Teck Resources Ltd

Ladies and gentlemen, thank you for standing by. Welcome to Tech's second quarter 2025 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, you may press star then one on your touchstone phone. Should anyone need assistance during the conference call, they may signal an operator by pressing star then zero on the telephone. This conference call is being recorded on Thursday, July 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 Texas Second Quarter 2025 Conference Call. Today's call contains forward-looking statements. Actual results may vary due to various risks and uncertainties. PEC 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. On today's call, Jonathan Price, our CEO, will start with highlights from our PEC supporter. review of the quarter. Jonathan will then wrap up with closing remarks and a Q&A session. With that, over to you, Jonathan.

Thank you, Emma, and good morning, everyone. Now, before we get into the quarter, I would like to take a moment to acknowledge the incident earlier on Tuesday at one of our peers' operations in the northwest of our home province of British Columbia. Our thoughts are with the three workers that remain in the underground work area, as well as their families, friends and colleagues and the emergency response teams. we hope for their safe and speedy rescue so turning to our second quarter 2025 results starting with highlights on slide four overall we were advancing our strategy proper growth while returning cash to shareholders our profitability improved compared to the same period last year 722 million dollars of adjusted EBITDA we had strong performance in our zinc segments with Red Dog sales above our guidance range and a significant improvement in our zinc net cash unit costs, as well as another quarter of profitability and cash generation and trail. Across our established operations, production is on track to meet our annual guidance. At QB, we had previously noted that we would be at the lower end of our guidance of around 230,000 tons for the year. While the team is working hard to achieve this, we acknowledge that there could be risk from possible external factors or, of course, any delay from the TMF development work. As a result, we've revised our outlook for QB to 210,000 to 230,000 tons for the year, but continue to target design rates by year end. Earlier today, we announced that the board has sanctioned the Highland Valley Copper Mine Life Extension project in British Columbia for construction. end of the decade. Given the strong demand for copper as an energy transition metal, the project will generate compelling returns with an IRR far surpassing our cost of capital and secure access to this critical mineral for the next two decades. The project extends a core asset to 2046 with average annual copper production of 132,000 tons over the life of mine. We are continuing to return significant cash to shareholders with elevated daily share buying levels in the quarter, resulting in a total of $487 million, or 9.8 million Class B shares. Here to date, we have returned a total of $1.1 billion to our shareholders through dividends and share buybacks, and we have completed approximately 70% of our authorized $3.25 billion buyback, which is the equivalent of $2.2 billion. Finally, we are maintaining the resilience of the business, including through our strong balance sheet, which enables us to navigate uncertainty and continue to create value. We currently have $8.9 billion in liquidity, including $4.8 billion in cash. Turning to slide five, we continue to be committed to safety and sustainability. Across the operations that we control, our high potential incident frequency rate remains low for the first half of the year at 0.09, below our 2024 performance of 0.12. I would like to take a moment to acknowledge the fatality occurred on April 22nd at Antamina, in which tech holds a non-controlling interest. We are deeply saddened by this event and offer our condolences to the families, friends, and colleagues of the deceased. DEC fully participated in the investigation, which was led by the team at Antamina, and learnings will be shared across our company and across the sector. We were honoured to be named as one of Corporate Nights 2025 Best 50 Corporate Citizens in Canada. It's the 19th consecutive year that we've received this recognition, which is based on an evaluation of up to 25 sustainability indicators, including board diversity, resource efficiency, financial management, sustainable revenue, So now turning to QB on slide six. QB's second quarter performance was impacted by the ongoing TMF development work. We're advancing multiple TMF development initiatives to improve sand drainage rates and accelerate mechanical movements of sand to achieve steady state operation. This work impacted mill online time in the quarter as previously disclosed. The plan post QB2 construction phase of TMF development was based on design assumptions for sand drainage rates that have subsequently proven unachievable. Modifications to cyclones alone, while showing an improvement in sand drainage rates, were not sufficient to allow us to fully catch up on TMF development work in the quarter. As a result, we are implementing a range of additional measures to improve sand drainage rates and accelerate the mechanical movement of sand, including enhanced sand placement techniques and optimization of the grind size of the concentrator. Importantly, the TMF development work and the transition from starter down to regular ongoing sand lifts is a one-time milestone related to the ramp up of the operation. When it is completed, the TMF development work will be behind us for the life of the facility. While the TMF development work will continue in Q3, we