Ladies and gentlemen, thank you for standing by. Welcome to Teck's Third Quarter 2020 Earnings Release Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. This conference call is being recorded on Tuesday, October 27, 2020. I would now like to turn the conference call over to Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analysis. Please go ahead.

Thanks very much, Melanie. Good morning everyone and thanks for joining us for Teck's third quarter 2020 results conference call. Before we begin, I would like to draw your attention to the caution regarding forward-looking statements on Slide 2. This presentation contains forward-looking statements regarding our business. This slide describes the assumptions underlying those statements. Various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statement. I would also like to point out that we use various non-GAAP measures in this presentation. You can find explanations and reconciliations regarding these measures in the appendix. With that, I will turn the call over to Don Lindsay, our President and CEO.

Well, thanks very much, Fraser, and good morning, everyone. Thank you for joining us this morning. I will begin on Slide 3 with our third quarter highlights and will be followed by Ron Millos, our retiring CFO, who will provide additional color on the financial results. We will than conclude with a Q&A session where Ron and I and several members of our senior management team would be happy to answer any questions. Before I start, I do want to say that after 25 years with Teck, this is expected to be Ron's last quarterly conference call and I just want to personally and on behalf of our whole team thank Ron for as many outstanding contributions to Teck over 25 years with the Company and we wish him the very best in his retirement. Thank you, Ron. Jonathan Price, Teck's new Senior Vice President and Chief Financial Officer will join me in presenting our fourth quarter 2020 results in February. So, these continue to be, what I guess many called unprecedented times as the world adapts to a new normal with COVID-19. And despite the ongoing challenges, our financial performance recovered strongly from the second quarter that clearly was very significantly negatively impacted by COVID-19. And despite the decline in realized steelmaking coal prices that you will have seen, we did post gains in profitability and operating cash flows. We made significant progress during the quarter on the execution of our major projects, including advancing the Neptune terminals upgrade in line with the schedule and the budget and also safely ramping back up construction and our QB2 project. We've also made progress in reducing costs throughout supply chain improvements and our cost reduction program and as a result of RACE21. Our adjusted site cost of sales in the steelmaking…

Great. Thanks, Don. I'll speak to the changes in our cash position during the third quarter and that's on Slide 13. So we received net proceeds of $540 million from debt in the quarter and that was made up of net draws of $49 million on our revolver and $341 million on the QB2 project financing facility. We generated $390 million in cash flow from operations. We spent $589 million on capital projects, and that included $246 million on QB2 and $89 million on the Neptune facility upgrade. Our stripping activities used $110 million and that was lower than our Q3 2019 due mainly to the planned mining and production footages at our steel coal operations in the quarter. We paid $104 million in interest and financing charges and $54 million on expenditures on investments and other assets. Lease payments totaled $41 million, and we paid $27 million in our regular $0.05 quarterly base dividend. And after these and other minor items, we ended the quarter with cash and short-term investments of $403 million. Turning to the impact of COVID-19 on our business on Slide 14. As Don mentioned earlier, while our third quarter financial results reflect the negative effect of COVID-19 on the prices and sales of our products compared with the same period last year, we saw a strong recovery compared with Q2 of this year, which was significantly negatively impacted by the pandemic. In the second quarter, all of our mines have recovered from COVID-19 production disruptions. And in the third quarter, we expensed $130 million related to COVID-19 on a pretax basis, which is half of the amount expensed in Q2. And of course, we expensed $107 million in other operating income expenses related to the temporary suspension of construction and remobilization at QB2 project and…

Thank you, Ron. And to wrap up on Slide 17. Despite the ongoing challenges, our financial performance did recover strongly in Q3, following the second quarter that was obviously negatively impacted by COVID-19. We believe that Teck has quality operating assets in stable jurisdictions, and we are advancing our copper growth strategy that is funded and is being implemented. We continue to progress our four key priorities to create shareholder value and position tax efforts to come. Those are the QB2 project, RACE21, Neptune and our company-wide CRP cost reduction program. We believe Teck is well positioned to generate shareholder value as the world adapts to the new normal with COVID-19. And with that, we would be happy to answer your questions. I should say, like many of you, most of us are on phone lines from home. So please bear with us if there is a delay while we sort out who will answer each question. So now, operator, over to you for questions.

