Modelling Workshop. March 13, 2012

Transcription

1 Modelling Workshop March 13, 2012

2 Forward Looking Information Both these slides and the accompanying oral presentation 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) and comparable legislation in other provinces. Forward-looking statements can be identified by the use of words such as plans, expects or does not expect, is expected, budget, scheduled, estimates, forecasts, intends, anticipates or does not anticipate, or believes, or variation of such words and phrases or state that certain actions, events or results may, could, should, would, might or will be taken, occur or be achieved. 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 our future production, sales, earnings and cash flow, and our statements as to management s expectations with respect to, among other things, business and financial prospects, the size and quality of Teck s copper development projects and the timing of those projects, proposed expansions at existing operations, our production growth profile in copper, coal and oil, mine lives and mineral and oil and gas reserves and resources, progress in development of mineral and oil sands properties, future production, capital and mine production costs, demand and market outlook for commodities, future commodity prices and the financial results, cash flows and operations of Teck. These forward-looking statements involve numerous assumptions, risks and uncertainties and actual results may vary materially. These statements are based on a number of assumptions, including, but not limited to, assumptions regarding general business and economic conditions, interest rates, the supply and demand for, inventories of, and the level and volatility of prices of coal, zinc, copper and gold and other primary metals and minerals produced by Teck as well as oil, natural gas and petroleum, the outcome of engineering studies currently underway in connection with Teck s development projects, the timing of receipt of regulatory and governmental approvals for Teck s development projects and other operations, Teck s costs of production and production and productivity levels, as well as those of its competitors, power prices, market competition, the accuracy of Teck s reserve and resource estimates (including with respect to size, grade and recoverability) and the geological, operational and price assumptions on which these are based, the resolution of environmental and other proceedings, our ongoing relations with our employees and partners and joint venturers, the availability of financing for development projects and the future operational and financial performance of the company generally. The foregoing list of assumptions is not exhaustive. 2

3 Forward Looking Information Events or circumstances could cause actual results to differ materially. Factors that may cause actual results to vary include, but are not limited to: unanticipated developments in business and economic conditions in the principal markets for Teck s products or in the supply, demand, and prices for metals and other commodities to be produced, changes in power prices, changes in interest or currency exchange rates, inaccurate geological or metallurgical assumptions (including with respect to the size, grade and recoverability of mineral or oil and gas reserves and resources), changes in taxation laws or tax authority assessing practices, legal disputes or unanticipated outcomes of legal proceedings, 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 permits or government approvals, industrial disturbances or other job action, and unanticipated events related to health, safety and environmental matters), decisions made by our partners or co-venturers, political risk, social unrest, lack of available financing for Teck or its partners or co-venturers, and changes in general economic conditions or conditions in the financial markets. Certain of these risks are described in more detail in Teck s annual information form available at and in public filings with the SEC. Teck does not assume the obligation to revise or update these forward-looking statements after the date of this document or to revise them to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws. 3

4 Agenda 1) Overview 2) Metal Pricing and Concentrate Contracts 3) Steelmaking Coal Operations 4) Base Metal Operations 5) Other Income Statement and Balance Sheet Items 6) Income and Resource Taxes 4

5 Strong and Growing Cash Flow $ millions 2800 Record results H 2H 1H 2H 1H 2H 1H 2H 1H 2H Operating Cash Flow Free Cash Flow 5 *Note: cash flows before asset sales, tax deferrals etc.

6 Leverage to Strong Commodities 2011 EBITDA $5.5 Billion 2011 Avg EBITDA Coal US$257/t $25 M / $1 Copper US$4.00/lb $7 M / $.01 Zinc US$0.99/lb $10 M / $.01 $C/$US $0.99 $85 M / $.01 Volume and cost changes from 2011 need to be taken into account in estimates of EBITDA for

7 2011 Cost of Sales and Operating Costs Total Cost of Sales, $6,637 Operating Costs, $3,625 Concentrate Purchases 16% Labour 43% Cash Operating Costs 55% Transportation 15% Other 10% Depreciation & Amortization 14% Energy 20% Supplies 27% 7

8 Analyst Earnings Estimates 2011 Consensus reasonably good relative to reported High/Low variance avg 40% Quarterly variance increased over the year Objective to help model accuracy, reduce variance in earnings estimates $1.50 $1.30 $1.10 $0.90 $0.70 Reported $0.50 Q1 Q2 Q3 Q4 8

9 9 Interactive Analyst Center - Launching Soon!

10 Copper, Lead and Zinc Metal Pricing & Concentrate Contracts

11 Background and Terminology WMT s versus DMT s Quotational Periods (QP) Payable Metals Spot and Annual/Benchmark Treatment Charge Treatment Charge (T/C), Price Basis TC/RC Treatment Charge and Refining Charge Price Participation or Escalator/De-escalator Evaluating a Contract 11

12 Quotational Period Usually based on arrival of the concentrates at customer and then may be one month or longer after this arrival month. Based on the parcel size, it may be all priced at one month s average or may be based on a prescribed tonnage per month (eg if we deliver 20,000wmt to customer in November it could be priced at 5,000 dmt per month starting in December and running to March) 12

13 Copper Pricing & Concentrate Contracts

14 Copper Payable Metals Typical Industry Contract: Copper Payment based on copper content If Cu is less than 22% then deduct 1.1%; If Cu is less than 32% then pay for 96.5%, subject to a minimum deduction of 1% If Cu is greater than or equal to 32% then pay for 96.65% If Cu is greater than 38% then pay for 96.75% 14

15 Payable Metals Gold & Silver Payable precious metals can vary by region and by customer and by content Typical Industry contract payables as follows: Gold Payment - Zero if less than 1gm/dmt - Pay for between 90 and 98% dependent on grade Silver Payment - Zero if less than 30gm/dmt - Pay for 90% if greater than 30gm/dmt 15

