Ladies and gentlemen, thank you for standing by. Welcome to Teck's Fourth Quarter 2023 Earnings Release Conference Call. At this time all participants are in listen only mode. Later we will conduct a question-and-answer session. [Operator Instructions] This conference call is being recorded on Thursday, February 22nd, 2024. 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 Ariel. Good morning everyone and thank you for joining us for Teck's fourth quarter 2023 conference call. Please note, today's call contains forward-looking statements. Various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statements. Please refer to Slide 2 of the assumptions underlying our forward-looking statements. In addition, we will reference various non-GAAP measures throughout this call. explanations and reconciliations regarding these measures can be found in our MD&A in the latest press release on our website. Jonathan Price, our CEO, will begin today's call with highlights from our fourth quarter and full year results. Crystal Prystai, our CFO, will follow additional color on the quarter. Jonathan will then conclude today's session with a brief update on our key priorities and proper growth strategy, which will be followed by a Q&A session. With that, I will turn the call over to Jonathan.

Thank you, Fraser and good morning everyone. So, starting on Slide 4. We had a strong fourth quarter performance across our business. We advanced the ramp-up of our QB operation, resulting in Teck's highest ever quarterly copper production. Adjusted EBITDA of $1.7 billion in Q4 and $6.4 million for the year reflects robust prices for steelmaking coal and copper as well as high-end steelmaking coal sale volumes. Over the course of the year, strong profitability allowed us to return a total of $765 million to shareholders by paying $550 million in dividends and completing $250 million in share buybacks and while continuing to strengthen our balance sheet through the repayment of $294 million of the QB2 project finance facility. In addition, the Board has approved the payment of our quarterly base dividend of $0.125 per share on March 28 and following the receipt of $1.3 billion in proceeds on closing of the minority sales stake in our steelmaking coal business to Nippon Steel in January, the Board has authorized up to a $500 million share buyback. This extends our track record of strong cash returns to shareholders with nearly $4 billion returned through the last five years. Now, turning to our 2023 highlights on Slide 5. 2023 was a transformational year for Teck as we continue to advance each of the four pillars in creation strategy. In addition to the strong EBITDA we delivered, we reported higher copper production and sales than the previous year, driven by the addition of QB operations. We also produced 23.7 million tonnes of steelmaking coal, above guidance and higher than the previous year. As we progress the full sale of the steelmaking coal business, we were pleased to announce the closing of the sale of our minority interest in EBR and Nippon Steel and…

Thanks Jonathan. Good morning everyone joining us today on the call. I'm going to start with the key drivers for our financial performance on Slide 8. Adjusted EBITDA in the fourth quarter increased compared to the same period last year, primarily driven by higher steelmaking coal sales volumes, which were partially offset by lower steelmaking coal and zinc prices as well as higher unit costs across our operations, including elevated costs at QB as production ramp-up continues. We continue to experience inflationary pressures in the cost of key supplies, including mining equipment and tires and labor and contractors as well as higher energy costs in Chile and changing diesel prices. These inflationary pressures impacted our unit cost in 2023, and we expect this to continue into 2024. As such, we have reflected inflation in our sustaining capital expenditures and our full year unit cost guidance ranges for 2024, which are unchanged. Our underlying mining drivers remain relatively stable, and we continue to be highly focused on managing our controllable operating expenditures. Our 2024 annual guidance that we disclosed in January is unchanged across our business. Now, turning to each of our business units in more detail, and starting with copper on Slide 9. We achieved record copper production in the fourth quarter, which was 58% higher than last year. This increase was driven by the ramp-up of QB operations, adding 34,300 tonnes of copper in concentrate production, higher production from Highland Valley Copper as a result of increased mill throughput, and higher production from Antamina due to higher grades. Cost of sales was higher year-over-year, primarily due to the inclusion of QB operations in the year with costs elevated as production ramp-up continued in the fourth quarter. As a result, gross profit before depreciation and amortization decreased compared to the…

