Teck Resources Ltd

Ladies and gentlemen, thank you for standing by. Welcome to tech's fourth quarter 2024 earnings release conference call. At this time, all participants are in listen only mode. Later we will conduct a question and answer session. To join the question queue, press star then one on your touchtone phone. Should anyone need assistance during the conference call, they may signal an operator by pressing star then zero. This conference call is being recorded on Thursday, February the 20th, 2025. I would now like to turn the conference over to Emma Chapman, Vice President Investor Relations. Please go ahead.

Thank you, operator, and good morning everyone, and thank you for joining us for tech's fourth quarter 2024 conference call. Today's call contains forward looking statements. Actual results may vary due to various risks and uncertainties. Tech does not assume the obligation to update any forward looking statements. Please refer to slide two for the assumptions underlying our forward looking statements. We will reference non-GAAP measures throughout this presentation and explanations and reconciliations are in our MDNA and the latest press release on our website. Jonathan Price, our CEO, will start with an overview of our fourth quarter and four year results. Crystal Presti, our CFO, will follow with a financial and operational review and Jonathan will conclude with closing remarks followed by a Q&A session. With that, I'll hand the call over to Jonathan.

Thank you, Emma, and good morning everyone. I'll start with highlights from 2024 on slide four. Last year was a transformational year for tech and we made significant advancements in our value creation strategy. We completed the sale of our steelmaking coal business for value, enabling tech to reposition as a pure play energy transition metals company focused on copper and zinc. With the 8.6 billion US dollars in proceeds from the transaction, we announced the largest cash return to shareholders in our history and we began executing the return immediately. In 2024, we returned $1.8 billion in cash to shareholders, including $514 million in dividends or approximately $1 per share and $1.25 billion in share buybacks. We also enhanced our resilience by further strengthening our industry-leading balance sheet. We reduced our debt by $2.5 billion and retained funding for our near-term value-accreted growth projects. We currently have $11.3 billion in liquidity, including $7.1 billion in cash. This includes our sustainability-linked revolving credit facility, which we've recently reduced by $1 billion US dollars to $3 billion US dollars and extended for a five-year term to October 2029. We were in a net cash position of $2.1 billion as of December 31st. In 2024, we generated $2.9 billion in adjusted EBITDA, more than double the prior year. We set a record for annual copper production, with a 50% increase from the prior year to 446,000 tonnes. In zinc, Red Dog had strong performance, increasing zinc in concentrate production while improving our net cash unit costs by 16 US cents per pound. We continue to have a strong focus on cost discipline and managing the controllable costs across our business. We are starting to see the positive impact of the structural cost reductions that we have implemented across our business following the sale of the steelmaking coal business in July. Over the full year, we reduced our corporate costs by 21% or $88 million compared with 2023. We did all this safely, with a high potential incident frequency that remained low across the operations that we control. Finally, we progressed our value-accretive near-term carbon growth projects. We completed construction of QB in Chile and ramped up the operation to design throughput by the end of the year. And we continued to lay the foundation for our next phase of copper growth by progressing our near-term copper projects. Overall, we made significant progress across the four pillars of our strategy for responsible growth and value creation. Now, looking at our fourth quarter highlights on slide five, our strong full year results were enabled by our fourth quarter performance. This was our third consecutive quarter of record copper production, as QB ramped up the design throughput rates by the end of the year. Our adjusted EBITDA increased by 160% to $835 million compared to the same period last year. We reduced our debt by a further $275 million and returned $549 million in cash to shareholders through share buybacks and our base quarterly dividend. And we continue to advance our near-term copper growth projects towards potential sanctioned decisions this year. Turning now to an update on safety and sustainability on slide six, we remain committed to ensuring the health and safety of our people, operating responsibly and building strong relationships with communities. As I mentioned earlier, we maintained a low high potential incident frequency of 0.12 across the operations that we control in 2024. And with our continued focus on sustainability, we released our 2024 climate change and nature report in December. This combines the recommendations of the TCFD and the TNFD to deliver an integrated report covering our progress on climate and the nature related aspects of our business. We will provide an update on all our sustainability performance in our 2024 sustainability report, which we expect to release in March. We continue to receive recognition for our sustainability leadership. Most recently, MediaCorp named Tech as one of Canada's top 100 employers for the eighth consecutive year. Forbes also named us one of the world's top companies for women for 2024. Turning to our progress at QB on slide seven. In Q4, QB delivered the strongest quarter so far, with mill throughput rates increasing quarter over quarter and achieving design throughput rates. This is a plant with a robust design and it continues to operate well. Recovery has improved to approximately 85% in the quarter and averaged 87% in November and December as a result of our successful improvement work on the grinding and flotation circuits in Q3 and Q4. In line with the mine plan, the improvement in our mining drivers led to copper production at QB increasing quarter over quarter to .7,000 tonnes from .5,000 tonnes in Q3. We also achieved record daily production throughout the quarter. For the full year, QB copper production was within our revised guidance at 208,000 tonnes. Looking forward to 2025, we're well positioned for further growth in copper production at costs at QB, setting us up for improved margins. Our 2025 guidance range of 230,000 to 270,000 tonnes at QB represents a significant increase from 2024. This guidance reflects an extended 18-day shutdown in January to conduct maintenance and reliability work and complete additional tailings lifts as part of the operational ramp up. We expect to continue to have regular quarterly maintenance shutdowns per our operating plans. In 2025, we expect to see an overall increase in average grade to 0.6%. In line with the mine plan, we are processing more transitionals, which is lower grade material, particularly in the first quarter of the year. Grades are expected to increase into the second half of the year. Our focus is on achieving steady state operational performance with consistent online time. With design recovery rates of 86 to 92%, depending on ore feed material. We expect a significant reduction in QB's net cash unit costs in 2025 to 180 to 215 US dollars per pound from 272 US dollars per pound in 2024. This reduction is primarily driven by a combination of higher copper production, cost discipline and increased molybdenum by-product credits as the QB molybdenum plant continues to ramp up. Overall, we are pleased with the performance of QB and we expect to see the operation generate significant cash flows in 2025. Looking at our copper segment in 2025 on slide 8, we expect significant growth in our copper production with improving margins this year. Our copper production is expected to continue to grow to 490 to 565,000 tons from 446,000 tons in 2024 due to the ongoing QB ramp up and improved grades at HBC. We also expect a significant reduction in our copper net cash unit costs in 2025 to 165 to 195 US dollars per pound from 220 US dollars per pound in 2024. We already saw an increase in our copper EBITDA margin in 2024 and expect this to continue to improve to 53% in 2025 based on consensus estimates. Slide 9 outlines our well-funded value-accretive near-term copper projects, including the MyLife extension at Highland Valley in British Columbia and our low capital intensity Greenfield projects at Zafranal in Peru and San Nicolas in Mexico. These are attractive projects that are simpler in scope and complexity than our QB2 project with significantly lower capital intensities. We continue our work to define the most capital efficient and value-accretive path for the expansion of QB, both through the optimization of the mill and low capital de-bottlenecking opportunities which could increase throughput by 15 to 25%. Through the execution of these projects, we have a clear path to increase our annual copper production to approximately 800,000 tonnes per annum before the end of the decade. I'll now hand the call over to Crystal to provide further details on our fourth quarter and full year results.

