Ladies and gentlemen, thank you for standing by. Welcome to Teck Resources Q2 2018 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. This conference call is being recorded on Thursday, July 26, 2018. I would now like to turn the conference call over to Mr. Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analysis. Please go ahead, sir.

Thanks very much, John. Good morning, everyone. And thank you for joining us for Teck's second quarter 2018 results conference call. Before we begin, I'd like to draw your attention to the forward-looking information on Slide 2. This presentation contains forward-looking statements regarding our business. However, various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statement. With that, I’ll turn the call over to Don Lindsay, our President and CEO.

Thank you, Fraser, and good morning, everyone. I will begin on Slide 3, with some highlights from the second quarter followed by Ron Millos, our CFO who will provide additional color on our financial results. We'll conclude with a Q&A session, where Ron and I and various additional members of our senior management team will be happy to answer any questions. And I am delighted to report a record first half for Teck. And in fact, we've now had seven quarters in a row of EBITDA, a $1 billion or more than that and the actual average during that time is $1.5 billion per quarter, and this has really put the Company in great shape as we look forward to an exciting growth program. But before discussing the quarter, I would like to comment on the announcement we made yesterday with the changes to our Board of Directors. Teck is very pleased to announce that Dominic Barton has agreed to join Teck’s Board of Directors, effective September 1, 2018. And many of you will know Dominic from his time at McKinsey & Company, where he has been the Global Managing Partner for the past nine years. And among Dominic's many accomplishments, he served as Chair of the Canadian Minister of Finance's Advisory Council on Economic Growth. He is a recognized thought leader on creating long-term social and economic value, and he brings tremendous global perspective to our business, including extensive experience in Asia, and we are very excited about the role that he will play at Teck in the future. We have also announced yesterday that our longtime Chairman, Dr. Norman Keevil will retire from the Board of Directors at year-end. And as part of our succession planning, Dominic Barton will assume the role of Chair on October 1. Also…

Thanks Don. I'll start with our liquidity on Slide 10 and as Don mentioned our liquidity is currently over $5.6 billion and that includes that 1.7 billion in cash and US$3 billion of the undrawn committed credit facilities. As Don mentioned earlier we expect to receive $1.2 billion in cash with the closing of the Waneta Dam transaction later to date. And that would strengthen our cash balance to about $2.9 billion and our liquidity to close to $7 billion. This will put us in a good position ahead of a potential sanctioning decision on the Q2 project later this year. In the meantime we're continuing to build cash on our balance sheet and progress engineering and that's reducing both the funding and the execution risk for that project. We also only have 220 million of debt maturities prior to 2022 and our strong credit metrics compare favorably to diversified in North American peers on a pro forma basis with the expected closing of Waneta Dam sale. On Slide 11, I've summarized changes in our cash during the second quarter. We generated $1.1 billion in cash flow from operations, we spent $345 million on capital projects including Fort Hills and our capitalized stripping costs for $175 million in the quarter. We paid $119 million on financial investments and other assets, including the US$52.5 million paid on closing of the transaction for the acquisition of the additional 13.5% indirect interest in the QB2 project through our purchase of IMSA, our minority partner. And that transaction simplifies the ownership and the capital structure of QB2 and gives us flexibility on financing options for the project. So we now have 90% equity interest and 100% funding interest in QB2. We paid $70 million in interest and finance charges and $28 million for our regular quarterly based dividend of $0.05 per share. And after these and other minor items, we ended the quarter with cash and short-term investments of around $1.6 billion. And with that, I'll turn it back over to Don for his closing comments.

Okay. Thanks Ron. I’d like to wrap up. We are looking forward to the next key catalysts or some call them evaluation milestones. For the second half of 2018, we anticipate receiving the final permit approval documents for QB2 and that should happen next month, in fact. We expect the partnering process for QB2 to be completed and to be in a position to announce the transaction in Q4. And then, of course, we hope to sanction the project, also probably in Q4. Full production at Fort Hills is expected at the beginning of the fourth quarter as well. We aim to complete the Highland Valley 2040 pre-feasibility study also in Q4. And then we also aim to complete the feasibility study at Zafranal in Peru and to submit the SEIA document in the quarter. And in 2019, we aim to complete the feasibility study on NuevaUnión that probably by Q3, and we also expect to complete the pre-feasibility study and submit this year for San Nicolás that’s in Mexico in the second half of the year. So there is a lot to look forward to in the next six to 12 months. For a close, I would be remiss if I did not comment on the risks that have risen in the global economy and the volatility that have caused – results in markets in particular. But I do want to say that demand for our products and the underlying fundamentals of our commodity markets remains strong. However, a government policy to government policy changes, including tariffs and the potential for trade wars have created uncertainty in global markets, and that threatens to slow global economic growth. That in turn has resulted in a significant correction in commodity prices over the past few weeks. That being said, as you…

