Bank of America Merrill Lynch Global Metals, Mining and Steel Conference
Global Metals, Mining & Steel Conference · 2015-11-12 · Global Metals, Mining & Steel Conference...
Transcript of Global Metals, Mining & Steel Conference · 2015-11-12 · Global Metals, Mining & Steel Conference...
Global Metals, Mining & Steel Conference May 12, 2015
Forward Looking Information
Both these slides and the accompanying oral presentations contain certain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and forward-looking information within the meaning of the Securities Act (Ontario). Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Teck to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These forward-looking statements include statements relating to management’s expectations with respect to executing Teck’s long-term strategy, reserve and resource life estimates, 2015 production guidance, 2015 estimated profit and estimated EBITDA, expectation that Teck will have a cash balance of $1 billion at the end of 2015, projected costs for our business units, expectations regarding the Corridor project, statements regarding the production and economic expectations for the Fort Hills project, including but not limited to free cash flow projections, estimated netback, operating margin, Alberta oil royalty, net margin, pre-tax cash flow, Teck’s share of go-forward capex, and the expectation that Fort Hills is expected to have significant free cash flow wide across a range of WTI prices, Fort Hills capital cost projections, Teck’s marketing and logistics plans, 2015 production and site cost guidance, capital expenditure guidance, management’s expectations with respect to production, demand and outlook in the markets for coal, copper, zinc and energy, and potential benefits of LNG use in haul trucks. These forward-looking statements involve numerous assumptions, risks and uncertainties and actual results may vary materially, which are described in Teck’s public filings available on SEDAR (www.sedar.com) and EDGAR (www.sec.gov). In addition, the forward-looking statements in these slides and accompanying oral presentation are also based on assumptions, including, but not limited to, regarding general business and economic conditions, the supply and demand for, deliveries of, and the level and volatility of prices of, zinc, copper and coal and other primary metals and minerals as well as oil, and related products, the timing of the receipt of regulatory and governmental approvals for our development projects and other operations, our costs of production and production and productivity levels, as well as those of our competitors, power prices, continuing availability of water and power resources for our operations, market competition, the accuracy of our reserve estimates (including with respect to size, grade and recoverability) and the geological, operational and price assumptions on which these are based, conditions in financial markets, the future financial performance of the company, our ability to attract and retain skilled staff, our ability to procure equipment and operating supplies, positive results from the studies on our expansion projects, our coal and other product inventories, our ability to secure adequate transportation for our products, our ability to obtain permits for our operations and expansions, our ongoing relations with our employees and business partners and joint venturers. Management’s expectations of mine life are based on the current planned production rates and assume that all resources described in this presentation are developed. Certain forward-looking statements are based on assumptions regarding the price for Fort Hills product and the expenses for the project, as disclosed in the slides. Assumptions regarding liquidity are based on the assumption that Teck’s current credit facilities remain fully available. Assumptions regarding our targeted cash balance are based on current foreign exchange rates and assume that Teck’s 2015 guidance for production, costs and capital expenditures are met. Assumptions regarding Fort Hills also include the assumption that project development and funding proceed as planned. Assumptions regarding our potential reserve and resource life assume that all resources are upgraded to reserves and that all reserves and resources could be mined. The foregoing list of assumptions is not exhaustive.
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Forward Looking Information
Factors that may cause actual results to vary materially include, but are not limited to, changes in commodity and power prices, changes in market demand for our products, changes in interest and currency exchange rates, acts of foreign governments and the outcome of legal proceedings, inaccurate geological and metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources), unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications or expectations, cost escalation, unavailability of materials and equipment, government action or delays in the receipt of government approvals, industrial disturbances or other job action, adverse weather conditions and unanticipated events related to health, safety and environmental matters), union labour disputes, political risk, social unrest, failure of customers or counterparties to perform their contractual obligations, changes in our credit ratings, unanticipated increases in costs to construct our development projects, difficulty in obtaining permits, inability to address concerns regarding permits of environmental impact assessments, and changes or further deterioration in general economic conditions. We will not achieve the maximum mine lives of our projects, or be able to mine all reserves at our projects, if we do not obtain relevant permits for our operations. Our Fort Hills project is not controlled by us and construction and production schedules may be adjusted by our partners. The effect of the price of oil on operating costs will be affected by the exchange rate between Canadian and U.S. dollars. Statements concerning future production costs or volumes are based on numerous assumptions of management regarding operating matters and on assumptions that demand for products develops as anticipated, that customers and other counterparties perform their contractual obligations, that operating and capital plans will not be disrupted by issues such as mechanical failure, unavailability of parts and supplies, labour disturbances, interruption in transportation or utilities, adverse weather conditions, and that there are no material unanticipated variations in the cost of energy or supplies. We assume no obligation to update forward-looking statements except as required under securities laws. Further information concerning assumptions, risks and uncertainties associated with these forward-looking statements and our business can be found in our Annual Information Form for the year ended December 31, 2014, filed under our profile on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov) under cover of Form 40-F.
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Agenda
Teck Overview & Strategy
Commodity Market Observations
Teck Update
4
5
Producing through multiple price cycles after capital is recovered,
enhancing returns
Focused on the Americas & Low Risk, Stable Jurisdictions
Strong Resource Position1
With Sustainable Long-Life Assets
Coal Resources ~100 years
Copper Resources ~30 years
Zinc Resources ~15 years
Energy Resources ~50 years
Attractive Portfolio Of Long-Life Assets & Resources
1. Reserve and resource life estimates refer to the mine life of the longest lived resource in the relevant commodity assuming production at planned rates and in some cases development of as yet undeveloped projects. See the reserve and resource disclosure in our most recent Annual Information Form, available on SEDAR and EDGAR, for additional detail regarding underlying assumptions.
