Key Success Factors for a Mining Project in a Time of Market Volatility


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This keynote presentation by Donald Lindsay, CEO, Teck Resources featured at Mines and Money Hong Kong in March 2012.

Topic: Key Success Factors for a Mining Project in a Time of Market Volatility

Perspectives on the makjet climate and implications for the industry
Right project, right, right team: Building blocks for success
Resource nationalism: Engaging with local partners to create a win-win

Donald Lindsay,
CEO, Teck Resources

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Key Success Factors for a Mining Project in a Time of Market Volatility

  1. 1. March 20, 2012
  2. 2. Our Cover Photos Red Dog Mine, located in Alaska, is one of the world’s largest zinc mines. Zinc is an essential nutrient for brain development and growth in children. Tragically, up to one-third of the world’s population does not get enough zinc in their diets. That’s why Teck and the zinc industry are working with UNICEF on the Zinc Saves Kids program to provide zinc supplements to children in need in developing countries. Bob Hamaguchi and W.E. Stanley cast their lines in quest of rainbow trout on Trojan Pond, a former tailings pond at our Highland Valley Copper mine. Trojan Pond is the site of an annual fly fishing tournament that raises funds for Royal Inland Hospital in Kamloops, BC., and is a living example of a successful reclamation program.
  3. 3. Our Cover Photos People like Gene Veilette, a haul truck driver at our Highland Valley Copper Mine, are Teck’s most important asset. We strive to create a company that is a special place to work for our employees, where a “safety first” approach permeates our culture. This small frog can tell a big story. A frog living downstream from a mine is a sign of an ecologically sound, well-managed operation. It means we are doing our job, using environmentally sensitive techniques to extract the metals that all of us use in our everyday lives.
  4. 4. 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
  5. 5. 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
  6. 6. Building a Leading Diversified Mining Company Ranking Producer of metallurgical coal in N. America #1 Exporter of metallurgical coal in world #2 Zinc miner in world(1) Top 3 Copper growth potential over next 5-7 years 2x Note 1: Brook Hunt, 20094
  7. 7. TECK RESOURCES–DIVERSIFIED PORTFOLIO ‘Stay the Course’ Strategy Low-cost Coal Incremental Growth Brownfield Copper Expansion Building Energy Resources Converting Resources to Cash Flow5
  8. 8. TECK RESOURCES Strong and Growing Cash Flow $ millions Record results * d ~20% CAGR Tren %* CAGR Trend ~23 *Note: cash flows before asset sales, tax deferrals etc.6
  9. 9. Strong Financial Position December 2011 Net Debt to Net Debt + Equity 13% Debt / EBITDA 1.3x EBITDA / Interest 11.3x($millions) Weighted average term to maturity: 15.2 Years Overall Debt Maturity Profile Weighted average coupon rate: 6.0% Year Mid Triple-B Ratings from All Major Agencies7
  10. 10. TECK RESOURCES Growing Global Middle Class* 3 Billion increase by 2030 • 700 million increase (million) 1980 to 2009 • 3 billion increase 2010 to 2030 • Most resource intensive period of economic growth Source: OECD, Jan 2010 *Daily per capita spending $10 to $100 in PPP terms8
  11. 11. Global Steel Consumption to Grow 1 Billion Tonnes by 2030 (million tonnes) Forecast Global Steel Demand Requires ~500 million tonnes +80% more coking coal Source: McKinsey Global Institute 20119
  12. 12. TECK RESOURCES China: Hard Landing or Soft Landing? GDP GDP Industrial Production Industrial Production FY: 9.2% Q4: 8.9% FY: 9.2% Q4: 8.9% FY: 13.9% Q4: 12.8% FY: 13.9% Q4: 12.8% Fixed Asset Investment Fixed Asset Investment Retail Sales Retail Sales FY: 23.8% FY: 23.8% FY: 17.1% FY: 17.1% Neither: Managed Growth (at a lower trajectory)10
  13. 13. AGENDA Delivering Results and Future Growth Coal Copper Zinc Energy11
  14. 14. TECK COAL – A CLOSER LOOK Growth in Global Steel Market Global Production Over the Last +20 years • 2000: China ~15% of global crude steel production • 2011: China ~46% of global crude steel production 1990-1995: 12% • Global (ex.China): production +15% over the same period 1990-1995: 51% Source: WSA12
