Ladies and gentlemen thank you for standing by. Welcome to Teck’s Third Quarter 2021 Earnings Release Conference Call. At this time all participants are in listen-only mode. [Operator Instructions] This conference call is being recorded on Wednesday, October 27, 2021. I would now like to turn the conference call over to Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analysis. Please go ahead.

Thanks very much, Lourie. Good morning, everyone and thank you for joining us for Teck’s third quarter 2021 results conference call. Before we begin, I would like to draw your attention to Slide 2. This call contains forward-looking statements regarding our business. This slide describes the assumptions underlying those statements. Various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statements. I’d also like to point out that we use various non-GAAP measures in the presentation. You can find explanations and reconciliations regarding these measures in the appendix. With that, I will turn the call over to Don Lindsay, our President and CEO.

Thanks very much Fraser and good morning, everyone. I will begin with third quarter highlights on Slide 3 followed by Jonathan Price our CFO, who will provide additional color on our financial results. Then we’ll conclude today’s session with a Q&A, Jonathan and additional members of our senior management team will join me in answering your questions. So, I’m pleased to report that our solid operational performance combined with an extremely favorable commodity price environment in third quarter, resulted in a record adjusted EBITDA and record adjusted profit. Third quarter adjusted EBITDA of $2.1 billion is more than triple the same period last year. And note that September alone contributed to approximately half of the total as strong realized pricing continued across all of our principle products, particularly steelmaking coal, but also copper, zinc and energy. And if you look at the pricing we’ve experienced in October, it’s higher than it was in September, right across the board. So, if you have pretty good indication how we did in the month of October. Despite the continued impact of COVID-19, as well as the impact of forest fires in British Columbia in July, Q3 production was in line with plan across our business units and our annual production guidance remains unchanged. However, as we previously mentioned, we are seeing inflationary cost pressures, notably in the price of diesel supplies and labor costs and not unlike our peers these cost increases impacted third quarter operating results across our businesses and we are expecting upward pressure on our cash unit costs through the balance of the year and into 2022. Despite this, we have not changed our full year cash unit cost guidance, as we anticipate higher utilization and efficiency gains to partially offset some of the current pressures. Looking ahead, we are…

Thanks, Don. I’ll start by addressing our third quarter earnings adjustments on Slide 15 to reconcile our profit and adjusted profit attributable to share holders. The most significant adjustment in the quarter is $97 million in QB2 variable consideration owing to IMSA a former owner. This is a derivative financial liability that arose from our 2018 acquisition of an additional 13.5% interest in QBSA through the private Chilean company. This liability is carried at fair value and any change in fair value is recognized on our income statement. The purchase price included additional amounts that may become payable in the event that average copper prices exceed US$3.15 per pound in each of the first three years, following commercial production up to a cumulative maximum of US$100 million, if commencement of commercial production occurs prior to January 21, 2024. A nominal value was attributed to the additional payments at the time of acquisition. As of September 30, 2021, the fair value of this financial liability increased by C$97 million reflecting the discounted value of the maximum consideration. The second largest adjustment in the quarter is $49 million in environmental costs on an after tax basis. This primarily relates to a decrease in the rates used to discount our decommissioning and restoration provisions for closed operations. Share based compensation expense was $28 million in the quarter and commodity derivatives were $10 million. After these and other minor adjustments bottom-line adjusted profit attributable to shareholders was $1 billion in the quarter or $1.88 per share on an adjusted diluted basis. Excluded from our earnings adjustments, our results include gains and losses due to changes in market prices in respective pricing adjustments, which resulted in $73 million of after tax gains in the third quarter or $0.14 per share. Notably the large increase in…

Thanks Jonathan. So in summary, this is a very exciting time for our industry and for Teck in particular. There are opportunities ahead as global growth and a transition to a lower carbon economy drive new copper metal demand. And in the near term, given the current commodity outlook, we have the ability to generate significant EBITDA and free cash flow. Looking ahead, we have an industry leading copper growth profile and a very attractive copper pipeline. We’re strengthening how we operate both through cutting edge innovation to improve productivity as well as our leading ESG performance. And we have a leadership team with the right mix of skills and experience to deliver on our strategy. So with that, we would be happy to answer your questions and like many of you, most of us are on phone lines from home. So please bear with us if there’s delay while we sort out who will answer your question. Thank you and operator over to you for the questions.