Thanks Jonathan, good morning everyone. I will start with our financial performance in Q4 and for the full year on slide 11. Our adjusted EBITDA more than doubled in 2024 to 2.9 billion and increased by 160% to 835 million in the fourth quarter. We had strong cash flow generation of 1.3 billion in the quarter benefiting from the working capital release at Red Dog and QB. Over the full year, we reduced our corporate costs by 21% or 88 million compared with 2023. This reflects our strong cost focus and structural cost reductions that we implemented across our business following the sale of the steelmaking coal business. We expect to reduce our corporate costs further in 2025 as reflected in our annual guidance. We returned a total of 1.8 billion in cash to shareholders in 2024, including 549 million in the fourth quarter. We also reduced our debt by 2.5 billion in 2024, including 275 million in the fourth quarter with the scheduled semi-annual repayment on the QB project finance facility and other debt reductions. The chart on slide 12 summarizes the key drivers of our financial performance in the fourth quarter as compared to the same period last year. As a result of the completion of the sale of the steelmaking coal business last July, EBR results are presented as discontinued operations for all periods reported in our Q4 financial statements and MD&A. Our adjusted EBITDA increased by 160% in the fourth quarter driven by strong base metals prices and higher copper and zinc sales volumes reflecting the ramp up of QB and strong sales from Red Dog. Copper and zinc sales volumes each increased by 24% from Q4 of 2023. Our strong adjusted EBITDA also reflects improved zinc unit costs driven by our rigorous approach to cost discipline as well as lower smelter processing charges and higher sales volumes. Now looking at each of our reporting segments in greater detail and starting with copper on slide 13. In the fourth quarter, gross profit before depreciation and amortization from our copper segment more than doubled to $732 million compared to the same period in 2023. The increase was primarily due to strong sales volumes and copper prices. QB ramp up continued to support growth in copper and we had our third consecutive record quarter of copper production in Q4. This was partially offset by lower production at Antimena due to a decline in grade and from the same quarter last year as expected in our mine plan. While Highland Valley's production was lower than the same quarter in 2023, it improved quarter over quarter as expected due to increased mining in the higher grade Lornex pit and improved haul truck performance. Production at Carmen de Andecollo increased due to higher grades, recoveries and mill throughput reflecting our efforts to improve water availability in the quarter. Our net cash unit costs increased as QB continued to ramp up. In Q4 2023, most of the costs associated with QB continued to be capitalized as ramp up costs. Excluding QB, our total net cash unit costs improved by 33 cents a pound US compared to Q4 2023 as a result of higher copper production and substantially higher molybdenum production from both Antimena and Highland Valley. And finally, we were pleased to ratify new three-year collective agreements with two of the three unions at QB representing 78% of the labour force and for all unionized labour at Antimena. Looking forward, in the first quarter of this year, we expect QB's production to reflect the extended 18-day shutdown in January as well as processing lower grade material in the quarter as Jonathan outlined earlier. Now moving to a forward look at 2025 in our copper segment on slide 14. Our copper production is expected to continue to grow to 490 to 565,000 tons from 446,000 tons in 2024. This increase is primarily due to the ramp up of QB as well as a significant increase in production from Highland Valley. Highland Valley's copper production is expected to increase as we continue to mine more ore from Lornex Pit, which is both higher grade and softer, leading to increased throughput. These factors combined should more than offset lower recovery rates expected from the Lornex ore. We also expect production at Carmen de Anacoyo to increase, reflecting improved water availability through the year. We expect a significant reduction in our copper net cash unit costs in 2025 to US 165 to 195 per pound from US 220 per pound in 2024. This reduction reflects an increase in copper and molybdenum production as well as continued cost discipline across our operations. We expect our molybdenum production to increase to 5.1 to 7.4 thousand tons from 3.3 thousand tons last year. This is based on the continued ramp up of the molybdenum plant at QB and increased molybdenum production at Highland Valley as we mine in the Lornex Pit. Turning now to our zinc segment on slide 15. Our gross profit before depreciation and amortization from our zinc segment more than doubled from the same quarter last year to 320 million. This was driven by higher zinc prices as well as strong Red Dog sales volumes due to the timing of sales, lower treatment charges and higher byproduct revenues. This was partially offset by higher nano royalty expense as a result of Red Dog's strong profitability. As expected in our mine plant and our annual guidance, Red Dog's zinc production declined in Q4 due to the lower price. Our Zinc production costs improved significantly from Q4 2023 reflecting lower smelter processing charges, the effect of higher sales and an increase in silver byproduct credits. At Trail operations, our refined zinc production was impacted by the localized fire in the electrolytic plant in September 2024 as previously disclosed. The repair of one of the four sections of the electrolytic plant continues to progress and is scheduled to be completed by the end of the first quarter of the year. And finally, as we progress the work required to extend the life of Red Dog, we successfully obtain a permit for construction of an all-season exploration access road which will enable us to progress the next phase of exploration and resource assessment. Looking forward to Q1, we expect Zinc can concentrate sales from Red Dog of 75 to 90,000 tons reflecting the normal seasonality of sales. Turning to 