the sand into the can pack the sand you need it to drain.
Speaker Change: We think the source of some of these are the slower drainage times has been a function of clay in fines in the sand, which has to be separated that separation happen through the <unk> and we've recently made some modifications to those sites loans on the initial results from those modifications are positive again, which.
Speaker Change: As you know part of what gives us confidence that we move through this issue by the third quarter of the year.
Speaker Change: Okay, and then the last little follow on.
Speaker Change: The need to take maintenance shutdowns is it because you're currently constrained on tailings capacity, so you're like waiting for these lifts to be ready to let the mill go.
Speaker Change: Do what it can do or as part of the shutdown also on the mill.
Speaker Change: So we have a regular shutdowns you know on the mill for mill realigning and other work. So there's nothing different at the mill over and above what we would consider to be also at a routine quarterly work.
Speaker Change: You know the the reason that we point towards the low end of the guidance range is the work we have to do on the tailings facility does create a constraint to production.
Speaker Change: But again.
Speaker Change: Factoring in the the range of outcomes.
Speaker Change: So that we can foresee for this year.
Speaker Change: We maintain the range of $2 30 to $2 70.
Speaker Change: Okay. Thanks for all of them.
Speaker Change: Thank you very much Matt.
Speaker Change: The next question is from Lawson Winder with Bank of America Securities. Please go ahead.
Speaker Change: Operator, thank you very much good morning.
Speaker Change: Jonathan and team and thank you for the update today would.
Speaker Change: Maybe I'll ask again about QB, two and just going.
Speaker Change: Going back to one to one of the challenges that was experienced last year.
Speaker Change: With the stabilization of the mix of clay in the feed is is the asset now on track to be able to deliver that consistency in the second half and then and then also on the geotechnical issue. The defaulting that led to the slip on the ramp as that is the work to date in the mine now confirm.
Speaker Change: That was in fact localized.
Speaker Change: Yeah. So so there's no ongoing a manifestation of that geotechnical issue, that's very much behind us our Lewiston.
Speaker Change: In terms of the the place you know as we go through this year, we started the year processing all other transition rules, which is why you've seen some lower recoveries in the first quarter as the year progresses, we expect to have less transition to war and therefore less play and therefore better recoveries. So so all of those things are connected that's been in the plan.
Speaker Change: For this year, it's why we've expected to partly at least why we've expected to see quarter over quarter improvements.
Speaker Change: Through the year.
Speaker Change: But nothing different from what we've communicated previously that Lawson.
Speaker Change: And then just a question on a grade.
Speaker Change: With T V too so when we started the year the guidance suggests that the grade would improve in the second half, but actually I mean, you guys had really solid grades at QB two.
Speaker Change: I think it was about six 1%.
Speaker Change: But you're guiding to a 0.6% average grade I mean is there some room in there for grade to potentially do better or is that part of what's driving your confidence in staying within the guidance range.
Speaker Change: We still expect grades for the full year to be approximately <unk> six.
Speaker Change: With the mine plan, we ended up processing, a little bit of higher grade in in March that was previously expected to come through in April. So there's always a few you know sort of puts and takes in this because as we look at this through the year as a whole the average of <unk> six is still the right number. So we're not relying on grade to deliver the guidance if I ask the question.
Jonathan Pryce: Yes, no that was it perfect. Thanks very much Jonathan.
Speaker Change: Your loss.
Bill Peterson: The next question is from Bill Peterson with Jpmorgan. Please go ahead.
Bill Peterson: Yeah, Hi, good morning, and thanks for taking the question I'm thinking I guess on trail, specifically nice job on the profitability I guess, how should we think about profitability in the second quarter back half of the year you guys. Specifically do you expect.
Speaker Change: The byproduct to repeat in subsequent quarters.
Speaker Change: And then maybe beyond that like what initiatives do you have to maybe continue driving improved profitability are there room for further improvements there.
Speaker Change: Yeah. Thanks for that Bill all else Crystal to just respond on the outlook for trial for the balance of the year.
Speaker Change: Nice to hear from you like in Q1 as you mentioned, we had very strong performance at trail, we generated $80 million of gross profit before depreciation and amortization that was really the result of that implementation of initiatives to improve cash flows, though those have been fully embedded now and we expect those to continue through.
Speaker Change: Through the rest of the year and we'll continue to realize the benefit of those and then in terms of the contribution from byproducts, such as silver germanium and indium and then obviously the FX rate has an impact we built up a stockpile of materials during the period. When we had the kids that boiler under repair in 2023, we are progressed.
Speaker Change: <unk> treating those materials, which is where you're seeing the benefit of some of those specialty metals.
Speaker Change: Through and supporting the improvement of the profitability. So we expect that to continue through this year, but of course that you know that's not a long term solution that Tc environment for trailers continues to be challenging, but the cost structure changes that we've made there has been has led to some improvement that we're seeing come fairly expect ought to come.
Speaker Change: Opinion.
Speaker Change: Yeah.
Speaker Change: Great. Thanks for that and then I guess for us analysts south of the border I guess any thoughts on the upcoming presidential election and.
Speaker Change: Any potential impacts to the industry industry, Canada read throughs for HCC or maybe you know truck.
Speaker Change: Basically FDI.
Speaker Change: Nothing in particular I mean, there's obviously an election early next week, we will know who they are who the prime minister will be at that point in time.
Speaker Change: I think what we can say is this with both sides of politics here are very very supportive of the of the resources industry that that's been a key part of that platforms, whether that's about deregulation and the simplification, whether that's a buyer was actually putting in place investment vehicles to help with the the development of the <unk>.
Speaker Change: Industry here I think there's a lot of support for resources.
Speaker Change: Recognizing that there's a real potential competitive advantage in the great lever through which to engage with the U S. On something that's clearly very important to them. So we hope to see that.
Speaker Change: Progress Bill in the in the weeks and months ahead, but I think however, the election works out.
Speaker Change: Canada will remain very focused on its on its mining industry on it on its critical minerals and we do expect to see.
Speaker Change: Supportive legislation to help ease the ease the doing business essentially in the country. So I think the outlook is positive from that perspective.
Speaker Change: Thanks, Jonathan Crystal Thanks for Xiaomi handsets.
Bill Peterson: Thanks Bill.
Bill Peterson: Thank you we are out of time for further questions I'd now like to hand, the call back over to Jonathan price for closing remarks.
Speaker Change: Yes. Thank you operator apologies once again for the issues of the call today I Hope you were able to to hear everything you needed to hear if not as ever please follow up with <unk> and.
Speaker Change: In the Investor Relations team I would just close off by saying the business is in really good shape, we are very resilient with managing very well through these turbulent times.
Speaker Change: Through our commercial strategy and through the strong balance sheet. We have we will continue returning capital to our shareholders a peer our commitment to balancing that with growth and we've discussed QB extensively on this call. We will get past this tailings situation by the third quarter of this year and move on to steady state.
Speaker Change: Operations and as I said, we see no changes to guidance this year or in the coming years. So thank you very much for joining us all today and 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.
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