Teck Resources Ltd

Welcome to TEC's first quarter 2025 results 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, April 24th, 2025. I would now like to turn the conference over to Emma Chapman, Vice President, Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and thank you for joining us for Tech's first quarter 2025 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. Explanations and reconciliations are in our MD&A and the latest press release on our website. Jonathan Price, our CEO, will start with an overview of our first quarter. Crystal Prestai, our CFO, will follow with a financial and operational review. Jonathan will conclude with closing remarks followed by a Q&A session. I will now turn the call over to Jonathan.

Thanks Emma and good morning everyone. Now before we get into the quarter I want to take a moment to acknowledge the current macro environment on slide four. As we all know the past few months have been marked by volatility and uncertainty Factors like the threat of a global economic downturn, geopolitical tensions, inflation and supply chain disruptions have created an uncertain and challenging global business landscape. Despite these headwinds, we believe that the fundamentals for our key metals, copper and zinc, are robust over the medium and long term as several macro factors continue to drive demand. These metals are essential for global manufacturing and development, industrial policy and national security, electrification infrastructure, as well as the growth of the digital economy. On the supply side, the industry continues to face constraints. At the same time, new demand opportunities are emerging as many economies seek to revitalize their industrial sector. For example, defence spending may be significantly broadened to include areas central to economic resilience, such as upgrades to and expansion of electricity grids, which remain central to copper demand. We see this providing a medium-term boost to metals demand, as the world enters into a state-backed, more capital-intensive phase of growth. And even in the short term, we continue to see extreme tightness in the concentrate markets that make up nearly 90% of our revenue, with benchmark treatment charges for copper and zinc at historically low levels. In this environment, tech is well positioned for continued value creation. We are growing copper production and improving margins through disciplined operational performance. In addition, we have an active share buyback program, portfolio of value accretive copper growth projects, an agile commercial strategy, and a strong balance sheet. Together, these underpin the resilience of our business, which is a competitive advantage for tech, enabling us to navigate uncertainty while continuing to deliver value through our strategy of balancing disciplined copper growth with returns to shareholders. So turning to slide five, we are closely monitoring the potential impact of tariffs and retaliatory trade measures between the countries we trade with and the risks of wider macroeconomic uncertainty. Although the situation is fluid and evolving rapidly, we do not expect announced tariffs to materially impact our business. That said, a global trade war could weigh on global economic growth with potential implications for metals demand. Today, we are continuing to see strong demand for our copper and zinc concentrates, and we are working closely with our customers with limited impact so far. Our copper and zinc concentrate sales are not exposed to US tariffs, as we primarily sell to Asia and Europe with no sales to the US. On the other hand, Chinese tariffs, if maintained, are expected to apply to our sales of red dog concentrate to China, which represent less than 20% of our zinc and lead concentrate sales. However, over the past few years, we have successfully developed a regionally diverse customer base, which gives us greater optionality while trade negotiations are ongoing. Red Dog is a highly valued concentrate in the zinc market, and we have several longstanding customers for this product. We also have other options available, including trail feed integration, delivery outside the Red Dog shipping season, and product swaps, all options that support continuity of sales. Turning to Trail and our metal sales, refined zinc, lead, and speciality metals such as germanium, indium, and sulfur products are sold into the U.S., but they are exempt from U.S. tariffs as they are compliant with the U.S. MCA. Overall, Tech has a strong business with diversified products and operations, an agile commercial strategy, and strong logistics capabilities. This enables us to quickly adapt and respond to changing market conditions to mitigate any potential impact on our business. Turning now to highlights from the first quarter of 2025 on slide six. Our profitability improved significantly compared to last year, driven by higher commodity prices and copper sales volumes. Our adjusted EBITDA more than doubled to $927 million. The ramp-up of QB operations continues and we are seeing performance improvements in key areas such as average daily mill throughput. Production was impacted in the quarter by additional shutdowns and I will provide more detail on this later in the presentation. During the quarter, QB successfully achieved the completion testing requirements under the US$2.5 billion project finance facility. This is a significant milestone that provides independent verification, confirming the robustness of the construction and the capacity of the asset to operate at design levels, providing further confidence in the ramp-up to steady state by the end of the year. In the first quarter, we had strong operational performance across our established operations, particularly Highland Valley at Karmadanda Koyo. Trail operations generated strong profit in the quarter following the successful implementation of a range of initiatives to improve profitability and cash flow generation. Our annual guidance is unchanged across all operations. Our balance sheet remains strong and resilient. We ended the quarter in a net cash position of $764 million and, as of yesterday, our liquidity is $10 billion. Finally, we continue to return cash to shareholders through share buybacks and dividends, totaling $568 million year-to-date. So turning to our ongoing commitment to safety and sustainability on slide 7. Our safety performance was strong in the first quarter. Our high potential incident frequency rate across the operations we control