2025 outlook for our zinc segment on slide 16. Our guidance for Zinc can concentrate production is 525 to 575,000 tons, a decrease from 616,000 tons produced in 2024. Our Red Dog production got to 2025 and the following years reflects expected grade decline as the mine life advances. At Antimina, zinc production is expected to increase as we mine a higher proportion of copper zinc ore relative to copper-only ore in 2025. We are focused on maximizing profitability and cash generation from trail operations. In light of current tightness of the zinc concentrate market, we expect to operate trail at lower production rates in 2025 with guidance for refined zinc production of 190 to 230,000 tons compared with 256,000 tons in 2024. Trail remains a strategically important asset, providing critical and strategic minerals such as germanium and indium as well as its valuable integration with Red Dog. Our net cash unit costs for the zinc segment in 2025 are expected to be between US 45 cents and 55 cents per pound compared with US 39 cents per pound in 2024. The expected increase is due to lower zinc production and higher labour and consumable costs partly offset by lower zinc treatment charges, higher by-product credits and a continued focus on cost discipline across our operations. Turning now to slide 17. We remain committed to our capital allocation framework which balances investment in value accretive growth with returns to shareholders while maintaining a strong balance sheet through the cycle. Our capital allocation framework commits us to return between 30 and 100% of available cash flows to our shareholders. In 2024, we deployed the proceeds received from the sale of the steelmaking coal business across the pillars of our capital allocation framework, balancing returns to shareholders with debt reductions and earmarking cash for our near-term value accretive growth projects. Looking at our balance sheet now on slide 18. We currently have one of the strongest balance sheets in the sector and we continue to maintain investment grade credit ratings. In 2024, our cash balance increased significantly as a result of the proceeds received from the sale of the steelmaking coal business. This also resulted in higher finance income as we earned interest on the higher cash balance. With the proceeds, we reduced our debt by $2.5 billion Canadian. We currently have liquidity of $11.3 billion including $7.1 billion in cash. We were in a net cash position of $2.1 billion as at December 31st and our remaining outstanding term notes of US$1 billion are long dated. We will continue to deleverage as we make semi-annual repayments on the QB Project Finance Facility through 2031. Our industry-leading balance sheet is a competitive advantage for tech, providing us with resilience to navigate current market conditions and allowing us to execute on our copper growth strategy while returning cash to shareholders, ensuring we create value for our shareholders. Turning to slide 19 and our track record of returning cash to shareholders. We continue to balance our investment growth with returns to shareholders and in 2024, we returned $1.8 billion to shareholders through share buybacks and dividends. This builds on our strong history of cash returns to shareholders which total approximately $5.1 billion since 2020. We retain our annual base dividend of $0.50 per share and in each of the past two years, we have paid a supplemental dividend of $0.50 per share bringing total dividends to $1 per share in 2023 and 2024. And we continue to be in the market daily, actively buying back our shares with $3.25 billion in share buybacks authorized last year. As of yesterday, we had executed $1.45 billion of the $3.25 billion authorization under our normal course issuer bid representing approximately $22.7 million Class B shares. This leaves approximately $1.8 billion of our authorized share buyback remaining to further improve our per share value. And with the strong cash flow generation potential of our business, we could see further cash returns to shareholders in line with our capital allocation framework. We remain committed to returning between 30 and 100% of future available cash flows to our shareholders. Turning to our capital expenditure guidance for 2025 on slide 20. We are focused on investing in our value accretive near term copper growth projects as we progress towards potential sanction decisions in 2025. Our guidance for 2025 sustaining capital and capitalized stripping remains within our expected range of 1 to 1.2 billion Canadian. Sustaining capital will remain relatively flat at between 750 and 845 million from 836 million in 2024. And capitalized stripping is expected to decline to between 260 to 300 million from 373 million in 2024 as we have largely completed the required waste stripping in the Lornex pit at a Highland Valley. Our growth capital is expected to be between 875 to 980 million or around US 625 to 700 million in 2025. This growth capital is for multiple projects across our portfolio with our focus on advancing our value accretive near term copper projects to potential sanction decisions in 2025. On an attributable basis we anticipate pre-sanctioned copper growth capital of approximately US 430 to 485 million in 2025. This includes approximately 100 to 110 million US for the mine life extension at Highland Valley and US 220 to 240 million for Zaffronil. Both projects are currently focused on advanced advancing detailed engineering, design, and project execution planning which are critical steps in meeting our investment requirements for potential project sanctioning. Zaffronil already has its main permit and we are therefore proceeding with advanced early works in 2025 to enable construction to start when the project is sanctioned. We also expect to spend US 25 to 30 million to progress QB de-bottlenecking this year. The remaining copper growth capital expenditures are focused on advancing studies for our pipeline of medium to long term projects including Galore Creek, Shaft Creek, New Range, and Nueva Union. These investments ensure that we are well positioned to advance these growth projects efficiently while remaining disciplined with our capital allocation. With that I'll turn it back to Jonathan.