Thank you. [Operator Instructions] Our first question is from Orest Wowkodaw from Scotiabank. Please go ahead.

Hi, good morning. I'm just curious on the coal business, Don, you mentioned earlier that you had demand for more than you could supply in Q2. And I'm curious about the guidance for Q3 at 6.8 million tonnes because – when I look back over the last couple of years, you've been able to ship more closer to about 7.5 million tonnes for the last two years in Q3? I'm just curious if the 6.8 million tonnes guidance if that reflects on anticipation of demand slowdown or is that more issues with either mine production or logistical issues?

Thanks. It's a good question and I can assure you, we had very, very strong sales in Q2. And we wish we would have been able to deliver more. But for more details, I'll turn it over to Réal Foley. Réal Foley: All right. Thanks, Don. And so Orest, we do have sales in place for Q3. Demand is continuing to be very strong and of course our estimated sales, our sales guidance reflects all considerations that you have mentioned. So it is really ensuring that we have appropriate call to meet demand and the ports and the port inventories continue to be tight. So we have sufficient coal to meet demand, but we – no doubt, we are tight and that is what we're observing in the world. So there has been a correction in the coal price, but the coal price levels at over $172 on average this morning, still reflect very strong demand fundamentals.

Could you, in theory deliver more than that or are you cap right now by rail or loading constraints?

We could deliver more than [6 8] but we also have to be reasonable in the guidance that we provide.

Okay. And just to the follow on, I didn't see any mention in the release about the board approval for the Neptune Coal Terminal Expansion. Is that – has have been approved or is that defer?

No, that has been approved. It's underway and going very well.

Okay. Thank you very much.

Thank you. Next question is from Chris Terry from Deutsche Bank. Please go ahead.

Hi, Don. My question is really around QB2. I just looking for a bit more color, so the project is 70% complete from a detailed engineering perspective. How far do you think you have to get through when you look at doing a transaction, do you think the case step is to get the permitting in place? Do you need to progress that further before you could look at the actual transaction with the bar?

And the short answer to that was, I don't think we need to progress it further. It will progress further just in the normal course. We had a target of wanting to have engineering design to the 80% completion level before sanctioning. So clearly we're on track to do that. We have had I should say an awful lot of interest in people being our potential partner from around the world and many of them would have already known that this was a possibility and done their numbers. So we will wait to before formally starting the process to get the permit in hand just because that's clearly a port evaluation milestone, that's very close. But after that we'll be fully into it and I think the potential partners are quite ready for that.

Okay. And follow up to that just two parts, what would you look to do with the cash if that comes in? It’s the first part. And secondly, when you go to evaluate who the potential partner is, how you're going to assess the – it is just the horse bitter or is it a bit that also brings some sort of operating expertise or build expertise or whatever it might be? How do you assess through the best partner would be?

Very good question, I'll take the second question first. We look at it, there's probably three categories of potential partners, a very large mining companies that have strong operating expertise and construction expertise that really helped to validate that projects long-term value and would be a great partner to have with long-term. Remember, we have about 100 years of resource at QB2. Right now, we've currently only published in mined plant for 25 years, but it uses only about 25% of the resource. There are also different partners out there that clearly are more marketing oriented. They're very, very keen to get their share of the copper concentrate, which is going to be a higher grade very clean cost rate which is clearly going to be in big demand as the world evolves. And then there's different financial players that have stepped up and have proposed interesting structures where they provide financing and really reduce the risk to us, but also still leaving us the potential you know five, seven, eight years down the road that we could buyback from them at prescribed return. So there's a range of choices and won't be just the highest bidder, but of course the valuation they put out will be a significant factor. So we're looking forward to it and because there are very few projects like this out there people sort of thought that the world really only had Cave Echo and QB2 as opportunities for those who wanted to grow and cooper with a large project Cave Echo of course has already been done and this looks like it's the last one for some time. So I think we'll have some scarcity value evolve and that should be a very interesting process.