16 Payable Metals Copper Concentrates Typical Industry Terms ASSUMPTIONS PRICE Cu US$8,400/t ASSAY Cu 27% Ag US$35.00/tr.oz Ag 150gms/dmt Au US$1,800.00/tr.oz. Au 2gms/dmt PER DMT Copper Pay for 96.5% of Cu content (min. dedn. 1 unit) Cu 27% -1% = 26% x $8,400 US$2, Silver Pay for 90% of content Ag 150 gms x 90% = 135gms (4.3 tr ozs) x $35.00 US$ Gold Pay for 90% of content Au 2 gms x 90% = 1.8gms (.06 tr ozs) x $1,800 US$ TOTAL PAYABLE US$ 2,

17 Evaluating a Copper Concentrate Contract PER DMT Cu 27% - 1%% = 26% x $8,400 US$2, Ag 150 gms x 90% = 135 gms (4.3 tr ozs) x $35.00 US$ Au 2 gms x 90% = 1.8 gms (0.06 tr ozs) x $1800 US$ TOTAL PAYABLE US$2, DEDUCTIONS TREATMENT CHARGE Base T/C = (US$ 85.00) Refining Charge Copper 573 payable lbs x 8.5 /lb = (US$ 48.70) Silver 4.3 payable tr ozs x 40 /tr oz = (US$ 1.72) Gold 0.06 payable tr ozs x $6/tr oz = (US$ 0.36) TOTAL DEDUCTIONS = (US$ ) INVOICE VALUE (CIF MAIN DELIVERY PORT) = US$2, Treatment / Refining Charges ~ 6% of Payable at these terms 17

18 Copper Concentrate TC/RC US$/dmt or US /lb From CRU data online: Monthly prices and TC/RCs TC/RCs Standard Grade - Spot TC RC TC/RC $/dmt c/lb c/lb Jan-11 $ Feb-11 $ Mar-11 $ Apr-11 $ May-11 $ Jun-11 $ Jul-11 $ Aug-11 $ Sep-11 $ Oct-11 $ Nov-11 $ Dec-11 $ Jan-12 $ CRU consider Standard Grade as 30% Copper Payable at that level is 96.5% Therefore 30% Cu x 96.5% payable x lbs/tonne equals lbs So if the TC is US$30/dmt divided by payable lbs of copper equals 4.7 /lb of payable copper Add in the RC refining charge of 3.0 /lb and you now have a combined TC/RC of 7.7 /lb of payable copper 18

19 Historic Copper Treatment Charge and Refining Charge US /lb payable copper Realised Spot includes price participation : eliminated in June 2006 Treatment Charge & Refining Charge is a deduction from the payable copper Theoretically what it take to convert a tonne of concentrates into metal but is a market driven/negotiated commercial term Charged by a smelter to a mine Revenue for a smelter : Cost to a Mine Source : CRU Realised TC is negotiated annually each year Price participation was eliminated in 2006 Spot TC is market negotiated throughout the year. 19

20 Historical Copper TC/RC Month TC US$/dmt RC US /lb PP TC/RC US /lb Jan 2006 $ Yes 24.4 /lb Jul 2006 $ Yes 15.4 /lb Jan 2007 $ No 15.4 /lb Jul 2007 $ No 13.3 /lb Jan 2008 $ No 11.5 /lb Jul 2008 $ No 10.9 /lb Jan 2009 $ No 19.2 /lb July 2009 $ No 12.8 /lb Jan 2010 $ No 11.9 /lb Jul 2010 $ No 10 /lb Jan 2011 $ No 14.4 /lb Jul 2011 $ No 21.8 /lb Source : CRU 20

21 Historic Copper Metal Premiums US$/tonne $250 $200 $150 $100 US East Coast CIF NW Europe Port CIF Japan CIF Shanghai Metal Premium is charged by a metal producer to his customer Theoretically to cover the cost (transportation, warehousing, financing, alloying and marketing costs) of shipping metal to a customer but is a market driven/negotiated commercial term Revenue for a refiner : Cost to a Consumer $50 $0 Source : CRU Annual Premiums are set once a year.tonnage is also sold on a spot basis 21

22 Zinc Concentrate Contracts

23 Payable Metals Zinc Concentrates Typical Industry Terms ASSUMPTIONS PRICE Zn US$2,100/t ASSAY Zn 55% Ag US$35.00/tr.oz Ag 5 tr ozs/dmt PER DMT Zinc Pay for 85% of Zn content (min. dedn. 8 units) Zn 85% x 55% = 46.75% x $2,100 US$ Silver Deduct 3ozs and pay for 70% of remainder Ag (5 tr ozs - 3 tr ozs) x 70% = 1.4 tr ozs x $35.00 US$ TOTAL PAYABLE US$1,

24 Price Participation or Escalator/De-escalator Added (escalator) or Deducted (de-escalator) from the Base Treatment Charge If the Price is US$2,700/mt then: Escalator: 6 US/dmt for every $1.00 the Zinc price is above US$2,500/t (base price) $2,700 - $2,500 = $200 x 6 /$1.00 = $12.00 If the Price is US$1,800/mt then: De-Escalator 4 US/dmt for every $1.00 the Zinc price is below US$2,500/t (base price) $1,800 - $2,500 = -$700 x 4 /$1.00 = ($28.00) 24

25 Evaluating a Zinc Concentrate Contract PER DMT Zn 85% x 55% = 46.75% x $2,100 US$ Ag (5 tr ozs - 3 tr ozs) x 70% = 1.4 tr ozs x $35.00 US$ TOTAL PAYABLE US$1, DEDUCTIONS TREATMENT CHARGE Base T/C = (US$ ) Price Participation: US$2,100-US$2,500 = -US$400 x 4 /$1.00 = US$ TOTAL DEDUCTIONS = (US$213.00) INVOICE VALUE (CIF MAIN DELIVERY PORT) = US$ Treatment / Refining Charges ~ 21% of Payable at these terms 25