Thank you. [Operator Instructions] The first question is from Orest Wowkodaw of Scotiabank. Please go ahead. Your line is now open.

Don, I was hoping we could get a bit more color on the cost guidance and coal. I final languaging in the MD&A fairly confusing because it on one hand, you say that you expect on-site cost and coal to exit this year sub $60 a ton. But then in the disclosure, it also talks about kind of preliminary 2021 site cash guidance to be in line with H2 levels, which are 60 to 64. Can you help explain how we should interpret that?

Yes, I'll turn it over to Robin in just a minute, but you should have the context that we haven't finished our budgeting for 2021 yet. So we didn't want to put out formal numbers very specifically until we've done that. And that process is ongoing. There are always a number of different factors within the operation that come at you throughout the course of the year. So we want to make sure that we've examined all those things before we put a very specific guidance. But for sure, the cost structure of the business has been materially reduced, and while it would be plus or minus a couple of bucks going forward, we are at a level at substantially lower than it was before and the starting point going into 2021 is pretty good. But with that, Ron, over to you.

You bet. Thanks. And thanks, Orest. As Don said, we're going through a budget process right now, so there's a lot of things like hall distance and the plant maintenance outages that normally occur in Q2 and Q3 that we have to take into account and we've also got two new water treatment facilities coming online this year with Fording River sells going to be completed at the end of Q1 as well as the Elkview saturated rock fill, which is just going online now. So those things all have to be rolled into a budget, but I'll give you a few important data points that will help you kind of frame a view around this. So, our strip ratio and this is a key cost driver is going to be -- we're coming down to around 10:1 through this last quarter. We will go through 2021 at that 10:1 and we see ourselves over the next few years staying at 10:1. And again, that's an extremely important cost driver for us. You remember, our strip ratio through 2019 was 11.4:1. It's going to be around 11.1:1 through 2020. So now that we've got the expansion Elkview behind us, we see that strip ratio stabilizing. So that's one really important data point. Don also mentioned the closure of Cardinal River, from a structural point of view, that was our highest cost operation, lower quality coal. And that Tony Jervis actually has been created through the Elkview expansion, which is now successfully executed, and we're running at a pace of 9 million per year at that operation. And that's our lowest -- one of our lowest cost operations in the business and at a higher quality coal. So, that's another factor you have to take into account because it's both cost…

But Robin, just on that -- I mean, for all the reasons you cite here, I guess I'm not understanding why costs are not going to remain below $60 a ton in 2021.

Well, Q4, I mean, one aspect about Q4 is we don't have plant shutdowns in that quarter. It's typically a quarter where that's all behind us. And we, on average, will operate at a lower cost normally in Q4 than we do over a full year. So quarter-to-quarter, you're going to have different impacts on your cost base. So that's why we're confident we'll end the year below $60. But that does it mean that every quarter forward in '21 will be at that same level.

Thank you very much.

Or as you can assume, it is certainly our objective to stable the $60, if we can put it all possible, but we don't want to over represent right now until we finish the budgeting process.

Yes, thanks Don.

I might add just on the all truck productivity's comment that Robin made, that we actually had a really high record off truck productivity during spring runoff. For those of you who have been a format the pit and seen what the role conditions are like at that time of the year. That's an incredible statement to be able to make. So RACE21 is certainly helping us a lot.

The next question is from Carlos de Alba of Morgan Stanley. Please go ahead.

My question maybe, Don, is on Highland Valley copper. Just two points there. First, given the guidance for the fourth quarter, is it expected then at the heart or the unit process in Q3 and the resulted in lower output if I think of the past and moving going forward, that is normalized and production should stabilize beyond the fourth quarter guidance that was provided? And also on that operation, the molybdenum production in the third quarter declined significantly year-on-year due to particularly lower grades. What can you comment in terms of the moly grade going forward at Highland Valley?

Okay. I think both of those questions can go to Dale Andres, please.