remained low at 0.05%. I would like to take a moment to acknowledge the fatality that occurred at Antamina, in which tech holds a non-operating interest, earlier this week. We are deeply saddened by this event and we offer our condolences to the family, friends and colleagues of the deceased. As ever, we will support the Antamina team with the investigation and ensure that lessons are both learned and shared. In March, we released our 24th annual sustainability report, which details last year's environmental and social performance, including key areas such as health and safety, support for communities, indigenous peoples, diversity and climate. Copy of the report is available on our website. So coming back to QB ramp up on slide 8. As I just mentioned, the successful achievement of completion testing under the QB project finance facility is a significant milestone. It comprised several independently verified operational and technical tests that validate the robustness of the design, construction and operational performance of QB. This demonstrates QB's ability to generate strong cash flows. We've made significant progress in the ramp-up of QB, as you can see on the left-hand side of the slide. we have a plan to consistently achieve design throughput and recoveries and have several data points showing that we can and have already operated at these levels. That said, first quarter production was impacted for two reasons. first the previously disclosed 18-day extended shutdown to conduct maintenance and reliability work and progress tailings development and second external factors that included a nationwide power outage in chile in february leaving the site without power which affected production for several days and challenging weather in particular challenging weather impacted the rate of material movement for tailings lifts required for the development of the tailings management facility which was also impacted by slower than expected sand drainage times. The result of this slower than planned TMF development is that additional mechanical movement is required prior to installation of the permanent infrastructure and we expect to extend planned maintenance shutdowns in Q2 and Q3 to complete this work. This is expected to impact production in the short term only and there are no issues with dam integrity. Once this phase of TMF development is complete, we will be on track for full production ramp up by year end and steady state operation into the future. Moving to slide 9. QB's plant performance continues to improve. In the first quarter, the average daily throughput, excluding the extended and unplanned shutdowns, increased compared to the fourth quarter, demonstrating continued improvement in operational stability. Higher levels of transition ore were mined, leading to lower recoveries, as expected, and higher grade ore mined in March increased the average grade for the quarter. For the remainder of the year, we will continue to drive operational performance and expect to achieve higher throughput rates and higher recoveries in line with design. We continue to expect to achieve our production guidance for QB, albeit at the lower end of our previously disclosed range of 230 to 270,000 tons. And we continue to expect QB net cash unit costs to be between 180 and 215 US dollars per pound for the full year. Although commensurate with production, we expect this to be towards the higher end of guidance. So turning to slide 10. We expect significant growth in our copper production with improving margins this year. Our copper EBITDA margin increased last year from 33% to 42%. This year, current consensus estimates show further improvement to 51%. We continue to expect our copper production to grow to between 490,000 to 565,000 tons for the full year, from 446,000 tons in 2024. reflecting the ongoing ramp up of QB and improved grades and throughput at Highland Valley. We also expect a significant reduction in our copper net cash unit costs to 165 to 195 US dollars per pound from 220 US dollars per pound in 2024, reflecting an increase in copper and molybdenum production as well as continued cost discipline across our reservations. Slide 11 outlines our ongoing growth trajectory, underpinned by our existing portfolio of operating mines, coupled with our well-funded, value-accretive, near-term copper projects, including the mine life extension at Highland Valley in British Columbia, and our high-returning greenfield projects at Zafranal in Peru and San Nicolas in Mexico. Compared to QB, these greenfield projects are significantly less complex and smaller in scope, with lower capital intensities. We are also working to define the most capital efficient and value accretive path for further growth of QB through optimisation of the mill and low capital debottlenecking opportunities that could increase throughput by 15 to 25%. With these projects, we have a clear path to increase our annual copper production to approximately 800,000 tonnes before the end of the decade. Now on slide 12, I will cover the key progress updates and major future milestones as we work to bring these near-term projects to potential sanctioning this year. An independent review of the mine life extension project at Highland Valley was completed in the first quarter and confirmed construction readiness of the project. This means we should be positioned for a potential sanction decision after we receive the necessary permits, which potentially could be in mid 2025. At Zafranal, the project is progressing as scheduled and we received the advanced works permit on April 10th. We aim to submit the construction permit in Q2 and the project could be ready for a potential sanctioned decision in late 2025. At San Nicolas, engagement with government authorities and other stakeholders is ongoing to support our permit application. We expect to complete the feasibility study in the second half of 2025, positioning the project for a potential sanction decision following the receipt of necessary permits. At QB, our focus is to ramp up to steady state. At the same time, optimization is progressing and detailed planning for de-bottlenecking is underway, which should enable us to submit the Declaration of Environmental Impact or DEA Permit application in the second half of the year. We look forward to progressing these well-funded near-term projects to sanction and launching the next phase of tech's copper growth. I'll now hand over to Crystal to provide further details on our first quarter results.

