Global Metals and Mining Conference

Global Metals and Mining
Conference
December 2, 2015
Forward Looking Information
Both these slides and the accompanying oral presentations contain certain forward-looking statements within the meaning of the United States Private
Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of the Securities Act (Ontario). Forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Teck to be
materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These forward-looking
statements include statements relating to the long-life our assets, estimated profit and estimated EBITDA, our expectation regarding market supply and
demand in the commodities we produce, our statement that we are in a strong financial position, our expected year-end cash balance, 2016 total
spending reduction expectations, capital and operating cost savings, our level of liquidity, statements regarding our credit rating, the availability of or
credit facilities and other sources of liquidity, reserve and resource life estimates, 2015 production and cost guidance, 2015 capital expenditure guidance,
our statements that we have a strong growth pipeline, potential benefits of LNG use in haul trucks, all projections for Project Corridor, statements
regarding the production and economic expectations for the Fort Hills project, including but not limited to operating and sustaining cost projections,
sustaining capital projection, free cash flow projections, estimated netback, operating margin, Alberta oil royalty, net margin, Teck’s share of go-forward
capex, mine life, Fort Hills capital cost projections, transportation capacity and our ability to secure transport for our Fort Hills production, and
management’s expectations with respect to production, demand and outlook in the markets for coal, copper, zinc and energy.
These forward-looking statements involve numerous assumptions, risks and uncertainties and actual results may vary materially, which are described in
Teck’s public filings available on SEDAR (www.sedar.com) and EDGAR (www.sec.gov). In addition, the forward-looking statements in these slides and
accompanying oral presentation are also based on assumptions, including, but not limited to, regarding general business and economic conditions, the
supply and demand for, deliveries of, and the level and volatility of prices of, zinc, copper and coal and other primary metals and minerals as well as oil,
and related products, the timing of the receipt of regulatory and governmental approvals for our development projects and other operations, our costs of
production and production and productivity levels, as well as those of our competitors, power prices, continuing availability of water and power resources
for our operations, market competition, the accuracy of our reserve estimates (including with respect to size, grade and recoverability) and the geological,
operational and price assumptions on which these are based, conditions in financial markets, the future financial performance of the company, our ability
to attract and retain skilled staff, our ability to procure equipment and operating supplies, positive results from the studies on our expansion projects, our
coal and other product inventories, our ability to secure adequate transportation for our products, our ability to obtain permits for our operations and
expansions, our ongoing relations with our employees and business partners and joint venturers. Management’s expectations of mine life are based on
the current planned production rates and assume that all resources described in this presentation are developed. Certain forward-looking statements are
based on assumptions regarding the price for Fort Hills product and the expenses for the project, as disclosed in the slides. Assumptions regarding
liquidity are based on the assumption that Teck’s current credit facilities remain fully available. Assumptions regarding our liquidity are also based on
current foreign exchange rates and assume that Teck’s 2015 guidance for production, costs and capital expenditures are met. Assumptions regarding
Fort Hills also include the assumption that project development and funding proceed as planned. Assumptions regarding our potential reserve and
resource life assume that all resources are upgraded to reserves and that all reserves and resources could be mined. The foregoing list of assumptions
is not exhaustive. Assumptions regarding the Corridor project include that the transaction closes as planned and that the project is built and operated in
accordance with the conceptual preliminary design from a preliminary economic assessment.
2
Forward Looking Information
Factors that may cause actual results to vary materially include, but are not limited to, changes in commodity and power prices, changes in market
demand for our products, changes in interest and currency exchange rates, acts of foreign governments and the outcome of legal proceedings,
inaccurate geological and metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources),
unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications or expectations, cost
escalation, unavailability of materials and equipment, government action or delays in the receipt of government approvals, industrial disturbances or
other job action, adverse weather conditions and unanticipated events related to health, safety and environmental matters), union labour disputes,
political risk, social unrest, failure of customers or counterparties to perform their contractual obligations, changes in our credit ratings, unanticipated
increases in costs to construct our development projects, difficulty in obtaining permits, inability to address concerns regarding permits of environmental
impact assessments, and changes or further deterioration in general economic conditions. We will not achieve the maximum mine lives of our projects,
or be able to mine all reserves at our projects, if we do not obtain relevant permits for our operations. Our Fort Hills project is not controlled by us and
construction and production schedules may be adjusted by our partners. The Corridor project will be jointly owned. The effect of the price of oil on
operating costs will be affected by the exchange rate between Canadian and U.S. dollars.
Statements concerning future production costs or volumes are based on numerous assumptions of management regarding operating matters and on
assumptions that demand for products develops as anticipated, that customers and other counterparties perform their contractual obligations, that
operating and capital plans will not be disrupted by issues such as mechanical failure, unavailability of parts and supplies, labour disturbances,
interruption in transportation or utilities, adverse weather conditions, and that there are no material unanticipated variations in the cost of energy or
supplies.
We assume no obligation to update forward-looking statements except as required under securities laws. Further information concerning assumptions,
risks and uncertainties associated with these forward-looking statements and our business can be found in our Annual Information Form for the year
ended December 31, 2014, filed under our profile on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov) under cover of Form 40-F.
3
Agenda
Teck Overview & Strategy
Commodity Market Observations
Teck Update
4
Long-Term Strategy
Diversification to expand opportunity set
Long life assets
Low half of the cost curve
Appropriate scale
Low risk jurisdictions
5
Attractive Portfolio of Long-Life Assets
• Headquartered in Vancouver,
Canada, with operations in the
Americas
• Strategy focused on long life assets
in stable jurisdictions
• Sustainability: Key to managing
risks and developing opportunities
Strong Resource Position1
With Sustainable Long-Life Assets
Coal Resources
~100 years
Copper Resources
~30 years
Zinc Resources
~15 years
Energy Resources
~50 years
1.
6
Reserve and resource life estimates refer to the mine life of the longest lived resource in the relevant commodity assuming production
at planned rates and in some cases development of as yet undeveloped projects. See the reserve and resource disclosure in our most
recent Annual Information Form, available on SEDAR and EDGAR, for additional detail regarding underlying assumptions.
The Value of Our Diversified Business Model
2015 Leverage to Commodities & FX1
Cash Operating Profit YTD Q3 2015
Coal
35%
Base
Metals
65%
Copper
55%
Zinc
45%
Production
Guidance2
Unit of
Change
Coal
27 Mt
US$1/tonne
$21M /$1∆
$32M /$1∆
Copper
350 kt
US$0.01/lb
$5M /$.01∆
$8M /$.01∆
Zinc
935 kt
US$0.01/lb
$8M /$.01∆
$12M /$.01∆
C$0.01
$32M /$.01∆
$52M /$.01∆
$C/$US
Estimated
Profit 3
Estimated
EBITDA3
Teck has good leverage to stronger zinc and copper
markets, and benefits from the weaker Canadian dollar
7
1. As of December 31, 2014.
2. Shows mid-point of 2015 guidance ranges at the start of the year. Current mid-point of guidance ranges are 25.5 Mt coal and
347.5 kt copper. Zinc includes 650kt of zinc in concentrate and 285kt of refined zinc.
3. Based on $1.20 CAD/USD, and budgeted commodity prices. The effect on our profit and EBITDA will vary with commodity price
and exchange rate movements, and commodity sales volumes.
