All questions and answers based on Satellite Assets

– Emily Chieng – Goldman Sachs & Co. LLC>: That’s really helpful color. And then maybe just one follow-up, if I may. On the copper price environment and positive demand trends that you’ve seen for the green metal and, certainly, QB2 delivering into that should be a very exciting time. But as you think about your longer-term organic portfolio, is there a need to accelerate any of the other growth projects that you have? Or from a tech perspective, would you rather see how the copper price environment plays out for a little while longer, enjoy the free cash flow harvest, and then make those decisions?

<A – Don Lindsay – Teck Resources Ltd.>: Let me speak to that. We don’t need to see the copper price play out any longer. We have confidence in the long-term copper price that the market is going to need those projects. So, that wouldn’t be the limiting factor. The limiting factor at this stage at which each of the projects are at, so, for example, QB2 is obviously going to be finished next year. Even if we wanted to go ahead with QB3, the earliest we could sanction that is probably beginning of 2026 because we have to finish the pre-feasibility study that it’s in now, then feasibility, then file for the SEIA and so on. If everything went perfectly, you might be able to do it three to six months faster. But nothing ever does go perfectly.

So, there’s going to be a gap between when QB2 starts off next year of probably three full years of very, very strong free cash flows. And even when QB3 is sanctioned, the first equity capital comes from our partners and then project finance. So, Teck wouldn’t have to come up with any funding till 2027 or 2028. So, there’s a long stretch where there should be very, very strong cash flows available to return to shareholders.

The other projects, Zafranal, the feasibility is finished, but there’s a lot of optimization going on. Peru, still locked down and I saw earlier that that’s likely to stay until September. So, the earliest anybody who wanted to partner with us there could go visit it, it’s not for several months yet. San Nicolás, we’ve just finished the pre-feasibility study, which we’ll be publishing in due course. We’re just working on some final questions. And that’s one that maybe could be built during the period between QB2 and QB3. We’d probably have a partner build that for us, so again we wouldn’t have to come up with any capital.

The market will need the projects, but the project themselves have to go through the stage gate process until they’re ready to be built. So, that’s really the state of affairs. And that’s the same worldwide, by the way. You look at all the list of projects, there’s about four or five that are already under construction coming on in the next two years. And then after that, there’s a long period when there’s quite a gap that’s going to open up.

<Q – Emily Chieng – Goldman Sachs & Co. LLC>: Great. That’s perfect. Thank you.

<A – Don Lindsay – Teck Resources Ltd.>: There is a consultant’s research report out a couple of days ago calling for a 4.5 million tonne gap between supply and demand by 2030. That’s 15 QB2s. They’re just not around.

– Timna Tanners – BofA Securities, Inc.>: All right. That makes a lot of sense. Thank you for that. And then on the project, the Satellite Project, you just went through and explained that the earliest sanctioning for QB2 will be 2026 and Zafranal needs to go – has done the feasibility in San Nicolás has potentially further. But can you just go through and give us earliest projection and what are the gaps in the projects, if you could? Because you had also said that Teck is in a favorable position to start earlier than other companies. So, I’d just like to understand that timing a little better. Thank you.

Don Lindsay – Teck Resources Ltd.>: That’s a fairly detailed question. What I’m going to suggest is that – what’s the best way to handle – because there’s eight projects really and all different timetables because there are different levels of development from prefeasibility, feasibility, and so on. And the permitting in different countries takes a different length of time. I think what we’ll probably do is put up a packaged answer to that and get it out to the market generally in some form between now and the next quarterly. And certainly, at Investor Day, we’ll be going through that, those plans in detail. But it would be a very long answer, and it would only generate a whole bunch more questions if we try to go through the whole list today.

<Q – Timna Tanners – BofA Securities, Inc.>: Okay.

<A – Don Lindsay – Teck Resources Ltd.>: Certainly appreciate the question. And we, in due

course, will get you a more reasonable answer.

– Lucas Pipes – B. Riley Securities, Inc.>: Réal, I really appreciate all this detail. My second question is along the lines of copper, Project Satellite, etcetera, and when I think back to a few years back, it seemed like those – some of those projects were a potential monetization targets. It sounds very different today, obviously. And what I wondered, in terms of strategy going forward, would you be going so far as to be inquisitive on the M&A side when it comes to copper project specifically? And if so, where would you be looking?