Thanks. And then just the potentially use of cash depending on what that would be from sale down?

We’re very, very good position it's an interesting question. As we've said we'll have close to $7 billion of liquidity before the end of today. And then they'll be some entry fee coming to QB2. So there are number choices first and foremost there's always return of capital to shareholders and we'll be making that decision at the November Board meeting as our policy describes and that would be a combination of cash dividends and buyback. And so clearly were in very strong position from that point of view we could also reduce debt further, market is quite volatile and fair bit of geopolitical uncertainty out there that might be appropriate. And then of course we do want to steward our capital for these potential growth opportunities although by doing the partnering process of QB2 we would require a less than the market would have thought previously and our financial resources will significantly exceed what would be required for QB2. So that allows give us other opportunities. As you know we have two large projects QB2 and revenue that would be sort of core to portfolio for decades to come and then within project satellite we have five copper projects, two of which could be in production by 2022, 2023 and while we don't know whether we're going to build those or sell those both of them are being advanced on the valuation milestone change with full feasibilities and pre-feasibilities. So we do want to maintain some capital for things such as that. But we have a lot to work with some very interesting choices so should be quite interesting.

Thanks Don. Good luck.

Thank you.

Thank you. The next question is from Greg Barnes from TD Securities. Please go ahead.

Thank you. Just want to switch topics little bit zinc, it was performing metal I don't think this was the full metal yes, they don't think it's not justified.

We don't think so and we're going to turn over to Andrew Stonkus in a minute but again the sometimes say I call it this way sometimes the market sentiment or the sheer weight of money can over fundamentals and we think zinc is the most extreme example that when we look at customer demand and treatment charges in particular is a signal of how tight the market is and different actions being taken by Chinese alters and so on. And we believe the zinc market is still very tight. But Andrew over to you.

Thanks Don. Yes, Greg I think Don summarized pretty well that’s demand is still for metal it's still a very firm I when you look at North American a steel mill galvanized production, steel mills are running at high utilization rates are looking at adding on additional galvanized capacity. So the regional market North America strong and so as the global market when look at global galvanized production it's continues to increase. So demand for metal is there. On the raw material side, concentrate side we're still have historically low treatment charges of approximately $40 million to $50 million in the sport markets. So that's considerably below the annual benchmark terms. So in the concentrate market continues to be extremely tight there is additional mind production coming on stream later on this year, below this new my production is also not sulfite production as we claim tailing. So you know that's another aspect of the marketplace it is looking for materials that are not traditional supply lines. So that's going to be a challenge I think for the industry to continue to bring on new mine production and concentrate feed for the marketplace. The Chinese mine, domestic mine production continues to be basically flat with the environmental restrictions both on the mining side and on the smelting side. So when you look at the metal drawdown from the Shanghai inventories they continue to fall down or decline. Smelters are now running at full rates in China, so demand in China is firm and the inventories in China contain to fall. So overall, the fundamentals are there. Technical trading for the situation is causing short-term volatility, but longer term of fundamental still remain very strong.

Thanks. Don, I just want to go back to another question. I repeatedly get after the oil is still a core business for Teck or is it a core business for Teck. Is it and would you potentially monetize your oil sands business now that you've got in Fort Hills up and running?

Well, I think two comments on that. First of all, we look at it as a mining business and when we went into it some 10 years ago, we think of it as a large open pit mine and shovel truck operation. We have a lot of skill and operating experience and expertise in that. And it's also great geopolitical jurisdiction even under NDP government. It's a lot better than many other jurisdictions that if you're sitting in my seat you get to choose whether to go into or not. And it’s very tax effective for us to – the capital we’ve invested there provide shelter against operating cash flow from the coal mines or Highland Valley trail and so on. The technology is proven and we're delighted that the product we're producing is – a carbon point of view would actually ranks in the middle of the pack of all the oil that's refined and consumed in North America. So that's a very different situation and normally people think of with oil sands. So there's a lot of reasons to hold it as a great high quality core asset, and we think once it's through this transition year, 2018 as it starts up that depending what your assumptions are for oil price and differentials that this would be a literally one of our best mines right up there with Antamina or Fording River, and in terms of like ongoing EBITDA for the next 45 years. So in an ideal world, we love to have it as a core asset for the long-term. It provides that much stability. And the nature of this whole business is that the risk is in getting it built, once it's built. And if you have a high quality result like we've had where the…

That's fascinating. Thanks Don.