continue to target design rates by the end of the year. Throughput increased from the prior quarter, and we expect to see consistent grades of approximately 0.61% in the second half of the year. Work is ongoing to improve recoveries by year end, which will also be helped by more consistent mill runtime. The outage of the shiploader at QB's port facility announced on June 2nd is expected to be extended into the first half of 2026. We have been successfully shipping concentrate through our alternative port arrangements and have maximized shipments to local customers, so there has been no production impact. Alternative sales logistics have had some incremental impact on our net cash unit costs, which is expected to be approximately 10 US cents per pound. We had a good step up in molybdenum production as a result of some key process improvement initiatives implemented during the quarter. We expect to continue to see molybdenum production improvements and we continue to target design throughput and recoveries of the MOLLE plants by year end. Once we have completed the TMF development work, QB will be able to run at steady state, showcasing it as a Tier 1 asset that will be a cornerstone of Tech's portfolio for generations. We continue to work on defining the most capital efficient and value accretive path for future growth of QB. through optimization of the mill and low capital debottle making opportunities that could collectively increase throughput by a further 50 to 25%. The foundation of QB is its large long life deposit that can support multiple expansions and it offers multiple potential paths to create value for our shareholders including assessing adjacencies or synergies with Coyote. The operation also has the advantage of a very low strip ratio which enables competitive all-in sustaining costs. We successfully achieved completion testing requirements under QB's $2.5 billion project finance facility earlier this year, which provides independent verification, confirming the robustness of design, construction, and operational capacity. And we have a taxability agreement in place through 2037. Taking all these factors into account, we are well-positioned to generate significant future cash flows from this Tier 1 asset, for decades to come. Returning to the MyLife Extension at Highland Valley on slide seven. Highland Valley is Canada's largest copper mine and a core asset in our portfolio. And we are excited to announce the sanctions of the Highland Valley Copper MyLife Extension or HPC MLE project. This is a lower risk and lower complexity brownfield project that is 100% owned by tech. The MLE is an extension of the operation to 2046 and proper per annum on average over the life of mine. Based on additional technical and engineering work, we have the project. As a result, this capital estimate sanction is 2.1 to 2.4 billion Canadian dollars in nominal terms. Compared with our prior estimates of 1.8 to 2 billion Canadian dollars, it now includes project level contingencies, accounts for inflation, input cost escalation, and the impact of potential tariffs on construction materials, and reflects the accelerated procurement of mobile equipment originally planned for later project phases. It also incorporates additional scope and indirect contract requirements identified through ongoing project requirements. The MLE project consists of development of site infrastructure and facilities, grinding circuit upgrades, increased sailing storage capacity and enhancements to power and water systems as well as the mine pushback that requires additional waste stripping to access high quality resources within the valley pit. The project economics are attractive including generating a robust internal rate of return that is significantly above our cost of capital and a project net present value using an eight percent sorry a positive net present value using an eight percent discount rate. The capital intensity of the project is expected to be low at 11,500 to 13,200 US dollars per ton of copper on an annualized basis. Overall, we expect to generate significant EBITDA and cash flows over the life of mine. We have operated Highland Valley for decades and have successfully executed several mine life extensions there. And importantly, project readiness for construction has been confirmed through independent assurance activities including an external construction readiness assessment and a review of the technical scope, capital cost estimate and execution strategy and planning. We are well positioned for solid project execution of the Highland Valley Mine Life Extension with a strong and experienced team in place. All major permitting complete, engineering nearly 70% complete and all contracting and permitting well advanced. Construction mobilization is underway delivering on this value accrued project. We have summarized the changes to our guidance on slide 8. Production changes are driven by the revised outlook to QB based on the TMF development work. We had previously noted that we would be at the lower end of our guidance of around 230,000 cents for the year. While this is still possible, we acknowledge that there could be risk from possible external factors or from any delay to the TMF development work. As a result, we have revised our outlook for QB to 210 to 230,000 tons for the year, but continue to target design rates by year end. Production guidance for all other operations is maintained. As such, the impact of the revised QB outlook is the only driver of flow-through changes to total copper production, moly production, and therefore net unit cash costs. We have also incorporated the increase in copper production in 2028 and the start of the growth capital investment associated with the sanction of the Highland Valley