Teck has good leverage to stronger zinc and copper markets, and benefits from the weaker Canadian dollar
The Value of Our Diversified Business Model
Cash Operating Profit 2014
Coal ~1/3rd
Copper ~60%
Zinc ~40%
Base Metals ~2/3rds
Production Guidance1
Unit of Change
Estimated Profit 2
Estimated EBITDA2
Coal 27 Mt US$1/tonne $21M /$1∆ $32M /$1∆
Copper 350 kt US$0.01/lb $5M /$.01∆ $8M /$.01∆
Zinc 935 kt US$0.01/lb $8M /$.01∆ $12M /$.01∆
$C/$US C$0.01 $32M /$.01∆ $52M /$.01∆
2015 Leverage to Strong Commodities
1. Mid-point of 2015 guidance ranges. Zinc includes 650,000 tonnes of zinc in concentrate and 285,000 tonnes of refined zinc. 2. Based on $1.20 CAD/USD, and budgeted commodity prices. The effect on our profit and EBITDA will vary with commodity price
and exchange rate movements, and commodity sales volumes . 6
Agenda
Teck Overview & Strategy
Commodity Market Observations
Teck Update
7
US Steelmaking Coal Exports Most at Risk
8
Current US exports are ~2.5 times above historical average levels
US Export HCC Margin Curve
US Steelmaking Coal Exports (ex. Canada)
0
10
20
30
40
50
60
70
Mt
2000-2009 average: 23 Mt
2010-2014 average: 55 Mt
Wood Mackenzie estimates that at US$102, ~45% of US HCC exports are cash negative
-100
-80
-60
-40
-20
0
20
40
0 4 7 11 15 18 22 26 29 33 37 40
US$
/met
ric to
nne
Million metric tonnes
Source: GTIS, Wood Mackenzie
(3,000)
(2,500)
(2,000)
(1,500)
(1,000)
(500)
0
500
2012 2013 2014 2015 2016 2017 2018 2019 2020
Thou
sand
tonn
es
• At 2.7% global demand growth, 680,000t of new supply needed each year
• Post 2016, production expected to decline ~280,000t per year
• Structural deficit starts in 2017
• Project developments slowed due to lower prices, higher capex, corporate austerity, permitting & availability of financing
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Forecast Copper Refined Balance
Long-Term Copper Mine Production Still Needed
Source: ICSG, Teck
10
US
¢/lb
thou
sand
tonn
es
plotted to April 24, 2015
Monthly Chinese Zinc Mine Production
LME Zinc Stocks
Zinc Market Positioned for Change
Source: LME, NBS, CNIA
Mt M
t
plotted to April 24, 2015
4005006007008009001,0001,1001,2001,300
70¢75¢80¢85¢90¢95¢
100¢105¢110¢115¢
Jan-
13
Apr
-13
Jul-1
3
Oct
-13
Jan-
14
Apr
-14
Jul-1
4
Oct
-14
Jan-
15
Apr
-15
Stocks Price
0
1000
2000
3000
4000
5000
6000
0
100
200
300
400
500
600
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 2014 2015
• Metal market in deficit
• LME stocks down >700 kt over 27 months; sub-500 kt first since 2010
• ‘Off-market’ inventory position to work down also
• Large periodic increases indicate significant off-market inventories flowing through the LME to consumers
• Chinese zinc mine production is flat to down in the last 27 months
Agenda
Teck Overview & Strategy
Commodity Market Observations
Teck Update
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Focus on Cost Management & Operational Performance
• Ongoing focus on cost management & operational performance
• Positive cash flows after sustaining capex at all operations
• Solid financial position
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0
10
20
30
40
50
60
70
80
90
2012 2013 2014 2015Guidance
(Mid)
Operating Capitalized Stripping
C$/
t
13
Delivering Results in Unit Cost Management
Copper Cash Costs3
Achieved significant unit cost reductions, and expect further reductions in 2015
Steelmaking Coal All-In Costs1
2
1. All-in costs are site costs, inventory write-downs and capitalized stripping, excluding depreciation. 2. Operating costs are site costs and inventory write-downs. 3. By-product credits currently reduce cash costs by ~US$0.30/lb.
0.00
0.50
1.00
1.50
2.00
2.50
2012 2013 2014 2015Guidance
(Mid)
Before by-product creditsAfter by-product credits
US$
/lb
Investment Grade Credit Rating
14
October 1, 2014 April 17, 2015
Teck’s 10-Year Bond Spreads
Ten year bond spreads tightened following stable outlook
0
100
200
300
400
500
bps
Teck 3.75% 02/23
Jan 30th: S&P rating BBB- stable outlook
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Source: Teck Resources Limited 1. Estimates are based on exchange rates as shown, expected bitumen netbacks, and assumed operating costs of C$25 per barrel
including sustaining capital. 2. Per barrel of bitumen. 3. Go-forward capital is the go-forward amount from the date of the Fort Hills sanction decision (October 30, 2013), denominated in
Canadian dollars and on a fully-escalated basis. 4. Pre-tax free cash flow yield during capital recovery period.
