Fort Hills Sanctioning Investor Conference Call & Webcast

Transcription

1 Fort Hills Sanctioning Investor Conference Call & Webcast October 31, 2013

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). Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Teck and the Fort Hills project 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 primarily to the Fort Hills project, including statements regarding mine life, expected production, compliance with regulations, cash margins and cash flow from the project, capital, operating and sustaining cost estimates and our marketing and logistics options for our portion of Fort Hills production. Other forward-looking statements relate to our plans for the Frontier and Lease 421 projects, expectations for global energy production and demand and our energy strategy. The forward-looking statements are based on certain assumptions, some of which are noted in this slide. Management s expectations of mine life are based on the current planned production rate and assume that all resources described in this news release are developed. In general, estimates of bitumen are based upon a number of factors and assumptions made as of the date on which the resource estimates were determined, such as geological and engineering estimates, which have inherent uncertainties. Production timing and rate, capital investment and project costs and water quality and environmental standards are based on, among other factors, the approved project development plan and the assumption that the project will be developed and operated in accordance with that plan. Certain forward-looking statements are based on assumptions regarding the price for Fort Hills product and the expenses for the project. In addition, certain statements are based on assumptions regarding general business and economic conditions, market competition, our ongoing relations with our partners and joint venturers, performance by customers and counterparties of their contractual obligations, and the future operational and financial performance of the company generally. The foregoing list of assumptions is not exhaustive. Events or circumstances could cause actual results to differ materially. Factors that may cause actual results to vary include, but are not limited to: adverse developments in business and economic conditions, risk that the development and operation of the Fort Hills project may not occur in the manner currently contemplated and the results of such development may not be as currently anticipated, risks that resource estimates may prove incorrect, unanticipated operational difficulties and failure of customers or counterparties to perform their contractual obligations. Fort Hills has contingent resources and there is no certainty that it will be commercially viable to produce contingent resources Certain of these risks are described in more detail in the annual information form of the company available at and in public filings with the SEC. The company 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. 2

3 Fort Hills Sanctioning Speakers Don Lindsay Ray Reipas President & CEO Senior Vice President, Energy 3

4 Mined Oil Sands Are In Teck s Sweet Spot Strategic diversification Large truck & shovel mining projects World-class resources Long-life assets Competitive margins Minimizing execution risk Tax effective Mining-friendly jurisdiction 4

5 Strategic Diversification Into Energy Energy Production Universe* Mining E&P Key Renewables Thermal Coal Oil Hydro-Electric Uranium Gas Not investing here Wind Bitumen Solar Adding mined oil sands to Teck s portfolio is a strategic diversification that transforms energy into a significant business unit - Bitumen is a consumer-driven commodity Many world-class diversified mining firms have significant mined energy production e.g. BHP Billiton, Rio Tinto, Anglo American, Glencore Xstrata 5 Shaded areas indicate Teck s energy production portfolio.

6 Leverages Core Competency In Large Truck & Shovel Projects In Teck s Current Operations 34 of the largest mining shovels, including 10 of the 72 yard class shovels planned for Fort Hills 250 large-scale mining trucks at 8 similar operations in coal and copper This core competency, combined with knowledge & capabilities gained at Fort Hills, will provide a foundation for creating value at all of Teck s oil sands assets 6

7 World-Class Energy Resources Contingent Bitumen Resources Millions of Barrels Teck s Share Low Best High Low Best High Fort Hills 1 2,460 3,310 3, Frontier 2 1,795 2,824 3,163 1,795 2,824 3,163 Lease 421 Project Total Still to be declared 4,255 6,134 7,003 2,287 3,486 3,931 No Exploration Risk No Large Finding Costs 7 Notes: 1. Contingent Resources - GLJ Petroleum Consultants, December Contingent Resources - Sproule Unconventional Limited, December 2012

8 Oil Production With >50 Year Reserves Lives Are Very Rare 70 Reserve Life Ratios for the 10 Largest Publicly-Traded Oil Producing Companies (Years) Fort Hills mine life expected to be > 50 years Source: Teck, Capital IQ