Thank you. Our next question is from Brad Rosenberg from Overbrook. Please go ahead.

Great. Thanks for taking the question. I really appreciate it. Just want to follow-up on the question before about some fundamentals. Obviously you had an increase in the LME inventories over the past four months now, and there's a good amount of supply that's projected to come on? Just curious what your thoughts about those projects you comment on them?

Just a quick overview statement, we have a team that is just following the zinc industry in extreme detail full time and not just in Toronto, where our commodity consultant – internal commodity consults are based. But people in Shanghai who spend the bulk of their time, analyzing what's going on in that country and what zinc production is coming on to come on or is not coming on. And we believe that one of the major commodity consults out there has significantly overestimated the supply that's coming on and that's one of the big differences in our view of the zinc market and it would appear that many in the financial markets have relied on that that estimate. But I guess we'll find out in the next six months whether it's right or not. But certainly what we're seeing is it's not close to right. But that is an overview comment. Andrew, do you have any more process on zinc?

Yes, I think Brad again when you look at the Terminals exchanges, stock exchanges LME has gone up. But again some of that is hidden stocks that are be appearing on to the LME. But the market today is still a backwardated market. So again the backwardated market means that the market physically is still firm, if it was a long market then the backwardation would probably be eliminated, and even with the increases into LME on occasion is still back with the market. When we look at the Shanghai exchanges, the other side it's down over 20%. So material has been there basically displace from other traditional markets and gone into the China market as a demand continues to be strong there, smelters are operating a low utilization rates as I mentioned, so that the demand in China is firm. They're just not enough metal supply because due to the tightness in the concert market, so metal inventories are declining in China. There is some flips in LME terminal stocks, but that is still some of the hidden stocks coming out of the woodwork. But overall it's a firm market. We're at 90s of global consumption. So again well below the historical long-term average of over twenty days. So we're still running at very low metal inventories and the concentrate markets and as I mentioned is historically low levels on treatment charges. And to your question on where that the quality of these materials coming to the marketplace on new production? Some of them are the reclaimed tailings and this will be something new to the marketplace, which has not experienced processing reclaimed tailing to the extent that this appears on to the marketplace. So the market for concentrates is still going to be tight in the near-term. So there's new additional material coming on is required. It is still not sufficient to meet the demand growth rates.

And just one other factor, I mean there has been no letup in China's commitment to environmental standards, much higher environmental standards. And if anything, they're getting stricter on that. So that has had a big impact on potential mine and zinc production in China. We just don't think it's going to materialize like some of the others do. I guess that's what makes the market a difference of views.

Very helpful. Thanks, guys.

Thank you. The next question is from Oscar Cabrera from CIBC. Please go ahead.

Thank you. Good morning, everyone. If we could get back to QB2, the objective to ultimately hold 70% interest, was that trying to diversify risk from the project or – and then participating in other projects and copper space later on or is it more the current market that we are seeing now and the possibility of slower than mine if it trade more escalate?

So I want to be very clear on this Oscar, because we saw your report and we know that you didn't get a chance to call us first before writing it. But the current market conditions have nothing to do with us making the decision to seek a partner at QB2. I repeat absolutely nothing to no effect whatsoever. This is a long-term project as I said 100 year resource. And short-term market volatility or even short- to medium-term kind of volatility or price. Does not affect these long-term investment decisions. We are making decisions that are more than 50 years. So it has no impact whatsoever. We just believe that given the experience the industry has had over the last 10 to 15 years putting all your eggs in one $5 billion basket isn't really the prudent thing to do. I bring on a partner will only strengthen the project whichever kind of partner we bring on whether it be a financial partner or market in a concentrated related partner or an operating construction related partner and that's a good thing for QB2 long-term and a good thing for Teck long-term. It does free up quite a bit of financial resources certainly US$2 billion for more for us to do other things and as I said that could start with capital returns to shareholders or reducing debt more or any of the other projects that we have and we do have a long list. But again I want to emphasize that decision has nothing to do and shouldn't have anything to do with current market volatility.

