Welcome to Teck Resources Q2 Earnings Call. [Operator Instructions]. I would now like to turn the conference call over to Greg Waller, Vice President Investor Relations and Strategic Analysis. Please, go ahead.

Thanks very much, Valerie and good morning, everyone and thanks for joining us for our second quarter results conference call. Before we begin, I'd like to draw your attention to the forward-looking information on slide 2. This presentation contains forward-looking statements regarding our business. However, there are various risks and uncertainties which may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statement. And with that, I'd like to turn the call over to Don Lindsay, our President and CEO.

Thanks very much, Greg and good morning everyone. I will begin with a brief overview of our second quarter results and Ron Millos, our CFO will provide additional color from a financial perspective. We will then conclude with a Q&A session when Ron, myself and additional members of our senior management would be happy to answer any questions. So while we have seen positive developments in zinc and steel making coal, prices overall remain at relatively low levels. Our focus remains on cost management and operating execution. We have continued to deliver results on these fronts including significant reductions in cash unit costs at our operations and as a result we have lowered our coal and copper cost guidance for the full year. We've also increased our production guidance in coal and tightened our guidance for copper and mine zinc production which represents a slight increase in the midpoint of those guidance ranges. We also executed a series of transactions in the second quarter to strengthen our financial position and this has extended our near term maturities and credit lines essentially clearing their one-ray [ph] through 2020 well Fort Hill is expected to be fully operating and Ron will speak to these transactions in greater detail little later. We now expect to exceed our original target for year-end cash balance ending the year with more than $700 million and finally we were honored to be named once again to the Best 50 Corporate Citizens of Canada for the fourth consecutive year by Corporate Knights and the ranking was based on 12 sustainability measures. Looking at an overview over Q2 results on slide 4 compared with the same quarter last year, revenues declined 13% to 1.7 billion primarily due to lower prices for all of our principal products. Overall gross profit…

Okay. Thanks, Don. I’ve summarized our changes in our cash balance for the quarter on slide 13, and as you can see cash flow from operations and working capital was $330 million. The liquidity management transaction that we completed during the quarter reflected in the cash flow statement this quarter, we received CAD$1.6 billion from the two debt issues and which we used to purchase the outstanding notes due in 2017-18 to 19 under our cash tender offer. In addition we spent $325 million on capital projects including Fort Hills, our capitalized stripping cost were 122 million and we also received $89 million proceeds from sale of investments in other aspects. We paid $74 million in interest and principal on our debt and $29 million on dividends. After these expenditure items, expenditures on financial investment and other assets the impact of exchange rate changes on our cash and cash equivalents and distributions to non-controlling interests. We ended the quarter with cash and short term investments of that just under $1.3 billion. In addition we’ve previously talked about our target for the core business of core copper and zinc excluding our investment in Fort Hill to be cash flow neutral or positive and in the second quarter our core business generated a 132 million in positive free cash flow. Moving on to the next slide, our second quarter pricing adjustments are summarized. Overall we had a $1 million of negative pricing adjustments this quarter compared with $32 million of negative judgments in Q2 of last year. These adjustments are included in our income statement under other operating income and expense. This was an unusual quarter pricing adjustments due to the silver price increase. Zinc was up $0.14 per comp from the end of Q1 to the end of Q2. So we…

So in summary on slide 18, looking across the mining industry from our vantage point we think we're pretty well positioned relative to others as we come out of the cycle. Unlike many of our peers we are not in a position where we need to issue equity or to sell off our core producing assets. What differentiates us is that we are going through this down cycle doing things to give us the best upside when the up cycle returns. We will have production growth from Fort Hills when most others are not building, no operating assets will have been sold well many others are selling mines and there will be no equity dilution or more shares. Therefore we will have more production per share coming out of this down cycle while others will have less production per share. At the same time we are maintaining strong liquidity looking for opportunities to manage our debt maturity profile and to reduce debt. We have always believed that if we can successfully achieve these things our shares will be better positioned coming out of this cycle than our competitors and with that we would be happy to answer your questions and please note that some of our management team members are on the line in different locations. So there may be a brief pause after you ask your question while we figure out who to allocate it to. So Operator back to you.

[Operator Instructions]. Our first question is from [indiscernible] with Morgan Stanley. Please go ahead with your question

So my question is on asset sales, I know earlier in the year when the commodity environment was a little more bleak. You talked about perhaps monetizing [indiscernible] or some of the port assets, wondering the thought there has changed with the rally in metal and zinc?

I don't think it's really changed, I would say that there's a no feeling of urgency at all, but these are things that actually take quite a long time and when we talk about infrastructure we're talking about - we need power down the Neptune Port, Winter Hill, windmills and so on. We’re still looking at them carefully we recognize that infrastructure assets such these tend to trade it much higher multiples of EBITDA than a diversified mining metals company will ever trade at so there is logic to it but you do want to get it right and that's something that certainly takes time which is what we've found when we sold a third of [indiscernible] last time in 2009. So we’re working through it to see if it could come to pass makes sense but we aren't feeling any pressure to do it.