The Fort Hills project is expected to have significant free cash flow yield across a range of WTI prices
Fort Hills Free Cash Flow Yield4
Sensitivity to WTI Price Potential Contribution
from Fort Hills $70 WTI &
$0.80 CAD/USD
$90 WTI & $0.90
CAD/USD
Teck’s share of annual production (36,000 bpd) 13 Mbpa 13 Mbpa
Estimated netback2 ~$54/bbl ~$63/bbl
Estimated operating margin2 ~$29/bbl ~$38/bbl
Alberta oil royalty – Phase 1 (prior to capital recovery) 2 ~$2/bbl ~$4/bbl
Estimated net margin2 ~$26/bbl ~$34/bbl
Annual pre-tax cash flow ~$350 M ~$444 M
Teck’s share of go-forward capex3 ~$2,940 M ~$2,940 M
Free cash flow yield4 ~12% ~15%
0%
5%
10%
15%
20%
25%
60 70 80 90 100 110 120
Free
Cas
h Fl
ow Y
ield
WTI $/bbl
$0.90 CAD/USD
$0.80 CAD/USD
Fort Hills’ Economics Robust1
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Market Access Strategy • Diversify market destinations
− Target 20,000 barrels/day East Coast − Target 20,000 barrels/day Gulf Coast − Balance sold at Hardisty or Chicago
• Common carrier and secondary pipeline capacity market
• Maintain rail as a back-up option as required
Export Pipeline Opportunities • Energy East (Europe, Asia, USGC, NEUS) • Flanagan South (USGC) possible “Open Season”
in Q4 2015 • West Coast (Asia)
Hardisty Tankage Update • Terminalling service agreement signed for
500,000 barrels dedicated storage at Hardisty
Fort Hills – Teck Logistics & Marketing
Summary
Attractive portfolio of long-life assets & resources
Good leverage to strong zinc & copper markets
Executing well & controlling the controllables
Solid financial position
Investment grade credit rating
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Global Metals, Mining & Steel Conference May 12, 2015
Additional Information
Diversified Portfolio of Key Commodities
North America
20% Europe
18%
Latin America
3%
China 26%
Asia excl. China 33%
Source: Teck Resources Limited; 2014 revenue 20
Diversified Global Customer Base
Coking coal Copper Zinc Lead Moly Silver Germanium Indium
Original Guidance Actual Results Steelmaking Coal
Coal production 26–27 Mt 26.7 Mt Record coal production
Coal site costs C$55-60 /t C$54 /t1
Coal transportation costs C$38-42 /t C$38 /t
Combined coal costs C$93-102 /t C$92 /t
Combined coal costs US$84-92 /t US$84 /t
Copper
Copper production 320–340 kt 333 kt Record thru-put at Antamina
Copper cash unit costs2 US$1.70-190 /lb US$1.65 /lb
Zinc
Zinc in concentrate production3 555-585 kt 660 kt Record at Red Dog
Refined zinc production 280–290 kt x 277 kt Higher production 2H14 (1H14: 133 kt; 2H14 143 kt)
Capital Expenditures4 $1,905M $1,498M Significant capex reduction
Solid Delivery Against 2014 Guidance
1. Including inventory adjustments. 2. Net of by-product credits. 3. Including co-product zinc production from our copper business unit. 4. Excluding capitalized stripping.
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Actual 2014 2015 Guidance Steelmaking Coal
Coal production 26.7 Mt 26.5-27.5 Mt Coal site costs C$54 /t1 C$49-53 /t Coal transportation costs C$38 /t C$37-40 /t Combined coal costs C$92 /t C$86-93 /t Combined coal costs US$84 ~US$69-74 /t2
Copper Copper production 333 kt 340-360 kt Copper cash unit costs3 US$1.65 /lb US$1.45-1.55 /lb
Zinc Zinc in concentrate production4 660 kt 635-665 kt Refined zinc production 277 kt 280–290 kt
2015 Production & Site Cost Guidance
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1. Including inventory adjustments. 2. At $1.25 CAD/USD. 3. Net of by-product credits. 4. Including co-product zinc production from our copper business unit.
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($M) Sustaining
Major Enhancement
New Mine Development Sub-total
Capitalized Stripping Total
Coal $100 $45 $ - $145 $490 $635
Copper 200 15 105 320 225 545
Zinc 180 - - 180 60 240
Energy - - 910 910 - 910
Corporate 10 - - 10 - 10
TOTAL $490 $60 $1,015 $1,565 $775 $2,340
Total capex of ~$1.6B, plus capitalized stripping
2014A $511 $165 $822 $1,498 $715 $2,213
2015 Capital Expenditures Guidance
Coal Well established with capital efficient growth options
Strong platform combined with diverse portfolio of options allows us to be selective in terms of commodity and timing
Completed In Construction Pre-Sanction
Copper Strong platform with substantial growth options
Zinc World-class resource combined with integrated assets
Energy Building a new business through partnership
Trail Acid Plant
HVC Mill Optimization
Pend Oreille Restart
Fort Hills
Elk Valley Brownfield (4 Mpta)
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Staged Growth Pipeline
Red Dog Satellite Orebodies
San Nicolas (Cu-Zn)
Elk Valley Brownfield (up to 10 Mpta)
Quintette/Mt. Duke
Frontier
Lease 421
QB Phase 2
Relincho
Mesaba Zafranal
HVC/Antamina Brownfield
Galore/Schaft Creek
Cirque
Growth Options
Operation Expiry Dates Line Creek In Negotiations - May 31, 2014 Coal Mountain In Negotiations - December 31, 2014 Antamina July 23, 2015
Carmen de Andacollo September 30, 2015 December 31, 2015
Elkview October 31, 2015
Quebrada Blanca October 30, 2015
November 30, 2015 January 31, 2016
Fording River April 30, 2016 Highland Valley Copper September 30, 2016 Trail May 31, 2017 Cardinal River June 30, 2017 Quintette April 30, 2018
Collective Agreements
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Note: Based on public filings
Teck Resources Limited March 3, 2015
Shares Held Percent Voting Rights Class A Shareholdings Temagami Mining Company Limited 4,300,000 45.97% 28.62% SMM Resources Inc (Sumitomo) 1,469,000 15.71% 9.78% Caisse de depot et placement du Quebec 1,587,600 16.97% 10.57% Public 1,996,870 21.35% 13.29%
9,353,470 100.00% 62.27% Class B Shares Temagami Mining Company Limited 860,000 0.15% 0.06% SMM Resources Inc (Sumitomo) 295,800 0.05% 0.02% Caisse de depot et placement du Quebec 8,603,197 1.52% 0.57% China Investment Corporation (Fullbloom) 101,304,474 17.87% 6.74% Public 455,788.822 80.41% 30.34%
566,852,293 100.00% 37.73% Total Shares Temagami Mining Company Limited 5,160,000 0.90% 28.68% SMM Resources Inc (Sumitomo) 1,764,800 0.31% 9.80% Caisse de depot et placement du Quebec 10,190,797 1.77% 11.14% China Investment Corporation (Fullbloom) 101,304,474 17.58% 6.74% Public 457,785,692 79.45% 43.63%
576,205,763 100.00% 100.00%
Share Structure & Principal Shareholders
26
• Common corporate structure in Canada
• May not confirm to typical governance expectations, but can still have strong governance practices
• Family-controlled issuers can benefit from a longer-term outlook and unique governance structure
Source: The Impact of Family Control on the Share Price Performance of Large Canadian Publicly-Listed Firms (1998-2012) by Clarkson Centre for Board Effectiveness (Rotman School of Management, University of Toronto)
Canadian family-controlled issuers outperformed peers over the past 15 years, greatly benefitting minority shareholders
Cumulative Average Growth Rate
Family-Controlled Public Issuers
27
Teck has been a strong investment in recent years
Long-term investments in Teck have outperformed non-family and materials firms
Family-Controlled Public Issuers; Teck Share Price Performance
28 Source: The Impact of Family Control on the Share Price Performance of Large Canadian Publicly-Listed Firms (1998-2012) by Clarkson Centre for Board Effectiveness (Rotman School of Management, University of Toronto)
Economic Outlook
Source: NBS & CEIC.