9 Margins Competitive with Low Quartile Copper Mining Projects Typical Bitumen Producer Bitumen netback $60/bbl Low-Quartile Cost Copper Mine LME Price $3.25/lb Cash Margin $35 58% Margin Cash Margin $ % Margin Cash Costs $25 Cash Costs $1.25 Fort Hills cash margins are expected to be comparable to the lowest cost mining operations 9

10 Projects Located in One of The Most Mining-Friendly Jurisdictions Athabasca Oil Sands Alberta, Canada Oil Sands Mining Projects Fort Hills Suncor 40.8% (Operator) Total 39.2% Teck 20.0% Frontier Teck 100% Frontier Twin Lakes Lease 421 Area Lease 421 Area Teck 50% Fort Hills 10

11 Fort Hills Project Will Make Teck A Mid-Sized Canadian Oil Producer Canadian Oil Production in 2012 (bpd) 120, ,000 80,000 60,000 bpd 40,000 20,000 - Bonavista Energy Corp MEG Energy Corp Lightstream Resources Teck Fort Hills Devon Canada Corp Arc Resources Ltd Baytex Energy Corp Crescent Point Energy Corp Canadian Oil Sands Ltd 11 Source: TSX, annual reports & Alberta Oil Magazine *2012 production figures; on a bitumen basis or other pre-blending basis

12 Global Energy Needs Increasing Global oil demand to increase over the next 20 years Depletion rates are higher New oil production required to replace existing oil fields New sources increasingly costly to find and develop As incomes rise, demand for resources increases and a similar curve is likely in China and India 12 Source: IEA, Global Insight, McKinsey

13 Increasing Energy Production Planned Over The Next 15 Years Teck s Potential Production Profile (kbpd) Teck s share of production could eventually be 200, ,000 bpd 13 * Order of magnitude estimate based on $100 oil price and expected bitumen discount and production costs

14 Fort Hills Sanctioning Speakers Don Lindsay Ray Reipas President & CEO Senior Vice President, Energy 14

15 FORT HILLS Teck s Oil Sands Project Partnership Large truck & shovel mining project in the Athabasca oil sands, Alberta, one of the most mining-friendly jurisdictions 20% ownership, with strong partners - Working with Suncor, the most experienced oil sands operator (40.8%) - Strong partner in Total E&P Canada (39.2%) World-class resource & expected to have a mine life >50 years Robust project economics Multiple options for marketing and logistics Knowledge & capabilities gained at Fort Hills will provide a foundation for creating value at all of Teck s oil sands assets 15

16 FORT HILLS One of the Best Undeveloped Oil Sands Mining Leases Strip Ratio vs. Ore Grade (TV:BIP vs. Wt% Bitumen) Fort Hills billion bbls of contingent resources* - 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) 13 Frontier TV:BIP Ore grade is a function of the bitumen quantity in the deposit Ore Grade (wt% bit) 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 - Scheduled to produce first oil as early as Q Expect 90% of planned production capacity within 12 months 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) 16 Source: Teck * Best estimate of recoverable barrels of bitumen.

17 FORT HILLS Competitive Costs 1 Fully Escalated Go-Forward Capital 2 Capital Cost Per Flowing Barrel (C$000 per barrel/day) Project Capital: ~C$13.5 billion Teck Capital: ~C$2.94 billion over four years ( ) ~ 27.5% of the next $3.2 billion in project capital spending (expected by early 2015) and then 20% thereafter Includes remaining earn-in of C$240M Operating & Sustaining Costs: C$25 to $28/bbl total Sustaining C$3-5/bbl (included in above) Excludes diluent purchase Costs $Thousands per Barrel/day $140 $120 $100 $80 $60 $40 $20 $0 Full project cost including spent to date: C$84 Project 1 Project 2 Fort Hills To be financed by a combination of cash balance, free cash flow over the four year period and $2B unused line of credit All costs and capital are based on Suncor s estimates. 2. 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.