Thanks, Crystal. So, turning to Slide 17 and our key priorities in 2024. As we mentioned, 2023 was a transformational year for Teck. And to ensure we can continue to demonstrate our focus on value creation, we have set up several key priorities for 2024. We were very excited to announce an agreement for the full sale of our steelmaking coal business in November. Glencore will acquire a 77% controlling interest in EVR and become the operator of the Elk Valley steelmaking coal lines. As we have discussed, we closed the sale of a minority interest in EVR to Nippon Steel and POSCO on January 3rd. Completion of the sale of our steelmaking coal business is one of our key priorities for this year, and regulatory approvals are progressing. The significant cash proceeds from this transaction will strengthen our balance sheet and ensure we are well capitalized to unlock the full potential of our base metals business, while balancing significant returns to our shareholders. As I mentioned earlier, we are also driving safe operational performance across our portfolio, and we have embedded known risks into our guidance to ensure we build confidence in our ability to deliver on our market commitments. At QB, we are pushing hard to complete construction of the port and commissioning of the molybdenum plant in the first half of the year and to achieve consistent operating performance at design capacity. At the same time, we are advancing the development projects in our industry-leading pipeline, which are foundational to our future growth. We will advance that growth in a disciplined way by following our capital allocation framework to ensure that our capital decisions are value maximizing for shareholders. Looking at Slide 18 and our priority to advance our copper growth in a disciplined way. This starts…

[Operator Instructions] The first question comes from Orest Wowkodaw of Scotiabank. Please go ahead.

Hi, good morning. With the quarter now more than half over, Jonathan, I'm wondering if you can give us an update on the first quarter operating performance at QB. Specifically, the mill, the plant, are we starting to see more consistent throughput, recoveries, et cetera? Can you give us an update?

Yes. Thanks, Orest. As I mentioned, we're working through the ramp-up phase for QB right now. It's in line with our expectations. We expect, of course, to progressively increase our copper production throughout the year to meet that guidance of 230,000 to 275,000 tonnes that we've previously communicated, and we're on track to do that. But I'll hand over to Shehzad Bharmal, our SVP of Base Metals, who is responsible for the operations there, just to give you a little more color.

Thanks, Orest. We have worked through most of the issues that we had mentioned previously with respect to the conveyors and the pumps that we had mentioned previously, and we are currently operating at close to design throughput rates. We are often on certain days limited by some conveyor issues on two conveyors at the front end part of the plant near the primary crushers, and we are working through those issues and expect to have those results in the next month or so and get back to above design rates or at design rates. On the recovery side, again, in January and February so far, we are close to design rates, so we are a little bit below. And we're actively working through this as we bring more stability to the front end of the plant. So, the consistency that we have seen over the last month or so has helped us improve our recoveries, and we continue to work through that to get to our design rates.

Thank you guys. Just as a follow-up, is the plan to basically have QB operating at consistent throughput recoveries, et cetera, call it, sort of some, I guess, midway through the second quarter? Is that the way to think about it?

I mean I think this is the ramp-up of the facilities. As I said, we will progressively deliver increased copper production throughout the course of the year. Of course, we're pursuing exactly what you're saying, that stability and operating at design throughput rates. But this is a ramp-up process. It will take some time to land, but we're confident in the guidance that we put forward and expect the delivery of copper to improve through the course of the year to deliver against that guidance.

Our next question comes from Liam Fitzpatrick of Deutsche Bank. Please go ahead.

Hi there. Liam Fitzpatrick from Deutsche Bank. So, just the first one on the balance sheet structure post EVR. Just wondering if you could give us more of a steer in terms of what sort of balance sheet you're targeting as we move into 2025. I know you've mentioned this one times EBITDA as a target level, but it seems unlikely that you're going to take leverage up that high. So, is it a small net debt position? Is it a small net cash position? Any kind of guidance on that would be helpful.

Yes, I'll hand you over to Crystal to talk to that. I mean the one thing I would remind is that, that is the sort of long-term position we're targeting here as we receive the proceeds and then how we allocate them in the subsequent years. But Crystal, if you want to provide some more color.

Yes, of course. Thank you. I think it's consistent with what we've been articulating in relation to reducing our gross debt levels from where they are today. I think there is an opportunity for us to do that. We will look across our debt stack when we think about that. We obviously want to do that in an economic way. So, in relation to some of the public notes we have those make-whole premium, so we want to be deliberate in how we think about that. We are committed to that investment-grade credit metrics, as Jonathan said, through the cycle 1.0 times net debt to adjusted EBITDA. We aren't necessarily focused on a set leverage level, but rather really focus on that ratio.

Okay. Thank you. And if I could ask one follow-up just on potential M&A versus organic opportunities. So, you clearly got a number of internal options that you think are very interesting that you're hoping to progress in 2025. Is that enough to keep you occupied? Or are you also on the lookout for potential external opportunities?

