Global Metals & Mining/Steel Conference. November 20, 2014

Transcription

1 Global Metals & Mining/Steel Conference November 20, 2014

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 management s expectations with respect to our diversification and the benefits of diversification, production, costs and sales targets and guidance, mine lives, costs for our projects, timing of production at our Pend Oreille and Fort Hills projects, anticipated economic benefits of our Pend Oreille and Fort Hills projects, including, but not limited, free cash flow, the anticipated results of our cost reduction program, dividend policy, our investment rating, capital expenditure guidance, demand and market outlook for commodities. 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 steel, 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, receipt of permits to mine, 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 assumption that our board will approve dividends, 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 events, 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. Our Fort Hills project is not controlled by us and construction, sanction and production schedules may be adjusted by our partners. Credit agencies set our credit rating. Certain of these risks are described in more detail in Teck s annual information form available at and in public filings with the SEC at Teck does not assume the obligation to revise or update these forwardlooking 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 Zinc Market Positioned for Change LME Zinc Stocks - 11 Years 250 1,400 LME Zinc Stocks Since Dec ,240 US /lb ,200 1, thousand tonnes US /lb ,140 1, thousand tonnes Stocks Price plotted to Oct 24, Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Stocks Price 640 plotted to Oct 24, 2014 LME stocks down about 458 kt over 20 months Large inventory position to work down Large, sudden increases in indicate there are significant off-market inventories as well Mine closures to alter supply / demand balance 4 Source: LME

5 China s Growth Is Strong In Absolute Terms In absolute terms, China s GDP growth is ~50% greater than 10 years ago Rmb (billions) 3,500 3,000 2,500 2,000 1,500 1,000 Real GDP Growth % = RMB2.84trn % = RMB2.95trn 14% 12% 10% 8% 6% 4% F Increment of GDP, Rmb bn (lhs) GDP real growth (rhs) 2% 0% Lower GDP growth rate on a higher base = strong absolute growth 5 Source: NBS&CEIC

6 Further Cuts Needed in the Steelmaking Coal Market Seaborne Metallurgical Coal Margin Curve at Spot Price of US$115/t ~25 Mt of production cuts announced - Lag to full implementation - Market imbalance ~10 to 15 Mt Teck Margin curve shows around one third of seaborne met coal is operating at negative margin 1 - Implies further cuts are warranted Market balance dependent on additional production cuts Brackets indicate producers closed or still supplying but due to close or deplete inventory 6 Source: Wood Mackenzie, Platts, TEX Report, AME, company & news reports and Teck Resources estimates 1. On an operating basis, excluding sustaining capital costs

7 Investment Grade Credit Rating Our long-term targets are consistent with maintaining mid-bbb credit rating Ratios may vary from targets periodically, reflecting commodity price cycles and corporate activity Our debt to debt+equity target is more conservative than our financial covenant - Bank credit facility requires <50% Ratio Long-Term Target Debt to Debt+Equity ~30% Debt to EBITDA EBITDA to Interest ~2.5x ~6.0x Committed to maintaining investment grade credit rating 7

8 Strong Balance Sheet* Investment Grade Credit Rating of Mid-BBB US$M $3,000 $2,000 $1,000 ~US$1.7B* Liquidity of ~$5 Billion Weighted average maturity ~15 years Weighted average coupon (interest rate) 4.8% Note maturities average <US$600M US$300M of notes due to end of 2016 Unused US$3B line of credit $0 Cash position Debt Maturity 8 * All figures as at September 30, 2014

9 Returning Cash To Shareholders Aim to pay a sustainable dividend that grows commensurate with growth in earnings and cash flow - Current dividend: semi-annual payment $0.45; annualized $0.90 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 Normal Course Issuer Bid in place for $0.10 up to 20M shares $- Annualized Dividend Payout 9

10 Significant Reductions in Operating Costs and Capex Total of $590M of annualized operating cost reductions realized since 2H2012 Capital spending plans for 2014 reduced significantly from the start of the year, to ~$1.5B 10

11 2014 Outlook UPDATED (October 29, 2014) Production & Site Cost Guidance Guidance Steelmaking Coal Coal production Mt Coal site costs C$52-55 /t Coal transportation costs C$37-39 /t Coal costs combined* US$79-84 /t Copper Copper production kt Copper cash unit costs (net of by-product margins) US$ /lb Zinc Zinc in concentrate production kt Refined zinc production kt Including co-product zinc production from our copper business unit. * At current exchange rates

12 Fort Hills Economics Robust Potential Contribution from Fort Hills at US$100 WTI* Fort Hills Free Cash Flow Yield 1 Sensitivity to WTI Price Teck s share of annual production (36,000 bpd) Estimated netback Estimated operating margin Alberta oil royalty Phase 1 (prior to capital recovery) Estimated net margin Annual pre-tax cash flow 13 Mbpa ~$65/bbl ~$40/bbl ~$5/bbl ~$35/bbl ~$455 M 40% 35% 30% 25% 20% 15% 10% 5% Teck s share of go-forward capex ~$2,940 M Free cash flow yield 1 ~15% 0% WTI Price US$/bbl The Fort Hills project is expected to have significant free cash flow yield at a range of WTI prices 12 Source: Teck Resources Limited 1. Pre-tax free cash flow yield during capital recovery period. * Estimates are based on $1.05 CAD / USD example exchange rate, expected bitumen netbacks, and operating costs of C$25-28 per barrel, including sustaining capital of C$3-5 per barrel. Gross revenue is project revenue based on the expected product transfer price at point of transfer from project facilities. Go-forward 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.

13 Global Metals & Mining/Steel Conference November 20, 2014