26 Historic Zinc Treatment Charges US$/dmt $600 $500 $400 $300 $200 Realised Spot Treatment Charge is a deduction from the payable zinc Theoretically what it take to convert a tonne of concentrates into metal but is a market driven/negotiated commercial term Charged by a refinery to a mine Revenue for a refiner : Cost to a Mine Realised TC (also referred to as Benchmark ) is based on a different price basis each year then escalated/de-escalated based on monthly average price Spot TC is market negotiated throughout the year potentially multiple times per year and is typically not escalated/de-escalated $100 $0 Source : CRU Benchmark TC s 2006 US$128/dmt price basis US$1400/t 2007 US$300/dmt price basis US$3500/t 2008 US$300/dmt price basis US$2000/t 2009 US$196.50/dmt price basis US$1250/t 2010 US$272.50/dmt price basis US$2500/t 2011 US$229/dmt price basis US$2500/t 26

27 Historic Zinc Metal Premiums US$/tonne $400 $350 $300 $250 USA Asia Europe Metal Premium is charged by a metal producer to his customer Theoretically to cover the cost (transportation, warehousing, financing, alloying and marketing costs) of shipping metal to a customer but is a market driven/negotiated commercial term Revenue for a smelter : Cost to a Consumer $200 $150 $100 $50 $0 Source : CRU Annual Premiums are set once a year.there are quarterly contracts and tonnage is also sold on a spot basis US premiums are delivered customer Asian premiums are delivered main port European premiums are ex works 27

28 Lead Concentrate Contracts

29 Payable Metals Lead Concentrates Typical Industry Terms ASSUMPTIONS PRICE Pb US$2,200/t ASSAY Pb 54% Ag US$35.00/tr.oz Ag 455 gms/dmt PER DMT Lead Pay for 95% of Pb content (min. dedn. 3 units) Pb 54% - 3% = 51% x $2,200 US$1, Silver Pay for 95% of Ag Content (min. dedn. 50 grams) Ag 455 gms - 50 gms = 405 gms or 13 tr ozs x $35.00 US$ TOTAL PAYABLE US$1,

30 Price Participation or Escalator/De-escalator Added (escalator) or Deducted (de-escalator) from the Base Treatment Charge If the Price is US$3,000/mt then: Escalator: 7 US/dmt for every $1.00 the Lead price is above US$2,500/t (base price) $3,000 - $2,500 = $500 x 7 /$1.00 = $35.00 If the Price is US$1,800/mt then: De-Escalator 4 US/dmt for every $1.00 the Lead price is below US$2,500/t (base price) $1,800 - $2,500 = -$700 x 4 /$1.00 = ($28.00) 30

31 Evaluating a Lead Concentrate Contract PER DMT Pb 54% - 3% = 51% x $2,200 US$1, Ag 455 gms 50 gms = 405 gms or 13 tr ozs x $35 US$ TOTAL PAYABLE US$1, DEDUCTIONS TREATMENT CHARGE Base T/C = (US$ ) Price Participation: US$2,200 - US$2,500 = US$300 x 4 /$1.00 = US$ Silver R/C 13 tr ozs (payable) x $1/tr oz = (US$ 13.00) TOTAL DEDUCTIONS INVOICE VALUE (CIF MAIN DELIVERY PORT) = (US$231.00) = US$1, Treatment / Refining Charges ~ 15% of Payable at these terms 31

32 Historic Lead Treatment Charges US$/dmt $450 $400 $350 $300 $250 $200 Realised Spot Treatment Charge is a deduction from the payable lead Theoretically what it take to convert a tonne of concentrates into metal but is a market driven/negotiated commercial term Charged by a refinery to a mine Revenue for a refiner : Cost to a Mine Realised TC (also referred to as Benchmark ) is based on a different price basis each year then escalated/deescalated based on monthly average price Spot TC is market negotiated throughout the year potentially multiple times per year and is typically not escalated/de-escalated Lead Conc TC s are becoming more grade dependent basis high silver or low silver $150 $100 $50 $0 Source : CRU Benchmark TC s 2006 US$149/dmt price basis US$850/t 2007 US$158/dmt price basis US$1500/t 2008 US$350/dmt price basis US$2500/t 2009 US$210/dmt price basis US$1500/t 2010 US$220/dmt price basis US$2000/t 2011 US$230/dmt price basis US$2500/t 32

33 Historic Lead Metal Premiums US$/tonne $300 $250 $200 USA (lhs) Asia (rhs) Europe (lhs) US$/tonne $4,000 $3,500 $3,000 $2,500 Metal Premium is charged by a metal producer to his customer Theoretically to cover the cost (transportation, warehousing, financing, alloying and marketing costs) of shipping metal to a customer but is a market driven/negotiated commercial term Revenue for a smelter : Cost to a Consumer $150 $100 $50 $0 Source : CRU $2,000 $1,500 $1,000 $500 $0 Annual Premiums are set once a year.there are quarterly contracts and tonnage is also sold on a spot basis US premiums are delivered customer Asian number is a Price includes premium European premiums are ex works 33

34 Other Things to Keep in Mind We report contained moly & zinc & lead & copper from our mining operations Payable moly is content x 99% (payable) Payable moly x moly oxide price less roasting charge Lead, Copper and Zinc refined metals are sold basis LME price (usually cash settlement monthly average) plus a premium : Silver, Gold, Indium, Germanium and Cadmium are all sold basis other indices. We deliver WMT s (wet metric tonnes) of concentrates to our customers and we pay freight on WMT s. Smelters receive WMT s, deduct the moisture content and pay for metals based on DMT s (Dry Metric Tonnes). 34

35 Sources Treatment Charges Wood Mackenzie Brook Hunt and CRU both report in their monthly monitors (Copper, Lead & Zinc concentrates) of monthly activity on TC/RC s and TC s CRU has a monthly historic data file covering both annual and spot numbers) Metal Premiums Wood Mackenzie Brook Hunt and CRU both report in their monthly monitors (Copper, Lead & Zinc Metal) of monthly activity on premiums CRU has a monthly historic data file covering both annual and spot numbers) 35