Agenda
Teck Overview & Strategy
Commodity Market Observations
Teck Update
8
Steelmaking Coal Price Cycles Current Cycle Long and Deep
700%
50
547%
45
40
347%
35
300%
188%
94%
100%
14%
12%
11%
17
-17%
-18%
-26%
-55%
-73%
15
10
-300%
4
2
3
4
2
5
4
2
-500%
9
20
-12%
-25%
25
22%
21%
1%
-10%
-12%
-20%
-100%
•
•
•
30
1
5
2
2
1
1
5
2
2
1
2
5
0
Up cycles in green and down cycles in orange; plotted against duration in years on the right scale
Peak-to-trough price moves during the cycle in blue; plotted against the left axis
Up cycles tend to be longer, with higher percentage gains
Source: Wood Mackenzie, USGS, WBMS, Teck
Years
Peak to Trough Cycle % Change
500%
Steelmaking Coal Will Slowly Rebalance
US Steelmaking Coal Exports (ex. Canada)
60
Mt
50
2000-2009
average: 23 Mt
40
30
20
10
0
Looking further ahead, seaborne met. coal demand
from China will be supportive of a market rebalancing
Seaborne met. coal imports change, Mt
2010-2014
average: 55 Mt
70
Tighter Market ex-China
10
5
0
-5
-10
-15
-20
-25
China
EU
Latin
America
India
• Excess supply continues to pressure prices & margins
• US exports ~2.5 times above historical average
• Reduced imports into China, although some evidence of destocking
• Stronger fundamentals ex-China
10
Source: GTIS, CRU
JKT
Copper Price Cycles –
Current Cycle Deepest since 1920’s
400%
40
332.9%
284.4%
300%
35
30
132.5%
100%
115.3%
97.9%
91.6%
72.3%
53.8%
50.4%
45.2%
68.2%
51.0%
25
0%
-12.6%
-37.2%
-56.7%
-100%
-68.4%
-11.7%
-27.9%
-14.7%
-30.1%
-34.5%
-26.4%
-45.2%
-46.4%
20
16
15
-200%
5
-400%
9
8
-300%
6
4
4
1
11
4
2
2
2
3
4
5
4
2
5
2
2
0
-500%
•
•
•
6
5
3
10
8
7
Up cycles in green and down cycles in orange; plotted against duration in years on the right scale
Peak-to-trough price moves during the cycle in blue; plotted against the left axis
Up cycles tend to be longer, with higher percentage gains
Source: Wood Mackenzie, USGS, WBMS, Teck
Years
Peak to Trough Cycle % Change
200%
Copper Prices Rarely Trade
Deep Into the Cost Curve
Copper Price vs. Average and Marginal C1 Cost
12,000
10,000
US$/t
8,000
6,000
4,000
2,000
0
Copper price ($/t)
12
Marginal C1 cost (90%, $/t)
Source: Morgan Stanley, Wood Mackenzie
Average C1 cost (50%, $/t)
plotted to
November 18, 2015
Copper Costs Higher than Understood
Bernstein Estimated Margin After Sustaining Capex
6,000
5,000
4,000
At US$2.00
At US$2.40
3,000
4,270kt
49th Percentile
6,239kt
72nd Percentile
Margin (US$/tonne)
2,000
1,000
(1,000)
(2,000)
(3,000)
(4,000)
(5,000)
-
1,000
2,000
3,000
4,000
5,000
6,000
Cumulative Copper Production (kt)
At US$2.00 Copper
13
Source: Bernstein Research
At US$2.40 Copper
7,000
8,000
9,000
Zinc Price Cycles –
Current Cycle Longest Since 1920’s
400%
25
311%
300%
188%
125%
50% 50%
12%
42%
-25% -26%
-100%
48%
44%
26% 26% 25%
-55%
-200%
-400%
26%
11% 21% 26%
36%
9%
15
-7% -20% -14% -22%
-8% -20%
-10%
-24% -11%
-29%
-31%
-32%
-36% -21%
-41%
-51%
10
-10%
-49% -40%
116%
8%
0%
-300%
20
10
7
5
5
4
2
2 2
3
1 1
2
5
5
3
1
1
1
2
3
2 2 2
1
2
3 3
1
2 2
3
4
2
1 1
2
1 1 1
2 2
3
4
5
-500%
5
1901-1906
1906-1908
1908-1912
1912-1914
1914-1916
1916-1919
1919-1920
1920-1921
1921-1923
1923-1928
1928-1929
1929-1932
1932-1937
1937-1938
1938-1948
1948-1949
1949-1951
1951-1954
1954-1956
1956-1958
1958-1960
1960-1961
1961-1966
1966-1968
1968-1975
1975-1978
1978-1981
1981-1982
1982-1984
2000-2002
1986-1989
1989-1991
1991-1992
1992-1993
1993-1995
1995-1996
1996-1997
1997-1998
1998-2000
2000-2002
2002-2006
2006-2009
2009-2011
2011-2016
0
•
•
•
14
Up cycles in green and down cycles in orange; plotted against duration in years on the right scale
Peak-to-trough price moves during the cycle in blue; plotted against the left axis
Up cycles tend to be longer, with higher percentage gains
Source: Wood Mackenzie, USGS, WBMS, Teck
Years
Peak to Trough Cycle % Change
100%
193%
168%
200%
Zinc Market Poised for Change
120¢
1,200
1,100
1,000
900
800
700
600
500
400
110¢
100¢
US¢/lb
• Supply situation fundamentally
unchanged
90¢
80¢
70¢
60¢
• Growth in zinc demand expected
to outpace supply
50¢
Stocks
• Recent decline in demand growth
caused inventory drawdown to
slow
Price
plotted to
Nov. 18, 2015
Spot TCs vs. Realized Annual TCs
$600
$500
• Terminal markets absorbing
unreported stock flows
US$/dmt
$400
$300
$200
$100
$0
Spot
15
Source: Teck, CRU
Annual
plotted to
October 2015
thousand tonnes
LME Zinc Stocks – Since Dec 2012
Agenda
Teck Overview & Strategy
Commodity Market Observations
Teck Update
16
Responding to Difficult Market Conditions
• Further cost reductions achieved & focus on resetting our
cost base
− Gross profit1 up 5% in steelmaking coal
• ~C$1B in cash generated via two precious metal
streaming agreements
• Strong financial position, with a cash balance2 of ~$1.8B
− Exceeds the ~$1.5B of remaining Fort Hills capex
− Expect to achieve year-end cash balance of ~$1.8B3
• Further capital and operating cost reductions announced
17
1. Before depreciation and amortization.
2. As at October 21, 2015.
3. Assumes current commodity prices, C$/US$ exchange rate of 1.33 ,Teck’s 2015 guidance for production, costs and
capital expenditures., existing US$ debt levels and no unusual transactions.
Delivering Results in Cost Management
Coal unit costs1
US$64/t
Reduction of
costs1,3
US$1.44/lb
Reduction of US$0.20/lb2
18
Copper Total Cash Unit Costs1,3
(US$/tonne)
(US$/lb)
US$20/t2
Copper cash unit
1.
2.
3.
4.
Steelmaking Coal Unit Costs1
84
24%
Inventory
3
64
Transport
35
2
xx%
12%
1.64
1.44
28
Site
46
Q3 2014
Does not include deferred stripping or capital expenditures.
As compared with Q3 2014.
After by-product credits.
Includes co-product zinc production in our copper business unit.
34
Q3 2015
Q3 2014
Q3 2015
Ongoing Focus on Conserving Capital
And Lowering Operating Costs
• Achieved >$650M in sustainable cost reductions from 2012-2014, and
targeting an additional ~$100M in 2015
• Implementing additional measures:
− Cut the dividend to $0.10/share on an annualized basis
− $300M of operating cost savings
− $350M of capital spending reductions and deferrals
− Elimination of 1,000 additional positions, including senior management
− Suspension of the Coal Mountain Phase 2 project
Expect to achieve a total spending reduction of $650M in 2016
19
Strong Financial Position1
$3,000
• ~$1B in cash generated via two precious metal
streaming agreements
$2,750
$2,500
• Current cash balance1 of ~$1.8B
− Exceeds the ~$1.5B of remaining Fort Hills capex
$2,250
US$M
$2,000
$1,750
• No debt due until 2017
• Opportunities to further strengthen liquidity
$1,500
$1,250
2017
Q1: US$300M
Q3: US$300M
$1,000
$750
$500
$250
Expect to achieve year-end cash balance of ~$1.8B2
20
1. As at October 21, 2015.
2. Assumes current commodity prices, C$/US$ exchange rate of 1.31 ,Teck’s 2015 guidance for production, costs and capital
expenditures., existing US$ debt levels and no unusual transactions
2043
2042
2041
2040
2039
2038
2037
2036
2035
2034
2033
2032
2031
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
$0
Credit Facilities
Note
Amount
($M)
Commitment
Maturity
Letters of Credit
Drawn / Limit ($M)
Available
($M)