Okay. Now that's really clear. Thank you Don. Then in terms of year about 70% complete on engineering? Have you seen any thing that would lead you to believe that I believe was $4.8 billion U.S. could be reduced.

I'll turn that over to I guess Alex Christopher or Dale Andres who wants to take it and we're in the final strokes that. I will highlight is the exchange rate exchange rate, which is only the [indiscernible] that you choose and that's been variable shall we say in the last 6 to 12 months just as kind dollars. So the name plate number that we end up publishing will be affected by that but Alex you answer.

Yes, certainly thanks to question Oscar. I guess a couple things here to point out as we advance engineering you know one of the key things we're doing here is reducing the exposure risk with respect to all of our estimates around pricing of contracts and labor productivity as we go through the current cycle we're getting firm numbers and from the companies that were letting the equipment hope to. So it would certainly reduce the risk of that capital number I'm moving from on the upward basis really that's the benefit of getting the advancement in the engineering and over into the market with respect to procurement. With respect to reducing the cost we continue to focus on a variety of things including our estimates of labor productivity in the field and are working hard with the major contractors that we're going out to our feet to bid on the major contracts in terms of improving our productivity estimates to maintain the capital number or bring it down and we see that is the place where we're going to see the best chance at reducing the overall capital price.

Okay. Thank you. That's helpful. And then lastly on switching over to still making call. On the MacKenzie Redcap 1.4 million tonnes over 9 years. If you – hope for the project in terms of capital expenditures and can you remind me what your capacity is on your processing facilities.

Okay. I'll just turn that over to Robin Sheremeta, but just to remind you that that 1.4 million tonnes would be over and above the current capacity that we're aiming for from the Elk Valley mines of 27 million tonne. So Robin.

As far as capacity that Cardinal River plant has capacity for about 1.8 million per year. So that's the nameplate on the plant. And then as far as capital I think to be fair it's still it feasibility stage we're still trying to establish what the toll capital costs are but it's actually quite a capital efficient project force if you looked at any of our expansion opportunities it's one of the top one. So I think that's probably we're going to leave the capital last in right now.

Would it be comparable to what we were talking about with Quintette?

It would be quite a bit less because it's it is a Brownfield expansion it's really the mining part there's not a whole lot to do beyond that. We just need to construct an access to that area of the operation. There's not a whole lot of extra equipment to bring that online. So it's quite a bit more capital efficient than Quintette would be.

Yes, and that would be order of magnitude less and I just want to clarify that QB2 engineering is 70% complete not 30% as I think was that.

Thank you very much.

Thank you. The following question is from Lucas Pipes from B. Riley FBR. Please go ahead.

Hey. Good morning, everybody, and thank you for taking my question. I also appreciate the clarity on seeking partner for QB2, and I really want to follow-up on just the previous question. Don, at various times that it appeared as if you would be happy to go at alone, if I think back for example to the Analyst Day. And what changed? I would really appreciate your perspective on that. I think it makes a ton of sense and I would appreciate kind of what changed your thinking?

I wouldn’t say anything actually changed, what I would say is that the Board has had a thorough discussion of the balance of risks and made the decision to be as prudent as possible on this project. Look, we’ve been in the business a long time. You know how hard it is to get a hold of a nice clean doable project in a decent geopolitical jurisdiction that has a really long life. Mine life to pay back ratios in excess of 10 or something, so to get a hold of that is really, really tough as just ask any of the other competing companies that are in the industry. It's tough to find one and we've got one. So you are tempted to keep it all and do it all. But we also have several other alternatives and we do want to ensure that shareholders get good returns on a capital return basis and we have debt at nice low levels for the long-term in an increasingly volatile world. So when you're balancing all those factors, eventually the board makes a decision. And this will free up in the order of US$2 billion or more in terms of capital required going forward. So completely changes the picture going forward and gives us flexibility to do something else. We could still end up with the same total copper production increase over a three or four-year period, but just having it in two different sources, perhaps two different countries, two different operational or construction risks, and that just makes a stronger company overall. So that's the Board's decision. We have done it yet of course, but we certainly see an awful lot of interest. So as we said, we think we can go through the process from now till to the end of the year and announce a transaction.