36 Steelmaking Coal

37 Basic Terminology Coking Coal: HCC hard coking coal WCC weak coking coal In between coal semi-soft, semi-hard Metallurgical Coal includes above plus: PCI pulverized coal injection Other: Cross tonnes can serve as either coking and thermal Benchmark Coal / Price: Price for premium coal product from which all other coals are discounted 37

38 90% High Quality Hard Coking Coal Product Mix Now and in the Future Large proven and probable reserves Long life coal reserves & resources Mt 6,500 Growth profile does not shift product mix Mainly high quality, hard coking coal Very long life resources 5,200 3,900 2,600 1,300 Inferred M&I of reserves & resources are hard coking coal 0 Reserves (P&P) Coking PCI Thermal 38

39 Metallurgical Coal Pricing Metallurgical Coal Price Assessments vs. Quarterly Benchmark Price $ / tonne McCloskey FOB Australia Argus FOB Australia Energy Publishing Coking Coal Queensland Platts FOB Australia Peak Downs Quarterly Contract Settlement Source: Platts, Argus, McCloskey and Energy Publishing 39

40 China Coal Imports Average Import Price by Country Significant distinction in value between imported coals Coking coal is differentiated and valued based on its performance in the blast furnace US$/t Tier 3 Tier 2 Tier 1 Benchmark Canadian and Australian coals highly valued due to their benefits in the steel making process Indonesia, USA and Russian coals are not considered benchmark quality 50 Mongolian coal viewed as a product for a different market 0 Source: The TEX Report 40

41 Equating Benchmark Price and Average Realized Price Realized Price vs. Benchmark Q4 premium products: US$285/t 90% hard coking coal on average Average realized price function of: US$ / tonne ~91% of Benchmark ~90% of Benchmark range of coal products Range of various qualities, carryover sales Q guidance average realized price: US$230t 0 Teck Realized Price Benchmark Price 41

42 Average Realized Coal Price Product mix covers multiple products not just benchmark coals (thermal, PCI, weak coking coal, hard coking coal and off-spec) Benchmark Price Benchmark Price Example $200 Average Realized Price Within HCC there are multiple tiers (premium, traditional hard various grades, semihard) US$ / tonne HCC 90% Different tiers Other 10% Benchmark of benchmark of benchmark WCC PCI Thermal Sales schedule can impact the average realized price (carry-over, sales mix) Benchmark Avg realized Avg price as % Overall Hard Coking Product Mix Grades $xxx / tonne xx% Sales Schedule Average Realized Price 42

43 Teck Coal Seasonality of Sales Quarterly Sales as % of Total Annual Sales Seasonality impacts sales 35% 30% Average Sales distribution is NOT symmetrical First half of calendar year is traditionally weaker 25% 20% 15% 10% 3-yr Average, Q1, 21% 3-yr Average, Q2, 26% 3-yr Average, Q3, 27% 3-yr Average, Q4, 26% 5% 0% Q1 Q2 Q3 Q4 43

44 Teck Coal Simplified Model Coal is cleaner to model than base metal business Step 1) Guidance Step 2) Input assumptions Step 3) Pull it together 44

45 Teck Coal Simple Cost Methodology 2011 GUIDANCE (GIVEN) COGS Distribution Sales / Production Guidance Range $71-76/t $31-34/t 21-23Mt Average $74/t $32/t 22Mt Total Annual COGS (COGS x Sales) Fixed Cost (FC) (Total COGS x % Assumption) Total Quarterly Fixed Costs ((FC x %) / 4 quarters) Variable Cost (VC) (VC% x Total Annual COGS) $1, % This is different for every operation and varies by mine size $125 Fixed cost stay constant across each quarter $1,170 Variable Cost / Tonnes $53/t 45

46 Teck Coal Simple Model Q1 Q2 Q3 Q % of Sales in Quarter 21% 26% 27% 26% 100% Sales (tonnes) Benchmark Price Average realized Price (US$) Average Realized Price 92% 82% 90% 89% FX Assumption Average realized Price (C$) Revenues ($ millions) 968 1,505 1,646 1,476 Costs ($/tonne) COGS One-off Distribution Cost Depreciation (rolling 4-qtr average) Gross Profit Summary Before depreciation & amortization , ,236 After depreciation & amortization ,716 3-year average, prior slide (annual sales x quarterly %) Industry news Assumption avg realized price slide Reported in our financials, assumption Given in guidance, fixed + variable cost assumption, previous slide Given in guidance, previous slide Rolling 4-quarter average Modeled result Reported results vs. above Before depreciation & amortization After depreciation & amortization Variance -6% 3% -6% -1% -2% Variance -4% 4% -7% -4% -3% 46

47 Teck Coal Things to Keep in Mind Costs Fixed / variable cost structure influences unit costs reported Increased volume equals lower fixed cost per tonne For a given cost guidance range Lower volume = higher costs in range Higher volume = lower costs in range Strip ratio whole mine impact (moving more total material) Haul distance impacts costs associated with trucks Other contractor costs, training & moving coal between sites 47

48 Coal Guidance Q4 Earnings Release (February 9, 2012): As of the date of this release, we have sold approximately 5.3 million tonnes of coal for delivery in the first quarter at an average price of US$230 per tonne. Not production guidance Sales guidance as to date of this release Likely to sell more Could be deferrals of contracted sales to next quarter Additional sales and/or deferrals impact average realized price 48

49 Expanding Port Capacity Supports Growth and Flexibility Westshore Terminals 29 Mt, expanding to 33 Mt Teck ~19 Mt entitlement Neptune Coal Terminal Exclusive usage Expanding to 12.5 Mt Planned Expansion Throughput Capacity 10 Ridley Terminals Flexibility and growth 5 Expanding to 24 Mt 0 Neptune Coal Terminal Ridley Terminals Westshore Terminals Capacity growing from 50 Mt to ~70 Mt Teck s share ~35 Mt 49