And my follow up is just on your maybe dig a little deeper into the supply side on met coal. We have seen the supply side reforms impacting coal far more than steel so far this year in China and there's been a little bit of flooding, so you know feels like the met coals are on better footing right now. How do you think that's going to impact. I guess one industry supply response, you see potential for mine restarts out of Australia or maybe a decline in the rate of curtailments in the U.S. and specifically for Teck, I mean how are you thinking about that? Do you still think that 27 production will be relatively in line with 2016? Any updated thoughts on Teck?

I will answer the last question and turn it over to Real Foley for the first part. We are not making any plans to increase production further from where we're at now. We have earlier announced that coal mountain will be closing down in 2017 and that we will consolidate our production around in Alpha Valley [ph]. There are no plans to restart any activity at Quintette. So with that over to you Real on the first part.

So typically for capacity to return to the market mining companies want to see prices improve not only over a short period of time but forecasted to last in order to step forward and make the decision to inject significant capital to restart operations, we hire employees and bring back equipment. So I had to turn quarterly benchmark price of 92.50 with Mackenzie still estimating that about 25% of the seaborne hard coking coal is operating at negative margin and around 75% of the U.S. hard coking coal exports are cash negative. So with respect to when to - where the restarts could come from, we need to go back and look at the time when those production cuts were made, what pricing levels were and what are the remaining coal reserves for that capacity, that was shut and the time production curtailments were done pricing was below breakeven most likely for those operations so that supports the fact that pricing would need to improve further for some of those idle operation to restart. And just to add on your question with respect to Teck, our increase of 1 million tonnes in our 2016 production guidance reflects our view that this is supported by demand and the fact that we've also achieved strong cost and production performance at our operations.

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

Also related to the coal division, just wanted to explore that a little bit further, put it another way. So in 2016 if the met coal price hadn't rebounded would you still have been producing what you are today? How responsive can you be to price increases overtime?

I'll just make an overview comment and then turn it over to Robin Sheremeta. So there's no exact answer to your question, part of the increase in production as Real just mentioned is related to productivity improvements. I just had a recent swing through four of our sites and I can tell you that everybody is really actively engaged in finding whatever way possible to be more efficient and a result of that is increased production and reduce costs. It's just sort of a natural consequence of people improving productivity's and so on. If the increase in demand had not occurred then we would be looking very closely at sales customer demand, managing inventories as we did last summer when the market was in a very weak state and we chose to have rotating shutdowns for three weeks at each of the mine sites to manage inventory and not dump incremental tonne of coal on the spot market. So it was sort of back to last year situation that's probably what we would have done or you could you could see a scenario like that, but I guess what we're saying is it's nowhere close to last situation, so we're not - Robin would you like to add any comment on our productivity activities?

Yes maybe just to add to that which pretty much covered scope pretty well but maybe to add to it, the productivity gains that we've seen are quite sustainable and we've had extremely good engagement with the operations. So our costs are in an area that makes us very competitive and there's no reason to believe that won't continue. So we've got very good response at the operating level to sustain this kind of performance, so that gives us quite a bit of flexibility in terms of response to a market change.

And taking into account the Coal Mountain coming to an end in a couple of years. Can you just remind us what the lighting capacity still in the system might be? So if we did get a big pickup in prices and you did one through to look at additional volumes what might be possible?

At this stage we will be able to absorb the production loss at Coal Mountain in the other four operations. So the current plan is to maintain the production level. We haven't built into any plan, an increase in production beyond what we currently have available at the sites.

And I would just add to that, it depends on how significant that price move is and I guess consistent with Real Foley told you about typically mines you want to see sustained increase in price before they consider restarting or closed operation. You know Quintette is actually one of the easier ones to get back on. It would be about a year of construction activity in capital and we clearly are not looking at bringing it back at these price levels. So while we do have an additional 4 million tonnes of capacity that we could bring on if we thought things were going to be sustainable at much higher levels. We aren't even looking at this point.

Our next question is from Orest Wowkodaw with Scotia Bank. Please go ahead with your question

Couple questions for me also for cold division. Firstly in terms of your cost reductions, the reduction in transport costs does that reflect efficiencies or are you actually getting some kind of pricing or cost you know discounts from the rails and the ports here?

The cost reduction in the transportation side is also a reflection of the diesel fuel prices that we're seeing so that's an impact on the cost structure for the transportation and also just the ongoing efficiencies that along with the operations side the transportation side is also working with the terminals in terms of maximizing efficiency of the supply chain to the customer, so a combination of fuel cost and streamline in the work and efficiencies on the on the port facilities and in performance of the rail service providers.