Thank you. [Operator Instructions] And the first question is from Orest Wowkodaw from Scotiabank. Please go ahead.

Hi, good morning. In your release, you disclosed that, there’s several challenges related to the port entailing facility at QB2. Can you please give us more detail on what the issues are and whether you see any potential impact to the schedule from these issues? Or is it strictly a CapEx issue and can you catch up here?

Okay. Well first congratulations Orest. You do it again. First up, so I’ll turn this question over to Red Conger. Red, you might be on mute.

Actually, I do apologize. His line has disconnected.

Okay. So, what we’re going to do is, is track Red down because I’d like you to hear it straight from the man in-charge. And we’ll come back to your question, and operator, if we could go then to the next question, while I think Fraser’s team will track down Red.

Perfect. And Mr. Wowkodaw, you’ll have to re-queue up once I clear you from the queue right now, please. So the next question is from Greg Barnes from TD Securities. Please go ahead.

Thank you. Don, can you give us some color around the inflation pressures you are seeing into 2022 other companies or the mining companies saying it’s in the range of outputs 5% to 7%?

Yes. So two or three comments and I’ll turn it over to Jonathan, and can even have Robin or Shehzad from the directly from the operations, give you some more insight. So, first of all, it’s not what we would call structural inflation. It’s more broad based inflation from different input items, such as the diesel and supplies, things related to supply chain problems that we all hear about it. And it’s in terms of order of magnitude. It’s not in the range that, you’ll be aware of some of our major competitors in coal for example, calling for 20% increases. This is something that in total takes us, perhaps $2 to $3 of ton in coal, higher than where we were. So the percentage would be in the 5% or less right now. We don’t know how it’s going to evolve. Obviously there is some supply disruptions in the global economy all over the place. And so we want to make sure that we flag that and I think you all anyway, but that, yes, we’re getting hit with it too, but it’s probably more moderate than some of our major competitors. How about Jonathan, any additional insight from you and then let’s give Robin and Shehzad chance to give more color. Jonathan?

Yes, thanks Don. I think if we look at some of the underlying indices here and particularly the changes from 2020 flowing into 2021, you look at crude up by 64%, gas up 39%, steel up 55%. This flows through all range of categories of spend, including diesel explosives, grinding media, mobile equipment, plant, tires, chemicals, et cetera, et cetera. There’s also of course some pressure coming through a whole range of other small consumables right across the business. And one of the things that’s impacting cost there, is supply chains, the cost of transportation and the way and which, these cost pressures are flowing through into the economy. So the sort of range, that Don just quoted is consistent with what we’re seeing in the business right now. We do expect, that pressure as, we’ve signaled in the release to be maintained into 2022. But we don’t see these as, necessarily structural changes to the underlying cost of the business. They are driven by movements in these indices and therefore to a certain extent, some of this pressure will be transitory. And as Don said, I don’t know if Robin or Shehzad want to provide any particular business context?

Maybe it’s Robin. Yes, go ahead Robin.

I just, I was going to add that there’s no question that some of the costs or inflationary, but I think one of the things to recognize is, we’ve had considerable success with some of our RACE21 initiatives. They’ve reduced costs in many cases and increased their productivity, particularly in the process plants and in the mines. So, we’re actually seeing some offset to that pressure as well. So, you’ve got to kind of look at both sides of that equation.

Shehzad?

The majority of it that translates really is the energy complex with gas and crude and steel. And of course, we enjoy some of the margins from that as well in terms of the amount of margin that has gone up in for all of our products as well. And as Robin said in copper, Don mentioned earlier in spite of the pressures, we have been able to maintain our guidance both in copper and zinc to be within our previous guidance as we work through efficiency gains and find new ways to reduce consumption, when pricing is so high, and we’ve been fairly successful in that.

Yes. Great. Thank you. Sorry, go ahead.