1
US 3,000
Committed
July 2020
None / US 1,000
US 3,000
2
US 1,200
Committed
June 2017
None / None
US 1,200
3
C 1,500
Uncommitted
n/a
C 1,150
C 350
C 1,150
C 5,810
Total1
• Unsecured; any borrowings rank pari passu with outstanding public notes
• Only financial covenant is debt to debt-plus-equity of <50%
• Availability not affected by commodity price changes
• No requirement to maintain a particular credit rating
Available for general corporate purposes
21
1. Assumes C$/US$ exchange rate of 1.30.
Positioned to Weather The Market Downturn
& Emerge Stronger and More Diversified
Attractive portfolio of long-life assets & resources
Good leverage to base metals markets
Attractive positions on commodity cost curves &
focus on resetting our cost base
<20 months from start of commissioning at Fort Hills
Strong cash balance, ample credit facilities &
opportunities to further strengthen liquidity
22
Additional Information
Our Sustainability Strategy
• In 2011, we launched our formal
sustainability strategy
• Organized around 6 focus areas
representing our most material
sustainability challenges
and opportunities
• Set short-term (2015) and long-term
(2030) goals and vision for each
area
• On track to achieve all of our 2015
goals this year
25
External Recognition
Best 50 Corporate
Citizens in Canada
2015
One of top 100 most
sustainable companies
in the world and one of
Canada’s most
sustainable companies
On the Dow Jones
Sustainability World Index
six years in a row
Top 50 Socially
Responsible
Corporations in
Canada
Received the PDAC
2014 Environmental
and Social
Responsibility Award
Received the Globe
Foundation Environment
Award in 2014
26
Diversified Global Customer Base
North
America
20%
China
26%
Europe
18%
Asia excl. China
33%
Latin
America
3%
Diversified Portfolio of Key Commodities
Coking coal
27
Zinc
Moly
Source: Teck; 2014 revenue
Germanium
Copper
Lead
Silver
Indium
Solid Delivery Against 2014 Guidance
Original Guidance
Actual Results
Steelmaking Coal
Coal production
26–27 Mt
Coal site costs
C$55-60 /t
Coal transportation costs
C$38-42 /t
Combined coal costs
C$93-102 /t
Combined coal costs
US$84-92 /t





26.7 Mt
Record coal production
C$54 /t1
C$38 /t
C$92 /t
US$84 /t
Copper
US$1.70-190 /lb


US$1.65 /lb
Zinc in concentrate production3
555-585 kt

660 kt
Record at Red Dog
Refined zinc production
280–290 kt
x
277 kt
Higher production 2H14
$1,905M

$1,498M
Significant capex reduction
Copper production
Copper cash unit costs2
320–340 kt
333 kt
Record thru-put at Antamina
Zinc
Capital Expenditures4
28
1.
2.
3.
4.
Including inventory adjustments.
Net of by-product credits.
Including co-product zinc production from our copper business unit.
Excluding capitalized stripping.
(1H14: 133 kt; 2H14 143 kt)
Production & Site Cost Guidance
Actual 2014
Current 2015 Guidance
Steelmaking Coal
Coal production
26.7 Mt
Coal site costs
C$54 /t1
Coal transportation costs
C$38 /t
Combined coal costs
C$92 /t
C$83-86 /t
Combined coal costs
US$84
~US$64-66 /t2
333 kt
345-350 kt
US$1.65 /lb
US$1.45-1.55 /lb
Zinc in concentrate production4
660 kt
635-665 kt
Refined zinc production
277 kt
280–290 kt
25-26 Mt
Copper
Copper production
Copper cash unit costs3
Zinc
29
1.
2.
3.
4.
Including inventory adjustments.
At $1.30 CAD/USD.
Net of by-product credits.
Including co-product zinc production from our copper business unit.
Current 2015 Capital Expenditures Guidance
($M)
Major
Enhancement
Sustaining
New Mine
Development
Coal
$75
$30
Copper
200
Zinc
Sub-total
Total
-
$105
$395
$500
15
105
320
225
545
180
-
-
180
60
240
-
-
910
910
-
910
10
-
-
10
-
10
TOTAL
$465
$45
$1,015
$1,525
$680
$2,205
2014A
$511
$165
$822
$1,498
$715
$2,213
Energy
Corporate
$
Capitalized
Stripping
Total capex of ~$1.5B, plus capitalized stripping
30
Delivering Results in Cost Management
Steelmaking Coal Total Site Costs1
Copper Cash Costs3
C$/t
2.50
90
80
70
60
50
40
30
20
10
0
US$/lb
2.00
1.50
1.00
0.50
0.00
2012
2013
2
Operating
2014
YTD Q3
2015
2012
2013
2014 YTD Q3
2015
Before by-product credits
Capitalized Stripping
After by-product credits
Achieved significant unit cost reductions,
and expect further reductions in 2015
31
1. Total site costs included site costs expensed, inventory write-downs and capitalized stripping, excluding depreciation.
2. Operating costs are site costs and inventory write-downs.
3. By-product credits currently reduce cash costs by ~US$0.25/lb.
Staged Growth Pipeline
Completed
In Construction
Pre-Sanction
Copper
Strong platform
with substantial
growth options
HVC Mill Optimization
QB Phase 2
Growth Options
Relincho
Galore/Schaft Creek
Mesaba
Zafranal
HVC/Antamina Brownfield
San Nicolas (Cu-Zn)
Zinc
World-class resource
combined with
integrated assets
Trail Acid Plant
Red Dog Satellite
Orebodies
Pend Oreille Restart
Cirque
Coal
Well established
with capital efficient
growth options
Quintette/Mt. Duke
Elk Valley Brownfield
(4 Mpta)
Elk Valley Brownfield
(up to 10 Mpta)
Energy
Building a new
business through
partnership
32
Frontier
Fort Hills
Lease 421
Strong platform combined with diverse portfolio of options
allows us to be selective in terms of commodity and timing
Collective Agreements
Operation
Coal Mountain
Antamina
Elkview
Fording River
Highland Valley Copper
Trail
Cardinal River
Quebrada Blanca
Quintette
Line Creek
Carmen de Andacollo
33
Expiry Dates
In Negotiations - December 31, 2014
In Negotiations - July 23, 2015
In Negotiations - October 31, 2015
April 30, 2016
September 30, 2016
May 31, 2017
June 30, 2017
October 30, 2017
November 30, 2017
January 31, 2018
April 30, 2018
May 31, 2019
September 30, 2019
December 31, 2019
Commodity Prices Impact Stock Price
Teck Stock Price vs. Bloomberg Commodity Price Index (2000-present)
$70
260
240
$60
220
$50
200
180
$40
160
$30
140
$20
120
$10
100
$0
80
Bloomberg Commodity Index (Left Axis)
34
Teck (Right Axis)
Plotted to November 9 ,2015
Steelmaking Coal
Business Unit & Markets
Met Coal Market Slowly Rebalancing;
FX Assisting Producers Outside USA
Coal Prices By Currency
Argus FOB Australia
150
• ~50 Mt cutbacks announced with
over 50% expected to be
implemented by the end of 2015
• US coal production high end of cost
curve and no currency benefit
130
$ / tonne
• Require additional cutbacks to
achieve market balance
140
120
110
AUS$
100
90
80
CDN$
US$
70
plotted to
November 19, 2015
Stronger US dollar favours producers outside of the US
36
Source: Argus, Bank of Canada
Global Hot Metal Production
Monthly Hot Metal Production
Traditional Steel Markets
• China slowing
• JKT overall stable
75
65
55
45
China
15
• EU stable
JKT
Mt
12
Rest of the World
9
• India good growth
6
Europe
India
• Brazil good growth
3
USA
• US slowing
Brazil
Update to Sep 2015
37
Source: WSA, based on data reported by countries monthly; NBS
Sep-15
Jun-15
Mar-15
Dec-14
Jun-14
Sep-14
Mar-14
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Jun-11
Sep-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
0
Crude Steel Production Continues to Grow
Crude Steel
Production (Mt)
2014
2015 Sep YTD
annualized
Global*
1,647 (+1.2% YoY)
1,621 (-1.6% YoY)
China
823 (+0.9% YoY)
814 (-1.0% YoY)
Global, ex-China*
825 (+1.5% YoY)
807 (-2.2% YoY)
JKT
205 (+3% YoY)
197 (-3.8% YoY)
Europe
208 (+1.3% YoY)
205 (-1.4% YoY)
India
83 (+2.3% YoY)
90 (+8.6% YoY)
* Global production includes production only for the countries which report
on monthly basis
Crude steel production to grow at
~1-2% CAGR between 2014 and 2019
Ex-China seaborne demand for
steelmaking coal is forecasted to increase
by ~2% CAGR in the same period
38
Source: WSA, NBS, Wood Mackenzie, CRU
1. Europe includes 12 countries.
Crude Steel Production 2014-2019
Production Cuts Offset by China’s Imports
US Steelmaking Coal Exports
35
30
Mt
• Minimal export growth from Australia
while others pull back
- Australian and Canadian imports to
Europe pushing out US supplies
- Exports to China reduced from all 3
supply areas
25
20
Sep-14
YTD
• China seaborne imports offset production
curtailments
EU & CIS
China
S.America
India
JKT
Others
Sep-15
YTD
Canada Steelmaking Coal Exports
26
24
22
Mt
Sep YTD 2015 Growth: Seaborne Steelmaking Coal
Exports vs. China Seaborne Imports
20
18
16
4
14
2.1
Sep-14
YTD
2
0
JKT
India
EU & CIS
Others
Sep-15
YTD
145
-2.5
-4
Mt
Mt
S.America
Australian Steelmaking Coal Exports
-2
-6
-8
China
-6.6
-6.6
USA
Canada
Australia
140
135
China
130
39
Source: GTIS; T.Parker
Sep-14
YTD
India
EU & CIS S.America Others
JKT
China
Sep-15
YTD
Steelmaking Coal Market Curtailments
Cumulative Production Curtailments
Curtailments Production Curtailments
By Region
60
Mt
0
10
20
30
50
Australia
Mt
40
USA
30
Canada
20
10
New
Zealand
0
Others
Period Cuts/Guidance Adj
2014
2015
2016
2017
2018+
Sustaining Cuts
• ~50 Mt cutbacks announced with over 50% expected to be implemented
by the end of 2015
• Require additional cutbacks to achieve market balance
• Low prices also impacting major players
• US coal production high end of cost curve and no currency benefit
40
Source: Teck estimates based on public announcements
* Production cuts are total market curtailments including sustaining cuts (mine idlings) and period cuts (guidance reductions).
