Teck (TECK) Q2 2025 Earnings Call Transcript

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CALL PARTICIPANTS

• Chief Executive Officer — Jonathan Price
• Chief Financial Officer — Crystal Prystai
• Senior Vice President, Base Metals — Shehzad Bharmal
• Vice President, Projects — Ian Anderson

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RISKS

• Teck lowered its QB (Quebrada Blanca) annual copper production guidance to 210,000 to 230,000 tonnes for 2025, citing ongoing TMF (tailings management facility) development issues and potential external delays, with online time affected in Q2 2025 and full completion dependent on successful remedial actions by year-end.
• The ship loader outage at QB’s port facility, announced June 2, is expected to extend into the first half of 2026, forcing the company to rely on alternative shipping arrangements resulting in an incremental impact on net cash unit cost, expected to be approximately $0.10 per pound.
• CFO Prystai highlighted a 21% reduction in corporate overhead as a positive in Q2 2025, but noted this was partially offset by lower copper and zinc prices, as well as higher operating costs at Highland Valley and QB.
• CEO Price acknowledged a fatality at the Antamina mine, noting the event led to a one-week site shutdown in the quarter and lower production from that operation.

TAKEAWAYS

• Adjusted EBITDA: $722 million of adjusted EBITDA in Q2 2025, up 3% year-over-year, driven by increased profitability at Trail operations, lower smelter processing charges, and reduced corporate overhead, partially offset by lower copper and zinc prices and higher operating costs.
• Copper Production Guidance: Revised to 470,000–525,000 tonnes for 2025, reflecting a lower outlook for QB due to TMF challenges, while all other operations maintain previous guidance.
• Copper Segment Gross Profit: $673 million before depreciation and amortization in Q2 2025, down 3% year-over-year, due to lower prices and higher costs, partially offset by co-product and byproduct revenues.
• Copper Net Cash Unit Cost: Net cash unit cost improved by $0.14 to $2.00 per pound in Q2 2025, driven by higher byproduct credits from zinc and molybdenum, despite cost increases at QB and Highland Valley.
• QB TMF Remediation Impact: Incremental net cash unit cost is expected to be approximately $0.10 per pound, with remediation work targeted for completion by year-end.
• Shareholder Returns: $487 million returned via buybacks in Q2 2025 (9.8 million shares); $1.1 billion returned year-to-date via dividends and buybacks; 70% of the $3.25 billion buyback authorization completed ($2.2 billion) as of Q2 2025.
• Highland Valley Copper Mine Life Extension (MLE) Project: Sanctioned by the board for construction, extending mine life to 2046 with expected average annual copper production of 132,000 tonnes; updated capital estimate is CAD2.1 billion–CAD2.4 billion (raised from a prior CAD1.8 billion–CAD2 billion estimate) due to contingencies, inflation, and accelerated procurement, as announced with the sanction of the Highland Valley Copper mine life extension project.
• Liquidity: $8.9 billion in liquidity, including $4.8 billion in cash on hand as of July 23, 2025; company maintains investment-grade credit rating and has reduced debt by $2 billion since 2024.
• Zinc Segment Performance: Gross profit before depreciation and amortization increased 137% year-over-year to $159 million in Q2 2025, primarily due to higher byproduct revenues and lower operating costs; Red Dog sales were 35,100 tonnes in Q2 2025, exceeding the guidance range.
• Zinc Net Cash Unit Cost: Decreased by $0.20 to $0.49 per pound in Q2 2025, mainly due to lower smelter charges and higher byproduct credits; annual production and cost guidance unchanged.
• Sustainability and Safety: High-potential incident frequency rate for controlled operations was 0.09 in the first half of 2025, below the 2024 performance of 0.12; recognized for the nineteenth consecutive year as a “Best 50 Corporate Citizen” in Canada by Corporate Knights in 2025.
• Labor Agreements: All collective bargaining agreements at QB now concluded, securing coverage through 2028; Carmen de Andacollo agreements finalized in June and July with three-year terms.
• Growth Projects Progress: Sanction readiness targeted by year-end for both Zafranal (Peru) and San Nicolas (Mexico) copper projects; Zafranal is more advanced in permitting and construction readiness.
• QB Optimization Potential: Mill optimization and debottlenecking could increase throughput by 15%-25%, according to company statements; planning underway with DIR permit application expected in the second half of the year.
• Copper Production Per Share: There is potential for a further 33%-50% increase in copper production per share by 2026 as QB stabilizes and share buybacks continue.