It gives you some color and I mentioned at the beginning that it isn’t structural, but what is structural is that we’re gaining the benefits from the investments we made in the LQ [ph] expansion to 9 million tons and the Neptune port we’re just going to the quarter, we’ll see lower port costs, so actually cash cost in Canadian dollars, were $4 lower this quarter than a year ago. So on balance, so getting some control from those investments and the RACE21 experience while at the same time flagging that all these different inputs worldwide, are showing some increases. So maybe your follow-on question, and then I do want to highlight, I’ve got Red Conger back. So, I want to get back to Orest question as well. So Greg you first.

Okay. Yes, just as you touched on, it was given you’ve got some experience now with Neptune operating at close to full capacity. What kind of tonnage loading rates are you seeing on a per ton cost basis?

Sorry, cost basis? We haven’t reported cost for like a full quarter running full capacity. That would be this quarter coming like before right now.

But obviously they’re going in the right direction, not 11, 12, all of ton like they’re paying less [ph].

Yes, but you’ll be familiar with this Greg, but what’s even more important as you know thermal coal prices are very high and you’ll remember what happened the last time, thermal coal prices. If we did not have – haven’t done that, we would’ve been at the mercy of the other provider where they shortchanges to a million tons last time at margins of $200 a ton. If that happened again to us this time, the margins are $400 a ton. So just by having it, the avoiding that potential cost is huge. So that’s why I said the optionality to have that optionality was strategically so important. And I’ll also say that, by dividing the business between CP and CN and keeping them both very competitive that has worked really well, both from a cost point of view and service point of view that we’re getting the coal delivered to the port very well. So, we’re looking forward to, the next year or two and getting the benefit from that. And we’re very, very pleased with Neptune.

Okay. Thanks all.

Red, I could call on you to answer Orest question which I believe you now have, which is about the port?

Yes, thanks Don. Good morning Orest, apologies to everybody from my phone dropping off. So, we’ve had several things that we’re dealing with in the third quarter starting at the port. The sea for conditions are actually softer now where we’re driving the pilings into extend the jetty out into the sea. And initially you’d think, well, that’s great. It’s going to go faster. But to meet the structural criteria that the facilities been designed to, we’re actually having to drive those piles now deeper down into the sea for to achieve that structural integrity. So that requires us, we’ve already ordered the pilings they’re at a designed length. So, now we pound them down and then well done an extension onto them to drive them, farther down into the ocean floor to achieve the structural integrity. So, we burned additional effort hours in the third quarter doing that. We have the material on hand now to proceed in that matter, if it continues this way. And when we think about first copper, the critical path that we’ve talked about, we really have a relatively short distance to connect is, and we’re going to show more of this in detail, on Mondays virtual tour. But we put a temporary island out in the sea and we’re actually driving pilings back toward the shore, as well as driving pilings from the shore out. So, that’s the critical path to get the water from the ocean up into the desalinization plant. And so, that continues to remain on track. As you indicated in your question, it’s going to be more expensive to build that as long as this condition endures, but as far as the schedule goes, we’re going to be able to accommodate that within the schedule. Likewise, up at the tailing management facility, we had a pump station where we had just completed the earthworks to just start doing the foundation work. We discovered some geotechnical instabilities and the wall that was remaining there. And we have redesigned and relocated that pump station. So, now that work is ongoing and we can accommodate that within the critical past startup schedule that we’ve been tracking to for next year. So those are two of the biggest items that are contributing to that upward cost pressure right now and some idea of how we’re dealing with those.

Thank you.

Thank you. The next question is from Curt Woodworth from Crédit Suisse. Please go ahead. Your line is now open.

Yes. Thanks. Good morning, Don and team. First question is for Réal in past cycles where we’ve seen, very extreme escalation and met coal oftentimes there was not significant liquidity at that price. And I know Teck didn’t always capture the full spot realization. So, can you just comment on your ability to capture the $600 China CFR price and what the net back would be for you today? Given ocean freight? Réal Foley: Yes. So thanks for the question, Curt. Yes, we are capturing those higher prices as they are occurring. We’ve got number of pricing mechanisms actually and we’ve made some sales at pricing, fixed pricing above $600. And we’ve also got some sales that are index linked and reflect the average of the index in the month of shipment. So yes, we are capturing those prices. On the FOB side, we have a combination of sales that are either price on the quarterly, on the average of the quarterly indexes lagged by a month. And those indexes, the average is now tracking at about US$370 as Don was saying. And we’re halfway through the quarter. If we go back to China, your question as to what is the FOB equivalent today? So freight has increased I mean, this is one place where we are seeing inflationary pressures, freight rates to China are currently around $33 to $35. So, we’re getting roughly between US$577 to US$580, if you compare to the spot price today, which is sitting at US$630 per ton.