Yes. Liam, I mean, given what we have in the portfolio already, we're not sure of the things to do. As we just discussed, we're very focused on the ramp-up stabilization in full production from QB this year. We've got then a tranche of projects, which should be subject to engineering economics and permitting ready for sanction in 2025, including the HVC life extension, San Nicolás and Zafranal. So, there's a lot to be getting on with there. And as we've always said, we want to balance that investment in growth with return of capital to shareholders. So, we'll continue to focus on those things that are entirely within our control and delivering that future growth that we've been talking to.

Our next question comes from Timna Tanners of Wolfe Research. Please go ahead.

Are you on mute, Timna?

No, I just didn't hear you. Hey good morning. How is everyone doing?

Good. Thanks Timna.

Can you hear me now?

Yes.

Okay. So, I'm asking a little bit more about the expansion projects. I know at one point, you had a permit for further QB opportunities and just want to know the updated thinking there. And then regarding Zacatecas, San Nicolás, the leadership in Mexico is looking into banning open-pit mining. And just wondered how that affects that project or if -- how you're looking at that?

Yes. So, starting with QB and future expansions of that facility, we have an incredible ore body there. It's very, very long life. It clearly will enable future expansions of capacity for QB and still something that we can run as a multigenerational asset. Our immediate priority, as I said, is getting the current plant fully ramped up and operating and then really exploring the full potential of that facility in terms of what additional capacity we can get through optimizing what we already have before we make a further commitment to any significant capital expenditure at the site. Medium term, very much expect us to continue to pursue larger-scale expansions of that operation. But with what we have at San Nicolás, Zafranal and the life extension of HVC, we have a fairly full task card in the immediate term. We'll focus on that in terms of our major capital deployment, but asset optimization studies for the medium and long term at QB are ongoing. For your second question, just around some of the moving pieces we've seen in Mexico of late really as they relate to the constitution, I'll hand you over to Tyler Mitchelson, who's our Senior Vice President, to cover it.

Yes, we're closely monitoring an assessment and assessing the proposed changes to the constitution. There's more than 20 proposed. Obviously, the ones around open-pit mining water consumption are the key ones. We've been working with our fellow industry players as well as [Indiscernible], the chamber of mines in Mexico to really understand what is the pathway forward. Given where we are right now, it's 4 months to the main general election and the -- actually closes on April 30. So it's really too early to determine whether or not these will be approved in the timeframe they're going to be approved and as well, what the ultimate impact will be as we go forward. You put it in the context of some of the largest mines in Mexico right now and some of the most successful mining companies to use open-pit mining. So, it's obviously a very significant impact, but we're continuing to monitor through the next months.

Makes sense. Thank you. I got my two in, so I'll pass it along. Thank you again.

Thanks Timna.

Our next question comes from Dalton Baretto of Canaccord Genuity.

Thank you, good morning Jonathan and team. Jonathan on the Glencore call, Gary was asked about synergies between Collahuasi and QB2. And in response, he talked about a number of work streams and he sort of alluded to billions in synergies. I'm just wondering if you can comment on sort of where those synergies are coming from, some of the work that's ongoing. And maybe when we can see an update on where QBME fits into all of that? Thanks.

Yes. Thanks for the question, Dalton. We, along with the other parties here, are doing detailed technical evaluation of the potential synergies between QB and Collahuasi. We haven't quantified those yet. And those synergies could take a number of forms, all the way from being infrastructure related to optimizing across two very significant ore bodies in that area. It's complex. It will take time, in particular, because there's a large number of counterparties involved in this, but engagement is ongoing. We're working together to identify the opportunity here, and we'll update in due course as we get closer to landing that technical evaluation. And of course, if and when we get closer to agreeing terms with other parties. As I mentioned before, the focus for us right now is and must be on the ramp-up of QB2 and optimizing the operation that we already have. The intersection with something like the QB mill expansion, as you referenced, as I said, we are looking at future asset optimization opportunities, which include debottlenecking in the short-term and could include project expansions in the medium term. And of course, if there were to be any agreement or commercial arrangement between the parties, then that would have to factor in future expansion opportunities on both sides, of course, at QB2 and Collahuasi. But we're not at that point yet, Dalton. There's a lot of work to be done. These things are complicated, but we're committed to understanding the value potential there and working constructively and collaboratively with the other parties.

Great. Thank you. And then maybe if I can ask one more, just on the Glencore transaction in the coal business. Can you give us an update on where you're at in the regulatory approvals process and whether you've seen anything that gives you concern at all?

Look, so our process is continuing. We expect that we will receive the required approvals, being both the Investment Canada approvals and the antitrust approvals. Nothing that gives us cause for concern, Dalton, that we're seeing. These things just take time. We're working through that process, and we still expect this to close no later than the third quarter of this year.

