Record quarterly copper production and transformation to pure-play energy transition metals company

Teck Resources Limited (TSX: TECK.A and TECK.B) (NYSE: TECK) announced its unaudited second quarter results for 2024.

“We generated $1.7 billion of Adjusted EBITDA¹ in the second quarter driven by record copper production with QB ramp-up continuing, as well as strong copper market fundamentals with copper prices reaching all-time highs,” said Jonathan Price, President and CEO. “In early July, we completed the sale of our steelmaking coal business, and we now move forward as a pure-play energy transition metals company with leading copper growth. With cash proceeds of US$7.3 billion we will reduce debt, retain cash to fund our near-term copper growth, and return significant cash to our shareholders.”

Highlights

• Adjusted EBITDA¹ of $1.7 billion in Q2 2024 was driven by record copper production as Quebrada Blanca (QB) continues to ramp-up operations, as well as strong copper prices and steelmaking coal sales volumes. Profit from continuing operations before taxes was $658 million in Q2 2024.
• Adjusted profit from continuing operations attributable to shareholders¹ was $413 million, or $0.80 per share, in Q2 2024. Profit from continuing operations attributable to shareholders was $363 million, $0.70 per share, in Q2 2024.
• On July 11, 2024, we completed the sale of the remaining 77% interest in our steelmaking coal business, Elk Valley Resources (EVR) and received cash proceeds of US$7.3 billion, subject to customary closing adjustments. We will deploy the cash proceeds to reduce debt, fund our near-term copper growth, and return significant cash to our shareholders.
• With the proceeds from the sale of the steelmaking coal business, the Board authorized up to a $2.75 billion share buyback and approved payment of an eligible dividend of $0.625 per share, including a $0.50 per share supplemental dividend, payable on September 27, 2024 to shareholders of record on September 13, 2024. Combined with the $500 million share buyback announced in February, total cash returns to shareholders of $3.5 billion from the sale of the steelmaking coal business have been authorized.
• On July 15, 2024, we purchased US$1.4 billion of our public notes through a bond tender offer.
• Our liquidity as at July 23, 2024 is $14.3 billion, including $8.7 billion of cash. We generated cash flows from operations of $1.3 billion in Q2.
• We returned a total of $346 million to shareholders in the second quarter through the purchase of $282 million of Class B subordinate voting shares pursuant to our normal course issuer bid, and $64 million paid to shareholders as dividends.
• Record quarterly copper production of 110,400 tonnes in the second quarter, with QB producing 51,300 tonnes. QB production continues to ramp-up to full production rates with first molybdenum produced in the quarter.
• Copper prices (LME) averaged US$4.42 per pound in the second quarter with spot copper prices reaching all-time highs of US$4.92 per pound in the quarter.
• Red Dog had a strong second quarter with zinc production increasing by 4% from a year ago to 139,400 tonnes and lead production increasing by 23% to 28,900 tonnes.

Note:
1. This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.

Financial Summary Q2 2024

Notes:

1. The financial metrics presented for each period includes results from our steelmaking coal business because final regulatory approval of the sale of EVR was not received until July 4, 2024, and EVR was not classified as a discontinued operation as at June 30, 2024.
2. This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.

Key Updates

Executing on Our Copper Growth Strategy

• QB copper production of 51,300 tonnes in the second quarter increased compared to 43,300 tonnes in the first quarter of 2024, as quarter over quarter production ramp-up continues.
• First molybdenum production and sales at QB in the quarter, as planned, with ramp-up progressing.
• Robust plant design and construction supports debottlenecking, and we remain focused on recovery and throughput. We continue to expect to be operating at full rates by the end of 2024.
• Throughput has improved and is close to design rates. Recoveries have improved as we adjust to the clays in the transition ores and improve plant stability. We have confidence in achieving target recoveries by the end of 2024. We are forecasting slightly lower grades in the second half of 2024 compared to plan due to short term access issues related to pit de-watering and a localized geotechnical issue. As a result, we have updated our previously disclosed annual 2024 QB production guidance for copper to 200,000 to 235,000 tonnes and molybdenum to 1.8 to 2.4 thousand tonnes.
• We continued to advance our industry-leading copper growth portfolio in the second quarter, with the focus on progressing feasibility studies and permitting, advancing detailed engineering work, and planning for project execution. At QB, we progressed work to define the near term debottlenecking opportunities. We achieved milestones in the permitting processes for HVC MLE and San Nicolás projects, and advanced the preparation of construction permits and feasibility study updates to support the next stages of Zafranal project development.

Sale of the Steelmaking Coal Business

• On July 11, 2024, we completed the sale of our remaining 77% interest in our steelmaking coal business, EVR, to Glencore and received transaction proceeds of US$7.3 billion, subject to customary closing adjustments.
• On July 4, 2024, we announced our intention to allocate the transaction proceeds consistent with Teck’s Capital Allocation Framework. This includes the repurchase of up to $2.75 billion of Class B subordinate voting shares, a one-time supplemental dividend of approximately $250 million, a debt reduction program of up to $2.75 billion, funding retained for our value-accretive copper growth projects, and approximately $1.0 billion for final taxes and transaction costs.
• In our second quarter 2024 News Release, Management’s Discussion and Analysis, and Condensed Interim Consolidated Financial Statements, EVR continues to be reported in continuing operations because final regulatory approval of the sale of EVR was not received until July 4, 2024. Beginning in the third quarter of 2024, EVR results will be presented as discontinued operations.

Safety and Sustainability Leadership

• Our High-Potential Incident (HPI) Frequency rate was 0.11 for the first half of 2024, a 46% reduction in HPI’s compared to the same period last year.
• Teck was named one of the Best 50 Corporate Citizens in Canada by Corporate Knights for the 18th consecutive year.