50 Improved Relative Cost Position Improved productivity to mitigate cost inflation Global Coal Cash Cost Curve Truck fleet: more, larger units Plant modernization: improved efficiency Rail: 10-year contract, no price participation Cost per tonne Teck 2011 Teck 2008 Teck 2006 Port: contracts tied to volume and performance Shanxi province now part of the seaborne global cost curve Cumulative Tonnes Source: Wood Mackenzie Coal Supply Service, January 2012, AME 50

51 Copper Mines Simplified Models

52 Copper Mines Simplified Models Cathode Producer eg. Quebrada Blanca Concentrate Producer eg. Highland Valley Antamina Modelling Issues Ore mix & grades, Mine life 52

53 Production Modelling Ore milled x head grade x recovery = Production Highland Valley Red Dog Antamina Copper-only ore 25,335 Copper-zinc ore 12,259 Tonnes milled (000's) 42,284 Tonnes milled (000's) 3,673 Tonnes milled (000's) 37,594 Copper Zinc Copper Head grade 0.26% Head grade 19.1% Head Grade 1.04% Recovery 87.6% Recovery 81.5% Recovery 85.9% Production (000's tonnes) 97.3 Production (000's tonnes) Production (000's tonnes) Lead Zinc Head grade 5.0% Head Grade 2.26% Recovery 45.9% Recovery 84.4% Production (000's tonnes) 84.0 Production (000's tonnes) Calculated results may not match reported results due to rounding of ore milled, grades, recoveries and production measurement location (port vs mine) 53

54 Cathode Producer - QB Simplified Model - Annual Revenues (C$ millions) Sales (000's tonnes) Metal Prices & Fx Rate Copper US$/lb Fx C$/US$ Revenues (C$millions) Copper (LME) Premiums (& timing of sales differences) (4) (0) 7 Total Revenues Premiums $/lb (& timing differences) (0.02) (0.00) 0.05 Cost of sales(us$ millions) Operating costs Distribution costs Depreciation and amortization Reported in our financials Implied Revenue (t x $) Premium to LME price Reported in our financials Operating Cost - $/t copper 2,217 3,062 4,733 Distribution Cost - $/t copper D&A Cost - $/t copper 1,361 1,281 1,509 Operating profit (loss) (CDN$ millions) Quebrada Blanca-Before depreciation Quebrada Blanca -After depreciation Derived Reported in our financials 54

55 Cathode Producer - QB Simplified Model - Quarterly Q1 11 Q2 11 Q3 11 Q Revenues (C$ millions) Sales (000's tonnes) Metal Prices & Fx Rate Copper US$/lb Fx C$/US$ Revenues (C$millions) Copper (LME) Premiums (& timing of sales differences) Total Revenues Premiums $/lb (& timing differences) Cost of sales(us$ millions) Operating costs Distribution costs Depreciation and amortization Reported in our financials Implied Revenue (t x $) Premium to LME price Reported in our financials Operating Cost - $/t copper 3,960 4,615 5,290 5,000 4,733 Distribution Cost - $/t copper D&A Cost - $/t copper 1,544 1,346 1,484 1,648 1,509 Operating profit (loss) (CDN$ millions) Quebrada Blanca-Before depreciation Quebrada Blanca -After depreciation Derived Reported in our financials 55

56 Concentrate Producer - HVC Simplified Model Annual Revenues (C$ millions) Metal Prices Copper - average Moly US$/C$ Copper Con Value US$/t con Copper Payable 2,337 2,734 Treatment Charge (world terms) Refining Charge Net Payable 2,241 2,619 Copper Con Sales Contained metal (tonnes) 97, ,900 Concentrate Grade 32.0% 32.0% Concentrate (tonnes) 305, ,688 Value $/t 2,241 2,619 Revenue (US$ millions) Moly Concentrates Moly Sales - k lbs 6,700 8,400 Price US$/lb Revenue (US$ millions) Total Revenues Copper Moly Other (Silver, Gold, Moly Rc) Total (US$ millions) 803 1,007 Total (C$ millions) Reported in our financials Calculated based on benchmark terms Reported in our financials Typical concentrate grade Implied Revenue (t x $) Reported in our financials To reconcile reported 56

57 Concentrate Producer - HVC Simplified Model Annual cont d Total Revenues (C$ millions) Operating Costs Distribution Costs Total Costs Reported in our financials Operating Margin (Before Dep'n) DD&A Operating Profit Operating Profit check Ore milled (k tonnes) 42,488 42,284 Operating Cost / t ore milled Distribution Cost / t con sold DD&A cost / t metal sold Reported in our financials Derived 57

58 Concentrate Producer - HVC Simplified Model Quarterly Q1 11 Q2 11 Q3 11 Q Revenues (C$ millions) Metal Prices Copper - average Moly US$/C$ Copper Con Value US$/t con Copper Payable 2,990 2,833 2,784 2,322 2,734 Treatment Charge (world terms) Refining Charge Net Payable 2,875 2,718 2,670 2,207 2,619 Copper Con Sales Contained metal (tonnes) 20,200 26,600 26,800 30, ,900 Concentrate Grade 32.0% 32.0% 32.0% 32.0% 32.0% Concentrate (tonnes) 63,125 83,125 83,750 94, ,688 Value $/t 2,875 2,718 2,670 2,207 2,619 Revenue (US$ millions) Moly Concentrates Moly Sales - k lbs 1,800 1,700 1,800 3,100 8,400 Price US$/lb Revenue (US$ millions) Total Revenues Copper Moly Other (Silver, Gold, Moly Rc) Total (US$ millions) ,007 Total Revenues (C$ millions) Reported in our financials Calculated based on benchmark terms Reported in our financials Implied Revenue (t x $) Reported in our financials To reconcile reported 58

59 Concentrate Producer - HVC Simplified Model Quarterly cont d Q1 11 Q2 11 Q3 11 Q Total Revenues (C$ millions) Operating Costs Distribution Costs Total Costs Reported in our financials Operating Margin (Before Dep'n) DD&A Operating Profit Operating Profit check Ore milled (k tonnes) 9,581 10,286 10,763 11,653 42,284 Operating Cost / t ore milled Distribution Cost / t con sold DD&A cost / t metal sold Reported in our financials Derived Without one-time labour settlement charge in Q4, cost / t milled ~ $