18 FORT HILLS Minimizing Execution Risk Suncor has completed 4 projects of ~$20 billion over last 5 years, all under budget All major approvals in place Cost-driven schedule - Cheaper rather than sooner Disciplined engineering approach - majority of project has completed Engineering Design Specification Shovel Ready - significant site work including camp and infrastructure started Global sourcing of engineering and module fabrication Efficient manpower profile ~15% of total capital already invested Benefiting from Suncor s operational and project development experience 18

19 FORT HILLS Multiple Marketing Options Options for Teck s Share of Diluted Bitumen (~50,000 bpd) 1. Teck Marketing 2. Third-Party Marketing 3. Third-Party Marketing; Then Teck Marketing Experience with complex products Additional support available from consultants Contract out Contract out initially Take over marketing in the future Teck has multiple marketing options to consider over the next four years 19

20 FORT HILLS Multiple Options For Western Canadian Market Access Common Carriage Pipeline No take or pay commitments When pipe capacity is constrained, access to capacity may be apportioned and netback prices are discounted Western Canada Contract Carriage Pipeline Typically requires year take or pay commitments Firm, secure access to capacity, and netbacks are linked to international benchmark related prices Rail More expensive (may require additional capital) Has the flexibility to alter destinations based on market conditions Firm, secure access to capacity, and netbacks are linked to international benchmark related prices Markets Traditional Markets US Gulf Coast Eastern Canada / US East Coast West Coast Exports East Coast Exports 20

21 FORT HILLS Enbridge Pipelines Suncor East Tank Farm Norlite Pipeline (new diluent) Norealis Terminal Woodland Pipeline Wood Buffalo Pipeline (existing) Cheecham Terminal Norlite Pipeline (new diluent) Athabasca Pipeline Fort Hills Blend Line (new) Kirby Lake Terminal Waupisoo/Woodland Pipeline Edmonton Terminal Athabasca Pipeline Fort Hills Blend Line (new) Hardisty Terminal 21

22 FORT HILLS Growing Take-Away Capacity In North American Pipelines Keystone XL Northern Leg Routing Size Hardisty to Cushing Timing kbpd Enbridge Northern Gateway Routing Size Edmonton to Kitimat Timing kbpd Fort Hills Enbridge Line 9 Reversal Routing Size TCPL Eastern Oil Pipeline Routing Size Hardisty to Quebec City / Saint John 1,100 kbpd Timing Sarnia to Montreal 300 kbpd Timing Kinder Morgan TMX Routing Size Edmonton to Burnaby 590 kbpd Timing Keystone XL Southern Leg Routing Size Timing 2014 Cushing to Houston/Port Arthur kbpd Legend Under construction or expected to start construction soon Additional proposed projects Enbridge Flanagan South Routing Size Flanagan to Houston kbpd Timing Q Other Mid-Continent to USGC Routing Size Cushing / West Texas to USGC ~1,500 kbpd total Timing Source: CAPP

23 FORT HILLS Bitumen Netback Bitumen Netback Calculation Example* Typical Diluted Bitumen (Dilbit) Blend Western Canadian Select (WCS) at Hardisty $120 $100 $100 $80 $60 $40 $95 $81 $60 ~25% Diluent $20 $0 ~75% Bitumen Teck seeks to secure dedicated transportation capacity for Fort Hills volumes to key markets, including the US Gulf Coast, to minimize WCS discount 23 Source: Alberta Energy bitumen valuation methodology ( * Based on example exchange rate of $1.05 CAD/USD

24 FORT HILLS A Great Value Proposition Working with Suncor, the most experienced oil sands operator One of the best undeveloped oil sands mining leases Multi-decade asset life Solid project economics Builds Teck s energy business unit 24

25 Fort Hills Sanctioning Speakers Don Lindsay Ray Reipas President & CEO Senior Vice President, Energy 25

26 Mined Oil Sands Are In Teck s Sweet Spot Strategic diversification Large truck & shovel mining projects World-class resources Long-life assets Competitive margins Minimizing execution risk Tax effective Mining-friendly jurisdiction 26

27 Fort Hills Sanctioning Investor Conference Call & Webcast October 31, 2013