Thanks Crystal. So as we look forward I want to take a moment to acknowledge the economic and political backdrop in which we are operating on slide 22. Globally we are witnessing a period of significant economic uncertainty and change that will alter trade flows and potentially impact global supply chains and market dynamics. In this context the outlook for our commodities remains robust driven by the underlying demand factors of economic growth and urbanization, electrification to ensure energy security, and growth in the digital economy. These secular tailwinds underpin significant demand for both copper and zinc, and when coupled with supply side constraints, underline the strength in our strategy as a pure play based metals company with a deep pipeline of copper growth opportunities. Turning to slide 23, we are closely monitoring the potential impact of tariffs and other restrictions between the US and Canada which is a fluid and rapidly evolving situation. Tech has a resilient business driven by the diversification of our products and operations coupled with an agile and sophisticated commercial strategy and a very strong balance sheet. To put the potential tariffs into context any imposed tariffs by the US are not expected to have a material impact on our business. Our copper and zinc concentrate sales would not be impacted as we primarily sell to Asia and Europe and not into the US. Trails refined zinc, lead, and specialty metals such as germanium, indium, and sulfur products are sold into the US, but in the event that tariffs are imposed we expect trade flows to adjust. While tech produces a large proportion of the ex-China supply for this diverse group of metals, they comprise less than 15% of our revenues.