60 Antamina Ore Mix & Grades How to model long term? Tonnes milled (000's) Copper only ore 18,996 52% 25,335 67% Copper zinc ore 17,511 48% 12,259 33% 36,507 37,594 tpd 100, ,997 Copper Grade (%) Recovery (%) Production (000's tonnes) ~ Sales (000's tonnes) Zinc Grade (%) Recovery (%) Production (000's tonnes) Sales (000's tonnes) Mineral Reserves At December 31, 2011 Copper ore grades and recoveries apply to all of the processed ores. Zinc ore grades and recoveries apply to copper-zinc ores only. Transitioning to higher copper production bias due to ore mix but will be variable Tonnes (000's) Proven Probable Total Grade (%) Milled ore mix must equal reserves mix over mine life Copper grade milled must equal reserve grade over mine life Zinc grade milled must equal reserve grade over mine life Tonnes (000's) Grade (%) Tonnes (000's) Grade (%) Ore Mix Copper Copper only ore 89, , , % Copper zinc ore 43, , , % 132, , , % Zinc Copper zinc ore 43, , ,

61 Antamina Reserves & Resources How long is the mine life? Mineral Reserves At December 31, 2011 Proven Probable Total Tonnes (000's) Grade (%) Tonnes (000's) Grade (%) Tonnes (000's) Grade (%) Ore Mix Copper Copper only ore 89, , , % Copper zinc ore 43, , , % 132, , , % Zinc Copper zinc ore 43, , , Expansion to 130 ktpd equals ~47.5 Mtpa ore milled Reserve life ~17 years Mineral Resources At December 31, 2011 Measured Indicated Inferred Tonnes (000's) Grade (%) Tonnes (000's) Grade (%) Tonnes (000's) Grade (%) Ore Mix Copper Copper only ore 34, , , % Copper zinc ore 14, , , % 48, , , % Zinc Copper zinc ore 14, , , M&I Resource life ~8 years Inf Resource life ~15 years 61

62 Copper Cash Costs 2011 HVC CMA QB CdA DP BU Sales (kt) Optg Profit Method OP before D&A & PA (C$M) ,674 Fx C$/US$ OP before D&A (US$M) ,691 Margin/ pay lb Copper Price (avg) Costs (by difference)

63 Zinc Mine Simplified Model

64 Concentrate Producer Red Dog Simplified Model Annual Revenues (C$ millions) Metal Prices Zinc - average Lead US$/C$ Zinc Con Value US$/t con Zinc Payable Treatment Charge (world terms) PP Net Payable Zinc Con Sales Contained metal (tonnes) 584, ,900 Concentrate Grade 55% 55% Concentrate (tonnes) 1,072,661 1,020,000 Value $/t Revenue (US$ millions) Reported in our financials Calculated based on benchmark terms Reported in our financials Implied Revenue (t x $) 64

65 Concentrate Producer Red Dog Simplified Model Annual cont d Lead Con Value US$/t con Lead Payable 963 1,079 Treatment Charge (world terms) PP 14-5 Net Payable Lead Con Sales Contained metal (tonnes) 129,900 78,300 Concentrate Grade 55% 55% Concentrate (tonnes) 238, ,670 Value $/t Revenue (US$ millions) Total Revenues Zinc Lead Other (Silver) Total (US$ millions) Total (C$ millions) Calculated based on benchmark terms Reported in our financials Implied Revenue (t x $) To reconcile reported 65

66 Concentrate Producer Red Dog Simplified Model Annual cont d Total Revenues (C$ millions) Operating Costs Distribution Costs Royalties Total Costs Reported in our financials Operating Margin (Before Dep'n) DD&A US$ Operating Profit costs Operating Profit check Ore milled (k tonnes) 3,572 3,673 Operating Cost / t ore milled Distribution Cost / t con sold DD&A cost / t metal sold Reported in our financials Derived 66

67 Concentrate Producer Red Dog Simplified Model Quarterly Q1 Q2 Q3 Q Revenues (C$ millions) Metal Prices Zinc - average Lead US$/C$ Zinc Con Value US$/t con Zinc Payable 1,093 1,023 1, Treatment Charge (world terms) PP Net Payable Zinc Con Sales Contained metal (tonnes) 101,000 76, , , ,900 Concentrate Grade 55% 55% 55% 55% 55% Concentrate (tonnes) 185, , , ,927 1,020,000 Value $/t Revenue (US$ millions) Reported in our financials Calculated based on benchmark terms Reported in our financials Implied Revenue (t x $) 67

68 Concentrate Producer Red Dog Simplified Model Quarterly cont d Q1 Q2 Q3 Q Lead Con Value US$/t con Lead Payable 1,183 1,163 1, ,093 Treatment Charge (world terms) PP Net Payable Lead Con Sales Contained metal (tonnes) ,600 32,700 78,300 Concentrate Grade 55% 55% 55% 55% 55% Concentrate (tonnes) ,670 60, ,670 Value $/t Revenue (US$ millions) Total Revenues Zinc Lead Other (Silver) Total (US$ millions) Total (C$ millions) Calculated based on benchmark terms Reported in our financials Implied Revenue (t x $) To reconcile reported 68

69 Concentrate Producer Red Dog Simplified Model Quarterly cont d Q1 Q2 Q3 Q Total Revenues (C$ millions) Operating Costs Distribution Costs Royalties Total Costs Reported in our financials Operating Margin (Before Dep'n) US$ DD&A costs Operating Profit Operating Profit check Ore milled (k tonnes) ,673 Operating Cost / t ore milled Distribution Cost / t con sold DD&A cost / t metal sold Reported in our financials Derived 69

70 Trail Metals Simplified Model

71 Trail Profit Model 1. Optimization of concentrates feed mix which generates the highest profitability from treatment charges, free metal, by-products 2. Maximize the utilization of assets whether its stockpiles or equipment 71