900
800
700
600
500
400
300
200
100
0
70%
65%
60%
Heilongjiang
Ansteel Baiyunquan Project
• Phase 1 (~ 5.4 Mt pig iron, 5.2 Mt crude
steel and 5 Mt steel products) in 2013.
Jilin
• Phase 2 (5.4 Mt BF) planned but no
progress yet.
Laioning
55%
Xinjiang
50%
45%
Inner Mongolia
40%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Million tonnes
Chinese Steel Industry Moving to the Coast
Total
Coastal
Coastal %
Beijing
Qinghai
Gansu
Baosteel Zhanjiang Project
• Coke ovens for BF #1 commissioned in July 2015.
• BF #1 will be commissioned as scheduled in September this
year.
Shanxi
Shaanxi
Tibet
WISCO Fangchenggang Project
• Major infrastructure in place. WISCO Fangchenggang Steel
Company established in Sep to wholly manage the project.
• Cold roll line to be commissioned in H1 2015. Other lines are
scheduled to start successively within the year.
• Blast furnaces (BFs) in the originally approved plan. Billet
rolling line only at this time. No timeline for BFs currently.
• Targeting 5 Mt steel products in 2016 and 10 Mt in 2017.
Hebei
Ningxia
Qinghai
Sichuan
Sichuan
Shandong
Henan
Anhui
Hubei
Zhejiang
Hunan
Jiangxi
Fujian
Guizhou
Yunnan
Guangxi
Jiangsu
Guandong
Capital Steel Caofeidian Project
• Planned 20 Mtpa steel capacity.
• Phase 1 (10 Mt) completed in 2010.
• Phase 2, planned with the investment of ~
US$7 billion, is kicked off soon in late Aug
and scheduled to be completed by 2018.
Capacity: hot metal 8.9Mt, crude steel
9.4Mt, steel products 9.0Mt.
Shandong Steel Rizhao Project
• Planned 21.35 Mt crude steel.
• Phase 1 (8.5 Mt) approved in Feb 2013
• Construction started in Sep 2014 and
scheduled to commission by the end of
2016.
Ningde Steel Base
• Proposed but no progress yet.
Relocation to China’s coastline facilitates access to seaborne raw materials
41
Sources: NBS, CISA
China Met Coal Still Struggling
Government support for domestic coal producers
• Import tax increase (Australia exempt under FTA)
• Export tax reduction
- Not large enough to stimulate exports
• Resource tax reform
- Higher rates in larger coal producing provinces
• Overall, changes not meaningfully supportive
Shanxi logistics improving
• Improved road transport efficiency (eliminating inspections)
• Extra-provincial trade fees cancelled
• Improved rail transportation capacity
China’s supportive actions are
preventing a meaningful price recovery
42
China Met Coal Still Struggling (cont.)
• Chinese coal companies are in heavy debt, with asset liability ratio now at 67%
vs. <60% in 2010-2012
• Coal mines successfully lowered costs relative to 2014 by cutting wages, raising
productivity, and improving product quality, but further reductions unlikely
• The Government is accelerating elimination of small mines (capacity <90 kt/a)
o Little impact on coal supply short term, as small mines account for <10% of China’s
total coal capacity.
• One KSOE met coal producer in northeastern China closed eight mines in June
2015 due to high cost and resource depletion
Chinese met coal production cuts progressing slowly,
but heading in the right direction
43
We Are a Leading Steelmaking Coal Supplier
To Steel Producers Worldwide
High quality, consistency, reliability, long-term supply
Asia excl. China
~50%
China
~25%
North
America
~5%
Europe
~15%
Latin
America
~5%
Proactively realigning sales with changing market
44
Source: Teck; 2014
Average Realized Price in Steelmaking Coal
Historical Average Realized Prices
88%
350
Discount to the benchmark price
is a function of:
300
96%
93%
250
1. Product mix: >90% hard coking coal
- Q4 2015 benchmark for
premium products is US$89/t
92%
200
US$ / tonne
2. Direction of quarterly benchmark
prices and spot prices
94%
YTD
91%
150
100
50
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
0
Teck Realized Price (US$)
Benchmark Price
Average realized price discount: ~8-9%
Average realized % of benchmark: 91-92% (range: 88%-96%)
45
Teck Response to Coal Market Conditions
Quarterly Benchmark vs. Argus Spot Price
• Temporary closures in Q3 2015 of ~3
weeks at all 6 mines to align production
and inventories with market conditions
350
325
300
275
• Annual cost guidance lowered
• Capitalized stripping guidance reduced
$ / tonne
• Quarterly production reduced ~1.5 Mt
250
225
200
175
150
• Continuing to meet all contracted and
committed coal sales for our entire suite
of products
125
100
Disciplined approach to managing production to market conditions and
cost focus to ensure our mines are well-positioned when markets improve
46
Steelmaking Coal Costs
Total Cash Cost YTD Q3 2015 vs. 2014
120
106
2014
100
US$/t
78
US$/t
80
(C$1.10
/ US$)
Site1
60
40
$50
$36
35
$28
Transportation
IFRS
Costs
IFRS Total
$85
$64
Capitalized Stripping
$15
$12
$100
$76
Sustaining Capex
$6
$2
Total Cash Cost
$106
$78
Full Cash Cost
0
2014
Site Costs
Inventory Write-Down
Sustaining Capital
YTD Q3 2015
Transportation
Capitalized Stripping
Teck costs lower than most major competitors
1.
(C$1.26
/ US$)
a
20
47
YTD
Q3 2015
Includes inventory write-downs.
Significant Long-Term Coal Growth Potential
Potential Production Increase Scenarios
Teck’s large resource base
supports several options for
growth:
• Brownfields expansions
- Elkview expansion
- Fording River expansion
- Greenhills expansion
• Capital efficiency and operating
cost improvements will be key
drivers
40
Production (Mt)
• Quintette restart (up to 4 Mtpa)
fully permitted
50
30
20
10
-
Time Conceptual
FRO
GHO
CMO
EVO
CRO
QCO
28 Mt
40 Mt
Potential to grow production when market conditions are favourable
48
LCO
>75 Mt of West Coast Port Capacity Planned
Teck Portion at 40 Mt
Westshore Terminals
West Coast Port Capacity
• Teck is largest customer at 19 Mt
• Large stockpile area
40
• Recently expanded to 33 Mt
35
• Planned growth to 36 Mt
3
Neptune Coal Terminal
• Exclusive to Teck
• Recently expanded to 12.5 Mt
• Planned growth to 18.5 Mt
Million Tonnes (Nominal)
30
25
7
20
15
33
6
10
Ridley Terminals
5
18
12.5
• Current capacity: 18 Mt
• Expandable to 25 Mt
• Teck contracted at 3 Mt
0
Neptune Coal
Terminal
Ridley
Terminals
Current Capacity
Teck’s share of capacity exceeds current
production plans, including Quintette
49
Westshore
Terminals
Planned Growth
LNG for Haul Trucks Project
• Pilot project underway to evaluate running Teck haul trucks on a blend
of diesel and LNG
- Starting in 2015
• Has the potential to reduce our haul truck fleet fuel bill by $27M
annually and lower our CO2 emissions by 35,000 tonnes per year
Comparison of Emissions
$1.20
100%
$1.00
80%
% of Diesel Emissions
Price per Liter
Comparison of Fuel Cost
$0.80
$0.60
$0.40
$0.20
LNG / Diesel Liter
50
40%
20%
0%
$Gas Cost
60%
Liquifaction
Carbon Tax
Diesel / Liter
Delivery
Diesel
CO2
NOx
Diesel
Particulate
Natural Gas
SOx
Coking Coal Strength
High Quality Hard Coking Coal
U.S.A.
Canada Other
Teck HCC
Australia
Japan
South Africa
80
70
• Around the world, and
especially in China, blast
furnaces are getting larger
and increasing PCI rates
Australia
(hard coking)
and Canada
Teck HCC
60
Japan
(Yubarl)
U.S.A.