  15. 15. TECK COAL – A CLOSER LOOK China’s Changing Steel Industry• 12th 5-year plan Domestic Steel announced Nov 2011 (Mt) Consumption• North east & central coastal regions: complete existing projects• Central region: industry- wide upgrade and restructuring Central• South-East Coast: New capacity in Guangdong (Zhanjiang), Guangxi tC oas t s (Fangcheng) and Fujian -Ea So uth (Ningde) *Source: MIIT forecast13
  16. 16. TECK COAL – A CLOSER LOOK China’s Move Toward Larger Furnaces Mt Capacity by Blast Furnace Size Coke Quality Requirement by Blast Furnace Size Teck Measure 1000m3 3000m3 5000m3 HCC Ash (%) ≤13.0 ≤12.5 ≤12.0 <10 S (%) ≤0.7 ≤0.65 ≤0.6 <0.55 CSR (%) ≥58 ≥63 ≥66 70-74 Source: Wuhan Iron and Steel Corporation, Wuhan, China14
  17. 17. TECK COAL – A CLOSER LOOK Increasing Production from Existing Six Operations Mt Annual Coal ProductionTargeting 28Mtpa 2013 • Production ‘12e vs. ‘11: +10% • Increasing fleet size • Modernizing plant • Adding people • Stabilizing strip ratio Source: Teck Resources, 2012 guidance 24.5 to 25.5mt15
  18. 18. TECK COAL – A CLOSER LOOK Quintette Re-startTargeting 3 Mtpa, 2013 start-up • Trucks, shovels, drills have been ordered • Permitting & stakeholder consultation proceeding • Residential units acquired in Tumbler Ridge • $340M capex for 2012 Existing plant at Quintette16
  19. 19. AGENDA Delivering Results and Future Growth Coal Copper Zinc Energy17
  20. 20. TECK COPPER – A CLOSER LOOKChinese Copper Imports Remain Strong China now accounts for more than 40% Record of global copper consumption Imports000’s tonnes (content) Source : Antaike 18
  21. 21. TECK COPPER – A CLOSER LOOK Growing Copper Production kt Annual Copper Production Low cost brownfield projects • Andacollo concentrator • Highland Valley Copper • Antamina expansion ‒ +30% ore first half 2012 Source: Teck Resources, 2012 Guidance19
  22. 22. TECK COPPER – A CLOSER LOOK Quebrada Blanca Phase II 200 kt Copper Production • Finalizing feasibility study • Safe geo-political jurisdiction; low permitting risk • Large resource: 200ktpa copper + 5ktpa molybdenum over 39 year mine life • Low strip ratio • No technology challenges – clean concentrate • Recent concentrator construction experience (Andacollo) South America20
  23. 23. TECK COPPER – A CLOSER LOOK Relincho Project (100% Teck) 180kt Copper Production • Central Chile, low altitude, access to infrastructure, and local workforce • Pre-feasibility completed Q3 2011: US$3.9b capex, 180ktpa contained copper, 6ktpa contained moly, 22-yr mine life, cash costs ~US$1.30/lb • 3.0Mt contained copper resource; upside potential • Full feasibility expected Q1 2013 South America21
  24. 24. AGENDA Delivering Results and Future Growth Coal Copper Zinc Energy22
  25. 25. TECK ZINC – A CLOSER LOOK World Class Assets Red Dog (100%) Red Dog • Exceptional zinc grades • One of the largest zinc mines in the world • 572,000 tonnes produced in 2011 • Outstanding exploration potential Antamina (22.5%) • Low cost, long life copper/zinc mine • One of the world’s largest zinc producers – 53,000 tonnes produced in 2011 (Teck’s share) • Expansion proceeding Trail (100%) • 1st quartile operating margin • Fully integrated zinc and lead operations • Captive hydro-electric power23
  26. 26. AGENDA Delivering Results and Future Growth Coal Copper Zinc Energy24
  27. 27. TECK ENERGY – A CLOSER LOOK Target for > 30 kbpd by 2016 Land Position post SBE Transaction• Consistent with diversification strategy• Core competencies: Open-pit, truck & shovel• Large long-life resource, low exploration risk• Safe jurisdiction25
  28. 28. TECK ENERGY – A CLOSER LOOK Growing our Resource Base Contingent Bitumen ResourceToday: billion bbls•Teck’s share: ~2.1 billion barrels ofbitumen resource•20% interest in Fort Hills & 50%interest in Frontier/EquinoxPost-SBE transaction:•100% interest in Frontier/Equinox•Resources: over 3.5 billion bbls•Lease 421 still to come26
  29. 29. TECK ENERGY – A CLOSER LOOKBuilding a Substantial Energy Business Teck’s Potential Oil Sands Production vs.Top 10 Canadian Oil Sands Producers (2010)Thousand Barrels per Day Market $56bn $41bn $11bn $42bn Cap: Market cap as at Feb 22, 2012 Source: Bloomberg, Teck estimates assuming Frontier at 50%, Lease 421 at 50%27
  30. 30. TECK RESOURCES Delivering Results and Future Growth Coking Coal Growing high quality production Crucial raw material for steelmaking Copper Expanding production Strong assets geared toward future growth Zinc World class operations 1st quartile cash costs Energy Emerging oil producer Creating value in Oil Sands assets28
  31. 31. March 20, 2012