Actively monitor and respond to the situation to see potential impacts to our business. We have a strong commercial strategy and logistical

strategy that enables us to quickly pivot and respond to changing market conditions. We are closely watching developments and engaging with our customers and we remain resilient in the current environment. So to conclude on slide 24, our focus at Tech is to create value for our shareholders and our priorities are focused on doing just that in 2025 and beyond. We've entered the year with QB operating at design throughput capacity rates and our primary focus is to complete the QB ramp up to steady state. We will continue to drive operational excellence across our portfolio of high quality copper and zinc operations and projects with a strong focus on cost discipline. This will ensure that we not only increase our copper production but also increase our margins. Importantly, we remain committed to returning cash to our shareholders through the execution of our authorized shared buyback program and annual based dividend. We are progressing our near term copper projects to possible sanction decisions in 2025 positioning us for our next phase of copper growth. And I feel confident that we have the resilience to navigate uncertainty and create value through our strong financial position and agile commercial strategy. Overall, I'm very excited about the opportunities ahead of us to continue to drive value creation. Thank you. With that, operator, please open the line for questions.

Certainly. To join the question queue, please press star then one on your touch tone telephone. You will hear a tone acknowledging your request. We ask that you limit yourself to one question and one follow up. If you're using a speakerphone, please ensure you lift your handset before pressing any keys. If you wish to withdraw your question, press star then two. The first question is from Oris Wacodow with Scotiabank. Please go ahead.

Hi, good morning. I wonder if we can get a bit more color on the QB2 ramp. Obviously, really strong performance in November, December, January impacted by the extended 18 month, 18 day shutdown. What's the performance been like since it restarted? And do you think QB2 is on track to reach that steady state full nameplate by mid year? I'm wondering if anything's come out of the shutdown that may perhaps either advance that or delay that.

Hi, Oris. Thank you very much for that question. Overall, I would say the ramp up is progressing well and it continues to be in line with what we would call normal course or benchmark ramp up timetables. We have planned quarterly shutdowns. They're embedded in our operating plans and we've communicated that previously. And as you highlighted, we did have an extended shutdown for 18 days in January to conduct maintenance reliability work and to complete some tailings lifts as part of the operational ramp up. That 18 day shutdown is fully reflected in the guidance range of 230 to 270,000 tons for 2025. And post that shutdown, the plant and the operation more generally has been running very much in line with our underlying operational plans. So we do have good confidence in achieving the guidance range that we've set out. As you've seen, we've mentioned a few things, for example, having lower grades towards the start of the year and higher grades towards the back end of the year and processing some more transition hours at the front end of the year, which as you know can lead to lower recoveries. But all of that is fully accounted for in the plan. And we're very pleased with the way that the plant and the operation as a whole is operating today.

Thanks. And just as a follow up, what is the planned cadence for future maintenance shutdowns at QB2 for the rest of the year? Like is it sort of like a week, a quarter now starting Q2 or just what's planned?

Yeah, look, that's a reasonable assumption. And, Oris, you know, overall the the online time for the plant is expected to be around 92%. That does imply a shutdown of around seven days in every quarter. As we did last year, we've typically been having those shutdowns in the first month of each quarter. And going forward in 2025, we expect to maintain a similar cadence.

Okay, so nothing no longer shut down currently planned beyond what we saw in January? That's correct.

Okay, thank you very much. Thanks, Oris.

The next question is from Carlos Dalba with Morgan Stanley. Please go ahead.

Yeah, thank you. Good morning, everyone. The balance sheet is unenviably strong. And so there is a how should we reconcile Jonathan, the capital allocation framework, the fact that under our estimates and consensus outside estimates, you're going to generate anywhere between 1 billion to 2 billion Canadian or more per year in the coming years of free cash flow. How do we reconcile this strong balance sheet, the capital allocation framework, or returning money shareholders, and the potential M&A where tech goes and buys smaller projects or smaller companies, even though it does have a very robust pipeline of projects? Or maybe we just see more outsized returns to shareholders as you have done in the last few years. This is a key question that we are discussing with investors and purely, as you know, the potential for M&A and I'll say risk in a way is something that that we would like to see how you from your perspective and the board perspective, you're looking at this.

Yeah, Carlos, thanks very much for that question. It was a fairly broad one. Look, you know, the capital allocation approach that we take here in the business is very much focused on value creation for our shareholders. We do have a very strong balance sheet, as Crystal outlines, we reduced debt quite significantly last year, and we are currently running a net cash position on that balance sheet. Also, we do still have a very significant outstanding authorization of share buybacks that we will continue to execute through the course of this year. You know, that's in the range of $1.8 billion of cash still to be deployed through the buyback of our shares. And as Crystal mentioned, we're in the market executing on that every day, in addition to the base dividend that we have and that we've maintained through this year. We've always said that if we continue to generate cash in excess of the needs of the business, that will make its way through the capital allocation framework. And under that framework, we do have the potential to return a further 30% or 100% of cash that's in excess of our needs. As you know, we also have a stable of projects in the portfolio. And when we went through the use of proceeds from the sale of EVR last year, one of the things we said we would do is reserve some cash for the development of what we consider to be low capital intensity and high returning projects that we have in the portfolio. You know, one of those being the Highland Valley Cop of Mine Life Extension here in British Columbia, another being the Zaffron Owl project in Peru and the other Greenfield being the San Nicolas project in Mexico. We continue to focus on the organic growth in the business because we see that as being the most value accreted path for our shareholders. We are, of course, very aware of the M&A activity in the sector that is spoken about. But from tech's perspective, you know, our focus remains creating as much value as we can for our shareholders. And we believe that the projects we have in the portfolio are a great way to achieve that. So it's a good position to be in. It gives us resilience. It gives us options, but we will maintain our focus on creating value for shareholders and executing on the plans that I think

we've clearly set out.

Great, thank you. Just a very short follow-up is Zaffron Owl arguably the Greenfield project that as of now will be next?