Okay. So you haven't received any discounts from the rail or the port?

No, we’re in the contract - we have the contracts in place from our service providers and they're being maintained.

Okay. And then just in terms of coal volume again coming back to your capacity, - I believe Coal Mountain is supposed to close at the end of 2017, there was some talk at the time that you'd be able to make up 2.25 quarter million tonne of production from the other mines. Could we assume that you could maintain something in the 26 million to 27 million tonne range excluding Quintette when Coal Mountain closes?

We have got solid plans in place to build a sustained production with minimal inputs at the other operations, there is enough capacity to absorb Coal Mountain's production.

Okay, so 26 to 27 is a realistic number?

Yes it.

Our next question is from Greg Barnes with TD Securities. Please go ahead with your question

Don or whoever else can answer this question. What can you do to increase your zinc mine production in light of what's going on in the zinc market?

I'll make an overview comment and then turn it to Dale. The short term answer is [Technical Difficulty], long term there are a number of different options but it would take significant capital and time to be able to do so. We're working on a number of projects at Red Dog and you know it great varies at Antamina and so you think you get some good years in zinc as well and there's some of that is coming but Dale over to you.

Greg, just to add a bit of color Red Dog is performing very well. We’re looking out further production optimization projects over the next couple of years but that really will help to offset any grade fluctuations and future grade declines with the current mine plan. So I think the ability of Red Dog to ramp up production in any significant way is limited. I think really in the short term looking forward over the next couple of years, the opportunity is really at Antamina and again that's associated with the mine plan. At the end of last year we did provide guidance looking forward for the 2017 to 2019 timeframe and we’ve put our guidance of an increase at Antamina to approximately 80,000 tonne contain metal range for our share and that compares to our recent update on guidance for this year 40 to 45. So really I think that’s the majority of the near term potential.

So what do you think the industry's supply response can be and what price, maybe it's just a question to you Stonkus, what kind of price do we need to have zinc mine supply lift higher from here? A - Andrew Stonkus I think what we're seeing today is that these current prices were not - the project pipeline is still very thin and we’re not seeing any significant supply response. I think the question always is what will China do and if you look at the Chinese mine production as Don mentioned the [indiscernible] are always a little bit suspect. I think the production guidance or production forecast out of China are tended to be overstated. One thing out of China we have to remember that the ore grades that they're working with there are quite low in the range of 4% to 5% combined zinc and lead. So the cost structure for the Chinese mine production is challenged and that's why we're not seeing the supply response as people expect out of China. And also the environmental issues certainly surrounding some of the mine production in China. So we're not seeing a supply response at current prices. So it's the trend is not significant in terms of new mine production coming on the current prices. So we need something higher, it's a matter of what the trigger price will be but it's not at the current price level that's for sure.

Just quickly do your forecast assume that Glencore turns their production back on next year?

I wouldn’t want to speculate on what Glencore's price point would be for restarts, they were very clear in last October that they want to keep the resource in the ground up those prices and that was done at a place of $1800. So we're slightly above that but they have made a decision to restart as far as I'm aware. A - Andrew Stonkus Yes, I might add Greg that one thing that’s clear is that Glencore believes that you make more money on price than volume and they believe in balanced market and operating on that additional tonne which may be a lower cost but puts the market into surplus. We believe in that too, we already have a fairly large zinc business. As you may know for a long time over the last 10 year period, I had a policy of read my lips no new zinc because the market was in serious oversupply and you know we really kind of believe in that. So, I think the key comes down to what Andrew just talking about in China and this grade issue is a big one. You know they have one of mine that's 11% zinc and then all the rest start with a four and that's versus current average rate of 6 to 7. So that any new mines that they can bring are going to be - have that much more capital per tonne of capacity and that much higher operating cost just because of lower grades. So it's actually a bigger step down percentage wise than what we're seeing worldwide in copper. So we'll see how it unfolds but for our purposes we know you make more money on price than volume and we've waited a long time for these conditions as zinc to occur so we'd like to enjoy it for a bit.

Our next question is from Karl Blunden with Goldman Sachs. Please go ahead with your question

Just had one on the balance sheet and one on the operating side. You know when you bought the bond deal back couple of months ago you had mentioned that on the uncommitted credit facilities you're looking at reducing some of the bank exposure through some surety bond. Can you comment on how that's progressing or how just generally how we should think about the risk in those facilities right now?

Yes, we're continuing to work with a couple of insurers on bringing on some surety bond capacity and expect to have something in the range of 150 million to 200 million in that regard completed in Q3 here.

And then just on Fort Hill, it's been some time since you’ve provided an update there in terms of what the operating costs might be? Is there any way for us to think about it first of all end of 2017, we've seen quite significant cost come out of oil production at. Suncor existing operations. Is there any way we can frame the opportunity in terms of how much cost have come down since I think your last update was a couple quarters ago now.