Guidance

• Our previously disclosed guidance has been updated for changes to our 2024 annual copper and molybdenum production, and copper net cash unit costs¹ as a result of changes to our 2024 annual production and net cash unit cost¹ guidance for QB.
• Our 2024 annual copper production guidance has been revised to 435,000 to 500,000 tonnes. Our 2024 annual molybdenum production guidance has been revised to 4.3 to 5.5 thousand tonnes. Copper net cash units costs¹ (including QB) guidance has been revised to US$1.90 to $2.30 per pound.
• Given the completion of the sale of EVR on July 11, 2024, we have removed all steelmaking coal business unit information from our Outlook and Guidance disclosures. Our guidance is outlined in summary below and our usual guidance tables, including three-year production guidance, can be found on pages 28-32 of Teck’s second quarter results for 2024 at the link below.

Note:

1. This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.

Click here to view Teck’s full second quarter results for 2024.

USE OF NON-GAAP FINANCIAL MEASURES AND RATIOS

Our annual financial statements are prepared in accordance with IFRS^® Accounting Standards as issued by the International Accounting Standards Board (IASB). Our interim financial results are prepared in accordance with IAS 34, Interim Financial Reporting (IAS 34). This document refers to a number of non-GAAP financial measures and non-GAAP ratios, which are not measures recognized under IFRS Accounting Standards and do not have a standardized meaning prescribed by IFRS Accounting Standards or by Generally Accepted Accounting Principles (GAAP) in the United States.

The non-GAAP financial measures and non-GAAP ratios described below do not have standardized meanings under IFRS Accounting Standards, may differ from those used by other issuers, and may not be comparable to similar financial measures and ratios reported by other issuers. These financial measures and ratios have been derived from our financial statements and applied on a consistent basis as appropriate. We disclose these financial measures and ratios because we believe they assist readers in understanding the results of our operations and financial position and provide further information about our financial results to investors. These measures should not be considered in isolation or used as a substitute for other measures of performance prepared in accordance with IFRS Accounting Standards.

Adjusted profit from continuing operations attributable to shareholders – For adjusted profit from continuing operations attributable to shareholders, we adjust profit from continuing operations attributable to shareholders as reported to remove the after-tax effect of certain types of transactions that reflect measurement changes on our balance sheet or are not indicative of our normal operating activities.

EBITDA – EBITDA is profit before net finance expense, provision for income taxes, and depreciation and amortization.

Adjusted EBITDA – Adjusted EBITDA is EBITDA before the pre-tax effect of the adjustments that we make to adjusted profit from continuing operations attributable to shareholders as described above.

Adjusted profit from continuing operations attributable to shareholders, EBITDA and Adjusted EBITDA highlight items and allow us and readers to analyze the rest of our results more clearly. We believe that disclosing these measures assists readers in understanding the ongoing cash-generating potential of our business in order to provide liquidity to fund working capital needs, service outstanding debt, fund future capital expenditures and investment opportunities, and pay dividends.

Adjusted basic earnings per share from continuing operations – Adjusted basic earnings per share from continuing operations is adjusted profit from continuing operations attributable to shareholders divided by average number of shares outstanding in the period.

Adjusted diluted earnings per share from continuing operations – Adjusted diluted earnings per share from continuing operations is adjusted profit from continuing operations attributable to shareholders divided by average number of fully diluted shares in a period.

Gross profit before depreciation and amortization – Gross profit before depreciation and amortization is gross profit with depreciation and amortization expense added back. We believe this measure assists us and readers to assess our ability to generate cash flow from our business units or operations.

Total cash unit costs – Total cash unit costs for our copper and zinc operations includes adjusted cash costs of sales, as described below, plus the smelter and refining charges added back in determining adjusted revenue. This presentation allows a comparison of total cash unit costs, including smelter charges, to the underlying price of copper or zinc in order to assess the margin for the mine on a per unit basis.

Net cash unit costs – Net cash unit costs of principal product, after deducting co-product and by-product margins, are also a common industry measure. By deducting the co- and by-product margin per unit of the principal product, the margin for the mine on a per unit basis may be presented in a single metric for comparison to other operations.

Adjusted cash cost of sales – Adjusted cash cost of sales for our copper and zinc operations is defined as the cost of the product delivered to the port of shipment, excluding depreciation and amortization charges, any one-time collective agreement charges or inventory write-down provisions and by-product cost of sales. It is common practice in the industry to exclude depreciation and amortization, as these costs are non-cash, and discounted cash flow valuation models used in the industry substitute expectations of future capital spending for these amounts.

Profit from Continuing Operations Attributable to Shareholders and Adjusted Profit from Continuing Operations Attributable to Shareholders

Note:

1. Profit from continuing operations attributable to shareholders and adjusted profit from continuing operations attributable to shareholders for each period reported includes results from our steelmaking coal business because final regulatory approval of the sale of EVR was not received until July 4, 2024, and EVR was not classified as a discontinued operation as at June 30, 2024.

Reconciliation of Basic Earnings per share from Continuing Operations to Adjusted Basic Earnings per share from Continuing Operations

Reconciliation of Diluted Earnings per share from Continuing Operations to Adjusted Diluted Earnings per share from Continuing Operations

Reconciliation of EBITDA and Adjusted EBITDA

Note:

1. EBITDA and adjusted EBITDA for each period reported includes results from our steelmaking coal business because final regulatory approval of the sale of EVR was not received until July 4, 2024, and EVR was not classified as a discontinued operation as at June 30, 2024.

Reconciliation of Gross Profit Before Depreciation and Amortization