Our next question comes from Carlos De Alba of Morgan Stanley. Please go ahead.

Thank you very much. Good morning everyone. So, maybe I'll just follow up on the prior question. Any more specific color, Jonathan, that you can provide on what approvals you have already received and which ones are still pending for closing the deal, the coal transaction?

So I mean, the -- one of the key ones here, of course, is the Investment Canada Act approval, and that remains outstanding with respect to these various antitrust approvals across a range of jurisdictions. We've received some of those, and some of those remain outstanding. So, as I said, I think things are progressing in the normal course, and we remain confident that this close is no later than the third quarter.

All right. And then on QB2 cost trends, I understand that you're going to provide further guidance once the production is stabilized at a steady state. But how do you see at least from a current -- currently, how do you see the trends of the cost moving once you get the steady state? The cost guidance for the next three years is a little bit wide. Should we assume that you only expect to get to the lower end of that three-year guidance, by the three-year production guidance period? Or maybe that's just conservative that you could achieve a lower, more sustainable cost earlier than the third year of that period?

Yes. Carlos, look, I think there are a few things here that are clearly within our control, that should see us improve the unit cost profile at QB. And they are, of course, getting our own port up and running so we can move away from the temporary logistics arrangement to the permanent solution. Of course, there's also getting the molybdenum plant up and running at full production given the byproduct credits we will get from that. And of course then, there's getting the main circuit running at full production so we get that full dilution effect on costs. So, all of those three things, as we progress, we'll see unit cost improve. So, even as we move through this year, we would expect costs in the second half of the year to be better than in the first half of the year. There are, of course, some factors that are less within our control. The inflationary environment is one of the impact that, that could have on labor costs. And the other part of that is just energy cost in Chile, which we've signaled is being higher than previously. And of course, we need to see how those things progress. So we do -- we put our guidance for 2024. That guidance reflects the phase of ramp-up that we're in today, and it reflects some of the areas that I just reflected, which we will resolve through the course of this year. So, we expect lower cost in the future. But of course, we haven't guided to those yet, and we'll have a much clearer view of that once operations are stabilized.

Our next question comes from Lawson Winder of Bank of America Securities. Please go ahead.

Great. Thank you very much operator and thank you for the update today, Jonathan and team. I wanted to ask about Antamina and then hopefully follow up on QB2. But on Antamina, given that Teck is just one partner of several in the JV, what is the risk that Teck will have to make an allocation decision on there prior to 2025? And what is driving the time line at Antamina in terms of an expansion decision -- or extension decision?

I'll hand over to Shehzad on that one.

Thanks, Lawson. So as you would have read that we didn't get the MEIA approval for the mine life extension from 2020 to 2036. And that is really expansion of waste facilities and tailings facilities in the location that they are. So, between now and then 2036, that mine life extension, other permits are in place and some capital associated with this that will be spent over the next eight years or so. Post-2036 extensions and expansions, all the parties that are looking at that right now, we are working on that. We're looking at permitting strategies for that. And that will be a few years before we'll have some definitive project definition on those. So, at this point, we are focused on getting that to 2036 from 2028, which we were very happy to achieve the permit.

Okay. Yes, that's great. Thanks. It's very clear. And then with QB2, I mean, you noted a very material increase in the copper resources at QB2. How does that influence the thinking on what the next expansion might be? Does it suggest that it could be something much bigger than the prior QBME mill expansion concept of a 50% increase? Thanks.

Not necessarily, Lawson. I mean I think the resource there was always very, very large, and now it's very, very, very large. So, it doesn't necessarily impact our short-term thinking around how we would expand this. We'll be very focused on the capital intensity of the next expansion here, where we looked at to maximize unutilized capacity in desalination in pipelines, et cetera. And what it means, of course, is we have far greater optionality in the long term, which is a fantastic position to be in, but it doesn't really change that short-term thinking. The focus on capital intensity and returns will be the front of mind for us.

Our next question comes from Lucas Pipes of B. Riley Securities. Please go ahead.

Thank you very much operator. Good morning everyone. My first question is on Slide 13 of the deck, which breaks out the CapEx over the last couple of years and into 2024, and sustaining capital and capitalized stripping in 2023, 2024 kind of a step-up from those 2020, 2022 averages. And trying to understand better what's going on here. Is that a catch-up from the pandemic? Is there something cyclical? Are there unique projects that have elevated this temporarily? Just trying to get a better sense of -- or is it mostly inflation? Would really appreciate to get a better sense of those drivers. Thank you.