I appreciate that. Thank you very much. And then on Neptune, I wanted to follow-up on the expansion project there, and I wanted to ask kind of what is the potential minimum amount of volumes that you could or would have to ship through Westshore once that Neptune expansion is completed?

I think that will depend at the time on what the alternative options are, but suffice it to say that we're going to have a lot of capacity there. And if competing options are not appropriate economics and we can put an awful lot through Neptune. I think, I mean we've announced different sort of nameplates and things, but it's going to give us a lot of flexibility. And remember that the key reason for doing this is it gives us long-term low cost and flexible capacity, so we can count on our coal being delivered into the market, particularly when prices are high. And so this is just going to make that whole business a lot stronger.

Got it. Thank you for that. And the competing options that you mentioned, would that be – could you elaborate on that?

Right now, we ship essentially through Westshore, Neptune, and Ridley and the mix of how many tonnes go there will change once the Neptune project is completed.

Got it. And then maybe one last one for Réal. Just following up on the drop in met coal prices, Réal do you attribute that? Two, is it some of the macro concerns or maybe more specifically related to weaker demand in China or supply growth, I would really appreciate your perspective, and also if you could comment on what you think is the best estimate for an equilibrium price and you are still making coal? I would appreciate your thoughts? Thank you. Réal Foley: All right. Thanks Lucas. Well maybe the first thing to say is demand in the market remains really, really strong. So even if you look at global crude steel production, June year-to-date that’s up 5% and that's in all the areas of the world. That's a global increase. But China is up 6%, India is up over 5%, and the rest of the world is up 3%. So as you can see the global demand remains strong. In terms of what we are seeing on our side, customers are continuing to request additional tonnes and that reflects really that stronger demand that we see on the coal side and on the steel side. With respect to pricing, yes pricing as corrected. It is a function of we believe the uncertainty around tariffs and also potential for a trade war. But that the price of coal is still pretty close to the long-term average of around $180. This morning, the average of the three assessments are above $172, and the average for the quarter to date lag by a month is sitting over $192. So it is still by all means very decent pricing for steelmaking coal, particularly in the Canadian dollars, whereas close to C$230 million.

Great, gentleman, I really appreciate. Thank you.

Thank you. The next question is from Piyush Sood from Morgan Stanley. Please go ahead.

Hey, guys. A couple of questions for me, first on Galore Creek, just want to understand that let’s say the project gets approved, would you be 50/50 partners and will you also get an off take of the precious metals side or is it possible to imagine a scenario where based on some economics. Can you keep the copper and Newmont keeps gold and silver, something like that?

Yes, I guess I mean its interesting question. I would say it's a little premature in that. We're going to be working with Newmont for the next three years. We have an agreed plan to redo the previous ability as we discussed and at that time then we'll make decisions on how to go forward, but we're delighted to have Newmont as a partner. Gary Goldberg and I work very closely together on different industry issues, and I think it's just a great partnership, really good culture fit. And could the long-term – we end up streaming gold one way and copper the other. That's of course a possibility, but it's something that I think we'd think about, literally, probably not for about four years. At the earliest, we need to get through the work that we've agreed to do, but it's still an exciting development. It just makes Galore Creek like a very real option for the long-term, and that's exciting for us because it’s right here in BC as well. So we're very, very pleased with that announcement today.

That’s fair. Thank you. And also the press release mentioned a little from U.S. Commissioners of International Joint Commission on the Water Quality. Could you talk a little bit more about it?

Yes. I think, hopefully the best person to answer that would be Marcia Smith, our Senior Vice President, Sustainability and External Affairs.

Sure. Happy to take the question. As we've said over the last few weeks, it is disappointing that members of the U.S. Joint International Commission claim that they lack information on water quality in the Elk Valley. In fact, I think as people on this call know there have been massive amounts of data, numerous studies made available about the potential impacts of selenium on water quality. And I think the issue is very well understood by both regulators and stakeholders on both sides of the border. This is a complex legacy issue caused by many decades of mining and that is why we are working to address those issues. We're working closely with regulators here in British Columbia, with Canada and in the U.S. and we are in the process of investing significant funds to treat water quality. And ultimately our view is that the plan we put in place is, is one of the most comprehensive of its kind ever developed. So we're making good progress. And I think we're on track to get our water treatment facilities up this fall. So that's really where the issue stands at this point.