72 Trail Profit Model Issues 1. Revenue Trail Produces: Zinc Lead Silver Gold Specialty Metals Indium, Germanium etc. Chemicals & Fertilizers 2. Concentrate Costs How to model? 3. Operating Costs How to estimate? Reported products, and paid for in concentrates Unreported products, but not paid for in concentrates 72

73 Trail Metals Simplified Model Revenues Annual Revenues (C$ millions) 1,190 1,447 1,989 Metal Sales Zinc (000's tonnes) Lead (000's tonnes) Silver (million ounces) Gold (thousand ounces) Power Sales Surplus power sold (GW.h ) 1, Power price (US$/MW.h) Reported in our financials Metal Prices & Fx Rate Zinc US$/lb Lead US$/lb Silver US$/oz Gold US$/oz Fx C$/US$ Revenues (C$millions) Zinc Lead >80% of total Silver revenues Gold Payable Metals 944 1,219 1,658 Power By-Products (incl premiums) Total Revenues 1,190 1,447 1,989 Implied Revenue from volume * price Unreported products 73

74 Trail Metals Simplified Model Costs Annual Cost of sales (C$ millions) Concentrates ,258 Operating costs Distribution costs Depreciation and amortization Payable Metals (from previous) 944 1,219 1,658 Cost of Concentrates (% of Payable Metals) 70% 69% 76% Operating Cost - $/t zinc & lead 1,028 1, Distribution Cost - $/t zinc & lead D&A Cost - $/t zinc & lead Operating profit (loss) (C$ millions) Operating profit (loss) before depreciation Operating profit (loss) after depreciation Reported in our financials Derived Reported in our financials Costs of metals paid for relative to revenue - Varies with metal prices higher silver prices in 2011 yielded higher payable % 74

75 Trail Metals Simplified Model Revenues Quarterly Q1 11 Q2 11 Q3 11 Q Revenues (C$ millions) ,989 Metal Sales Zinc (000's tonnes) Lead (000's tonnes) Silver (million ounces) Gold (thousand ounces) Metal Prices & Fx Rate Zinc US$/lb Lead US$/lb Silver US$/oz Gold US$/oz Fx C$/US$ Revenues (C$millions) Zinc Lead Silver Gold Payable Metals ,658 By-Products (incl premiums) Total Revenues ,989 Reported in our financials Implied Revenue from volume * price Unreported products 75

76 Trail Metals Simplified Model Costs Quarterly Q1 11 Q2 11 Q3 11 Q Cost of sales (C$ millions) Concentrates Operating costs Distribution costs Depreciation and amortization Payable Metals (from previous) ,658 Cost of Concentrates (% of Payable Metals) 72% 74% 79% 78% 76% Operating Cost - $/t zinc & lead ,007 1, Distribution Cost - $/t zinc & lead D&A Cost - $/t zinc & lead Operating profit (loss) (C$ millions) Operating profit (loss) before depreciation Operating profit (loss) after depreciation Reported in our financials Derived Reported in our financials Costs of metals paid for relative to revenue - Varies with metal prices 76

77 Other Income Statement and Balance Sheet Items

78 Other Operating Expenses and Finance Items Consolidated Statements of Income (Unaudited) General and Admin costs Exploration Research and development Other operating income (expense) Pricing adjustments Share based compensation Closed property costs Finance expense Non-operating income (expense) Liability management transactions Year ended (Cdn$ in millions) 31-Dec-2011 Revenues $11,514 Cost of sales -6,637 Gross profit 4,877 Other operating expenses General and administration -125 Exploration -105 Research and development -17 Other operating income (expense) -174 Profit from operations 4,456 Finance income 113 Finance expense -595 Non-operating income (expense) 197 Share of losses of associates -5 Profit before tax 4,166 Provision for income and resource taxes -1,398 Profit $2,768 78

79 General and Administration Costs Vancouver office costs only 2007 ~2.6% of CoGS 2011 ~1.9% of CoGS C$ millions Other operating expenses Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 General and administration Averaging $33 million per quarter last two years 79

80 Exploration and R&D Costs Exploration costs All costs up to the creation of a reserve or resource All initial costs expensed Mineral property acquisition costs capitalized C$ millions Other operating expenses Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Exploration Research Costs Mainly CESL hydro-metallurgical technology development 80

81 Other Operating Income (Expense) Usual Items to Model for Pricing adjustments Share based compensation Closed property costs Unusual Items not to Model and Adjust for Asset sale gains Commodity derivatives Asset impairments OTHER OPERATING INCOME (EXPENSE) Year ended (Cdn$ in millions) 31-Dec-2011 Gain on sale of operating assets 130 Commodity derivatives 7 Pricing adjustments (210) Share-based compensation 21 Provision for closed properties (30) Asset impairment (30) Other (62) (174) 81

82 Pricing Adjustments Revenue Basics Majority of our metal sales from mines are as concentrates Concentrate sales priced off LME, but net of Tc/Rc s Pricing Adjustments Prices finalized 2-3 months after sale (1,2,3 Mama) Price risk is primarily the mines Financial Statement presentation Included in Other operating Income Taxes and minority interests shown on separate lines 82

83 Pricing Adjustments Pricing Adjustment effect on earnings Zinc example Pounds Sold 100M Price Change $0.10/lb Gross effect $10.0M Participation 75% Net Effect $7.5M Royalty $1.9M Pre Tax $5.6M Tax $1.5M Earnings effect $4.1M 83

84 Pricing Adjustments Q3 Example Outstanding at June 30, 2011 Outstanding at Sept 30, 2011 Settlement Adjustment (C$ M) Before Tax* Copper 150 M lbs $4.22 US$/lb 149 M lbs $3.24 US$/lb -$152 Million Zinc 103 M lbs $1.05 US$/lb 210 M lbs $0.87 US$/lb -$23 Million Lead - M lbs $- US$/lb 61 M lbs $0.93 US$/lb -$10 Million Other (moly, silver, etc.) -$7 Million Total Pricing Adjustments* -$192 million Settlement Adjustment = (Change in price Quarter-end to Quarter-end) x average pounds outstanding, less allowance for treatment and refining charges *Net of treatment and refining charges 84