Lower GDP growth rate on a higher base = strong absolute growth
In absolute terms, China’s GDP growth is approximately double that of 10 years ago
China’s Growth: Less is More!
30
• Incremental GDP in 2015 is expected to be similar to last year, in absolute terms • 2014: ~RMB3,764 billion • 2015: ~RMB3,824 billion
• Nature of growth changing from fixed asset intensive to more consumer spending, impacting material consumption growth -1%
1%
3%
5%
7%
9%
11%
13%
15%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
The increase of GDP at 2010 constant prices in RMB (bn)
Increment of GDP, Rmb bn (lhs) GDP real growth (rhs)
RM
B Bi
llion
China
Japan
Korea
0
10
20
30
40
50
60
70
80
90
100
1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008
%
Source: Dragonomics
With the right policies, China still has the potential to boost incomes
China’s GDP ~20% of the US’s on a per capital basis in 2010
Substantial Economic Growth Requires Decades to Achieve
31
Per Capita GDP Relative to the US at PPP
Country
20-Year Period Beginning When Country’s
Per Capital GDP Was 21% of US’s
Average Annual GDP Growth Rate
Over a 20-Year Period
Japan 1951-1971 9.2
Singapore 1967-1987 8.6
Taiwan 1975-1995 8.3
Korea 1977-1997 7.6
Other Asian economies show that China could continue to grow significantly for some time
Substantial Potential For Continuous Robust Growth in China
32
Steelmaking Coal Business Unit & Markets
AUS$
Stronger US dollar favours producers outside of the US
Source: Argus, Bank of Canada
• >30 Mt cutbacks announced, slowly being implemented
• Require additional cutbacks to achieve market balance
• US coal production high end of cost curve and no currency benefit
• Continued closure announcements promising for last half of 2015
Coal Prices By Currency Argus FOB Australia
CDN$
US$
Met Coal Market Slowly Rebalancing; FX Assisting Producers Outside USA
plotted to April 27, 2015
34
85
95
105
115
125
135
145
$ /
tonn
e
0
2
4
6
8
10
Dec
-09
Mar
-10
Jun-
10
Sep
-10
Dec
-10
Mar
-11
Jun-
11
Sep
-11
Dec
-11
Mar
-12
Jun-
12
Sep
-12
Dec
-12
Mar
-13
Jun-
13
Sep
-13
Dec
-13
Mar
-14
Jun-
14
Sep
-14
Dec
-14
Mar
-15
Traditional Steel Markets
• China slowing
• Japan stable
• South Korea slight growth
Rest of the World
• Europe stable
• India good growth
• US flat
Monthly Hot Metal Production
Source: WSA, based on data reported by countries monthly; NBS
Mt
35
Update to March 2015
45 55 65 75
Global Hot Metal Production
Japan
India
South Korea
Europe
China
USA
• China’s hot metal production continues to grow - 2004: 258 Mt
- 2014: 712 Mt, representing 2.5x the 2004 level and ~60% of global output
- 2019E (CRU International) ~840 Mt
• Excluding China, global hot metal production remains significant at ~40% of the total
Hot Metal Production Growth
Source: WSA, based on data reported by countries annually; NBS; CRU International 36
Global Hot Metal Production A Look Back and Forward
350
550
750
950
1,150
1,350
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Chin
a
Amer
icas CIS
JKT
Indi
a
Euro
pe
Oth
er
2019
f
Growth from 2014 to 2019 (CRU Nov 2014) Global ex. China China
Mt
Source: WSA, NBS, Wood Mackenzie, CRU 1. Europe includes 12 countries.
Crude Steel Production Continues to Grow
37
Crude steel production to grow at ~1.5-2.5% CAGR between 2014 and 2019
Ex-China seaborne demand for steelmaking coal is forecasted to increase
by ~25 Mt in the same period
Crude Steel Production 2014-2019 Crude Steel Production 2014 (Mt)
Global 1,662 (+1.2% YoY)
China 823 (+0.9% YoY)
Global, ex-China 839 (+1.5% YoY)
JKT 205 (+3% YoY)
Europe1 208 (+1.3% YoY)
India 83 (+2.3% YoY)
Xinjiang
Tibet
Qinghai
Sichuan
Inner Mongolia
Henan
Shanxi
Guangxi Guandong
Fujian
Zhejiang
Jiangsu
Shandong
Laioning
Jilin
Heilongjiang
Guizhou Hunan
Hubei
Jiangxi
Anhui
Shaanxi Gansu
Ningxia
Qinghai
Sichuan
Yunnan
Beijing
Hebei
WISCO Fangchenggang Project • Major infrastructure in place. WISCO Fangchenggang Steel
Company established in Sep to wholly manage the project. • Cold roll line to be commissioned in H1 2015. Other lines are
scheduled to start successively within the year. • Blast furnaces (BFs) in the originally approved plan. Billet
rolling line only at this time. No timeline for BFs currently. • Targeting 5 Mt steel products in 2016 and 10 Mt in 2017.