So at this point you probably doing R&D on the saturated rock fill site technology. So you think eventually maybe costs are actually go down versus what we previously hurt from you?

We are pretty excited about this going to ask Robin Sheremeta to talk about saturated rock fill?

You bet. I love talking about saturated rock fills. We’ve got at this stage a very successful pilot in process. In fact we're managing to treat now we're approaching 10,000 cubic meters a day. We're seeing 95% to 100% removal of selenium out of the water from saturated rock fill. And you know I'll just put a perspective that's almost double the capacity and what we will have operating in first line Creek and we want our plant comes back online here shortly. So far it is an extraordinarily positive plot and we do anticipate this will be a part of our long-term strategy in our water treatment.

And possible effects on a couple required?

Yes, just I mean briefly if you take a 20,000 cubic meter a day plant just for reference. It would cost in/and around $300 million to construct. The saturated rock fill would cost roughly $50 million to construct at that same level of capacity. And then operating basis 20,000 cubic meter a day plot would run it roughly $22 million to your operating cost and saturated rock fill would be about half that, so around $10 million a year.

So big difference into clearly we're very excited about the potential but we will have to finish very confirmation of the results there and make sure that regulators and so on fully understand it before it becomes part of the long-term plan. But you know clearly very, very positive development.

Right. Thanks Guys. Thanks for the color.

Thank you. The next question is from Jeremy Sussman from Clarkson. Please go ahead.

Yes, thanks very much for taking my question. I think Don last quarter you sort of pretty clear in terms of noting your priority for QB2 over Quintette. I'm curious of the decision to sell down a state in QB2 changes anything for the potential for Quintette to move ahead?

That’s very good question. My initial sort of responses not really, but I think it's a fair question in that it certainly frees up a lot of capital for us to be able to do other things one of which could be Quintette. But the principles that I probably talked about last time remain the same that we are working longer term to rebalance the portfolio. We obviously are a little bit overweight steelmaking cool not that we don't like the business it's proving to be one of the very best mining businesses in the world and so we like that and we're seeing strong demand as we talk about and we had a lot of requests from customers in India and so on to reopen Quintette. So I do think at some point that it will make sense to do so. But right now we've you know committed to our shareholders that growth in copper is again a priority and the strategy of the company is quite simple we're taking strong cash flows from coal and strong cash flows from zinc and devoting it to doubling our copper business. To the extent that we're not going to put all of our eggs in one $5 billion basket of QB2 because we just think it's more prudent to diversify a bit. And that frees up as much as US$2 billion to do something else. I still think that that copper would take priority for some time but you never know. So and that's a decision that you know we would be looking at that deploying any extra capital I would think for at least a year you'd want to see QB2 up and running smoothly or not I mean in terms of its construction up and running smoothly before you decided to commit capital to the growth projects one of which could be Quintette. But during that year we're going to see several milestones including the full feasibility and Zafranal pre-feasibility on say Nicholas and so on. So it's going to very interesting here. Fair question and I'm not sure give you that clear but at least you get a feel for how we think about.

And it actually a super helpful answer and maybe just as my follow-up obviously QB2 and Quintette are both world-class projects and one of the two just fall down a further 22% stake for $600 million curious if you have a thought you valuation there.

Yes, I think depending on future payments you get a number even higher than that. We see a lot of comparability between the two projects we literally do and we called apples to apples, but direct comparison line-by-line on the different aspects of the two projects and they have a little bit higher production and the early years because of higher grade, but QB2 has more consistent over the life and the whole bunch like we have much lower strip ratios all-in sustaining costs are really good. We're going to be going out to the market Canada, U.S., and Europe once a project sanctioned with very detailed presentations on all elements of QB2 and comparing to what else is out there. So you know we can't predict what the valuation is going to be and the world will evolve between now and when happened in Q4 that will have an effect. But we do see a lot of comparability between the two projects.

Agreed. Thanks very much and good luck.

Thank you.

All right. John I think we've got to have gone over a little bit here get time for one more question.

Thank you. So the last question for today will be from Mark Levin from Seaport Global Securities. Please go ahead.