CSR
50
Australia
(soft coking)
40
• Teck coals with high hot and
cold strength are ideally suited
to ensure stable blast furnace
operation
30
Japan (Sorachl)
20
South Africa
10
50
51
60
70
Drum Strength Dl
30
80
(%)
• Coke requirements for stable
blast furnace operation are
becoming increasingly higher
90
100
• Produce some of the highest
hot strengths in the world
Copper
Business Unit & Markets
Base Metal Stocks Low on Days Consumption
53
Source: LME, ICSG, ILZSG
* Charts as of November 19, 2015.
Historic Copper Metal Prices & Stocks
Daily Copper Prices & Stocks
500¢
1400
450¢
1200
1000
US¢/lb
350¢
300¢
800
250¢
600
200¢
150¢
400
100¢
200
50¢
0¢
2003
0
2004
2005
2006
2007
LME Stocks
54
Source: LME, ICSG, ILZSG
2008
2009
Comex
2010
2011
SHFE
2012
Price
2013
2014
2015
plotted to
Nov. 18, 2015
thousand tonnes
400¢
Copper Mine Production
Forecasts Continue to Decline
2015
2016
Down 584,000 tonnes from February
2013 estimates
55
Source: Wood Mackenzie
•
•
Oct-15
Aug-15
Jun-15
Apr-15
Feb-15
Dec-14
15,500
thousand tonnes contained copper
16,000
Oct-14
15,000
16,500
Aug-14
15,500
17,000
Jun-14
16,000
17,500
Apr-14
16,500
thousand tonnes contained copper
18,000
17,000
2015 Adjusted
Market Adjustment
5% Disruption
•
18,500
18,500
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Nov-14
Feb-15
May-15
Aug-15
thousand tonnes contained copper
17,500
2017
18,000
17,500
17,000
16,500
16,000
5% Disruption & Projects
5% Disruption net of Projects
Market Adjustment
Market Adjustment
2016 Adjusted
2017 Adjusted
Down 1,044 kt from April 2014 estimates
New project production down by 55%
•
•
Down 544 kt from April 2015 estimates
New project production down by 22%
Disruptions Continue in Copper
Significant Copper Mine Production Disruptions
2015
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD
Copper Concentrate TC/RC
60¢
0
50¢
-100
Thousand tonnes
-200
40¢
-300
-400
30¢
-500
-600
-584
-700
20¢
-800
-776
-851
-859
-900
-1,000
-950
plotted to
October 2015
56
Source: Teck, CRU
-839
-945
-831
-973
-968
-1,011
10¢
0¢
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Standard Spot
Realised TC/RC
High Grade Spot
plotted to
October 2015
Ore Grade Trends
Ongoing decline will put upward pressure on unit costs
57
Source: Wood Mackenzie
Margin Compression at Its Lowest Point
Worse than During the Global Financial Crisis
58
Source: Wood Mackenzie
Wood Mac Still Forecasting Demand Growth
59
Chinese Copper Imports
Switch from Cathode to Concentrates
Net Copper Imports Down 9% in Q1 2015; YTD Now Equivalent to 2014
1,000
000’s tonnes (content)
900
800
700
600
500
400
300
200
100
0
2004
2005
2006
2007
2008
Cathode
60
Source: NBS
2009
Concs
2010
Scrap
2011
Blister/Semis
2012
2013
2014
2015
Updated to
September 2015
Significant Chinese Copper Demand Remains
Annual Growth Rate of Chinese Copper
Consumption to Slow Dramatically…
30%
25%
…But Will Add Significantly
in Additional Tonnage Terms
1,400
Annual Avg.
11.9%
1,200
Annual Avg. Growth
400 Mt/yr
1,000
Thousand tonnes
20%
15%
10%
Annual Avg.
3.3%
800
Annual Avg. Growth
356 Mt/yr
600
400
5%
200
0%
1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030
1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030
China expected to add almost as much to global demand
in the next 15 years as the past 25 years
61
Source: CRU, Wood Mackenzie, Teck
Chinese Copper Demand Indicators
Mostly Negative – But Some Bright Spots
China Floor Space Under Construction Down &
Sales Up, as Lower Interest Rates Take Effect
60,000
100
50,000
80
60
40,000
%, YoY
RMB mn
China Power Grid Spending Down on
Anti Corruption Campaign – Starting to Improve
30,000
20,000
-20
0
2010
-40
2011
2012
2013
2014
2009
2015
Thousand Units
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2009
2010
2011
Production
2012
Sales
2013
2014
2010
2011
2012
2013
2014
Area under construction
Sales
2015
China Auto Manufacturing Slows
Due to Slower Economy and High Sales in 2014
ousa ds
China Air Conditioner Inventory
Drawing Down & Sales Improving
Thousand Units
20
0
10,000
62
40
2015
2,500
2,000
1,500
1,000
500
0
2009
2010
2011
Inventory
Source: China Electricity Council, NBS, China IOL, China Association of Automobile Manufacturers
* Data to August 2015
2012
2013
2014
2015
Global Copper Cathode Balances
Wood Mackenzie’s Outlook is Trending Down
900
900
Surplus only 2% of
Global Demand
800
800
700
600
600
‘000s tonnes copper
700
500
400
300
200
400
300
200
Source: Wood Mackenzie
Sep-15
Jul-15
May-15
Mar-15
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
Sep-13
Jul-13
0
May-13
0
Jan-13
100
63
Surplus only 0.9% of
Global Demand
500
100
Mar-13
‘000s tonnes copper
Wood Mackenzie 2016F Refined Surplus
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Wood Mackenzie 2015F Refined Surplus
Long-Term Copper Mine Production Still Needed
Forecast Copper Refined Balance
1,000
500
• Structural deficit starts in 2018
• Project developments slowed due to
lower prices, higher capex, corporate
austerity, permitting & availability of
financing
0
Thousand tonnes
• At 2% global demand growth, 400 kt
of new supply needed annually
(500)
(1,000)
(1,500)
(2,000)
(2,500)
(3,000)
2012 2013 2014 2015 2016 2017 2018 2019 2020
64
Source: WM, CRU, ICSG, Teck
Building Partnerships: Corridor Project
Teck and Goldcorp have combined Relincho
and El Morro projects and formed a 50/50
joint venture company
• Committed to building strong, mutually
beneficial relationships with
stakeholders and communities
Capital smart partnership
• Shared capital, common infrastructure
• Shared risk, shared rewards
Benefits of combining projects include:
• Longer mine life
• Lower cost, improved capital efficiency
• Reduced environmental footprint
• Enhanced community benefits
• Greater returns over either standalone
project
65
Corridor Project Summary
Initial Capital
Copper Production1
Gold Production1
$3.0 - $3.5
190,000
315,000
billion
tonnes per year
ounces per year
Mine Life
Copper in Reserves2
Gold in Reserves2
32+
16.6
8.9
years
billion pounds
million ounces
66
Note: Conceptual based on preliminary design from the PEA
1. Average production rates are based on the first full ten years of operations
2. Total copper and gold contained in mineral reserves as reported separately by Teck and Goldcorp; refer to Appendix A in Additional Information.
3. Capital estimate for Phase 1a based on preliminary design shown in 2015 dollars on an unescalated basis
Before Project Corridor – Duplicate infrastructure
Pipelines
Power Line
Port
Pipelines:
Water &
Concentrate
Desalination
Tailings
Port
Desalination
El Morro
Site
Power
Tailings
Power
Pipelines:
Water Relincho
Site
Mine and Mill
Mine and Mill
67
Source: “Project Location.” -28.395839, -70.486738, 4679ft. Google Earth.
February 8, 2015. April 23, 2015.
Project Corridor – Common infrastructure
Pipeline
Power Line
Conveyor & Utilities
Road
Desalination
Tailings
Port
Power
Pipelines:
Water
Mine and Mill
Conveyor & Utilities
Mine
68
Source: “Project Location.” -28.395839, -70.486738, 4679ft. Google Earth.
February 8, 2015. April 23, 2015.
Copper Development Projects in the
Americas
Corridor is one of the largest open pit copper development projects in the Americas on
the basis of copper contained in Proven and Probable Reserves
Copper Equivalent in Reserves (Mlbs)
25,000
Copper-equivalent contained in Reserves (Mlbs)
(North & South American Copper Projects)
20,000
15,000
10,000
5,000
69
Rio Blanco
Galore Creek
Schaft Creek
Casino
El Morro
Relincho
Agua Rica
Quellaveco
Quebrada
Blanca II
El Arco
Corridor
Radomiro
Tomic
-
Note: Copper equivalent reserves calculated using $3.25/lb Cu and $1,200/oz Au. Does not include copper resource projects that are
currently in construction
Source: SNL Metals & Mining, Thomson One Analytics, and company disclosures.