Baosteel Zhanjiang Project • The environment evaluation was approved in Dec 2014
(~8.8Mt crude steel, 8.2Mt pig iron and 3.2Mt coke). • BF #1 to be commissioned in 2015.
Ningde Steel Base • Proposed but no progress yet.
Relocation to China’s coastline facilitates access to seaborne raw materials
Sources: NBS, CISA
Ansteel Baiyunquan Project • Phase 1 (~ 5.4 Mt pig iron, 5.2 Mt crude
steel and 5 Mt steel products) in 2013. • Phase 2 (5.4 Mt BF) planned but no
progress yet.
Capital Steel Caofeidian Project • Planned 20 Mtpa steel capacity. • Phase 1 (10 Mt) completed in 2010. • Phase 2 (10 Mt) under preparation but no
progress yet.
Shandong Steel Rizhao Project • Planned 21.35 Mt crude steel. • Phase 1 (8.5 Mt) approved in Feb 2013 • Construction started in Sep 2014 and
scheduled to commission by the end of 2016.
Chinese Steel Industry Moving to the Coast
38
40%
45%
50%
55%
60%
65%
70%
0100200300400500600700800900
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Mt
Total Coastal Provinces Coastal %
China Met Coal Still Struggling
Government support for domestic coal producers • Import tax increase (Australia exempt under FTA) • Export tax reduction
- Not large enough to stimulate exports • Resource tax reform
- Higher rates in larger coal producing provinces • Overall, changes not meaningfully supportive
Shanxi logistics improving
• Improved road transport efficiency (eliminating inspections) • Extra-provincial trade fees cancelled • Improved rail transportation capacity
39
China’s supportive actions preventing a meaningful price recovery
60.0
15.4 13.2
75.4
47.7
14.8
6.9
68.8
0
10
20
30
40
50
60
70
80
Seaborne Landborne Stock changeat six ports
Importdemand
Mt
2013 2014
Mixed Views on China Coking Coal Imports
40
2019
F
China's Coking Coal Imports and Stock Change at Ports
Imports down by <10% when combined with inventory drawdowns; stocks at ports near record lows
China Rolling 12-Month Coking Coal Imports
2019 Forecast: 50~95 Mt
0
10
20
30
40
50
60
70
80
Jan-
09
Jul-0
9
Jan-
10
Jul-1
0
Jan-
11
Jul-1
1
Jan-
12
Jul-1
2
Jan-
13
Jul-1
3
Jan-
14
Jul-1
4
Jan-
15
Mt
Seaborne Mongolia
Source: GTIS, Wood Mackenzie, CRU, Mysteel
We Are a Leading Steelmaking Coal Supplier To Steel Producers Worldwide
41
North America
~5% Europe ~15% China
~25%
High quality, consistency, reliability, long-term supply
Asia excl. China ~50%
Source: Teck Resources Limited; 2014
Latin America
~5%
Proactively realigning sales with changing market
0
50
100
150
200
250
300
350
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
US$
/ to
nne
Teck Realized Price (US$) Benchmark Price
Average realized price discount to benchmark is a function of:
1. Product mix: over 90% is hard coking coal
2. Carry over sales volumes
3. Direction of quarterly benchmark prices and spot prices
- Q2 2015 benchmark for premium products is US$109.50/t
Hard Coking Coal Benchmark Price
Premium Steelmaking Coal Product
42
Average realized price discount of ~8%
96%
88%
93%
94% 92%
0
20
40
60
80
100
120
2014 2015E
US$
/t
Site Costs Transportation Inventory Write-DownCapitalized Stripping Sustaining Capital
105
93
Teck costs lower than most major competitors
Total Cash Cost 2015 vs. 2014
Steelmaking Coal Costs
43
(US$/t) 2014 ($1.10
CAD/USD)
2015E* ($1.20
CAD/USD)
Site1 $49 $43
Transportation 35 $32
IFRS Total $84 $75
Capitalized Stripping $15 $15
Full Cash Cost $99 $90
Sustaining Capex $6 $3
Total Cash Cost $105 $93
* Based on the mid-point of 2015 guidance. 1. Includes inventory write-down.
IFRS Costs
Significant Long-Term Coal Growth Potential
44
Potential Production Increase Scenarios Teck’s large resource base supports several options for growth: • Quintette restart (up to 4 Mtpa)
fully permitted
• Brownfields expansions - Elkview expansion - Fording River expansion - Greenhills expansion
• Capital efficiency and operating cost improvements will be key drivers
-
10
20
30
40
50
Prod
uctio
n (M
t)
FRO GHO CMO EVO LCO
CRO QCO 28 Mt 40 Mt
Time Conceptual
Potential to grow production when market conditions are favourable
>75 Mt of West Coast Port Capacity Planned Teck Portion at 40 Mt
45
• Exclusive to Teck • Recently expanded to 12.5 Mt • Planned growth to 18.5 Mt
Westshore Terminals
Neptune Coal Terminal
Ridley Terminals
West Coast Port Capacity
• Current capacity: 18 Mt • Expandable to 25 Mt • Teck contracted at 3 Mt
• Teck is largest customer at 19 Mt • Large stockpile area • Recently expanded to 33 Mt • Planned growth to 36 Mt
Milli
on T
onne
s (N
omin
al)
Teck’s share of capacity exceeds current production plans, including Quintette
12.5 18
33 6
7
3
0
5
10
15
20
25
30
35
40
Neptune CoalTerminal
RidleyTerminals
WestshoreTerminals
Current Capacity Planned Growth
0%
20%
40%
60%
80%
100%
CO2 NOx Particulate SOx Diesel Natural Gas
LNG for Haul Trucks Project
• Pilot project underway to evaluate running Teck haul trucks on a blend of diesel and LNG - Expected to be running in 2015
• Has the potential to reduce our haul truck fleet fuel bill by $27M annually and lower our CO2 emissions by 35,000 tonnes per year
46
Comparison of Fuel Cost
$-
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
LNG / Diesel Liter Diesel / LiterGas Cost Liquifaction Carbon Tax Delivery Diesel
Pric
e pe
r Lite
r
Comparison of Emissions
% o
f Die
sel E
mis
sion
s
• Around the world, and especially in China, blast furnaces are getting larger and increasing PCI rates
• Coke requirements for stable blast furnace operation are becoming increasingly higher
• Teck coals with high hot and cold strength are ideally suited to ensure stable blast furnace operation
• Produce some of the highest hot strengths in the world 50 60 70 80 90 100
South Africa
Japan (Sorachl)
Japan (Yubarl)
U.S.A. Canada Other Teck HCC Australia Japan South Africa
Australia (hard coking) and Canada
U.S.A.