– Don Lindsay – Teck Resources Ltd.>: Okay. There are several questions within that. I’ll start with some of them. So, first, in terms of you mentioned inquiries or looking at buying. We’re not interested in buying anything because we are very rich in resources. And technically, we have eight projects to work through. So, that’s not to say that our eyes are closed. We’re always going to keep an open mind. If something comes along that is that much better than everything we’ve already got, then we’ll take a look at it. But we don’t expect that to occur.

In terms of exploration budget, as we get further along knocking off all these initiatives such as Neptune, Elkview water treatment, Fording River water treatment, and with pricing with copper, zinc where they are, more capital becomes available and I would expect that exploration will share in that. And we’ve been very pleased with the work our exploration team has done over the years. So, yes is the answer to that question.

In terms of monetization of the assets, I guess I’d make two observations. One is, clearly, the assets are worth more today than they were a year ago pre-COVID and that’s just a function of two things. One is the long-term view of copper price or copper demand, which drives price, has shifted from about 2% copper demand growth to 3% to 3.5%. That opens up a big gap, which means that these projects are more valuable based on the long-term price people are using. But then also the midcaps that really need their next project, they have much better access to capital markets and they can do a block deal for $500 million of equity and put that to work, getting themselves a new project. So, the number of buyers and the ability of the buyers to pay has increased significantly over the last year.

So, in that context, we will look at the market. But as one of our board members said, why would you ever sell a copper project given the outlook for the world over the next 10 years? I think the answer is somewhere in between getting the right balance. And we’ve looked at some of our situations and listen to the inbound calls that we’ve been receiving. And there are some interesting opportunities whereby we could bring on a partner and they build it with their capital and their people, and we’re left with half a mine or more for free. And if that sneaks in between QB2 and QB3, then that’s a pretty good situation. So, we’re looking at those kind of options. And then what we’ll do is we’ll put together a whole package of information on the portfolio.

And just back to Timna’s question earlier. I mean, one of the reasons we can’t really answer this is because we just don’t know when COVID is going to end. And COVID is the single determining factor as to whether people can even visit a site to decide whether they want to buy something or partner with us or whatever. That’s still up in the air. Still not possible in some circumstances. So, that’s why it’s hard to be too definitive on the dates.

Q – Brian MacArthur – Raymond James Ltd.>: Hi. Good morning, Don. Again, mine has to do with Project Satellite. I know you’d given lots of answers. But just so I – and obviously, you’ve got lots of strategic options. Are we now thinking – originally Project Satellite with all the monetization, you’ve talked about a partner building one of your projects. Can I assume that you don’t really want to build any of these eight projects? I mean, I could argue maybe you should have another production center, or what’s your philosophical thinking on that given originally you thought you could monetize Project Satellite for CAD 3 billion or at least that number was originally put out. I don’t know if you’d be willing to put out a new potential number you might be able to get out of this.

<A – Don Lindsay – Teck Resources Ltd.>: Okay. A couple clarifications that – we took these projects that were all very early stage. And what we said is we’d move them through the scoping – resource reserve scoping study prefeasibility, feasibility, and then decide what best to do with it, whether it was to actually build it if it made sense as part of Teck’s portfolio or to partner or to contribute into another company, take back shares, ride the cycle, or just sell outright for cash. So, it was never contemplated that we would monetize all of them, but some were less likely to become part of the Teck portfolio going forward.

And so, it was always thought that some of them would be monetized. We set a target of CAD 3 billion of value. In terms of NAV, we have significantly exceeded that for those five projects, but we haven’t necessarily realized any of it in cash. We do know from just inbound calls and letter proposals and things that we get unasked that we could clear significantly over CAD 1 billion on a couple of them if we chose to do that. When we say we know, we know we’ve received offers that say those numbers, we did, it’s a long way from getting a letter to actually closing a deal. But so significant value has been created by the satellite team. Market has shifted structurally we think for some time. COVID has had a big impact, no question about it, and part of that is decarbonization and the associated electrification and long-term demand for copper looks very strong. So, that causes us to rethink it carefully so that we don’t leave value on the table. We’ve done studies of all our competitors to see what they have becoming. And like a lot of people don’t have much covered in terms of copper resources to develop. And if you look at the exploration track record as an industry, the copper industry hasn’t done that well overall. I mean, there have been some successes, but it’s limited.

So, we’re looking at it very carefully. And as I said earlier, we will commit to putting out a full update on our copper growth division, if you like, we’ll maybe start calling it that and so that people can see just what kind of a pipeline we’ve got. But it’s pretty exciting and we’ve got tremendous resources, we’re rich in resources.

https://www.teck.com/media/Teck-Q1-2021-Transcript.pdf