SUMMARY

Teck Resources (TECK -8.81%) reported a year-over-year increase in adjusted EBITDA for Q2 2025 and highlighted a robust capital return program, with approximately 70% of its authorized share buyback executed as of Q2 2025. The company sanctioned the Highland Valley Copper mine life extension project, raising its capital estimate to CAD2.1 billion–CAD2.4 billion to account for inflation, contingencies, and accelerated equipment procurement, and described this investment as foundational for its ambition to double copper production by decade’s end. Management addressed operational setbacks at QB, reducing copper production guidance for 2025 due to TMF issues and forecasting incremental unit costs of approximately $0.10 per pound due to alternate shipping logistics after a ship loader outage in Q2 2025, while asserting these constraints should be resolved by year-end. The company’s zinc segment delivered substantial profit growth in Q2 2025, and management emphasized disciplined cost management, resilient balance sheet strength, and maintained investment-grade credit status. Strategic project advances were noted across the portfolio, with Zafranal and San Nicolas targeted for sanction readiness and all major labor agreements now secured through multi-year terms.

• CEO Price stated, The project extends the core assets to 2046, with average annual copper production of 132,000 tonnes over the life of the mine.
• Ship loader repairs at the QB port are ongoing as of Q2 2025, with capital cost estimates pending full damage assessment, and insurance recovery is being pursued, according to Anderson: we do have insurance coverage, and that includes interruption.
• The planned transition to steady-state operations at QB will mark a one-time milestone following completion of TMF work, after which long-term production is expected to stabilize, with the company targeting design rates by the end of 2025. “showcase [QB] as a tier-one asset.”
• CFO Prystai reported, “We have now completed $2.2 billion or approximately 70% of our $3.25 billion authorized buyback, leaving approximately $1 billion remaining.”
• Growth project sanctioning approaches for Zafranal and San Nicolas were framed as optionality, with sequencing yet to be determined and each subject to final investment decisions.

INDUSTRY GLOSSARY

• TMF (Tailings Management Facility): An engineered structure for storing the byproducts (tailings) of mining operations, critical for operational continuity and environmental compliance.
• QB (Quebrada Blanca): Teck Resources Limited’s large-scale copper mining complex in Chile, subject to ongoing expansion and operational ramp-up.
• MLE (Mine Life Extension): A capital project that extends the operational life of an existing mine through new development and infrastructure.
• DIR (Declaración de Impacto Ambiental): The environmental impact statement submission required for permitting new or expanded mining activities in certain jurisdictions.

Full Conference Call Transcript

Jonathan Price: Okay. Thank you, Emma, and good morning, everyone. Now before we get into the quarter, I would like to take a moment to acknowledge the incident earlier on Tuesday at one of our peers’ operations in the Northwest of our home province of British Columbia. Our thoughts are with the three workers that remain in the underground work area as well as their families, friends, and colleagues, and the emergency response teams. And we hope for their safe and speedy rescue. So turning to our second quarter 2025 results, starting with highlights on Slide four. Overall, we are advancing our strategy of copper growth, while returning cash to shareholders.

Our profitability improved compared to the same period last year, to $722 million of adjusted EBITDA. We had strong performance in our zinc segment, with Red Dog sales above our guidance range and a significant improvement in our zinc net cash unit costs. As well as another quarter of profitability and cash generation at Trail. Across our established operations, production is on track to meet our annual guidance. At QB, we had previously noted that we would be at the lower end of our guidance of around 230,000 tonnes for the year.

Whilst the team is working hard to achieve this, we acknowledge that there could be risk from possible external factors or, of course, any delay from the TMS development work. As a result, we’ve revised our outlook for QB to 210,000 to 230,000 tonnes for the year but continue to target design rates by year-end. Earlier today, we announced that the board has sanctioned the Highland Valley Copper mine life extension project in British Columbia for construction. This is foundational to our strategy to double copper production by the end of the decade. Given the strong demand for copper as an energy transition metal, the project will generate compelling returns.

With an IRR far surpassing our cost of capital and secure access to this critical mineral for the next two decades. The project extends the core assets to 2046, with average annual copper production of 132,000 tonnes over the life of the mine. We are continuing to return significant cash to shareholders, with elevated daily share buying levels in the quarter resulting in a total of $487 million or 9.8 million Class B shares. Year to date, we have returned a total of $1.1 billion to our shareholders through dividends and share buybacks and we have completed approximately 70% of our authorized $3.25 billion buyback which is the equivalent of $2.2 billion.