Australia (soft coking)
10
20
30
40
50
60
70
80
Drum Strength Dl 30 (%)
CSR
Teck HCC
47
Coking Coal Strength
High Quality Hard Coking Coal
Copper Business Unit & Markets
Base Metal Stocks Low on Days Consumption
49
Zinc Reported Stocks
17 days of consumption
Copper Reported Stocks
10 days of consumption
Lead Reported Stocks
8 days of consumption
Source: LME, ICSG, ILZSG * Charts as of April 15, 2015.
75¢
85¢
95¢
105¢
115¢
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 86.6¢ US/lb 2014 98.2¢ US/lb 2015 94.8¢ US/lb
2014
2015
LME ZINC Prices
225¢
245¢
265¢
285¢
305¢
325¢
345¢
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 332.1¢ US/lb 2014 311.2¢ US/lb 2015 264.9¢ US/lb
2015
2014
LME COPPER Prices
75¢80¢85¢90¢95¢
100¢105¢
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 97.1¢ US/lb 2014 95.1¢ US/lb 2015 82.6¢ US/lb
2015 2014
LME LEAD Prices
0100200300400500600700800900
1,000
Jan Feb Mar Apr May Jun Jul AugSep Oct NovDec
Thou
sand
s
Stocks fell 241,875t or 25.9% in 2014 Stocks have fallen 190,875t or 27.6% in 2015
LME ZINC Stocks
0
100
200
300
400
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Thou
sand
s
Stocks fell 189,400t or 51.7% in 2014
Stocks have risen 160,225t or 90.5% in 2015
LME COPPER Stocks
0
100
200
300
400
Jan Feb Mar Apr May Jun Jul AugSep Oct NovDec
Thou
sand
s
Stocks rose 7,526t or 3.5% in 2014
Stocks have risen 10,950t or 4.9% in 2015
LME LEAD Stocks
0
200
400
600
800
1000
0¢
100¢
200¢
300¢
400¢
500¢
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
LME Stocks Price
US¢
/lb
thou
sand
tonn
es
plotted to April 24, 2015
Source: LME
Copper Prices & Stocks
50
LME Daily Copper Prices & Stocks
Copper Concentrate TC/RC
0¢
10¢
20¢
30¢
40¢
50¢
60¢
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Spot Realised TC/RC
51
TC/R
C –
Nom
inal
US¢
/lb
Source: CRU
plotted to March 2015
Copper Concentrate TC/RC
-950
-859 -776
-851
-945
-584
-839
-973
-831
-1,060
-495
-1,200
-1,000
-800
-600
-400
-200
02005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2015YTD
Thou
sand
tonn
es
0
100
200
300
400
500
600
700
800
900
plotted to Feb. 2015
Copper Market Balance Trending Down Th
ousa
nd to
nnes
Surplus only 0.6% of global demand
52
Mine Guidance Wood Mackenzie Forecast 2015 Refined Copper Surplus
Mine guidance being revised downwards; mine disruptions still significant
Source: Wood Mackenzie
Significant Chinese Copper Demand Remains
-
200
400
600
800
1,000
1,200
1,400
1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 20300%
5%
10%
15%
20%
25%
30%
1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030
Annual Avg. 13%
Annual Avg. 5%
Annual Avg. Growth 330 Mt/yr
Annual Avg. Growth 505 Mt/yr
Thou
sand
tonn
es
53
…But Will Add Significantly in Additional Tonnage Terms
Annual Growth Rate of Chinese Copper Consumption to Slow Dramatically…
China expected to add almost as much to global demand in the next 15 years as the past 25 years
Source: CRU, Wood Mackenzie, Teck
0
100
200
300
400
500
600
700
800
900
1,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Cathode Concs Scrap Blister/Semis
000’
s to
nnes
(con
tent
)
China Now Accounts for >49% of Global Copper Consumption
Source: Antaike
China’s Copper Imports Remain Strong
54
Updated to March 2015
Zinc Business Unit & Markets
Zinc Prices & Stocks
0
200
400
600
800
1,000
1,200
1,400
0¢
50¢
100¢
150¢
200¢
250¢
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Stocks Price
56 Source: LME
US¢
/lb
thou
sand
tonn
es
plotted to April 24, 2015
LME Daily Zinc Prices & Stocks
Zinc Treatment Charges
$0
$100
$200
$300
$400
$500
$600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Spot Annual Realised
57
US$
/dm
t
Source: Teck, CRU
plotted to March 2015
Zinc Spot TCs vs. Realized Annual TCs
Committed Zinc Supply Insufficient for Demand
• We expect mine supply increases to allow for growth in refined supply of 1.2 million tonnes between 2014 and 2020
• Over this same period we expect refined demand to increase 3.7 million tonnes or about 4%/yr
• The market has been in deficit since 2014, but large inventory has funded the deficit
• Metal market moving into significant deficit with further closures, but inventories are depleting
58
(3,000)
(2,500)
(2,000)
(1,500)
(1,000)
(500)
0
500
2012 2013 2014 2015 2016 2017 2018 2019 2020
Thou
sand
tonn
es
Forecast Zinc Refined Balance
Source: Teck
400
500
600
700
800
900
1,000
1,100
1,200
50¢
60¢
70¢
80¢
90¢
100¢
110¢
120¢
Stocks Price
59
0
200
400
600
800
1,000
1,200
1,400
0¢
50¢
100¢
150¢
200¢
250¢
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Stocks Price
US
¢/lb
thou
sand
tonn
es
plotted to April 24, 2015
US
¢/lb
thou
sand
tonn
es
• LME stocks down ~600 kt over 24 months • Large inventory position still to work down but we are under 500kt for the first time
since early 2010 • Large, sudden increases indicate there are also significant off-market inventories
flowing through the LME to consumers
LME Zinc Stocks – Since Dec 2012
plotted to April 24, 2015
LME Zinc Stocks - 11 Years
Zinc Inventories Declining
Source: LME
60
China 6%
USA 19%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Galvanized Steel as % Crude Production China Zinc Demand 2014
Construction 15%
Transportation 20%
Other 5%
Consumer Goods 30%
Infrastructure 30%
Chinese Zinc Demand to Outpace Supply
Source: Teck