Thanks, Jonathan. Good morning, everyone. I will start with our first quarter 2025 financial performance on slide 14. We more than doubled our adjusted EBITDA in the quarter compared to a year ago to $927 million. This was primarily driven by higher copper and zinc prices and increased copper sales volumes due to strong production performance across our established operations. We generated increased revenue and profit from byproducts, including molybdenum from QB in Highland Valley, as well as silver, germanium and other critical metals from the trail. We also benefited from a weaker Canadian dollar as we converted U.S. dollar denominator revenue into Canadian dollars. Our results reflect positive pricing adjustments of $106 million, primarily as a result of higher copper prices. Our finance income increased significantly to $91 million, compared with $27 million a year ago, as our investment income increased due to our LH balance since the sale of the steelmaking coal business last year. In February, we paid a final $20.24 Canadian income tax of $130 million. primarily related to earnings and the proceeds from the sale of the steelmaking coal business. And importantly, we continue to return cash to shareholders throughout the quarter, with $568 million returned year-to-date. Turning to slide 15, which summarizes the key drivers of our financial performance in the first quarter compared to the same period in 2024. Our adjusted EBITDA increased by 127% in the first quarter as a result of strong base metals prices, higher copper and zinc and concentrate sales volumes and the positive impact of a weaker Canadian dollar. Copper sales volumes increased by 11% from Q1 of last year, reflecting higher volumes from Highland Valley and Carmen de Andacoyo. Zinc and concentrate sales volumes increased by 10% due to the timing of sales from Red Dog and increased volumes from Antemina. Our strong adjusted EBITDA also reflects improved copper and zinc unit costs, reflecting cost discipline across our business. This was partially offset by an increase in royalties, primarily as a result of increased profitability at Red Dog. Now looking at each of our reporting segments in greater detail and starting with copper on slide 16. In Q1 2025, gross profit before depreciation and advertising from our copper segment increased 90% to $704 million compared with the same period last year, primarily due to higher copper prices and sales volumes and increased byproduct revenues from molybdenum and zinc. This reflects strong performance across our established copper operations. Copper production increased by 7%.

Just a moment. I'm going to turn the hold music on for just a moment and check the volume with the backup line.

Operators, Bruce, I'll get the line back going. Okay.

The operator, can you hear me on the backup line?

Hi, Kayleen. Yes, Kayleen, we can hear you. Do you know where we cut off?

Just a few seconds before I interrupt it. So I would go back a paragraph. Okay. Okay? All right, I'm going to join you back in. If you hold me thick, I'll cut the music. Okay. Join you back in now. Okay. Thank you for your patience. We have reconnected with the presenters.