Capital Smart – Phased Development
Phased Development
Phase 1a
Phase 1b
Phase 2
Initial Production of Relincho ores
Transition to El Morro ores
Transition to Relincho ores
• Low cost to first ore;
high grade, low strip
starter pit
• Initial mill throughput
of ~90 ktpd
• Transition to higher
grade El Morro ore
• Mill throughput of ~110
ktpd due to softer ore
• Option to blend ores
and expand throughput
• Transition back to
Relincho ore once El
Morro is depleted
• Potential expansion to
a mill throughput of
175 ktpd
Phase 1 development concept is a single line mill (90 -110 ktpd)
which produces higher metal production than either standalone project
Average production of 190,000 tonnes copper and 315,000 ounces gold
per year over first 10 years of operation
70
Note: Conceptual based on preliminary design from the PEA
Corridor Project
Appendix A: Reserve and Resource Disclosure
The following mineral reserve and resource information is as at December 31, 2014. All mineral resources disclosed below are reported
exclusive of mineral reserves.
El Morro — Reserves (100% basis) (1)(3)(5)
El Morro — Resources (100% basis)(1)(2)(4)(5)
Category
Proven
Probable
Proven + Probable
Category
Measured
Indicated
Inferred
Tonnes (millions)
Gold (g/t)
321.81
277.24
599.05
0.56
0.35
0.46
Tonnes (millions)
Gold (g/t)
19.79
72.56
678.07
0.53
0.38
0.30
Grade
Copper (%)
0.55
0.43
0.49
Grade
Copper (%)
0.51
0.39
0.35
Gold (millions of
ounces)
5.82
3.10
8.92
Contained Metal
Copper (millions of pounds)
3,876.59
2,626.36
6,502.95
Contained Metal
Gold (millions of ounces) Copper (millions of pounds)
0.34
0.88
6.45
223.33
630.00
5190.00
Notes:
1) All Mineral Reserves and Mineral Resources have been estimated in accordance with the CIM Definition Standards.
2) Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.
3) Goldcorp has estimated El Morro mineral reserves assuming commodity prices of US$1,300 per ounce of gold and US$3.00 per pound of
copper.
4) El Morro’s mineral resources are estimated using commodity prices of US$1,500 per ounce of gold and US$3.50 per pound of copper.
5) The mineral reserves and mineral resources are reported at a 0.2% Copper equivalent cut-off grade, with 67.3% gold recovery and 86.6%
copper recovery.
71
Corridor Project
Appendix A: Reserve and Resource Disclosure
The following mineral reserve and resource information is as at December 31, 2014. All mineral resources disclosed below are reported
exclusive of mineral reserves.
Relincho — Reserves (1)(2)(3)
Relincho — Resources (1)(2)(3)(4)(5)
Category
Tonnes (millions)
Copper (%)
Proven
Probable
Proven + Probable
435.30
803.80
1,239.10
0.38
0.37
0.37
Category
Tonnes (millions)
Copper (%)
Measured
Indicated
Inferred
79.90
317.10
610.80
0.27
0.34
0.38
Grade
Molybdenum (%)
0.016
0.018
0.017
Grade
Molybdenum (%)
0.009
0.012
0.013
Copper (millions of
pounds)
3,646.75
6,556.70
10,106.65
Copper (millions of
pounds)
475.60
2,376.89
5,117.02
Contained Metal
Molybdenum (millions of
pounds)
153.55
318.97
464.36
Contained Metal
Molybdenum (millions of
pounds)
15.85
83.89
175.06
Notes:
1) All Mineral Reserves and Mineral Resources have been estimated in accordance with the CIM Definition Standards.
2) Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability.
3) Teck has estimated Relincho mineral reserves and resources assuming commodity prices of US$2.80 per pound of copper and US$13.70
per pound of molybdenum.
4) Mineral resources are reported separately from, and do not include that portion of the mineral resources reported as reserves.
5) Mineral Resources are contained within a conceptual ultimate pit shell defined with Measured, Indicated and Inferred blocks using the
same economic and technical parameters as used for mineral reserves and are reported considering a variable cut-off grade based on a
marginal value of US$5.59/t.
72
Corridor Project
Appendix A: Reserve and Resource Disclosure Cont’d
These tables use the terms “Measured”, “Indicated” and “Inferred” Resources. United States investors are advised that while such
terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not
recognize them. “Inferred Mineral Resources” have a great amount of uncertainty as to their existence, and as to their economic and
legal feasibility. A significant amount of exploration must be completed in order to determine whether an Inferred Mineral Resource
may be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of
feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of Measured or
Indicated Mineral Resources will ever be converted into Mineral Reserves. United States investors are also cautioned not to assume
that all or any part of an Inferred Mineral Resource exists, or is economically or legally mineable.
The projected mine life of the combined project from the PEA is based on mineral reserves only and does not include other mineral
resources. The financial analysis under the PEA of Project Corridor assumed commodity prices of US$1,200 per ounce of gold,
US$3.25 per pound of copper and US$10.00 per pound of molybdenum. The projected mine life of the combined project and other
results of the PEA disclosed in this news release have been reviewed and approved by Gil Lawson, P.Eng., Vice President of Geology
and Mine Planning, Goldcorp and Rodrigo Marinho, P.Geo., Technical Director, Reserve Evaluation, Teck, each of whom is a qualified
person as defined under NI 43-101.
73
Zinc
Business Unit & Markets
Historic Zinc Metal Prices & Stocks
Daily Zinc Prices & Stocks
250¢
1,800
1,600
200¢
US¢/lb
1,200
150¢
1,000
800
100¢
600
400
50¢
200
0¢
2003
2004
2005
2006
2007
2008
LME
75
Source: LME, SHFE
2009
2010
SHFE
2011
Price
2012
2013
0
2015
plotted to
November 19, 2015
2014
thousand tonnes
1,400
Zinc Mine Production
Undersupplied, Even With Lower Growth
120¢
• Metal market in deficit
1,200
1,100
1,000
900
800
700
600
500
400
110¢
• LME stocks down >700 kt over 27
months; sub-500 kt recently for the
first time since 2010
US¢/lb
100¢
90¢
80¢
70¢
60¢
50¢
• ‘Off-market’ inventory position to work
down also
• Large periodic increases indicate
significant off-market inventories
flowing through the LME to
consumers
• Chinese zinc mine production is down
in the last 27 months
Stocks
Price
plotted to
Nov. 18, 2015
Monthly Chinese Zinc Mine Production
600
6,000
500
5,000
400
4,000
300
3,000
200
2,000
100
1,000
0
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013
76
Source: LME, NBS, CNIA
thousand tonnes
LME Zinc Stocks
2014
2015
plotted to
September, 2015
Zinc Mine Production
Wood Mackenzie’s Outlook is Trending Down
2016
15,000
14,500
14,500
14,500
14,000
13,500
13,000
12,500
77
Source: Wood Mackenzie
13,500
13,000
12,500
12,000
Feb-13
May-13
Aug-13
Nov-13
Feb-14
May-14
Aug-14
Nov-14
Feb-15
May-15
Aug-15
Down 719 kt from October 2014
estimates
14,000
thousand tonnes contained zinc
15,000
12,000
•
2017
15,000
thousand tonnes contained zinc
thousand tonnes contained zinc
2015
•
Down 958 kt from October 2014
estimates
14,000
13,500
13,000
12,500
12,000
•
•
Down 446 kt from April 2015 estimates
New project production down by 22%
-200
400
-300
300
-400
200
-500
100
78
2013-2020
-100
Source: ICSG, Wood Mackenzie Teck, Company Reports
Gamsberg
McArthur River
Dugald River
Antamina
Bisha
Sindesar Khurd
Shalkiya Restart
Kyzyl-Tashtygskoe
Aguas Tenidas
Wenshan Dulong
Penasquito
Zawar Mines
San Cristobal
Sanguikou
Taifeng
Duddar
Santander
Garpenberg
Caribou Reactivation
Perseverance
Cayeli
Endeavor
Brunswick
Pomorzany-Olkusz (incl Bulk)
Red Dog
Rosebery
Skorpion
Lisheen
Tara
Rampura Agucha
Century
Significant Zinc Mine Reductions
Large Short-Term Losses, More Long Term
2013-2020
0
500
0
Zinc Inventories Declining
LME Zinc Stocks – Since Dec 2012
120¢
250¢
110¢
1,200
200¢
100¢
600
400
50¢
Stocks
Price
900
800
80¢
700
70¢
600
200
60¢
500
0
50¢
400
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
0¢
1,000
90¢
US¢/lb
800
thousand tonnes
150¢
1,100
100¢
1,000
US¢/lb
1,200
1,400