If China were to galvanize crude steel at half the rate of the US using the same rate of zinc/tonne, a further 2.1 Mt would be added to global zinc consumption
Significant Zinc Mine Reductions; Large Short-Term Losses, More Long Term
-600
-500
-400
-300
-200
-100
0
Cen
tury
Ram
pura
Agu
cha
Lish
een
Red
Dog
Sko
rpio
n
Pom
orza
ny
Bru
nsw
ick
Per
seve
ranc
e
Wol
verin
e
Zyry
anov
sk
Mae
Sod
Par
agsh
a
61
-600
-500
-400
-300
-200
-100
0
Cen
tury
Ram
pura
Agu
cha
Lish
een
Sko
rpio
n
Ros
eber
y
Red
Dog
Pom
orza
ny-O
lkus
z
Bru
nsw
ick
Cay
eli
Per
seve
ranc
e
Wol
verin
e
Jagu
ar
Zyry
anov
sk
Akh
zal (
Akt
ogas
k)
Kid
d C
reek
Bra
cem
ac-M
cLeo
d
Source: ICSG, Wood Mackenzie Teck, Company Reports
2013-2017 2013-2020
Energy Business Unit & Markets
Building An Energy Business
Strategic diversification
Large truck & shovel mining projects
World-class resources
Long-life assets
Mining-friendly jurisdiction
Competitive margins
Minimizing execution risk
Tax effective
63
Mined bitumen is in Teck’s ‘sweet spot’
Diesel & Crude Oil Prices
Spread has widened; Delay in changes in crude oil prices flowing through to diesel prices
Diesel Prices vs. WTI Prices 2007-2015
Source: Alberta Transportation, OPIS. 64
$-
$20
$40
$60
$80
$100
$120
$140
$160
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
CA
D$/
L
Alberta ULSD Rack Rate (CAD$/L) WTI (CAD$/L)
Average Diesel Premiums: 2007-2015: C$0.23/litre 2011-2015: C$0.28/litre
Plotted to 3/2015
• Significant value created over long term
• 60% of PV of cash flows beyond year 5
• IRR of 50-year project is only ~1% higher than a 20-year project
• Options for debottlenecking and expansion
50-year assets provide for superior returns operating through many price cycles
The Real Value of Long-Life Assets
65
Fort Hills Project Indicative Rolling NPV1
1. Indicative NPV assumes US$95 WTI, $1.05 Canadian/US dollar exchange rate, and costs as disclosed with the Fort Hills sanction decision (October 30, 2013).
1. GLJ Petroleum Consultants, December 2014. 2. There is no certainty that it will be commercially viable to produce any portion of the contingent bitumen resources. For more information
about contingent bitumen resources, see Teck’s annual information form dated March 2, 2015 available at www.sedar.com. 3. Sproule, December 2014.
World-Class Energy Reserves & Resources
No Exploration Risk – No Large Finding Costs
Bitumen Reserves
Teck’s Share (million bbl) Proved Probable Proved Plus Probable
Fort Hills1 414 200 614
Contingent Bitumen Resources2
Project Teck’s Share (million bbl) Low Best High Low Best High
Fort Hills1 30 139.4 763.1 6 27.9 152.6
Frontier3 2,360 3,047 3,465 2,360 3,047 3,465
Lease 421
Total 2,390 3,186.4 4,228 2,366 3,074.9 3,617.6
Still to be declared
World Class Energy Reserves & Resources
66
Fort Hills Is One of the Best Undeveloped Oil Sands Mining Leases
Ore grade is a function of the bitumen quantity in the deposit
TV:BIP is a ratio of the total volume of bitumen in place to the total volume of material required to be moved (like a strip ratio)
Strip Ratio vs. Ore Grade
Source: Teck
9.5
10
10.5
11
11.5
12
8910111213
Ore
Gra
de (w
t% b
itum
en)
TV:BIP
Fort Hills
Frontier
• >3 billion bbls of proven plus probable reserves of bitumen
- Production 180,000 barrels per day (bpd) of bitumen
- Teck’s share is significant at 36,000 bpd; equivalent to 13 million barrels per year (Mbpy)
• World-class resource - Average ore grade of 11.4% - Strip ratio of 1.5:1 and TV:BIP of 10.5
• Consistent production year-over-year through multiple decades
- Scheduled to produce first oil as early as Q4 2017
- Expect 90% of planned production capacity within 12 months
67
Fort Hills Is Part Of A New Breed Of Mineable Oil Sands Projects
68
Mine & Extraction
Diluted Bitumen (Doesn’t meet commercial pipeline specs)
Heavy Crude Conversion Refinery With Coker
Simple Refinery On-Site Upgrader ($10-15B)
New mining projects produce clean, high-quality bitumen and receive a heavy oil price (discounted), but don’t have to invest in an upgrader
‘PFT’ Diluted Bitumen (Meets commercial pipeline specs)
Export Pipeline
Synthetic Oil
Legacy Oil Sands Mining Projects (~30 Years Ago)
Oil Sands Mining Projects Today
Naphtha froth treatment process
Paraffinic froth treatment ‘PFT’ process
Mine & Extraction
Minimizing Execution Risk In The Fort Hills Project
• Cost-driven schedule - “Cheaper rather than sooner”
• Disciplined engineering approach
• “Shovel Ready” • Global sourcing of engineering
and module fabrication • Balanced manpower profile
Suncor has completed 4
projects of ~$20 billion over last 5 years, all at or under budget
Benefiting from Suncor’s operational and project development experience
69
• Focusing on productivity improvements - Reduced pressure on skilled labour and contractors
• Benefiting from availability of fabricators for major equipment
• Seeking project cost reductions - Exploring performance improvements with
contractors and suppliers - Building cost savings and improved productivity
expectations into current contract negotiations - Reviewing all indirect costs
70
Lower Oil Price Environment Provides Opportunities for the Fort Hills Project
“Major projects in construction such as Fort Hills…will move forward as planned and take full advantage of the current economic environment.