Hi, everyone. Sorry about the technical difficulties. I'm going to start back at the beginning of slide 16. and get going again. In Q1 2025, gross profit before depreciation and amortization from our copper segment increased 90% to $704 million compared with the same period last year, primarily due to higher copper prices and sales volumes, and increased by-product revenues from molybdenum and zinc. This reflects strong performance across our established copper operations. Copper production increased by 7% to 106,000 tons, driven by increased grades and mill throughput at Highland Valley and Carmen de Andocoyo. Production significantly improved at Highland Valley as we advanced mining in the higher grade Lornex pit, which has softer ore, leading to increased mill throughput. Carmen de Andocoyo also had improved mill throughput as a result of increased water availability compared to the same period last year, which was affected by drought conditions. Antamina performed in line with expectations. Our net cash unit costs improved by 32 cents U.S. per pound to $2.04 U.S. per pound as a result of higher copper production, increased byproduct credits, reduced smelter processing charges, and lower transportation costs at QB. This strong performance led to an improvement in our gross profit margin before depreciation and amortization of 13% to 47% compared to the same period last year. On April 9th, QB's third and final labor union ratified a new three-year collective bargaining agreement. This completes all labor negotiations for QB's workforce, with labor agreements now in place through 2028. Looking forward to the rest of this year, we expect to see QB continue to ramp up to steady state by year-end, as well as increase quarterly copper production at Highland Valley as we process increasing proportions of higher-grade Lornex ore through 2025. For the full year, as Jonathan mentioned, we continue to expect growth in our copper production with improving margins in line with our guidance of 490,000 to 565,000 tonnes at a net cash unit cost of between $1.65 US and $1.95 per pound. Turning now to our zinc segment on slide 17. Our profitability in zinc improved significantly in the first quarter with a 79% increase in gross profit before depreciation and amortization to 225 million. This increase was due to higher zinc prices, strong sales volumes at Red Dog, and improved profitability at our trail operations. Our Red Dog zinc and concentrate sales of 91,000 tons were higher than our guidance range for the quarter of 75 to 90,000 tons due to the timing of sales. Red dog production was impacted by lower grades as expected in the mine plant. Our net cash unit costs improved to 59 cents U.S. per pound from 67 cents U.S. per pound in the state period last year, driven by reduced smelter processing charges and partially offset by the impact of lower production levels. At trail operations, we generated strong profitability in the quarter, reflecting increased production of byproducts such as silver, germanium, and other critical metals, as well as the successful implementation of initiatives to improve profitability and cash flow generation at trail. Looking forward to the second quarter, we expect zinc and concentrate sales from Red Dog of 25,000 to 35,000 tons, reflecting the normal seasonality of sales. Our full-year production and unit cost guidance for our zinc segment is unchanged. Our guidance for zinc and concentrate production remains at 525,000 to 575,000 tons, and we continue to expect refined zinc production of 190,000 to 230,000 tons for the year. Net cash unit costs are expected to be between 45 and 55 cents U.S. per pound. Turning to our balance sheet on slide 18. Our balance sheet remains strong and resilient. We were in a net cash position of $764 million at March 31st, and as of yesterday, our liquidity was $10 billion, including $5.8 billion of cash. Our cash balance decreased in the first quarter, primarily due to continued returns to shareholders through dividends and share buybacks. The final 2024 tax payment relating to the earnings and sale of the steelmaking coal business and the seasonally larger royalty payment to NANA in respect of Red Dog's strong Q4 2024 performance. Our remaining outstanding term notes of $1 billion are long dated. We will continue to deleverage as we make semi-annual repayments on the QB project finance facility through 2031. With the achievement of the QB project financing completion testing requirements, tech and the other sponsor guarantees of the project finance facility have been released. Our balance sheet strength and investment grade credit ratings enable continued value creation in current market conditions. On slide 19, we remain committed to our disciplined capital allocation framework, which balances investment and value accretive growth with returns to shareholders while maintaining a strong balance sheet through the cycle. Our capital allocation framework and project sanction requirements ensure the prudent deployment of capital. All growth projects must meet stringent criteria, delivering attractive risk adjuster returns and competing for capital. We are continuing to execute on our $3.25 billion authorized share buyback, and we are committed to returning between 30% and 100% of available cash flows to our shareholders. Looking at our cash returns now on slide 20. We continue to build on our strong history of cash returns to shareholders, which currently total approximately $5.4 billion since 2020. We are in the market daily, actively buying back our shares under the $3.25 billion share buyback announced last year, with more than half of the buyback now complete. We have increased the daily number of shares reported

Operator, the quality of your backup line has deteriorated to the point where we're not really able to hear you. I'd like to suggest that we pause for a moment and reconnect your main line, and I will put music on again. I apologize. I really don't think that we should proceed when we can't hear you. Hi, I spoke to you out into a private conference. If we could reconnect the main line, I will put this line on hold and we'll go back to the main line. It looks like we're reconnected. Maybe. I'm still showing it as I'll be right back.

I'm sorry, I'm not able to hear you. I'm trying to get to the 844 number. and I'm getting a busy signal.

We're also hearing that the audio is fine for those listening.

All right. If you want, I can join you back in or dial out the 604 number that would show displayed on screen. From the presenters line?

Okay, Lina, I can give you a number to call me up. Okay. 604-649-88667.

I'm not hearing it.

604-649-88667. Can you hear us on this side?

You're not able to hear you. Is there any way that somebody can type the number into the Q&A chat? If you can hear Bruce? Emma, I know you're connected.

Can you hear me?

Okay, I think, Gaylene, everyone on the line can still hear us, so we're just going to continue on and proceed with the rest of the call. Apologies again, everyone on the line. I'm just going to jump. We are getting feedback that people that are listening on the line can hear what's going on in the room, so we want to just continue. Okay.