Finally, we are maintaining the resilience of the business. Including through our strong balance sheet which enables us to navigate uncertainty and continue to create value. We currently have $8.9 billion in liquidity, including $4.8 billion in cash. Turning to slide five. We continue to be committed to safety and sustainability. Across the operations that we control, our high potential incident frequency rate remained low in the first half of the year at 0.09 below our 2024 performance of 0.12. I would like to take a moment to acknowledge the fatality that occurred on April 22 at Antamina in which Teck Resources Limited holds a non-controlling interest.

We are deeply saddened by this event and offer our condolences to the family, friends, and colleagues of the deceased. Teck Resources Limited fully participated in the investigation, which was led by the team at Antamina, and learnings will be shared across our company and across the sector. We were honored to be named as one of Corporate Knights’ 2025 Best 50 Corporate Citizens in Canada. It’s the nineteenth consecutive year that we’ve received this recognition, which is based on an evaluation of up to 25 sustainability indicators including board diversity, resource efficiency, financial management, sustainable revenue, and sustainable investment. So now turning to QB on slide six. QB’s second quarter performance was impacted by the ongoing TMF development work.

We’re advancing multiple TMF development initiatives to improve sand drainage rates and accelerate mechanical movements of sand to achieve steady-state operation. This work impacted mill online time in the quarter as previously disclosed. The planned post-QB2 construction pace of TMF development was based on design assumptions for sand drainage rates that have subsequently proven unachievable. Modifications to cyclones alone, while showing an improvement in sand drainage rates, were not sufficient to allow us to fully catch up on TMF development work in the quarter. As a result, we are implementing a range of additional measures to improve sand drainage rates and accelerate the mechanical movements of sand. Including enhanced sand placement techniques and optimization of the grind size concentrator.

Importantly, the TMF development work and the transition from starter dam to regular ongoing sound lifts is a one-time milestone. Related to the ramp-up of the operation. When it is completed, the TMS development work will be behind us for the life of the facility. While the TMS development work will continue in Q3, we continue to target design rates. By the end of the year. Throughput increased from the prior quarter, and we expect to see consistent grades of approximately 0.61% in the second half of the year. Work is ongoing to improve recoveries by year-end, which will also be helped by more consistent mill run time.

The outage of the ship loader at QB’s port facility announced on June 2 is expected to be extended into the first half of 2026. We have been successfully shipping concentrate through our alternative port arrangements and have maximized shipments to local customers so there has been no production impact. Alternative sales logistics have had some incremental impact on our net cash unit costs, which is expected to be approximately $0.10 per pound. We had a good step up in the molybdenum production as a result of some key process improvement initiatives implemented during the quarter. We expect to continue to see molybdenum production improvements and we continue to target design throughput and recoveries at the moly plant by year-end.

Once we have completed the TMF development work, QB will be able to run at steady state. Showcasing it as a tier-one asset will be a cornerstone of Teck Resources Limited’s portfolio for generations. We continue to work on defining the most capital-efficient and value-accretive path for future growth of QB. Through optimization of the mill, and low capital debottlenecking opportunities, that could collectively increase throughput by a third of 15% to 25%. The foundation of QB is its large long-life deposit, which can support multiple expansions. And it offers multiple potential paths to create value for our shareholders including assessing adjacencies or synergies with Coyoac. The operation also has the advantage of a very low strip ratio.

Which enabled competitive all-in sustaining costs. We successfully achieved completion testing requirements under QB2.5 dollars project finance facility earlier this year, which provides independent verification confirming the robustness of design, construction, and operational capacity. And we have a taxability agreement in place through 2037. Taking all these factors into account, we are well positioned to generate significant future cash flows from this Tier one asset for decades to come. Turning to the mine life extension at Highland Valley on slide seven. Highland Valley is Canada’s largest copper mine, and a core asset in our portfolio. And we are excited to announce the sanction of the Highland Valley Copper mine life extension or HPC MLE project.

This is a lower risk and lower complexity brownfield project that is 100% owned by Teck Resources Limited. The MLE is an extension of the operation to 2046. And is expected to produce 132,000 tonnes of copper per annum on average over the life of the mine. Based on additional technical and engineering work, have the project as a result this capital estimate of the sanction is CAD2.1 billion to CAD2.4 billion, in nominal terms.

Compared with our prior estimate of $1.8 billion to $2 billion Canadian dollars, it now includes project level contingencies, accounts for inflation, input cost escalation, and the impact of potential tariffs on construction materials, and reflects the accelerated procurement of mobile equipment originally planned for later project phases. It also incorporates additional scope, and indirect contract requirements identified through ongoing project refinement. The MLE project consists of development of site infrastructure and facilities, grinding circuit upgrades, increased tailings storage capacity and enhancements to power and water systems. As well as the mine pushback that requires additional waste stripping to access high-quality resources within the Valley Pit.

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