Thanks. Just a few very quick questions. One has to do with capital structure and maybe if you have some updated thoughts about what you think will look like or looks like the best capital structure for the business going forward particularly given QB2 in the decision you made to find a partner.

Okay. I'll also ask Ron Millos first to start just on our basic ratios and then I may have some additional comments.

Yes. Our basic ratio is debt equity [audio dip] ratio wouldn't we like to see that somewhere in the 20% to 30% range and the debt-to-EBITDA, the leverage test we would like to be in that sort of 2 to 2.5 times on occasion will exceed that. Depending on the opportunities in front of us or commodity prices are but if we sort of get to those levels we think that will be certainly helpful to get back to an investment grade credit rating.

One thing we wanted to add to that is that the structure of the your outstanding debt is really important too in terms of your maturity ladder and balanced against how much liquidity you keep on. So we said that we know we're going to have close to $7 billion liquidity and this is before any entry fee into QB2. And that compares to no debt due for the rest of 2018, no debt do in 2019, no debt do in 2020, and 220 million debt do in 2021. So $7 billion liquidity with only $200 million of debt coming due in three years time. So during the time that we would be building. We would have - are really, really strong position. So the total debt outstanding is one thing and we could still reduce that, but this is the maturity lot of the timetable of our maturities it's really, really important to us and that's why we've structured it the way it is.

That makes sense. One last question I think I know the answer all before I ask but I'll try anyway with the realizations the nickel price realizations this quarter kind of return back to have more normal levels. I am assuming because the strands weren't as wide during the quarter, but obviously the quarter before that it kind of blown out. Any preliminary ideas right now if this where you were this quarter with the met coal price realization relative to the benchmark is more likely in Q3 or something that looks more like you didn't in Q1.

Yes. So on this one we have made a decision not to focus on the percent realized price versus benchmark because it became clear that it was highly misleading to the market of people who are focusing on that number. The reality is that it depend that if we ever put a number out there it is only good for a moment in time and we found that people are sort of putting that in their models and leave it there. When really you need to pay attention to that daily the trade journals who publish core price Index every day. And look at the difference between high quality hard coking coal and then the lower quality products that are out there and see what the spreads were. It is true that the percent realization number if you did the calculation which we're not going to do any more was wider last time because in the market there was a significant difference in demand for high quality and little quality and those spreads widened quite significantly in this quarter they've gone back more to normal. Nothing is changed in terms of the coal it's in the ground it is what it is and in the long-term if you just took normalized prices presence of 92% is where we end up. We were I think 93% at this time but I am trying to forget what those numbers are because it's more important to just look at the day-to-day numbers.

I understand. That makes sense. And then finally, last question on for real has to do with Chinese buying patterns in the met coal market do you want has obviously had a pretty significant move even at the repaid India is the currency moved a little lot. Have you seen in the market less sort of an interest from either Chinese or Indian buyers potentially is a function of currency more than anything?

So interesting question Mark and then the Chinese imports are still making coal from Seaborne markets are down this year compared to last year. But India is running very, very strong and that is where we see the most growth and going forward. There is still the government plan for crude steel production is still to increase 200 to 300 tonnes of capacity by 2030, 2031 that's compared to 120 to 125 million tonnes currently. So there is still very strong demand in that market in Eastern Europe with the completion of mines it relying more on Seaborne market we're also seeing growth in Southeast Asian markets. So we need to look at market as a whole suppose to market-by-market.

Fair enough. Thank you guys very much. End of Q&A

Okay. Well, let me just make a closing comment and to repeat we think it was an extraordinary quarter, solid earnings of 650 million and a record first half for the company 1.4 billion earnings. We've increased guidance on each of the zinc, copper, and coal businesses. We've got the QB2 partner process getting started which should free up as much as US$2 billion from future capital requirements. We've got the permitting almost done a QB2 and as there's real scarcity value in QB2 in terms of projects out there. The Fort Hills start up could not have been better really got a fantastic plant there, Suncor doing a great job, the Onida transaction closes today $1.2 billion more cash, Newmont coming in as a partner Galore Creek that is fantastic and we've got all sorts of catalysts coming in the next 6 to 12 months so we're feeling great here look forward to talking to you after Q3. Thanks very much.

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