Great. Thank you. And then just on QB2, can you frame some of the buckets, I guess, around the 5% increase in the contingency and would you feel that beyond the 5% increase, it’s fairly derisk at this point? And then can you confirm? I think my understanding is that Bechtel was taking most of the raw material price risk with respect to steel and whatnot and Teck was more kind of on the blocking and tackling operationally labor. Thank you.

Red, back to you.

Yes, Curt. So, let me talk about the material risk first. We continue to procure all the material for this project throughout the pandemic. So even though, we idled construction during the early onset of the pandemic, we continued to procure materials. So all the material that we require for to complete this project is actually procured. And most of it is onsite at this point. So that’s a huge advantage for us given what’s going on globally today. This issue, that I just mentioned of requiring additional piling material. And in order to relocate this pump station that I just talked about, we need some additional pipe runs and cable runs. Those materials have been procured, secured and are on the way to site. So, we have little or no risk associated with the things that are going on with global supply chain right now, as far as construction is concerned. And the buckets that I would put the additional contingency in that were of signaling to you today with upward pressure on the capital cost of the project itself are primarily related to geotechnical issues. The C4 condition, requiring additional pilings, so you can imagine the, if we have to pound those deeper, it just requires more, more effort hours, more construction hours per unit of progress than we had engineered and forecast. So it’s a pretty straightforward calculation. And we’re already have, we have a fit in hand and are underway proceeding with that modification. And then likewise, this pump station up at the dealing management facility, same set of circumstances. We’ve re-engineered that the constructions well underway. One of the advantages that we have having a operating mine site there, our mine team is doing a lot of that earth work. So, they were immediately available to respond to that. The one other bucket we’ve had is weather related where high sea conditions of support for safety reasons, we don’t put divers in the water. When we have high sea conditions, we had an inordinate amount of that exposure in the third quarter, and we also had some high wind conditions of the altitude that kept us from making some of the lifts that we needed to make in the afternoons that, that caused us some setbacks, but by those are the categories and what we would include in that additional contingency we’re talking about today.

Okay. Thanks very much.

Thank you. The next question is from Abhi Agarwal from Deutsche Bank. Please go ahead. Your line is now open.

Yes. Thanks operator. Good morning Don and Dean. And thanks a lot for taking my question. I have a couple of questions. So the first one is, is it fair to assume that you could look to target another 7.5 million tons of met coal into China depending on the premium between CFR and FOB persisting. And also, can you look to increase this as you plan for the next year? That’s my first question.

Okay. I’ll turn that over to Réal. Réal Foley: All right. Thanks for the question, Abhi. Yes, we are still targeting at some changed around 7.5 million tons of sales to China for 2021. And as we’re looking at our book for 2022, our objective is the same to maximize sales into China. Keep in mind as we do that, that we have a number of long-term well established and stable customers that we’re continuing to deliver into as well and demand in that market is also very strong. So it took a long time to develop and build those relationships acquired those contracts. And we don’t know how long the import restrictions in China will last. So, we need to balance between our sales to long-term customers and also to China.

Thanks. Réal. My next question is on Neptune. With these ramp up progressing in line with expectations to the guidance to get to below, I think the guidance was lower end of $36 to $39 per ton by 2022. Does that still stand, or do you think that given the inflationary pressures, it could hit into majority of those gains? Thank you.

Go on Réal. Réal Foley: Yes. So, we haven’t provided guidance yet for 2022 Abhi. This is something that we will be doing when we report Q4 results in February. What we’re seeing for Q3 and actually in the market currently, the inflationary pressures that we’re seeing on diesel price and therefore rail fuel surcharge on ocean freight rates and also on vessel to emerge. Those are probably the main areas. The benefits in the savings that we’re achieving with the increase throughput through Neptune is helping to offset those inflationary pressures. So, you can just imagine that if we did not do Neptune, we would be impacted by the full on effect of those cost inflations. And keep in mind too, that for Q3 the impact from the wildfires with the tons that we were able to divert to Ridley Terminals also increased our cost, because Ridley is a much longer distance and therefore more expensive to get the call there. But as Don explained, it provides the benefits of getting the call to market reliably and more importantly, realizing the benefits of the current very high prices and the steelmaking coal market.

