Teck Resources Limited (TSX: TECK.A and TECK.B) (NYSE: TECK) announced its unaudited third quarter results for 2023.

“We made solid progress on the ramp-up of our flagship QB2 copper project, generating gross profit in the third quarter, and we remain on track to achieve design throughput by year end,” said Jonathan Price, CEO. “Positive financial performance was driven by continued strong commodity prices, partially offset by lower steelmaking coal sales due to supply chain disruptions – resulting from the B.C. port strike and wildfires – in the quarter.”

Highlights

• Adjusted profit attributable to shareholders¹ of $399 million, or $0.77 per share, in Q3 2023.
• Profit from continuing operations attributable to shareholders of $276 million, or $0.53 per share, in Q3 2023.
• Adjusted EBITDA¹ was $1.2 billion in Q3 2023, driven by robust prices for copper and steelmaking coal and higher base metals sales volumes. Profit from continuing operations before taxes was $589 million in Q3 2023.
• Sales volumes in our copper and zinc business units were higher than the same period last year. QB2 continued to ramp-up operations with production of 18,300 tonnes of copper and sales of 14,300 tonnes generating gross profit before depreciation and amortization¹ of $19 million in the third quarter.
• The QB2 plant is performing well and we continue to expect to achieve design throughput at QB2 by the end of 2023.
• Steelmaking coal prices remain robust, driven by supply constraints and strong demand, particularly from India and China. Prices rose through the third quarter and into October, with FOB premium spot prices trading at US$343 per tonne as of October 23, 2023. Our high-margin steelmaking coal business unit is well positioned to continue to deliver strong financial performance in the fourth quarter.
• We generated cash flows from operations of $736 million, ending the quarter with a cash balance of $1.3 billion.
• Our liquidity as at October 23, 2023 is $7.0 billion, including $1.5 billion of cash.
• We continue to advance our copper growth portfolio. In the third quarter, we completed the feasibility study for our HVC 2040 project and submitted the Project Environmental Assessment to the Environmental Assessment Office of British Columbia in October 2023.

Financial Summary Q3 2023

Note:
1.  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 – QB2 a long-life, low-cost operation with major expansion potential

• QB2 generated gross profit before depreciation and amortization¹ of $19 million in the third quarter.
• Line 2 fully commissioned at the end of September, benefiting from the learnings from Line 1 commissioning with a faster, more effective ramp-up schedule.
• At the end of the third quarter the plant has been operating consistently at 70% of design capacity. We expect to be operating at design throughput and recovery rates by year end, although we expect to be at the lower end of our 2023 annual production guidance for QB2.
• Construction completion of the molybdenum plant is now expected by the end of the fourth quarter of 2023 and the port offshore facilities completion is expected in the first quarter of 2024. Existing shipping arrangements are expected to provide adequate capacity for shipping product though the first quarter of 2024.
• Delays in construction of the molybdenum plant and port offshore facilities, slower than planned demobilization progress and contract claims risk have put pressure on our capital cost guidance. As a result, we have updated our capital cost guidance for QB2 to US$8.6 to US$8.8 billion from our previously disclosed guidance of US$8.0 to US$8.2 billion. Significant efforts are ongoing to mitigate the risks and cost pressures.

Safety and Sustainability Leadership

• Our High Potential Incident Frequency remained low at a rate of 0.13 in the third quarter.
• We announced an agreement with Norden that is expected to reduce CO₂ emissions in our steelmaking coal supply chain for Teck shipments handled by Norden.

Note:

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

Guidance

• 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 third quarter results for 2023 at the link below.
• Our previously disclosed guidance has been updated for changes to our capital cost guidance for QB2, as outlined above, 2023 annual copper, molybdenum and steelmaking coal production guidance, noted below, and 2023 capitalized stripping guidance for our copper business unit.
• Our 2023 annual copper production guidance has decreased to 320,000 to 365,000 tonnes from 330,000 to 375,000 tonnes, driven by a localized geotechnical event at Highland Valley Copper that occurred in August. We do not expect this geotechnical event to impact our annual production guidance beyond 2023. Our 2023 annual copper production guidance for QB2 is unchanged from our previously disclosed guidance of 80,000 to 100,000 tonnes, although we expect to be at the lower end of this range.
• Our 2023 annual molybdenum production guidance has decreased to 3.0 to 3.8 million pounds from 4.5 to 6.8 million pounds due to the delay in the construction of the QB2 molybdenum plant, as outlined above.
• Due to plant challenges this year, we have reduced our 2023 annual steelmaking coal production guidance to 23.0 to 23.5 million tonnes from 24.0 to 26.0 million tonnes. We implemented a plant improvement initiative in the second and third quarters. Combined with the completed major maintenance outages, we are seeing improved plant performance in the fourth quarter and we are well positioned for the remainder of the year.

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

Click here to view Teck’s full third quarter results for 2023.

USE OF NON-GAAP FINANCIAL MEASURES AND RATIOS

Our annual financial results are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. 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 and do not have a standardized meaning prescribed by IFRS 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, 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 in substitute for other measures of performance prepared in accordance with IFRS.

Adjusted profit attributable to shareholders – For adjusted profit attributable to shareholders, we adjust profit (loss) 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 attributable to shareholders as described above.

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

Adjusted diluted earnings per share – Adjusted diluted earnings per share is adjusted profit 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.

Unit costs – Unit costs for our steelmaking coal operations are total cost of goods sold, divided by tonnes sold in the period, excluding depreciation and amortization charges. We include this information as it is frequently requested by investors and investment analysts who use it to assess our cost structure and margins and compare it to similar information provided by many companies in the industry.

Adjusted site cash cost of sales – Adjusted site cash cost of sales for our steelmaking coal operations is defined as the cost of the product as it leaves the mine excluding depreciation and amortization charges, out-bound transportation costs and any one-time collective agreement charges and inventory write-down provisions.

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.

Adjusted site cash cost of sales per tonne – Adjusted site cash cost of sales per tonne is a non-GAAP ratio comprised of adjusted site cash cost of sales divided by tonnes sold. There is no similar financial measure in our consolidated financial statements with which to compare.

Profit Attributable to Shareholders and Adjusted Profit Attributable to Shareholders

Notes:

1. Adjustments for the three and nine months ended September 30, 2022 are as previously reported.
   2. Adjustment required to remove the effect of discontinued operations for the three and nine months ended September 30, 2022.

Reconciliation of Basic Earnings per share to Adjusted Basic Earnings per share

Notes:

1. Adjustments for the three and nine months ended September 30, 2022 are as previously reported.
   2. Adjustment required to remove the effect of discontinued operations for the three and nine months ended September 30, 2022.

Reconciliation of Diluted Earnings per share to Adjusted Diluted Earnings per share

Notes:

1. Adjustments for the three and nine months ended September 30, 2022 are as previously reported.
   2. Adjustment required to remove the effect of discontinued operations for the three and nine months ended September 30, 2022.

Reconciliation of EBITDA and Adjusted EBITDA

Notes:

1. Adjustments for the three and nine months ended September 30, 2022 are as previously reported.
   2. Adjustment required to remove the effect of discontinued operations for the three and nine months ended September 30, 2022.

Reconciliation of Gross Profit Before Depreciation and Amortization