These are long-term growth projects that are expected to provide strong returns when they come online in late 2017.”
- Suncor, January 13, 2015
Enhanced ability to deliver on time and on budget
Secondary Extraction
Primary Extraction Utilities & Cogen
Admin Complex Robson Lodge
Construction Trailers
River Water Intake
Flare Area
Tailings Area
Ore Prep Plant
Overall Fort Hills Site Photo
71
1. All costs and capital are based on Suncor’s estimates. 2. Go-forward capital is the go-forward amount from the date of the Fort Hills sanction decision (October 30, 2013),
denominated in Canadian dollars and on a fully-escalated basis.
Competitive Costs1 for Fort Hills
Project Capital: ~C$13.5 billion
Teck Capital: • Fully-escalated capital investment:
~C$2.94B over four years (2014-2017), including earn-in of C$240M
• Estimated spending in 2015: C$850M of incurred costs, based on Suncor’s planned project spending
Operating & Sustaining Costs: • C$25 to $28/bbl total
• Sustaining C$3-5/bbl (included in above)
• Excludes diluent purchase
72
To be financed by a combination of cash balance, free cash flow and $3B unused line of credit
Fully Escalated Go-Forward Capital2
$0
$20
$40
$60
$80
$100
$120
$140
Project 1 Project 2 Fort Hills
Cos
ts in
C$
Thou
sand
s pe
r Bar
rel/d
ay
Capital Cost Per Flowing Barrel
Full project cost including spent to date:
C$84
Source: Alberta Energy bitumen valuation methodology (http://www.energy.alberta.ca/OilSands/1542.asp) * Based on example exchange rate of $1.25 CAD/USD
Bitumen Netback Calculation Example*
Teck seeks to secure dedicated transportation capacity for Fort Hills volumes to key markets to minimize WCS discount
Bitumen Netback Calculation Model
73
US$75.00
C$56.50
C$75.00
$0$10$20$30$40$50$60$70$80$90
~75% Bitumen
~25% Diluent
Typical Diluted Bitumen (Dilbit) Blend
Western Canadian Select (WCS) at Hardisty
WTI Bitumen Netback
US$60 C$42.75
US$75 C$56.50
US$90 C$70.25
Heavy Oil Price Differential
74
West Texas Intermediate (WTI) & Western Canadian Select (WCS) Prices WTI-WCS Differential
Source: Bloomberg, Teck Resources Limited
Fort Hills project economics benefit from recent narrowing of the WTI-WCS differential
Plotted to 4/27/20154
Plotted to 4/27/2015
Long-term WTI-WCS differential
$0
$20
$40
$60
$80
$100
$120
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
WTI Cushing WCS Hardisty
US$
/bar
rel
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Differential…
US$
/bar
rel
Netback2
$56.50/bbl
Cash Margin $31.50
Cash Costs $25.00
LME Price US$3.00/lb
Cash Margin US$1.75
Cash Costs US$1.25
Competitive Bitumen Margins1
Typical Bitumen Producer
56% Margin
Low Quartile Cost Copper Mine
58% Margin
75
Fort Hills’ cash margins are expected to be comparable to the lowest cost mining operations
1. Excludes royalties. 2. Assuming US$75 WTI, $15 differential WTI to WCS and $0.80 USD/CAD
Wood Buffalo Extension
Norlite Diluent Pipeline
East Tank Farm Blending w/Condensate
Cheecham Terminal
Hardisty Terminal
Wood Buffalo Pipeline
Athabasca Pipeline Waupisoo
Pipeline
Edmonton Terminal
Fort Hills Mine Terminal
Northern Courier Hot Bitumen Pipeline
Committed Energy Logistics Solutions in Alberta
76
Pipeline Operator Nominal Capacity (kbpd)
Teck Capacity (kbpd)
Status
Northern Courier Hot Bitumen TransCanada 202 40.4 Construction
East Tank Farm - Blending Suncor 292 58.4 Construction
Wood Buffalo Blend Pipeline Enbridge 550 65.3 Operating
Wood Buffalo Extension Enbridge 550 65.3 Regulatory
Norlite Diluent Pipeline Enbridge 130 18.0 Regulatory
Teck
Options Export Pipeline
Rail
Local Market
Pipeline Legend Bitumen Blend Diluent Existing New Kirby
Terminal
Terminal Operator Nominal Capacity
(k barrels)
Teck Capacity (kbpd)
Status
Hardisty Blend Tankage Gibson Energy 500 500 Construction
Dedicated Storage Tank at Gibson Terminal in Hardisty, AB
Battle River
Station (ENB)
Inbound Pipeline
Teck Pipe & Tank
77
Fort Hills’ Dedicated Storage Tank
1. Planned connection to TransCanada Energy East is via modification of existing Keystone connection.
1