Thanks, Réal.

Thank you. The next question is from Lawson Winder from Bank of America Securities. Please go ahead. Your line is now open.

Good morning and thank you for the update. I’d like to ask about the energy business if I might. Even the past suggested that business could potentially be divested, given a strong oil price environment and improving in operations. So certainly the first criteria, seems to be met. And it looks like there scope for the operations to turn around in the fairly near future. Could you maybe comments on whether or not now might be the right time to divest, and how would you assess the marketplace of potential buyers at this point? Thank you.

Yes. No, I agree with the way you’ve phrased the question. We do see strong pricing, and if Fort Hills was running at full capacity today, it would be very profitable and the board would be able to make a decision. What we’ve said in the past, and it hasn’t changed is that once Fort Hills is at full production and then generating the kind of EBITDA we think it can. And particularly at these prices, then the board would assess whether we’re getting paid for it in Teck Resources shares and if not, then it would entertain a transaction to have it held differently, but still to have Teck shareholders benefit. So, what we mean by that is, possibly contributing it into a midcap and taking back shares, distributing those to Teck shareholders. We could do a direct Teck energy spin-out. We could sell to another party for shares in that company. And it looks like, the ramp up will occur this quarter. So, we’re very pleased with that, but it hasn’t happened yet. But if it does hit full production by January 1, then Q1 like next quarter would be the first full quarter where we could demonstrate financial results with it running at full production. So coming soon, yes, but not quite there yet will be a time when the Board can make a decision.

And then if I might just follow-up on QB2, you’ve mentioned before and in the release today, mitigation measures with the aim of attracting new talent, and improving retention and minimizing absenteeism, and how should we think about the cost associated with those programs vis-à-vis the offsetting costs of potentially less overtime. I mean, if you’re successful with those measures, would the really the risk of that $600 million going much higher or would that actually help keep the $600 million of COVID-related costs under control? Thanks. That’s it for me?

Excellent question. And back to Red.

Yes. And the way to think about it is, we’re – in many ways we’re moving heaven and earth to minimize the impacts of COVID-19. So if the right thing to do now is to not be so cautious about staying away from the job that not when you’re sick, but we need everybody to come to work and we incent them to do that, those people are getting paid when they’re off. We need them getting paid when they’re on the job. So it’s going to minimize the upward pressure on these COVID-related capital costs, same thing with attracting talent and retention. So those, anytime someone leaves and goes somewhere else, or we have a spot unfilled that that’s just more pressure for us on what it’s going to cost to get all this done. So this is the time now to be aggressive with getting, as many people outside as we can. We have material. We have work fronts. We’ve got a very solid work plan to get all of this done, and we need to get as many people on site and not laying off of who work to get this thing built.

Yes. Thank you.

Thank you. The next question is from Jackie Przybylowski from BMO Capital Markets. Please go ahead.

Thanks very much. I don’t normally ask the bond question, but I just wanted to ask you about the sustainability bonds that you reported the other day. And if you could give us a sense on roughly what the cost of borrowing on those bonds would be, if there’s any kind of range and maybe a little bit of color on what changes in terms of text behavior, if anything to take advantage of more favorable terms with the sustainability aspect of those bonds?

Okay, Jonathan, over to you unless we have Justine on the line. I’m not sure we do.

I’ll pick it up, Don, if you like. Jackie, just to be clear, they weren’t bonds. It was our committed, revolving credit facility. The pricing on that at LIBOR plus 150 basis points is exactly the same as the prior facilities that we had. However, in this instance, what we have is, essentially discounts or penalties based on the performance of the underlying sustainability metrics that we have. As I sort of said previously, the intent here is to ensure that we embed sustainability in everything we do in the organization, now including our financing. We’re already heavily motivated to meet the commitments and the targets that we’ve made in the market. And this is just a further confirmation of that and shows our willingness to connect that to the pricing of our borrowing where, of course, if we fail to meet those targets, there would be a penalty, albeit not material in terms of cost of the organization. But I don’t think to directly answer your question, it changes our motivation, because we’re already very highly motivated, but it does create that direct connection between the cost of borrowing and off performance.

