Executive Summary / Key Takeaways

• Teck Resources Limited has fundamentally transformed into a pure-play energy transition metals company, divesting its steelmaking coal business to focus strategically on copper and zinc.
• The company is aggressively pursuing copper growth, targeting a doubling of production to 800,000 tonnes annually by the decade's end, driven by the Quebrada Blanca (QB) ramp-up, the sanctioned Highland Valley Copper Mine Life Extension (HVC MLE), and advancing greenfield projects like Zafranal and San Nicolas.
• Despite operational challenges at QB, including tailings management facility (TMF) development and a shiploader outage, management remains confident in achieving design rates by year-end 2025 and maintaining 2026 guidance, viewing current issues as temporary ramp-up milestones.
• Teck maintains a robust balance sheet and is committed to significant shareholder returns, having completed approximately 70% of its $3.25 billion share buyback program and consistently paying dividends.
• The zinc segment, particularly Trail Operations, is strategically important, demonstrating strong profitability through byproduct revenue and cost reductions, and is a key supplier of critical minerals like germanium.

A Strategic Pivot Towards Energy Transition Metals

Teck Resources Limited, with roots tracing back to 1913, has undergone a profound strategic transformation, culminating in 2024 with the divestiture of its steelmaking coal business. This pivotal move, generating US$8.6 billion in proceeds, has repositioned Teck as a pure-play energy transition metals company, singularly focused on meeting the burgeoning global demand for copper and zinc. This strategic shift underpins the company's capital allocation framework, balancing disciplined growth investments with substantial returns to shareholders.

The global landscape underscores the sagacity of this pivot. Copper and zinc are indispensable for global manufacturing, electrification infrastructure, national security, and the expanding digital economy. These secular tailwinds, coupled with persistent supply-side constraints in the mining industry, create a robust long-term demand outlook for Teck's core commodities. The company's strategy is designed to capitalize on this demand, leveraging its agile commercial approach and strong balance sheet to navigate market uncertainties.

In the competitive mining sector, Teck operates as a mid-tier player with significant regional influence, particularly in North America. While it may not possess the sheer operational scale of diversified giants like BHP Group (BHP) or Rio Tinto (RIO), Teck differentiates itself through a focused portfolio and deep regional expertise. Its diversified asset base, including copper and zinc operations, provides a degree of resilience against market volatility. The company's emphasis on organic growth, particularly through its pipeline of copper projects, is viewed as a more value-accretive strategy than M&A, where premiums can often erode upside.

Operational Excellence and Technological Differentiators

Teck's operational capabilities and rigorous project delivery framework serve as key differentiators in a capital-intensive industry. The company's approach to project development, particularly evident in its Quebrada Blanca (QB) operation, emphasizes robust design and the ability to operate at design levels, as independently verified by the successful completion testing of its $2.5 billion project finance facility in Q1 2025. This validation confirms the asset's inherent capacity and potential for strong cash flow generation.

At the Highland Valley Copper Mine Life Extension (HVC MLE) project, Teck has applied "additional technical and engineering work" to optimize the project. This includes incorporating project-level contingencies, accounting for inflation and input cost escalation, and accelerating the procurement of mobile equipment. This comprehensive estimation process reflects "learnings that we took from the QB projects," aiming to provide greater certainty for future capital expenditures and derisking project execution. Furthermore, at Trail Operations, an "updated operating strategy" and "initiatives to improve profitability and cash flows" highlight a continuous focus on process improvement and operational efficiency. These operational and project execution capabilities, while not proprietary material science, are critical "technological" advantages that drive efficiency, cost control, and successful project delivery, directly contributing to Teck's competitive moat and long-term growth strategy.

Quebrada Blanca: Ramping Up to Full Potential

The Quebrada Blanca (QB) copper mine in Chile is central to Teck's copper growth strategy. After completing construction in 2024, QB ramped up to design throughput rates by year-end, contributing to a record annual copper production of 446,000 tonnes for Teck in 2024, with QB alone producing 208,000 tonnes. However, the ramp-up has encountered several challenges.

In Q1 2025, production was impacted by an 18-day extended shutdown for maintenance and tailings development, a nationwide power outage in Chile, and challenging weather conditions. Slower-than-expected sand drainage times at the Tailings Management Facility (TMF) necessitated additional mechanical movement, leading to anticipated extended maintenance shutdowns in Q2 and Q3 2025. The company revised its 2025 QB production outlook to 210,000-230,000 tonnes, acknowledging these risks. An outage of the shiploader at QB's port facility, caused by a brake failure, is expected to extend into the first half of 2026, though alternative shipping arrangements are in place to prevent production impact.

Despite these hurdles, management views the TMF development as a "onetime milestone related to the ramp-up" and expects it to be "behind us" by year-end 2025, ensuring no constraint on 2026 operations. The plant's throughput has shown consistent improvement, and recoveries are expected to improve in the second half of 2025 due to more consistent mill run time and successful test work on grinding and flotation circuits. Teck is also exploring optimization and debottlenecking opportunities at QB, which could increase throughput by an additional 15% to 25% beyond nameplate capacity.