So we are quite advanced on Zaffron Owl as you know, in terms of having the environmental permit associated with that. And as you see from our disclosures around our copper growth spend this year, we are increasing the spend there, you know, reflective of a project that is close to a sanction decision. You know, we continue to work very hard on San Nicolas as well. We see that as a very attractive option. And ultimately, you know, the economics of those projects, the progress of the other permits that are required to actually take a project through into execution and, you know, the completion of the right level of engineering work that needs to be done prior to sanction will determine which of those projects is up for sanction first. But I think you can see from our disclosures that Zaffron Owl today is in a very strong position.

Thank you, Jonathan. Thanks Carlos.

The next question is from Lian Sitspatrick with Deutsche Bank. Please go ahead.

Hi Jonathan, two questions from me on QB. The first one is on the topic of a potential tie-up some sort of JV with Coloassi. We've seen an interesting deal announced today by Anglo and Kadelco and it would seem that from a value unlock perspective, this is a fairly obvious area for tech and the other companies involved. Can you give any colour on where the discussions are and are there any reasons why this isn't being looked at or pursued more aggressively? And my second question is on QB costs. Just looking at the absolute costs in Q4, they did go up quite significantly. Is there anything in there that you can talk to that should unwind? Because looking at it, it seems like there's a lot of costs that have to come out through 2025 for you to hit the unit cost guidance. Thank you.

Liam, thank you for those questions. I'll in a moment hand the second question over to Crystal. But just starting with your question on QB Coloassi, as we've discussed before, we do recognise the potential value of some form of tie-up between those two operations and it's something that we've done a good deal of work on to understand the various ways in which that value could be unlocked. As we've also consistently said, our number one focus remains on optimising value for tech shareholders and we look at all the decisions we make through that lens. Right now, our focus remains on the ramp up of QB to full production and steady state. And as we've spoken about previously, the optimisation and de-bottlenecking of that plant, which will be some of the most capital efficient unlock of tons that we have anywhere in the portfolio. So that remains key focus for us. We have, as you would expect, had a level of engagement around the opportunities with QB Coloassi, with the partners on the other side, but as you'd appreciate, those discussions are confidential in nature and of course we can't say anything more about those at this point in time, other than to reaffirm that we recognise the value potential there and we will always act in the best interests of tech shareholders in terms of how we maximise value from the portfolio that we have. And with that, I'll hand over to Crystal on the cost question. Hi,

Leanne. Thanks for your question. I think you've drawn out the key point just in the context of as we look forward, expecting significant reductions in QB costs as we move to more stabilised production levels through 2025 and we complete the demobilisation of contractors that supported the ramp up through 2024. In the fourth quarter, of course, we saw an increase in volume that does drive a modest increase in operating costs as we have higher electricity and supplies and when you balance that over a higher production that should normalise. There were also some one time costs that we incurred in the fourth quarter. We mentioned the settlement of two or three of our labour contracts, which were of course a good outcome. Those lead to bonuses paid to those to those unions as we as we resolve those contracts. So we do continue to expect decline in our unit costs for QB and for the copper business as we move into into 2025 and we see an uptick in our production levels as well as in the in the

molybdenum credits we expect in the in 2025.

Okay, thank you both. Thanks, Leanne.

The next question is from Craig Hutchinson

with TD Cullen. Please go ahead.

Hi, good morning guys. Just a question on the Highland Valley light extension. There's a note near me and a saying that there's a I've just been a challenge by one of the Indigenous Government organisations that delayed the approval process of the EA. Does that have to be resolved before the EA can be issued or can you get the EA and resolve these issues after the fact? And I guess just maybe as a follow-up, do you have a certain anticipated timeline for I guess solving it or getting any additional impact benefit agreements with those who don't have them already?

Yeah, great. Thank you for that question. It's a good one and as you can imagine, it's a file we're working very hard on at the moment. We are in the final phases of the EA process for the light extension project and the dispute process that we referenced is a formal established part of that environmental assessment process which is designed to resolve issues. You know, as noted, we have secured agreements with other Indigenous Government organisations that are involved in the approval process for Highland Valley mine life extension and we got those coming through in December and January and we do continue to engage with SSN who are the party that has disputed the approval of this project. Look, we have a very long track record of working successfully with Indigenous nations and sharing the benefits of the operation and of future growth with those nations and we do remain confident in our ability to move forward successfully. You know, we also have a good track record of permitting here specifically in British Columbia and it's worth noting that the province of British Columbia recently announced that they would be working to fast-track permitting on this project. So we do have a lot of support with respect to this and we remain confident in getting this done, getting the approvals we need. It's a project that we believe has compelling returns and we do expect

to be in a position to sanction it later this year. Okay,

great. And maybe just a follow-up question. You guys mentioned you got the permit for the road for expiration of Red Dog. The step-up in growth capital this year versus last, does that include spending on the road this year or is that a separate line item?

Yes, it does include that Craig, you're exactly right. Okay, great, thanks.

Okay, thank you.

The next question is from Lawson Winder with Bank of America Securities. Please go ahead.