Thank you. That sounds great. And maybe another question for you, Jonathan, in the Capital Markets Day, you guys did recently, you talked about RACE21. And I thought in a really helpful way in terms of what that program is and the benefits that you’re seeing. I kind of got the sense from the Capital Markets Day presentation that that there may be additional phases. I don’t know if you’re going to change the name to RACE22 or something. Can you talk about that, is there additional objectives or goals for that program that you can kind of contemplate announcing sometimes soon? Or is this just maybe just more of an ongoing initiative at this point?

Don, do you want me to talk to that? Happy to do so.

Sure. Go ahead. Go ahead. Yes.

Yes. I mean, Jackie really, it’s a continuum of activity that will continue to be embedded in Teck and through all of our operations. So whilst, we coined RACE21 to sort of bring together a series of targets and goals for a defined period of time, which we will report on in February 2022, when we give you our fourth quarter results. The work carries right on through that there are new initiatives being developed all the time inside the organization, looking for that next leg of performance and further embedment of the digital transformation, the cultural transformation, the empowerment of the workforce is centrally that comes with that. So it’s certainly not a case of we hit the end of this year and we stop. We very much keep going. But we will tell you in February, what’s been delivered up to the end of 2021.

Sorry. Are you going to maybe put new targets out for, excuse me, subsequent years or not so much published targets?

I think the importance with any program or program of transformation, like this is really to see the benefit coming through the businesses, coming through our production, coming through our safety, coming through our unit operating costs rather than necessarily creating new targets for RACE. I think, you increasingly every time you’ll hear from Robin, you hear from Shehzad, they’re talking to the benefit that RACE is having for their operations and for their business. That’s a sign of success of a transformation program, because that’s where the that’s ultimately where the benefits would show up and, I think that’s probably how we can continue to communicate going forward.

Great. Thank you. Am I allowed to ask one last question?

Go ahead.

Thank you. I just wanted to ask, we’ve heard from other companies that freight and shipping has been increasingly challenged, and I was wondering if you can comment on how that affects your CFR priced coal going into China, is the freight rates going up or are you having issues finding vessels?

That one is for you Réal. Réal Foley: Yes. Thanks, Jackie. Yes, freight rates are going up. If you compare to what they were at the beginning of 2021. They would’ve been in the mid-to-high teams, maybe as high as US$20 per ton. They’re currently in the $33 to $35 range, so substantial increase. But at the same time, the coal price has increased so much more that the margins are highly beneficial. In terms of vessel availability, we have not had issues finding vessel availability, and we actually have COA as well for part of our business, a contract, a fragment for part of our business that covers some of our sales too. So that helps to balance some of the increases.

Great, thank you very much Réal, and everybody thanks.

And Jackie, just add some first to what Jonathan was talking about with RACE21 and to refresh what we said in the Capital Markets Day in case there’s those on the line that weren’t there. RACE21 has already completed more than a 100 projects, and we will report on those and the measurement of how much EBITDA sort of gained, what the value of that was. But they have identified another 450 initiatives divided into 40 different digital squads to go after those. So it truly is a transformation across the company into the digital world. And we’re very, very excited about it and look forward to giving you the report in February.

Thanks very much, Don. It was a great presentation of the Capital Markets Day. I really enjoyed that one.

Operator, Laurie it’s Fraser Phillips. I think we’ve reached end of time, Don, if you want to make a few closing comments?

Okay. Well, thanks very much. Once again, that was the record quarter, but it will likely be exceeded like Q4 and if you translate what we showed you in September, and we’ve already completed in October and recognizing that we priced two thirds of the coal for the quarter already. And in fact for the benchmark, the 90-day calculation period, we’re almost two thirds of the way through that as well. So Q4 is shaping up to be pretty good. We hope to see you at the virtual site visit of our flagship QB2 copper growth project on November 1 from 1:00 PM to 2:00 PM Eastern time. And the live webcast link will be available on our website and further details are also available in the October press release. So once again, thank you for joining us and we very much look forward to talking to you in February. Thank you all.

Thank you. The conference is now ended. Please disconnect your lines at this time. And we thank you for your participation.