Possibly hear what's going on in the room because your room line is not connected in the call. But I will join you back in if that's your choice and cut the whole music. Joining you back in now.

You are now rejoining the main conference.

Pardon me. We've reconnected with the presenters. Please proceed.

Sorry, everyone. I'm going to jump back in here, still on slide 20. As of yesterday, we've executed $1.75 billion of the $3.25 billion authorization under our normal course issuer bid, including over $500 million year-to-date. This leaves approximately $1.5 billion of our authorized share buybacks 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. Turning to our near-term growth now on slide 21. Our value-accretive near-term copper projects are well-funded. While the project capital attributable to these growth projects remains unsanctioned and uncommitted, we continue to expect to deploy between 3.2 and 3.9 billion U.S. over the next four years for our near-term cover projects. And we will continue to be disciplined in our assessment and progression of these projects to ensure value of creative growth. As we continue to balance our growth in copper with cash return to shareholders, we can continue to significantly impact the accretive growth potential of our metrics on a per share basis, as shown on slide 22. Last year, with the ramp-up of QB and with a significant portion of our $3.25 billion share buyback completed, we increased our copper production per share by 54% compared to the prior year. And by 2026, as we stabilize QV at full production and complete the remaining authorized share buyback, our copper production per share could increase by a further 34% to 51%. Beyond that, our copper production per share could increase substantially as we bring our near-term value of credo growth projects online. And this does not consider the impact of any further share buybacks that could be authorized under our capital allocation framework as a result of the strong cash flow generation potential of our business. Through the end of the decade, our copper production has the potential to increase rapidly on a per share basis. With that, I'll now turn it back over to Jonathan.

Thanks, Crystal. So turning to slide 24, we remain focused on our priorities to create value for our shareholders. Completing the QB ramp-up to steady-state operations, continuing to drive operational excellence across our portfolio of high-quality copper and zinc operations and projects, growing our copper production and improving our margins, remaining committed to returning cash to our shareholders by continuing to execute our authorized share buyback program and paying our base dividends, Progressing our value accretive near-term copper projects to possible sanctioned decisions in 2025, positioning us for our next phase of copper growth and maintaining the resilience of our business to navigate uncertainty and create value leveraging our agile commercial strategy and strong balance sheet. So to wrap up on slide 25, our strategy remains delivering growth and creating value in a responsible and disciplined way. We will continue to balance investment in growth with returns to shareholders. We have the resilience to successfully navigate the current environment as well as potentially exploring evolving opportunities. As a pure play energy transition metals company, TEC is uniquely positioned to deliver significant value to shareholders through the execution of our copper growth strategy. Apologies again for the disruption on the line during that portion of the call. Hopefully you can hear us clearly now. So with that, operator, please open the line for questions.

Thank you. You will hear a tone acknowledging your request. If you wish to remove your question, please press star then two. We ask that you limit yourself to one question and one thought. Go ahead.

Hi, good morning. Questions on, it sounds like you're pushing back the target for sustainable full production of the operation from mid-year to end of year if the guidance is unchanged. Can you give us a sense of how long these extended maintenance

the range for the year uh hi oris thank you for the questions uh look we'd always expected um 2025 to be a build of production throughout the year and you know achieving uh steady state operations towards the end of the year rather than the first part of the year And I think that's no different with what we've guided to today. We still expect to deliver the guidance of 230,000 to 270,000 tonnes this year, albeit now towards the bottom end of that range. and yes you know there's some additional work we have to do here around the tailings facility we're making good progress we're implementing measures to complete that work quickly and that includes initiatives which will allow us to speed up sand drainage and deposition of material at the dam look as we said you know completing this work will require some additional downtime in q2 and q3 which is why we anticipate being at that lower end but once we get through this phase of the transition from the starter dam to regular ongoing sand lifts, which is essentially a one-time event, we can then operate at steady state for the life of the facility. So that's the phase of work we're going through this quarter and next quarter. That's why we have confidence that we can end the year running at steady state. And that's why we believe that we will continue to deliver within the guidance range that we've set out for 2025. You know, knowing that this was a ramp up year for the operation, you know, we reflected in that guidance range, you know, the uncertainty with operations in this phase of the life of a project. And that's what you're seeing in our disclosures today. But I think, you know, critical that we remain confident of delivering production within that range.

And sorry, can you give us detail how long are the expected ?