Yes. Thanks, Carlos. Just to start on the first question with hardness. Basically, there's two factors that led us to change the mine plan and the sequence for the year, one due to reduced stripping around COVID in the second quarter, where we focused more in on the valley pit and as well as some geotechnical constraints that limited our flexibility for the various ore sources that we feed to the mill. So, we found ourselves in a particular area in the pit that was harder than expected, an area that we didn't quite have as much hardness data around. And that's the reason for the lower guidance for the quarter. We do expect higher production and throughput going into the fourth quarter and into 2021 as well. So while we won't completely be out of that area in 2021, we do have other areas that will blend and mix with the softer ores. So, we don't anticipate that same kind of issues as Q3 going forward. Just on moly, again, to the change in mine sequence originally more or as planned from other areas in the mine when we change the mine sequence, that directly affects the moly reduction in grades. So again, we don't anticipate that as low as we've had for moly, we do anticipate that strengthening going forward as well. We'll issue updated guidance for 2021 on Q4 as we finish the budgeting process as well.

Next question is from Curt Woodworth of Crédit Suisse. Please go ahead.

A question on coking coal. Curious what you're seeing on the demand side, given some of the poor restrictions now in China? It seems like if you look at the domestic price in China, it's up about $15 a ton to $200. I guess, your Australian price has done a quick U-turn given they're out of the market. So it seems like the ARB is extremely wide. And potentially, India is coming back to the market. So just curious your -- what you're seeing with respect to that? And do you have any sense at a consumer level, how you're viewing coking coal inventories because obviously, it's -- there's no limited data for us to look at?

Thank you for your question. I thought this would actually be the first question of the day. There are some exciting developments there, but I'll turn it over to Réal Foley. Réal Foley: All right. Thanks, Curt. So maybe I'll start with your second question with respect to inventories. So you'll recall that steel production was actually turned down in glass furnaces were shut down a lot quicker with the pandemic. And as a result of that, inventories of steelmaking coal were also brought down very quickly. So going into this quarter and from the second half of the second quarter -- of the third quarter, really, we've seen blast furnaces restart again. And as those black furnaces are restarting, the steelmakers are trying to replenish inventories as well. So orders have been trending up, and that is reflected in our Q4 sales guidance. But just a note of caution on that, Demand is not yet back to pre-COVID levels. So just want to qualify that also. Now your first question on what is happening like with the coal market overall and the impact of the heightened seaborne import restrictions. The first thing, I guess, to say is there's been no official announcement on those restrictions, but they appear to be mainly direct into industrial and coal. And we're continuing to see China steel production run at record high levels. So you're quite right, the steelmaker requires steelmaking coal. And we are starting to see a few sales to China above original expectations, and that is coinciding well with our operations ramping up through the quarter, as Robin was just explaining. Now when we look at China per se, if there's three sources of steelmaking coal for China, seaborne market is one, Mongolia is another, and of course, domestic coal…

Réal, any further color on the Chinese domestic price and the spread between that and the seaborne price and whether any of that will find its way to a non Australian seaborne supplier? Réal Foley: Yes, good question. We -- the current arbitrage is somewhere around $70 or just under that actually. And we're starting to see a few sales to China above original expectations. And yes, if Chinese steelmakers become pinched for steelmaking coal, they could very well continue looking to the seaborne market for more supply from regions other than Australia, and that could very well continue to push price up.

I appreciate all the granular data. That's very fascinating. And maybe a quick one for you, Don, as we're kind of coming out of COVID, obviously, the base metal performance, I think, has been pretty remarkable, certainly within both copper and zinc. With respect to portfolio construction, can you give us an update on kind of project satellite? Has there been any more traction there with regards to divestiture potential? And then I guess, similarly with Fort Hills, as you see some additional capacity coming on? Is there -- there's been some consolidation in energy. Is there any potential for looking at monetizing that asset potentially ahead of when you would get back to your more baseline level of the 200 barrels a day and 23 cost structure?