Yes. Thanks Lucas. I'll hand you to Crystal on that.

Thanks Lucas. I think sort of primary driver that I would focus on would be inflation. I think there we did see from that sort of 2020 to sort of, I guess, really now, a significant increase in the underlying costs that were driving our sustaining capital as well as our operating costs. So, I think that is a key piece. In relation to capitalized stripping, I would just say, in our coal business, we were moving into new mining areas in 2023. And you saw those costs being elevated in that year, I guess, 2022 and 2023, and that's coming off in our guidance for 2024. There are also a couple of projects that are larger. In the coal business, the Elkview administration and maintenance complex is a large project in -- started off in 2023, the elevated cost in 2024 as we reach peak spending on that project. And then I'd say the last point in what's included in sustaining capital is, obviously, we now have QB sustaining capital included in our figures. So, those are some of the bigger items. But I think inflation would be probably one of the largest drivers. And we can get you a bit more granular detail if you give Fraser a call after.

That would be helpful. On Slide 24, you show the kind of copper production through 2027. And you anticipate a plateau in 2025 and the decline after that mostly really driven by Highland Valley. With the spending at Highland Valley today, is there any potential for a more sustained production level off of 2025? Or is that really the outlook through 2027, the best base case even with the spending taking place today? Thank you.

Yes, I'd say not within that period, Lucas. This is how we see the current mine plan progressing the capital that we'll be putting work is subject to returns. Of course, for the life extension of HVC, we'll really see the production pick up in forward years, but I wouldn't expect to see any material impact on the guidance that we put out here.

Our next question comes from Bill Peterson of JPMorgan. Please go ahead.

Hi, good morning everyone and thanks for taking the questions. You've discussed just now actually, again, about the returns framework for the next stage of growth projects, including learnings from QB2. But I guess on the other side, I guess, how should we think about the demand and pricing environment necessary for type of sanction growth projects, especially considering what is looking -- increasingly looking like a tightening supply environment?

Yes. Thanks Bill. I mean we do see a tightening supply environment. And we think even as we progress during this year, the outlook for copper pricing could be very constructive. We've seen the shortness of concentrate and the impact that, that's had on TC/RCs and we expect at some point that to flow through into refined metal, and hence headline copper pricing. Of course, each of the projects will have its own unique economics based on the capital, the operating costs and the volumes associated with those mines. They will all need to compete for capital. We will be very returns focused in terms of the decisions that we take here. And of course, the copper price will be a key determinant of that. But as I said, we remain very confident in the copper price certainly in the medium term, but even now in the short term based on the dynamics we see playing out in the market.

Okay. Thanks for that. And I guess on that coal, I guess, obviously, maybe only relevant for a few more quarters. But can you give us your thoughts on the outlook for that segment and latest developments you're seeing both on the supply and demand side globally?

Yes. I'll ask Ian Anderson, our Chief Commercial Officer, to talk to that.

Thank you very much for the question, Bill. So, I'd start just with where we're at in terms of overall steel consumption and production during the course of the year. Global steel production was flat at about 1.85 billion tonnes, really representing above where it was last year and really saw that taper off at the end of the year as a result of Chinese production. It rapidly dropped. We're not certain about that number. So that was one of the factors. At the same time, the Indian crude steel production went up by about 11.8%, and that was offset by some small declines in EU, Japan, and South Korean markets. So, overall, if we look back over the course of the year, the high-quality steel and coal price exceeded $295 per tonne. It really rose at the end of the year when we saw it up to about $315, and there's two factors that drove that. First of all, a tiny supply, mostly in Australia; and secondly, heightened demand from India and China primarily. So, what we've seen in terms of Australian supply is key miners, including some of our peers there have adjusted their production guidance down in 2024. Chinese domestic production is, of course, going a bit deeper than it has in the past. And Russian coals, even though they've come in to fill the gap have been lower quality and not as good. So, we've not really seen investment in terms of hard coking coal supply, and we think that really promises a future price increase. Thank you.

I will now hand the call back over to Jonathan Price for any closing remarks.

Yes. Thanks operator and thanks to everyone for joining us today. As we talked about we're very excited about the prospects here for 2024 and beyond. We're looking forward to the completion of the transaction with Glencore. We're looking forward to updating you then on how we intend to allocate the proceeds, including shareholder returns, and we remain very focused on the ramp-up and stability of QB and progressing and de-risking the future pipeline of projects that we have. As always, please reach out to Fraser and the IR team if you have any more detailed questions. But thank you all very much and have a good day.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.