Thank you, operator. Good morning, Jonathan and Crystal. Thanks for the update. I wanted to ask about capital allocation and zinc and so just pointing to zinc showing some signs of in zinc and also noting that to maintain the current zinc business it will require significant investment. When you think about allocating capital to the various projects, are the zinc and copper segments separate buckets or could there be a situation where zinc prices point to higher IRRs and as a result you de-emphasize copper growth?

Look, I think, you know, we look at capital allocation holistically across the entire organisation. We're not contemplating that separately for copper and zinc. Everything has to compete for the capital we have and compete on the range of metrics that we've spoken about before and particularly returns on this growth. Look, I think we see the fundamentals for zinc to be attractive. There is strong demand for zinc and perhaps the demand growth outlook is not as compelling as it is for copper but we've seen a dearth of new supply in zinc for many, many years. No major zinc projects coming through and at Red Dog, of course, we have a world-class tier one operation and while that comes to end of current life around 2031, we have a couple of very high quality ore bodies nearby and that is where the spending is being directed today to understand the potential future of Red Dog and the potential for a significant life extension there. So based on those fundamentals, based on the quality of the project we have at Red Dog, we continue to see that as a core part of the portfolio. Of course, in addition to Red Dog, we do get zinc concentrate from Antimena and in future, in the event we sanction San Nicolas, that will be a further source of zinc concentrate for us. So, you know, we hold a strong position in that market right now. Provided the fundamentals remain intact, we would continue to want to maintain a strong position

in that market into the future.

Okay, thanks Jonathan. And then just looking at another asset that has a significant zinc component, your Mexican asset. Has the political situation in Mexico evolved any more favourably at this point and what's your thinking in terms of actually making a decision to invest capital into San Nic? Thank you.

Yeah, so we remain highly interested in the San Nicolas project. It's a relatively small, simple flow sheet. It will have a low capital intensity. It's very high grade, which means it will deliver strong margins through its life. We're closely monitoring the mining environment in Mexico and I was in Mexico City in January and had an opportunity to meet with President Scheinbaum and talk to her about San Nicolas and about mining more generally. While at the present time, you know, it appears to be a priority for the its legislation on mining, given it has its hand full with its neighbour to the north, we do see longer term a focus there on foreign direct investment, a focus on building critical minerals supply chain and capability. And I would say the signals we get from the administration are encouraging, particularly given the commodities that San Nicolas will be producing and particularly given the track record of being responsible in our approach developing operating mines that both ourselves and Agnico Eagle bring to the table. Now, we don't see any negative immediate impacts in relation to San Nicolas, so we continue to do our study work. But it would be fair to say, of course, that we won't make a sanction decision and we won't commit significant dollars to further investment, you know, on the ground in Mexico until such time as we have certainty of permitting and the support of the

government. But we remain optimistic.

Fantastic. Thanks Jonathan. Thank you Lawson.

The next question is from Miles Althop with UBS. Please go ahead.

Maybe just on QB, could you remind us how much you had mentioned capitalising costs, how much you're capitalising at the moment? Is it just interest or is it other costs as well? And will you stop capitalising those? And then maybe second on trail, it's going to be free cash flow negative last year, it's likely to be even more cash flow negative this year. What does it take to decide to close trail? And I know you said strategically important, but when it's burning cash, how long do you maintain that view of strategic importance?

I'll come back to your second question on trail in a moment, due to Crystal for the first question on QB costs.

Yeah, thank you. Maybe just a bit of a clarification there. When I mentioned that we were capitalising ramp up costs associated with QB, that was in Q4 of 2023. Through 2024, we have not been capitalising interest on the project. Of course, construction was complete in the first quarter with the port and molybdenum plant in the second quarter, so no longer capitalising interest, depreciating the assets there, and we haven't been capitalising ramp up costs in 2024. So the only capitalisation you're seeing at QB is in relation to sustaining capital costs and to a very minor extent, capitalised tripping.

Thanks, Crystal. And then moving on to trail, Miles, a couple of comments there. We've been very focused on profitability and cash generation at trail, and we've made a number of changes to support that. We've implemented cost reductions at the site in relation to maintenance and non-routine work. We've reduced headcount at the site and with new leadership there, worked on a whole series of cost reduction opportunities across the operation. We have reduced our refined zinc production this year in the context of the TC environment, and that, again, will directly improve trails profitability and cash generation. The kit set plant that we did a significant amount of maintenance on is now operating very well, and our production of lead, in particular, is very strong. And we do also have the option at trail to sell excess power to generate cash flows as needed. So we've taken a very commercial focus to the way that we're operating trail right now. I'm very pleased with the early results that we are seeing there. And, you know, I think trail is doing the things it needs to do to continue to earn its place in the portfolio from a profitability and cash flow generation perspective. The other comments I make on trail is that it really is, particularly in the current context, quite a strategic asset. It's key to our portfolio, particularly that integration with the red dog mine, and gives us optimal market access for the red dog concentrate. Importantly, though, it produces a number of metals, which would become quite strategic and important in the current context of the relationship between Canada and the US. You know, we estimate that trail would be the largest producer of germanium in the world and the only primary producer of germanium in North America. And this is a time where China has cut off or restricted supplies of germanium into the US. And it's a critical component for defence spending, for example, and goes directly to that national security agenda. So, you know, foundationally, it's absolutely critical that we profitably and cash flow generation from trail. And I'm confident that we're on the right path there. And then secondly, there's a compelling strategic overlay with trail being part of an integrated flow sheet that we have with red dog.