Yes. So first on project satellite, we continue to add value where we can on the five different assets. As you know, there's still travel restrictions, so whether you wanted to do a sales process or not, it would be difficult for people to do site due diligence and so on. But we certainly like the way that the direction the market is taking. And as a point I would offer zinc have performed pretty well. So the market looks stronger than it was when we had launched the Zafranal sale process before. So that should be a benefit. We're not in rush because we can't really do everything we want to do until you have much pre-year travel than we have today. But certainly, the assets are getting more valuable. And at some point, we'll engage in some sort of a transaction to get that for shareholders. In terms of Fort Hills, I think the partners will have to come up with the plan on how to ramp up Fort Hills to the next level. As I said in my comments, that we'll be looking at different market conditions and operating parameters, but the objective would be to get back to full production and thereby lower their cost per barrel quite significantly as it goes up. So I think you'll see some version of that. Suncor is the managing partner, obviously, and you'll see announcements from them on that in due course. And in terms of where it stands within the Teck portfolio for construction, I think you called it, we have said for more than a year now that if we get through some of these issues in the market in terms of getting back running at full capacity and people have better visibility on pipelines. And it's clear that we're not going to be paid for IT in Teck Resources, and we were engaged in the transaction where it's on differently, whether it's not right sale for cash, whether it's contributing to another company taking back shares in some sort of consolidation play. It's not lost on us. There's some consolidation going on in the sector. So you can assume conversations are taking place. But I wouldn't anticipate that we'd see anything in the near term, not until we've been able to ramp up and demonstrate what the asset can do. I mean, when Fort Hills first started that first 8 to 9 months, it was absolutely a terrific operating performance for start-up and got to a point where it was running above capacity. As I told, 80% of projects of that scope never hit design capacity at all. And this one got there pretty quickly and has been for debottlenecking on top of that. So I think you want to be sure we can demonstrate that value before we engage in the transaction. But Alberta is remove a Capstone people expected, and we started that the second train now, so inside production.

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

Just a question for Don or Réal. Do you have the ability to meet additional demand from China for Canadian coal? You said they're coming to you? Does the guidance imply that you are leading some of that demand? Or is there upside to that number, the guidance number?

Réal, I'll turn it over to you, but Greg, as you like to expect, I'm putting a lot of pressure on Réal. Réal Foley: Yes. Thanks, Greg. So yes, we are starting to see some of that demand. We are making a few sales into that demand. But as we look at the full quarter, keep in mind that the guidance that we've provided is based on the fact that overall demand for steel inking coal in the world, not only in China but in the world, is not back to pre-COVID levels. So the guidance is we feel is appropriate. And let's keep in mind, too, that there remains a risk to the recovery with the second wave that we're seeing with the pandemic in a number of places in the world getting hit pretty hard right now.

Sure. So I just want to go back to Orest question on the costs for 2021. Does that also include some I guess, conservatism on what volumes could be next year. And obviously, you don't have any guidance out there yet, but it does look challenging into 2021 still. And that would obviously have an impact on the unit cost, if volumes are back up to that 26 million ton, 27 million ton level.

I'll let Robin talk about initial production plans. But directionally, Greg, we want to be going into 2021 at full production or very close to it. Go ahead, Robin.

Yes. Not much to add to that, Don. That's the plan. So like I said, we go into '21, quite strong with healthy ROC coal inventories, a stable mine plan. Record productivities, all those things set us up. So if the market supports full production, the plan obviously is to meet that demand.

Okay. Just a follow-up question finally for you, Robin. In the MD&A, it says something about regulatory changes coming shortly that will increase water management costs over and above the 350 million to 400 million as planned for 2021 through 2024. What is that whole amount?

Yes. I'd probably defer to Peter for that one.

Yes. Unfortunately, Greg, there's not much more we can say on that in light of the ongoing prosecution, but we do expect some additional regulatory requirements in the near future that will complement measures that we're already taking under the Elk Valley water quality plan. And to the extent that those represent a significant change in our spending plans, we probably make an announcement when those are finalized.

The next question is from Jackie Przybylowski of BMO Capital Markets. Please go ahead.

I have a couple of questions, I guess, I just want to ask. First, your dividend policy. I know when you initiated the formula, the dividend formula last summer, you had mentioned for last year you would either provide an update on your dividend in November or in February. And in fact, I guess, it came in February last year, this year. Do you have a sense of what the policy is going to be on that going forward? Can we expect a dividend announcement next month? Or are you more likely to update the market in February on that?