Look, that will be a function of what needs to be done, which will be determined by the operations team and will be a function of the improvements that we make in the improvements that we make in the pace of material deposition at the dam. So it's not possible to be precise on the number of days that we will need to achieve that this year at this point in time. But I can tell you that the range of outcomes that we expect to be likely in terms are reflected in the guidance and are reflected in the fact that we continue to hold that guidance, yet we are pointing towards the lower end of that range.

Anything that impacts the guidance range for 26, the 280 to 3,

expected to be solved by year end? Yeah, so the short answer is no, Oris. We don't expect to see any changes due to the guidance for 2026 or beyond. The work that's required here on the tailings to transition into steady state, we expect to be finished in the third quarter of this year. So therefore, as we move into 2026 and beyond, we don't see any ongoing impact of the works that we're undertaking today. Thank you. Thanks, Oris.

Liam Fitzpatrick with Deutsche Bank. Please go ahead. If I can take control of the next question, it's from Liam Fitzpatrick with Deutsche Bank. Please go ahead.

Can you hear me okay?

Yeah, all good.

Got you, Liam. Okay, all right. Yeah, my question is just around the next slide. Just to put, would you realistically approve something like Zafranals in the current macro environment? Or would you place a greater clarity around industry policy in general? And then it also seems that three or four of your projects are all converging towards to the identity of the patient.

Yeah, thanks for the question, Liam. Now, of course, you know, as we look at the projects that we have in the portfolio here, what we're focused on is the long-term perspective for the fundamentals of the commodities associated with those projects. And we see nothing at this point in time that changes our view or our conviction on the long-term fundamentals for both copper and zinc being the, you know, the key components of growth with copper being the primary target. there's nothing in that respect that causes us to to sort of take a pause in that regard um the Growth projects that we have in the portfolio are critical to the long term strategy, as I mentioned in the call. These are projects that are smaller in scope, lower in complexity than QB, for example, with low capital intensities, which should be very competitive projects and should deliver strong returns. So from that perspective, no change. Of course, we always continue to evaluate those things. And when we take our projects forward for sanction, we always look at a range of forward pricing scenarios to ensure that those economics and returns will be robust. Just in terms of your comments on organizational bandwidth, just to put these projects into context. So Highland Valley Mine Life Extension is a brownfield project at a site where we've been operating since the 60s and we've undertaken numerous previous brownfield expansions of that site. The team is all in place, is ready to go. And as I mentioned, we had a very positive independent review of our construction readiness for that project. So we've got a good level of confidence moving forward with that. The other Greenfield project that we would deliver and then Tech would take the lead on is Zafranau because of course we're 80% of that project. So that's where we would be delivering. And again, we've been building a very strong team over an extended period of time now, coupled with our EPC partners. So we're well set up, subject to sanction and permits, of course, for construction and delivery of that project. San Nicolas is somewhat different because, of course, that is an incorporated joint venture with Agnico, which doesn't mean tech is taking the lead on delivering that project. It's actually the joint venture that does that work. So, of course, we'll be very closely involved in a range of ways in support of that project, and in particular, really taking a lead on the commercial aspects of that project when it comes to the marketing and sales of copper and zinc. But that necessarily, by virtue of the way that that's been set up, is a lower lift on the organization here. So we do believe that this is manageable, Liam. We've been preparing for this for a number of years in terms of systems, processes, procedures, etc. But most importantly, bringing in the talent, developing the teams, and getting ourselves set up for success in execution.

Thanks, Liam.

Salva with Marcus Stanley. Please go ahead.

Yeah, thank you very much. Good morning. I would like to see if you received any feedback or suggestions for potential improvement on the completed QB independent testing that you successfully did recently, which, again, congratulations on that, but I'm interested to know if there was any Any suggestion for the professional improvement that the league provides?

Look, I think in short answer is no. You know, that's not really the way that process works. There's a series of tests that have to be achieved, you know, based on performance. And those tests were achieved and individually validated and certified. But it's not really an improvement, you know, an improvement focused process, Carlos.

was to be shut down as a result of the power outages. I think it was several days, but it was almost Yeah.

So, Carlos, you know, we were sort of directly shut down for a couple of days, and then it took us a couple of days to get back up and running to full rates again. So, you know, broadly speaking, four days, half of which was, you know, downtime and then half of which was recovery. Of course, it's the first time at QV that we've had to deal with one of these events and get the site ready. back up and running to full capacity. So that's a learning experience. Perhaps in future we'll be able to come back online more quickly, but we have to be prudent first time out dealing with an event like this at that site. Thanks, Carlos.