How much revenue do you get from germanium and the smaller metals? Is that becoming a meaningful stream that will surprise the upside given what's happening?

Yes, so it's look, it's

relatively small in terms of the in terms of the direct revenue and and, you know, cash flow profitability impact on the business. What it has, I think, is a lot of ancillary strategic benefits from a relationship perspective in a period of time where you know, trade relations are strained. And that flows all the way back upstream to the outlaw for the red dog mine, which of course is in the US in Alaska. And as we look forward to, you know, the future expansions of red dog, the proportion of specialty metals in that concentrate will actually increase. So we think it's interesting for a number of reasons. But the again, just on trial, the core focus there is on profitability and cash generation. And we're in good shape there with a number of the changes that have recently been made. And the new operating strategy that team has put in place for 2025.

Right, thank you.

Thanks, Miles.

The next question is from Bill Peterson with JP Morgan. Please go ahead.

Yeah, I good morning. Thanks for taking the questions. Maybe on the growth project, you spoke to, you know, the assessment of Highland Valley and a little bit on Mexico. But if we think about higher level, I guess at this stage for 2025, can you go through each project in terms of what's in your control versus local authorities? What should we be looking out for next steps? And I guess on Zafanil in particular, you discussed the potential sanction decision, what are the key requirements you're looking for, whether it be market related or expectations on cost or IRRs you're looking for to potentially sanction by your end?

Look, I mean, I think, you know, as ever, the things that are in our control remain the studies and the completion of those studies. They remain the engineering work that we're undertaking. And of course, they remain, you know, the engagement with vendors and contractors that ultimately will support the project, as is the case with any project, to a certain extent, you know, permitting is beyond our control. But of course, it's something that we engage on very heavily. And it's something where we work very closely with the regulators in a collaborative fashion through that process. You know, I think all of these projects will have to earn their place in the portfolio and earn their place in terms of capital allocation. Of course, we have a view that that is the case, which is why we are pursuing them as near term priorities. And the economics that we see associated with these projects are compelling, offering, you know, a combination of strong IRRs, strong cash flow generation, strong EBITDA contribution to the group, and a meaningful contribution to our product base. So all of those things must be true, ultimately, for a project to be sanctioned, and for the risks to be appropriately managed. So we're comfortable with the portfolio that we have, you know, HBC being a mine life extension here in BC, and then two Greenfield projects with Zafranal in Peru being one that TEC will construct and operate, and then San Nicolas in Mexico under that 50-50 joint venture with Agnico Eagle, which will be constructed and ultimately operated by the joint venture company. So we're very happy with the shape of that portfolio. We'll continue to progress these projects to sanction decisions. And as I said, provided the financial metrics are there, we expect to sanction

them and see them in their place in our portfolio going forward.

Yeah, thanks for that. And then I wanted to ask about cost, maybe in a slightly different way than than a prior question. First, you talked about the union, two out of three, being negotiated, one more to go. I guess, how should we think about a run rate impact to the model and costs? And then I guess, Taina, one step further on the cost trajectory for QV2, how should we think about the exit rate, you know, cost per pound, given the expected output increases throughout the year? Crystal, over

to you on that, please.

Yeah, I mean, I think in the context of sort of run rate costs, of course, Emma and the team can you through more of the details. But I think in terms of labour costs, you can continue to assume sort of lower single digit inflation here. And I'll get Emma to follow up with you offline. And then in terms of sort of run rate, you know, I think in the way that we've talked about production, you know, escalating as we go through the year to more stable run rates at QV, I think you can think about the costs in the same way as we've established our guidance with a lower end and a higher end. And we've continued to disclose the unit cost per QV to give you that indication. So I think I would see that as sort of a tale of two halves of

the year, similar to production.

Thank you, Jonathan and Crystal. Thanks for those questions, Bill.

That's all the time we have for questions today. I will now hand the call back over to Jonathan Price for closing remarks.

Thank you, operator. And thanks again to everyone for joining us today. Before we sign off, I did want to note that it is Fraser Phillips' last quarterly conference call with tech before his retirement. I'd like to sincerely thank Fraser for his many contributions to tech over the past eight years and wish him and his wife, Kimberly, all the very best for their next chapter. Meanwhile, we look forward to seeing many of you in person at a major mining conference in Florida next week. If you have any further questions, please reach out to Emma Chapman and to our IR team.

Enjoy the rest of your day.

This concludes today's conference call. You

may disconnect your line. Thank you for participating and have a pleasant day.