No. It would be February. The decision was made to wait until the year is complete before determining any supplementary capital returns. We have the capital allocation model that's published, and I believe we keep it in the IR appendix in every presentation. So you can see how the decision-making flows on that one. If there's capital available for further returns above the base dividend, and we have in the past surveyed shareholders to determine whether buybacks or cash dividends are preferred, and then the Board makes a decision at that stage. So basically, nothing has changed from what was.

Okay. And to follow-up on Greg's question about coal. And if you do see -- and I know you mentioned that there's still some risks to the volumes and outlook. But if you do see higher demand for coal, say, from China through Q4 through 2021, are there still mechanisms like you've had in the past to push the mines to raise volumes? Could you bring in contract labor or something like that to sort of produce more than what you normally would for a short period to take advantage of that high demand? Is that still possible?

Robin?

Yes. It's less possible, and it might have been when we had six operating mines. We're down to four now. So the flexibility around that is incrementally less, I guess, than it was before. There's still opportunity. I think there's some latent capacity in the one mine right now, but it's pretty marginal, so.

That's why I was asking with the change to the number of ideas. That makes sense. And maybe just one final question. I know it's difficult for you guys to comment on low water treatment costs. We've seen some press releases reports recently about some more stringent water treatment protocols, whether it's through Canada or in some of the U.S. states like Montana. Is there potentially more that Teck would have to do to keep selenium levels under control beyond what you guys have already envisioned in the water treatment plan? Is there something you can talk to on that?

Yes. I think we start with Peter on that one, and then maybe Jon.

Yes. So I think what we have to do over the long-term is going to depend very much on the results of our current program and ongoing environmental monitoring. We're obviously committed to protecting water quality as far down as the trans boundary impacts of our operations including Lake Koocanusa. And there's Montana rulemaking that's still ongoing. We're primarily regulated in BC and the BC government hasn't yet announced a recommended water quality objective for Lake Koocanusa and they recently announced that they remain committed to a science-based process. And that BC will only commit to a standard once that science-based process has been fulfilled. And obviously, there's ongoing consultation with the Ktunaxa Nation Council. We're participating in the regulatory process on both sides of the border. And from a good news perspective, annual average saline levels in Lake Koocanusa had been stable since 2014, and we expect to see reductions in those levels as treatment capacity comes online. And as Robin said earlier, the Elkview saturated rock fill is being commissioned in Fording active water treatment facility is coming online very shortly. So difficult to say, Jackie, what the future holds, but I think we believe that our current spending estimates are reasonable, subject to the additional regulatory actions that Greg spoke about, which may require some additional spending.

Okay. So that's helpful.

And the good news, Jackie, is in the next three or four months, our capacity to treat water is about to go up dramatically from 7.5 million liters a day currently to 47.5 million liters. So that's the Elkview SRF will be finished shortly and ramping up that we finish under budget and ahead of schedule. And then the Fording River Active Water Treatment plant will be coming online in the next quarter. And so that will really increase the capacity for water treatment and we'll demonstrate how the other plants of SRFs not plans, SRFs for coming will continue to help that. So, we're looking forward to getting that capital deployment, which makes the Company a better company behind us. So we're past 9:00 now. So I want to call it close and just make a couple of final comments. First, I do want to say how exciting October 8 was. And for those of us in the Company because in the morning, we had pictures sent to us from Chile, where we saw ball mill #1 being almost rolled into place, and that's just a significant threshold of construction to see things a lot large piece of equipment to be in there. And that afternoon, we saw the ship order coming in from Vietnam, arriving into the harbor, sailing underneath alliance average. And these are two big pieces of equipment and two initiatives that we have that are really going to make the Company lot much stronger projectors to come. On the coal side, the Neptune initiative is going to lower costs by quite a few dollars for decades to come on a lot of times and just make us a stronger, more competitive steelmaking coal business. And of course, QB2, when finished, is going to double on a consolidated basis on copper production and change the look of our portfolio. And this is what we're looking towards making the Company a much stronger company. Commodity prices will be what they will be, but certainly, the underlying assets will be much stronger. And then a final comment, I do want to say thank you to all mills once again for tremendous 25 years of contribution to making this company with us today. We very much wish you all the best on your time on. Thank you for on for continued service. And with that, operator, we'll close on.

The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.