Expanding the Copper Horizon: HVC MLE and Greenfield Projects

Beyond QB, Teck's copper growth strategy is underpinned by a robust pipeline of near-term projects. The Highland Valley Copper Mine Life Extension (HVC MLE) project in British Columbia was sanctioned in Q2 2025, with a capital estimate of CAD 2.1 billion to CAD 2.4 billion. This brownfield project, 100% owned by Teck, is expected to extend the mine life to 2046 and produce an average of 132,000 tonnes of copper annually. The project's economics are attractive, generating a robust internal rate of return significantly above the cost of capital and a positive net present value using an 8% discount rate. Its capital intensity is projected to be low, at USD 11,500 to USD 13,200 per tonne of copper on an annualized basis.

Greenfield projects, Zafranal in Peru and San Nicolas in Mexico, are also progressing towards sanction readiness by year-end 2025. Zafranal initiated advanced early works in May 2025, following permit receipt, and aims to submit its construction permit in Q2 2025. San Nicolas is expected to complete its feasibility study in Q4 2025. These projects are characterized as "significantly less complex and smaller in scope than QB with lower capital intensities, attractive project economics and well-balanced risk return profiles." Teck aims to double its annual copper production to approximately 800,000 tonnes by the end of the decade through these initiatives.

Zinc Segment: A Strategic and Profitable Complement

While copper takes center stage, Teck's zinc segment remains a vital and increasingly profitable component of its portfolio. In Q2 2025, the zinc segment's gross profit before depreciation and amortization surged by 137% to $159 million compared to the prior year, driven by higher byproduct revenues and lower operating costs. Red Dog, a world-class zinc mine in Alaska, continues to perform strongly, with sales of 35,100 tonnes in Q2 2025 exceeding guidance. The segment's net cash unit costs improved significantly to USD 0.49 per pound in Q2 2025.

Trail Operations, Teck's integrated zinc and lead smelting and refining complex in British Columbia, delivered another quarter of profitability and cash generation in Q2 2025. This improvement reflects an updated operating strategy focused on increasing byproduct revenue and implementing cost reductions. Trail is a key producer of critical and strategic minerals, notably germanium, of which Teck is estimated to be the fourth largest global producer and the only primary producer in North America. This capability is particularly strategic given recent supply restrictions from China and germanium's importance in defense applications. Despite a non-cash impairment charge of $828 million in Q3 2024 related to challenging treatment charges and a localized fire, Teck remains committed to Trail, emphasizing its integration with Red Dog and its role in providing essential metals. The annual guidance for the zinc segment remains unchanged, with zinc in concentrate production projected at 525,000-575,000 tonnes and refined zinc production at 190,000-230,000 tonnes.

Financial Strength and Shareholder Returns

Teck's financial position is robust, providing a strong foundation for its growth strategy and shareholder returns. As of Q2 2025, the company commanded $8.9 billion in liquidity, including $4.8 billion in cash. While the company moved into a small net debt position in Q2 2025 due to deploying proceeds from the steelmaking coal sale, it anticipates a release of working capital from Red Dog inventory to unwind in Q3 2025.

The $8.6 billion proceeds from the steelmaking coal divestiture have been strategically deployed, including a significant reduction in debt by $2.5 billion in 2024 and $1.5 billion in Q3 2024. This deleveraging, coupled with semiannual repayments on the QB project finance facility, strengthens the balance sheet. Teck is also actively returning capital to shareholders, having returned over $1.1 billion year-to-date in Q2 2025, including $487 million in share buybacks. Approximately 70% of the authorized $3.25 billion share buyback has been completed, with $1 billion remaining.

This commitment to returning between 30% and 100% of future available cash flows underscores management's confidence in the business's cash-generating potential.

Outlook and Risks

Teck's outlook is one of significant copper growth, underpinned by operational improvements and a disciplined approach to project development. The company targets doubling copper production to 800,000 tonnes annually by the end of the decade. This growth is expected to be accompanied by improving margins, with copper EBITDA margin projected to reach 51% in 2025. Copper net cash unit costs are guided to reduce to USD 1.90-USD 2.05 per pound for 2025.

However, risks persist. The QB ramp-up faces ongoing challenges with TMF development and the shiploader outage, which could impact short-term production targets. Geopolitical tensions and trade tariffs, particularly between the US and China, could affect zinc concentrate sales from Red Dog, although Teck's diverse customer base and agile commercial strategy are mitigating factors. The permitting environment for greenfield projects, such as the EA dispute for HVC MLE and the uncertain mining environment in Mexico for San Nicolas, presents regulatory risks. Commodity price volatility remains an inherent risk for any mining company, potentially impacting revenue and profitability.

Conclusion

Teck Resources Limited stands at a pivotal juncture, having successfully transformed into a focused energy transition metals powerhouse. The strategic divestiture of its coal assets has unlocked capital for aggressive copper growth and substantial shareholder returns, positioning the company to capitalize on robust long-term demand for critical minerals. While the ramp-up of the flagship QB operation has encountered expected challenges, management's proactive measures and confidence in achieving design rates by year-end 2025 underscore the asset's long-term potential. The sanctioning of the HVC MLE project and the advancement of greenfield opportunities like Zafranal and San Nicolas provide a clear roadmap to significantly increased copper production. Coupled with a strong balance sheet, a commitment to shareholder value, and the strategic importance of its zinc operations, Teck is well-positioned for sustained value creation in a metals-hungry world.