85 Share Based Compensation Share Options Value based on Black Scholes - not subsequently adjusted Share units (DSU s RSU s) Cash Payout based on price of shares Expense Based on Market value of share Adjusted over the life of the unit 85

86 Share Based Compensation Timing of expense Directors grants vest immediately & expensed immediately Employees grants vest and expense over three years Volatility relates to vested Share units (1.6M) 86

87 Closed Property Costs Charges relate to re-measurement of liability Liability is present value of expected future costs Change in liability goes to P&L for closed properties Change can relate to Change in expected future costs Change in discount rate. 87

88 Finance Expense IFRS is more inclusive including more than just interest and aggregating items from additional sources Finance expense includes Interest based on effective interest rate Financing fees Pension accretion DRO accretion Less capitalized interest FINANCE EXPENSE Year ended (Cdn$ in millions) 31-Dec-2011 Debt interest (449) Financing fees and amortization (12) Pension liability accretion (101) Decommissioning and restoration provision accretion (52) Less interest capitalized 19 (595) Debt interest ~7.5% of average debt outstanding in

89 Finance Expense Effective Interest versus Coupon Takes into account Coupon Issue discounts Fees Net proceeds (cash inflows) to Net outflows = effective interest rate Example: Recent Bond Issue Principal Value US$1.00 billion US$500 million 3.000% notes due 2019 US$500 million of 5.200% notes due Net proceeds ~US$987 (deduction for fees offering expenses) Effective interest rate ~3.2% on 2019 s, 5.3% on 2042 s 89

90 Finance Expense Dec 31 Now Debt face value $7,100 $7,049 Coupon 6.68% 6.01% Debt Book Value $6,917 $6,911 Interest Rate 7.23% 6.30% Monthly accretion $2M $1M 90

91 Non-Operating Income (Expense) Foreign exchange gains Other derivative gains Debt Option Re-valuation Gain on sale of investments NON-OPERATING INCOME (EXPENSE) (Cdn$ in millions) Foreign exchange gains Other derivative gains Gain on sale of investments Year ended 31-Dec

92 Other Derivative Gains Debt Options Option to call debt valued as embedded derivative Debt Interest and Option Value Actual Interest Market Interest Difference Present Value

93 Bond Transaction Charge Q1 Liability Management Transaction Purchase Price$1,250 Face Value $1,000 Premium $ 250 Option Value $ 200 Pre-tax Loss $ 450 Taxes $ 110 Post-tax Loss $

94 2012 Guidance Production Coal Coal site costs Copper Zinc in Concentrate Refined Zinc M tonnes $72 78/ tonne k tonnes k tonnes k tonnes 94

95 2012 Capex Guidance Sustaining & Other Development Sustaining Development Copper Coal Zinc Energy (incl. Fort Hills Investment) Corporate 25 - $870 $647 Major Project Spending Quintette 340 QB Phase II 325 HVC Mill Expansion & extension stripping 300 Antamina Expansion 73 $1,038 Total (incl. Investment in Fort Hills) $2,555 95

96 Sustaining Capital $millions e Long Term Coal ~ 300 Copper ~ 250 Zinc ~ 100 Corporate ~ 25 Reflecting business structure post 2013, but prior to Fort Hills start-up and major Copper expansions Total ~

97 Income and Resource Taxes

98 Income and Resource Taxes Tax Rates by Jurisdiction Canada US Chile Peru Tax Provision vs Deferred Tax Canadian Tax Pools Overall effective tax rate Consolidated Statements of Income (Unaudited) Year ended (Cdn$ in millions) 31-Dec-2011 Revenues $11,514 Cost of sales -6,637 Gross profit 4,877 Other operating expenses General and administration -125 Exploration -105 Research and development -17 Other operating income (expense) -174 Profit from operations 4,456 Finance income 113 Finance expense -595 Non-operating income (expense) 197 Share of losses of associates -5 Profit before tax 4,166 Provision for income and resource taxes -1,398 Profit $2,768 98

99 Canadian Taxation Rates BC Mining (Coal & HVC) Other (Trail) Capital Gains (1/2) Income before taxes BC Mining Tax (13%) (130) 0 0 Net Income Taxable Income Income tax (combined Federal & BC at 25%) (218) (250) (125) Income after tax Effective Tax Rate 35% 25% 12.5% 99 *Tax rates in effect as of February 28, 2012

100 Canadian Taxation Deferred Taxes Tax Pools Canadian Development Expense (CDE) = $3.6 Billion 30% declining balance write-off Historical costs of resource properties (Fording) Net Operating Loss (NOL) = $4.7 Billion 100% write off Historical write offs in excess of income No current Canadian cash income taxes 100

101 Canadian Taxation Deferred Taxes Tax Pools How long will the pools last? Canadian entities have own tax pools & income streams Teck Resources Limited and Teck Metals Ltd. Canadian tax results do not consolidate 101

102 Canadian Taxation Other Points BC Mineral Tax Mine-by-mine generally allows immediate write off of costs incurred Income Tax allows accelerated write off of capital costs Historical costs of resource properties (Fording) Rule of thumb 25% declining balance starting after two years 102

103 US Taxation Red Dog Operations Statutory Tax Rates Federal 35% Blended State 4% Combined 39% Special Deductions: % depletion allowance is 22% on sales (capped at 50% of taxable income) Manufacturing deduction is 6% of net income Alaska Mining License Tax (AMLT): 7% 7% on operating profit (eligible for % depletion allowance at 15% of sales) AMLT deductible for federal income tax purposes 5% withholding tax on dividends 103

104 US Taxation Example Revenue 1,000 Less: Costs of sales 500 Net Income before AMLT 500 Less: AMLT 24 Net Income before % depletion 476 Deduct: % depletion 220 Taxable Income 256 Income Tax Rate at 39% 101 Total taxes 125 Effective Tax Rate 25% *Tax rates in affect as of February 28,