plotted to
Nov. 18, 2015
Stocks
Price
plotted to
Nov. 18, 2015
• LME stocks down ~730 kt over 24 months
• Large inventory position still to work down but we were recently under 500kt for the
first time since early 2010
• Large, sudden increases indicate there are also significant off-market inventories
flowing through the LME to consumers
79
Source: LME
thousand tonnes
LME Zinc Stocks - 11 Years
Zinc Cost Curve
Wood Mackenzie Zinc Cost League 2015, With
Teck Estimates for Some Uncosted Chinese Mines
(12.3 Mt of 13.3 Mt estimated)
180
180
160
160
140
140
120
120
Cents/lb
Cents /lb
Wood Mackenzie Zinc Cost League 2015
(8.6 Mt of 13.3 Mt market estimated)
100
Zinc LME Price Nov. 18, 2015
80
100
60
60
40
40
20
20
0
0
0%
80
Zinc LME Price –
Nov. 18, 2015
80
20%
40%
Source: Wood Mackenzie
60%
80%
100%
0%
20%
40%
60%
80%
100%
Zinc Concentrate Balances
Wood Mackenzie’s 2015 and 2015 Outlooks Trending Down
2015
2016
2017
400
400
400
300
200
100
0
(100)
thousand tonnes contained zinc
thousand tonnes contained zinc
thousand tonnes contained zinc
300
200
0
(200)
(400)
(600)
(200)
200
100
0
(100)
(200)
(300)
(400)
Down 108 kt from October 2014
estimates, taking the market from
surplus into a deficit of 197 kt
81
Source: Wood Mackenzie
•
Sep-15
Jul-15
May-15
Mar-15
Jan-15
Nov-14
Sep-14
Aug-15
Feb-15
May-15
Nov-14
Aug-14
Feb-14
May-14
Nov-13
Aug-13
Feb-13
•
May-13
(300)
Jul-14
May-14
(800)
Down 314 kt from October 2014
estimates, taking the market further into
deficit of 639 kt
(500)
•
•
Up 273 kt from April 2015 estimates
Wood Mackenzie expects 300 kt of
projects will come online in 2017 due to
higher prices
Zinc Metal Market Mostly in Deficit Since 2013
Zinc Metal Balance
Market View – Wood Mackenzie & CRU
400
• Zinc metal deficit forecasted for 2016
and 2017
200
0
• Mine production increases of 5.8% and
4.5% respectively expected for 2016 and
2017, as higher prices bring a large
amount of Chinese mine production
online and Glencore brings production
back in 2017
-200
-400
-600
-800
2013
2014
WoodMac
82
2015
CRU
Source: Wood Mackenzie, CRU
2016
2017
• Deficits of almost 500kt/year in 2016 and
2017 will still result in large draw down of
stocks
Chinese Zinc Demand to Outpace Supply
China Zinc Demand 2014
Galvanized Steel as % Crude Production
20%
Other
5%
USA
19%
18%
16%
Construction
15%
Infrastructure
30%
14%
12%
10%
Transportation
20%
8%
6%
Consumer Goods
30%
4%
China
6%
2%
0%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
If China were to galvanize crude steel at half the rate of the US using the same rate of
zinc/tonne, a further 2.1 Mt would be added to global zinc consumption
83
Source: Teck
Imports Affecting US Refined Zinc Demand
Galvanized Sheet US Imports
450
• Cheaper imports of HDG have subdued
demand growth for zinc in the US
400
350
• US Sheet Mills filed a petition with the
Department of Commerce in June 2015
Thousand tonnes
300
250
• Demand for refined zinc seems to be
picking up going in 2H 2015
200
150
• Premiums have decreased due to the large
amount of metal stocks available and lower
US demand
100
50
0
Europe
84
Asia
Source: GTIS
China
North America
Others
Refined Zinc Balances
Wood Mackenzie’s Outlook is Trending Down
2016
•
(50)
(50)
(350)
(250)
(300)
(200)
(250)
(300)
(350)
Deficit reduced by 256 kt from October
2014 estimates, to 161 kt
•
•
85
Source: Wood Mackenzie
Down increased by 29 kt from October
2014 estimates, to 309 kt
Increase due to production cuts,
resulting in insufficient concentrate
available to smelters and less refined
production in 2016.
(400)
Apr-15
Sep-15
Jul-15
May-15
Mar-15
Jan-15
Nov-14
Sep-14
Jul-14
May-14
Aug-15
May-15
Feb-15
Nov-14
(500)
Aug-14
(450)
Feb-14
(500)
May-14
(450)
Nov-13
(400)
Aug-13
(450)
May-13
(400)
(350)
•
Oct-15
(300)
(200)
(150)
Sep-15
(250)
(150)
Aug-15
thousand tonnes
(200)
(100)
Jul-15
(100)
(150)
Feb-13
thousand tonnes
(100)
0
Jun-15
(50)
0
thousand tonnes contained zinc
0
2017
May-15
2015
Deficit increased significantly by 205 kt
from April 2015 estimates, to 429 kt
Committed Supply Insufficient for Demand
Forecast Zinc Refined Balance
500
•
We expect insufficient mine supply to
constrain refined production, allowing
a refined metal supply increases of
only 94 kt between 2014 and 2020
•
Over this same period we expect
refined demand to increase 2.5 Mt
tonnes
•
Market in deficit since 2014, but large
inventory has funded the deficit
•
Metal market moving into significant
deficit with further mine closures and
inventories are depleting
Thousand tonnes
0
(500)
(1,000)
(1,500)
(2,000)
(2,500)
2013 2014 2015 2016 2017 2018 2019 2020
86
Source: Teck
Energy
Business Unit & Markets
Global Oil Market to Rebalance
West Texas Intermediate (WTI) Price
2014-2015: Price drop due market imbalance
$140
• Supply growing
$120
− OPEC: highest ever production at 31.7 MMbpd; more
supply from Iran & Iraq
− Non-OPEC: production growing faster than global
demand; abnormally high US inventories
US$/bbl
$100
$80
$60
$40
$20
• Demand growth eased in 2014
May-15
Jan-15
Sep-14
May-14
Jan-14
Sep-13
May-13
Jan-13
Sep-12
May-12
Jan-12
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
$0
plotted to
August 2015
− Slowing growth (especially non-OECD)
− Economic uncertainty in China
World Production & Consumption Balance
102
6
90
0
86
-3
2016-Q1
2015-Q1
2014-Q1
2013-Q1
2012-Q1
2011-Q1
82
2010-Q1
MMbpd
3
94
Implied stock change and balance (right axis)
World production (left axis)
World consumption (left axis)
88
Source: EIA Short-Term Energy Outlook, July 2015
MMbod
Forecast
98
+2016: More balanced market expected
• Demand growth stronger than non-OPEC production
• Decline rates of existing fields require >5 Mbpd new
production annually
Building An Energy Business
 Strategic diversification
 Large truck & shovel mining
projects
 World-class resources
 Long-life assets
 Mining-friendly jurisdiction
 Competitive margins
 Minimizing execution risk
 Tax effective
Mined bitumen is in Teck’s ‘sweet spot’
89
The Real Value of Long-Life Assets
Fort Hills Project Indicative Rolling NPV1
• Significant value created
over long term
• 60% of PV of cash flows
beyond year 5
• IRR of 50-year project is
only ~1% higher than a 20year project
• Options for debottlenecking
and expansion
50-year assets provide for superior returns
operating through many price cycles
90
1. Indicative NPV assumes US$95 WTI, $1.05 Canadian/US dollar exchange rate, and costs as disclosed with the Fort Hills sanction
decision (October 30, 2013).
Fort Hills Is One of the Best
Undeveloped Oil Sands Mining Leases
Strip Ratio vs. Ore Grade
• >3 billion bbls of proven plus probable
reserves of bitumen
12
11.5
Fort Hills
11
Frontier
10.5
10
9.5
13
12
11
10
9
8
TV:BIP
Ore grade is a function of the bitumen quantity in the deposit
TV:BIP is a ratio of the total volume of bitumen in place to the total
volume of material required to be moved (like a strip ratio)
91
Source: Teck
Ore Grade (wt% bitumen)
-
Production 180,000 barrels per day
(bpd) of bitumen
Teck’s share is significant at 36,000
bpd; equivalent to 13 million barrels
per year (Mbpy)
• World-class resource
-
Average ore grade of 11.4%
Strip ratio of 1.5:1 and TV:BIP of 10.5
• Consistent production year-over-year
through multiple decades
-
Targeting first oil in Q4 2017
Expect 90% of planned production
capacity within 12 months
Minimizing Execution Risk
In The Fort Hills Project
• Cost-driven schedule
- “Cheaper rather than sooner”
Suncor has completed 4
projects of ~$20 billion over last
5 years, all at or under budget
• Disciplined engineering
approach
• “Shovel Ready”
• Global sourcing of engineering
and module fabrication
• Balanced manpower profile
Benefiting from Suncor’s operational
and project development experience
92
Lower Oil Price Environment Provides
Opportunities for the Fort Hills Project
“Major projects in construction such as Fort Hills…will move forward as
planned and take full advantage of the current economic environment.