The next question is from Craig. The next question is from Craig Hutchinson with TD Collins. Please go ahead.

or they would be in place. Any suggestions of whether they're concerned

Yeah, thanks, Craig, for those questions. Look on the outbound, as I mentioned, given the levels of tariffs being placed on imports from the U.S. into China, that creates challenges with supply at the moment. Now, fortunately, at this time of the year, given the shipping seasons at Red Dog, we're not moving material from the site in any event. So we're pretty well covered. at present. The commercial team is working very hard, as I mentioned on the call, as a range of options and alternatives here, which could see us placing material elsewhere through this period of time. The bottom line is, Craig, that we don't expect to face a material impact here as the result of tariffs between China and the US. And as I said, we've got a number of months up our sleeve here to resolve any issues that might arise. There is no risk the other way around. We're not exposed on the inbound here in terms of imports of goods from China into US or into Red Dog. So no risk there. Yeah, look, as I said, you know, tragic event. We will work very closely as we always do with the Antamina team here to understand what's happened and to look at learnings for the future and learnings not just for Antamina, of course, but for the industry more generally. Our understanding is that the site will be returning to operations today. So back up and running.

Thank you, Greg. If all goes to plan, should you get the licenses to be able to this throughput of actually 143,000 tons a day? This is how we model that kind of optimization debottlement.

Yeah, I mean, I think there's a level of optimization that's allowed under the current permit, Miles, as we have it today, which is essentially a 10% allowance from nameplates. So that's something we already have in hand. In terms of the submission of the deal, let's say that goes in in July of this year, we would expect to have an approval on that 12 months subsequent. So that would be July of the following year, which fits very well with the timeframe we have for the debottlemaking. So the existing permit really allows for the optimisation that we've been talking about, and this deer or amendment to the permit allows for the de-bottlenecking. So we can get the optimisation with what we have now, and with the deer we can unlock the de-bottlenecking.

I think there was a bit of a dispute that had to be resolved before we could push it out of the baseline extension project as well.

Yeah, so we are going through engagements with various of the indigenous government organisations surrounding Highland Valley and a number of those parties too, and those parties in fact have initiated dispute resolution processes under the Environmental Assessment Act. That's not unusual for these sorts of processes, it's the way in which they engage with the province. essentially around the the terms of the permit ultimately you know we stay very close to this of course you can imagine we're very close with the indigenous government organizations we're very close with the province here in British Columbia who have this as a priority project and for them. So they're working very hard on this. Of course, you know, we continue to assess the project plan and schedule as these processes unfold. And while we can't guarantee time for permitting, you never can with any project, we are optimistic that we will have a resolution in the middle of this year. So we'll continue to progress the project. As I said, the work we've done on construction readiness looks very good. That's been independently verified. and we'll continue to move the project forward this year. So yes, we've got to get through those engagements and ultimately get the permits issued, but we're hopeful that the middle of this year is still the timeframe that we're working to.

Are you comfortable now we're not going to see any more downgrade to production by 2025?

Yeah, look, you know, what we know about the site, what we see in the operation of the mine, of the concentrator, of the port and our view now on the work that is required to progress the tailings facility from today into steady state. operations, all of those factors are considered in the guidance range. So, of course, you know, we are looking at guidance all the time to ensure it's appropriate and representative of what we expect to do at the asset and, you know, we've communicated 230 to 270 again today because we have confidence in delivering within that range, albeit at the lower end. Thanks, Myles.

The next question is from Matthew Murphy with CMO Capital Market. Go ahead.

Hi, Jonathan. Just would like to dig a little deeper on the understanding the tailings issue. Sand drainage, is that referring to like how wet the sand is?

Well, it's essentially referring to how long it's taking that sand to dry might be a better way of thinking about it. But yes, it is to do with the moisture in the sand and the time that it's taking for those moisture levels to reduce.

Thank you.

No, it's really a separate issue there. I mean, ultimately what you need to be able to do is to compact the sand and to compact the sand you need it to drain. We think the source of some of these slower drainage times has been a function of clay and fines in the sand which have to be separated. That separation happens through the cyclones and we've recently made some modifications to those cyclones and the initial results from those modifications are positive. Again, which is, you know, part of what gives us confidence that we move through this issue by the third quarter of the year.

Does it need to take maintenance shutdowns? Is it because you're currently constrained on tailings capacity? So you're like waiting for these lifts to be ready to let the mill go, see what it can do? Or is part of the shutdown also on the mills?