I'll make a couple of comments and turn it over to Tim Watson, we been looking at this issue quite closely and note that industry wide since the oil price that is steep downturn, industrywide cost seem to have gone down on average 24% and then we also look looked closely at Suncor's base operations and see where they're producing those - these are public numbers and our belief and I think Suncor's belief as well is that Fort Hills will be lower cost than their current operations. So with that this context, over to Tim.

With respect to an update on the operating cost estimate, as Suncor is moving through the second half of the year, they are doing a total project forecast update as well as a the schedule update for the remaining portion of the project and included in that work is an update to the operating cost estimate. So we expect to see that at the tail end of the fourth quarter of this year.

And just one more quick one here just here on met coal, you did mention here and I think the point is well taken that your stripping levels has remained consistent in terms of cost their relative to the coal being mined. Is their flexibility and if you do think about a downside case, is there significant flexibility to reduce stripping cost temporarily to reduce [ph] cash or is that not really a choice that you have?

A brief comment and then over to Robin, I think we've been through perhaps the most severe time period in medical pricing relative to industry cost that we've seen in our lifetimes and we didn't do that. So that's just what the history shows. In terms of what options we have over to you Robin.

I mean it's an operating philosophy to maintain a long term view of coal and we resist obviously very strongly any move that would jeopardize that and to take advantage of a short period of time I think would be shortsighted and so we've been able to keep that focus in coal and be able to come out of this downturn stronger now than we were going into the downturn. So for us it's a philosophical choice more than anything.

You always pay an extraordinary price later and it's just not worth it.

[Operator Instructions]. Our next question is from is from Lucas Pipes with FBR & Company. Please go ahead.

I wanted to ask a little bit more about your strategy given the improvements in the commodity markets. If you've done refinancing earlier this year kind of just big picture, how are you thinking about growth? There were a couple of questions this morning about organic growth opportunity. How would you rank kind of the opportunities in today's marketplace? Thank you.

So the next year or so we're focused on Fort Hills and seeing that finished and brought on stream either very end of 2017 or early 2018 and that will add you know the fourth leg, fourth core business in a long life operation in a good geo political jurisdiction and add some good balance to the portfolio. So we're looking forward to that, we have all the cash on the balance sheet now that we need to complete that and we haven't touched the $3 billion credit facility that we have and we don't intend to touch it this year and I think we have a reasonable shot at finishing the project without ever touching it. So that does give us some capacity to look at other opportunities, it's our job to look at other opportunities anyway. So everything that you see are rumored to be on the block or whatever we do review sometimes we go and visit them, occasionally we put in a bid but in terms of acquisitions. We've seen at least in copper which we have a long term interest in that assets have traded at prices that discount a reasonable copper price that usually over $3, so it's not as if there are any fire sales going on from what we see. We do have our own key projects in Quebrada Blanca 2, QB2, and [indiscernible] both of which we think the world is going to need and both of which are solid projects. The QB2 timeline looks like the earliest that we could sanction that project would be first quarter of 2018, that's if everything went perfectly on the permitting timeline and as you're probably well aware that usually there have been delays and sometimes long delays so we'll see, but that is…

Our next question is from David Wang with Morningstar. Please go ahead.

I had one on coal, so the cash costs that you guys have achieved have pretty great and their reduction in guidance seems to indicate that you've been cutting even more. Is there further potential for cost cutting as you look out in next year or so or even beyond that and do you think that you're cutting costs in-line with other competitors in the market or how do you see your cost cutting versus the other industry players?

Yes, I guess if you think about the cost cutting it's sort of happened in three stages so the first stage was really around increasing equipment productivity and we think we're - well we know we're in the top quartile in terms of that metric. The next area of focus for us has been maintenance and procurement and we're working through that this year and we continue to see good progress on that. So through the rest of this year we anticipate our ability to certainly hit the cost guidance [Technical Difficulty] as time goes on - coal is probably three to four years into a cost cutting optimization kind of stage and so we're seeing certainly the increase is now becoming more difficult to find big numbers, but we still make progress we're still making good progress and the cost cutting that we have achieved is all sustainable. We will carry that forward. So we're pretty confident at the level we're, very competitive.

Thank you. There are no further questions registered at this time. I would like to turn the meeting back over to your Mr. Lindsay.

Okay. Well thank you all for attending today. We’re very pleased with the quarter but I have to say we’re looking forward to Q3 as Coal Production, coal sales ramp up in a market that appears to have a decent tailwind in both steel making coal and in zinc. So we look forward to speaking to you in October. Thank you.

Thank you, gentlemen. The conference has now ended. Please disconnect your lines at this time and thank you for your participation.