These are long-term growth projects that are expected to provide
strong returns when they come online in late 2017.”
- Suncor, January 13, 2015
• Focusing on productivity improvements
- Reduced pressure on skilled labour and contractors
• Benefiting from availability of fabricators for major
equipment
• Seeking project cost reductions
- Exploring performance improvements with
contractors and suppliers
- Building cost savings and improved productivity
expectations into current contract negotiations
- Reviewing all indirect costs
Enhanced ability to deliver on time and on budget
93
Fort Hills By The Numbers1
Teck’s Sanction Capital2
Teck’s Estimated 2015 Spend
Teck’s Remaining Capital3
~$2.94
$850
~$1.5
billion
million
billion
Operating & Sustaining Costs3
Sustaining Capital3
Teck’s Share of Production
$25-28
$3-5
13,000,000
per barrel of bitumen
per barrel of bitumen
bitumen barrels per year
Mine life: 50 years
94
1. All costs and capital are based on Suncor’s estimates.
2. Sanction capital is the go-forward amount from the date of the Fort Hills sanction decision (October 30, 2013), denominated in
Canadian dollars and on a fully-escalated basis. Includes earn-in of $240M.
3. As of October 21, 2015.
4. Sustaining capital is included in operating & sustaining costs.
Fort Hills Bitumen Netback Calculation Model
Cash Margin1 Calculation Example: Prior to Capital Recovery
$70
$15.50
$60
$60
$11
$1.25
$55.50
$7-9
$10
$50
$22
$37
$40
$30
$3
$20
$1-2
$2-3
$10-$11
$10
$13
$-
Teck seeks to secure dedicated transportation capacity for
Fort Hills volumes to key markets to minimize WCS discount
95
Royalties based on pre-capital payout.
* WTI/WCS Differential based on forecast from Lee & Doma Energy Consulting: 2017/2018 Fort Hills Startup, Constrained Pipe/Excess Rail
**Tidewater Premium based on average premium pricing for USGC market via Keystone and Flanagan South Pipelines
Source: Alberta Energy bitumen valuation methodology (http://www.energy.alberta.ca/OilSands/1542.asp)
1. Estimates are based on C$/US$ exchange rates as shown, expected bitumen netbacks, operating costs of C$25 per barrel (including
sustaining capital of C$3-5 per barrel) and Phase 1 (pre-capital payout) royalties.
Western Canadian Select (WCS)
Average Monthly WTI-WCS Differential
Western Canadian Select (WCS) Is The Benchmark
Price For Canadian Heavy Oil At Hardisty, Alberta
$45
$23.12
$40
$35
$30
$15.69
$25
WCS differential to West Texas Intermediate (WTI)
$16.60
$20
$15
$10
$5
$Plotted to
Oct. 2015
WCS Differential (US$/bbl)
• Contract settled monthly as differential to Nymex WTI
• Long term differential of Nymex WTI minus $10-20 US/bbl
• Based on heavy/light differential, supply/demand, alternate
feedstock accessibility, refinery outages and export capability
− Narrowed in 2014/2015 due to export capacity growth, rail
capacity increases, and short term production outages
• Recently improved export capability to mitigate volatility
− Further export capacity subject to rigorous regulatory review;
potential impact to WCS differentials.
Long-term WCS Differential
FORECAST*
WTI (US/bbl)
$40
$50
$60
$70
$80
$90
$100
WCS Differential to
Nymex WTI (US/bbl)
-$13.00
-$14.50
-$15.50
-$17.00
-$18.00
-$19.50
-$20.50
*Forecast Assumptions: Fort Hills Startup 2017/2018 with supply/demand model exiting Western Canada in a
constrained pipe/excess rail transportation model, per Lee & Doma Energy Consulting.
96
Source: Shorecam, Net Energy, Lee & Doma
Diluent (C5+) Pricing
Average Monthly WTI/Diluent (C5+) Differential
$20
$15
Diluent (C5+) differential to West Texas Intermediate
(WTI)
$10
US/bbl
Diluent (C5+) at Edmonton, Alberta Is The Benchmark
Contract For Diluent Supply For Oil Sands
• Contract settled monthly as differential to Nymex WTI
• Based on supply/demand, seasonal demand (high in winter,
low in summer), import outages
• Long-term Diluent (C5+) differential of Nymex WTI +/- $5
US/bbl
$5
$0
($5)
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
($10)
WTI/C5+ Diff
Long -term C5+ Diff
Diluent (C5+) “Pool” in Edmonton is a common stream
of a variety of qualities
• Diluent (C5+) pool comprised of local and imported Natural
Gas Liquids
FORECAST*
WTI (US/bbl)
$40
$50
$60
$70
$80
$90
$100
Diluent (C5+) Differential
to Nymex WTI (US/bbl)
+$2.50
+$1.50
+$0.50
-$0.50
-$1.50
-$2.50
-$3.50
*Forecast Assumptions: Fort Hills Startup 2017/2018, using 2015 CAPP Western Canadian oil production forecast, Diluent
(C5+) differentials per Lee & Doma Energy Consulting
97
Source: Shorecam, Net Energy, Lee & Doma
Diversified Market Access Strategy
Teck Marketing Plan for
50 kbpd Diluted Bitumen Blend
Sufficient Export Capacity In Place
• Includes Pipeline And Rail Capability
• No shut in risk, but price risk likely
Kitimat
Edmonton
Hardisty
Targeting Long Term Market Access
• US Gulf Coast And Deep Water Ports
• Entered into commercial agreements:
• 425 kbbls Hardisty storage capacity
• Pipeline capacity opportunities:
• Keystone/Keystone XL/Flanagan South to
US Gulf
• TransMountain expansion to Vancouver
• Energy East to East Coast
Non-committed barrels sold spot at
Hardisty or nominated on common
carriage pipeline
Teck can enter long-term commitments
98
Asia
Saint John
Vancouver
Superior
Europe
Flanagan
Steele City
N.E.
US
Asia
Cushing
Houston
US
Gulf Coast
Europe
Asia
TransCanada Energy East (Europe, Asia, US Gulf Coast, N.E. US)
Keystone, Keystone XL (US Gulf Coast)
Enbridge Flanagan South (US Gulf Coast)
TransMountain Pipeline (Asia)
Enbridge Northern Gateway (Asia)
Sufficient Transportation Capacity
In Western Canada
Western Canadian Transport Supply & Demand
8,000
2 New Pipelines
7,000
Assumptions
Fort Hills’ First Oil
• Fort Hills first oil late 2017
6,000
Enbridge Expansions
• Enbridge mainline capacity expansions
move forward
4,000
3,000
• Two of the proposed new export pipelines
are put in place between 2019-2022
2,000
1,000
Balanced
Pipe
2015 CAPP Supply Forecast
2014 CAPP Supply Forecast
Total Pipeline & Local Refining
Total Pipeline, Local Refin ing & Rail
2030
2029
2028
2027
2026
2025
2024
2023
2022
Excess
Pipe
Constrained
Pipe &
Balanced Rail
Constrained Pipe &
Excess Rail
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
0
Constrained
Pipe &
Balanced Rail
kbbls/day
5,000
− Providing incremental capacity of 1.0-1.6
MM bbls/day
− Based on three potential new pipelines:
• TransMountain TMX
• Keystone XL
• Energy East
− Northern Gateway delayed
Sufficient pipeline & rail capacity to accommodate all production
99
Source: CAPP (Canadian Association of Petroleum Producers), Lee& Doma, Teck
Committed Logistics Solutions in Alberta
Bitumen & Blend Logistics
Operator
Nominal
Capacity
(kbpd)
Status
Northern Courier Hot Bitumen
TransCanada
202
Construction: ~30% complete
Suncor
292
Construction: ~25% complete
Wood Buffalo Blend Pipeline
Enbridge
550
Operating
Wood Buffalo Extension
Enbridge
550
Construction - field crew mobilized
Hardisty Blend Tankage
Gibsons
450
Construction - Tank pad civil work
East Tank Farm - Blending
Fort Hills
Mine Terminal
Northern Courier
Hot Bitumen Pipeline
East Tank Farm
Blending w/Condensate
Cheecham
Terminal
Diluent Logistics
Operator
Nominal Capacity
(k barrels)
Status
Norlite Diluent Pipeline
Enbridge
130
Construction - first pipe spread
complete
Wood Buffalo
Pipeline
Kirby
Terminal
Norlite
Diluent Pipeline
Waupisoo
Pipeline
Edmonton
Terminal
100
Pipeline Legend
Bitumen
Blend
Diluent
Existing
New
Wood Buffalo
Extension
Athabasca
Twin Pipeline
Options
Teck
Hardisty
Terminal
Export Pipeline
Rail
Local Market