So we have our regular shutdowns, you know, on the mill for mill relining and other work. So there's nothing different at the mill over and above what we would consider to be our sort of routine quarterly work. The reason that we point towards the low end of the guidance range is that the work we have to do on the tailings facility does create a constraint to production. But again, factoring in the range of outcomes there that we can foresee for this year, we maintain the range at 230 to 270. Thank you very much, Matt.

My question is for Juan Benito with Texas American Security. Please go ahead.

Operator, thank you very much. Good morning, John. Thank you for the update today. Maybe I have to get in about QE2 and just going back to one of the challenges that was experienced last year. That was the stabilization. look on the ramp at that, that the work should stay in the mind. I'm concerned that that was, in fact, localized.

yeah so so there's no ongoing uh you know manifestation of that geotechnical issue that's very much behind this uh lawson um in terms of the the clays you know as we go through this year we started the year processing a lot of transitionals which is why you've seen some lower recoveries uh in the first quarter as the year progresses we expect to have less transition or and therefore less clay and therefore better recoveries so so all of those things are connected that's been in the plan for this year it's why we've expected or partly at least why we've expected to see quarter over quarter improvements uh through the year um but but nothing different from what we've communicated uh previously there lawson here the guidance uh suggests that grade would improve the second half but actually

I think it was about 0.61%. or for grade is potentially better than part of what's driving your confidence in staying within the guidance range?

No, look, we still expect grade for the full year to be approximately 0.6. You know, with the mine plan, we ended up processing a little bit of higher grade in March that was previously expected to come through in April. So there's always a few, you know, sort of puts and takes in this. But as we look at this for the year as a whole, the average of 0.6 is still the right number. So we're not relying on Gray to deliver the guidance, if that's the question, Lawson.

Yeah, no, that was it. Perfect. Thanks very much, John.

Thank you, Lawson.

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

Yeah, hi. Good morning, and thanks for taking the question. I'm thinking, I guess, on trail, please, I want to talk with Oli. I guess, how should we think about Yeah, thanks for that, Bill.

I'll ask Crystal to just respond on the outlook for trial for the balance of the year.

Thanks, Bill. Nice to hear from you. Look, in Q1, as you mentioned, we had very strong performance at Trail. We generated $80 million of gross profit before appreciation and amortization. That was really the result of that implementation of initiatives to improve cash flows. Those have been fully embedded now, and we expect those to continue through the rest of the year, and we'll continue to realize the benefit of those. And then in terms of the contribution from byproducts such as silver, germanium, and indium, And then obviously the FX rate has an impact. We built up a stockpile of materials during the period when we had the Kivset boiler under repair in 2023. We are progressing treating those materials, which is where you're seeing the benefit of some of those metals coming through and supporting the profitability. So we expect that to continue through this year, but of course that's not a long-term solution. The TC environment for trails continues to be challenging, but the cost structure changes that we've made there have led to some improvements that we're seeing come through, and we expect that to continue.

Adrian, thanks for that. And then I guess for us analysts out on the border, I guess any thoughts on the upcoming presidential election, any special impact to the industry in Canada, research, or basically the FDI?

Look, nothing in particular. I mean, there's obviously an election early next week. We will know who the prime minister will be at that point in time. I think what we can say is that both sides of politics here are very, very supportive of the resources industry. That's been a key part of their platforms, whether that's about deregulation and simplification, whether that's about actually putting in place investment vehicles to help with the development of the I think there's a lot of support for resources, Canada recognizing that as a real potential competitive advantage and a great lever through which to engage with the U.S. on something that's clearly very important. Who then? So we hope to see that progress, Bill, in the weeks and months ahead. But I think however the election works out, Canada will remain very focused on its mining industry, on its critical minerals. And we do expect to see supportive legislation to help ease doing business essentially in the country. So I think the outlook is positive from that perspective. Thanks, Bill.

Thank you. We are out of time for further questions. I'd now like to hand the call back over to Jonathan Price for closing remarks.

Yeah, thank you, operator. Apologies once again for the issues with the call today. I hope you were able to hear everything you needed to hear. If not, as ever, please follow up with Emma and the investor relations team. I would just close off by saying the business is in really good shape. We are very resilient. We're managing very well through these turbulent times, both through our commercial strategy and through the strong balance sheet we have. We will continue returning capital to our shareholders per our commitment of balancing that with growth. And we've discussed QB extensively on this call. We will get past this tailings situation by the third quarter of this year, move on to steady state operations. And as I said, we see no changes to guidance this year or in the coming years. So thank you very much for joining us all today and enjoy the rest of your day.