Copper Mine Life Extension Project. Please refer to the MD&A for further details. Turning to the Neotium growth on slide nine. Our ongoing growth trajectory is underpinned by our established portfolio of operating mines. The sanction of the HBC MLE project is foundational to our copper growth strategy and a significant milestone in the growth of TEX copper production in the future. Our high-returning greenfield projects at Zafranal in Peru and San Nicolas in Mexico are progressing as planned, and we are targeting sanction readiness by year end. At Zafranal, we initiated advanced early works in May, following receipt of the advanced works permit in April. This will enable construction to start immediately following project sanctions. We are targeting receipt of the construction permit of stage 8 approval, first of two approvals required in Q3, San Nicolas, engagement with government authorities and other stakeholders is ongoing to support our permit applications. We plan to complete the feasibility study in the fourth quarter, which is the earliest stage of the project to be positioned for a potential sanctioned decision following the receipt of necessary permits. These projects are significantly less complex and smaller in scope than QV, with lower capital intensities, attractive project economics, and well-balanced risk return profiles. In addition, we are working to define the most capital-efficient and value-accreted path for further growth of QB through optimization of the mill and low capital debottlenecking opportunities that could increase throughput by 15% to 25%. Our priority at QB remains completing the rampart, but optimization plans are also progressing. Detailed planning for debottlenecking is underway. This should enable us to submit the Declaration of Environmental Impact or deer permit application in the second half of the year. All of our growth projects must meet stringent criteria, delivering attractive risk-adjusted returns and competing for capital in alignment with our capital allocation framework. Overall, we expect to be able to double copper production by the end of the decade, with a path to annual copper production of up to 800,000 tons through these near-term projects. With that, I will now hand the call over to Crystal.

Thanks, Jonathan. Good morning, everyone. I will start with our second quarter 2025 financial performance on slide 11. Our adjusted EBITDA increased by 3% in the quarter compared to a year ago to $722 million, primarily due to another profitable quarter from trail operations, lower smelter processing charges, and reductions in corporate overhead costs, partially offset by lower copper and zinc prices and higher operating costs at Highland Valley due to increased production and at QB. The improved performance from trail operations reflects the implementation of initiatives to improve profitability and cash flows, including increasing byproduct revenue. While the current low smelter processing charges are a headwind for trail, tech overall has a net benefit from them. We successfully reduced our corporate overhead costs by 21%, reflecting our ongoing efforts to reduce costs across our business. continue to expect lower annual corporate overhead costs compared to 2024. Importantly, we continue to return cash to shareholders, with $548 million returned in the second quarter. This includes $61 million of base dividends and $487 million of share buybacks, which equates to 9.8 million shares and reflects elevated daily share buying levels through the quarter. Year-to-date, we have returned over $1.1 billion to our shareholders. Turning to slide 12, which summarizes the key drivers of our financial performance in the second quarter compared to the same period in 2024. Our adjusted EBITDA increased by 19 million to 722 million, driven by another profitable quarter from trail operations, lower smelter processing charges, reductions in corporate overhead costs, and lower royalties. It also reflects higher positive foreign exchange impact. Trails' improved results reflect higher byproduct production volumes such as silver, germanium, and indium, and higher refined lead production as compared with a year ago. These factors were partially offset by a $91 million reduction in settlement pricing adjustments and higher operating costs at Highland Valley due to increased production and at Now, looking at each of our reporting segments in greater detail, I'm starting with copper on slide 15. In the second quarter, gross profit before depreciation and amortization from our copper segment declined by 3% to $673 million compared to the same trade last year, primarily due to lower copper prices and higher operating costs, partially offset by increased coproduct and byproduct revenues from zinc and molybdenum and lower smelter processing charges. Copper production remained similar to the same period last year at 109,000 tons. At QB, no online time was impacted by the TMF development work required to complete the wrap-up of the operation as expected. Our established operations are performing in line with guidance, and our outlook remains on track for the balance of the year. Production improved significantly at Highland Valley, driven by higher grades and mill throughput Production at Antamina was lower, reflecting a shutdown of approximately one week due to the fatality, as well as the processing of a lower proportion of copper-only ore as expected in the limestone. The site returned to full production in June. Parmesan de Coyo had higher production in the quarter, driven by higher grades and recoveries, as water availability improved compared with the same period last year, which was impacted by drought conditions. The improved performance in June maintenance at the stag mill for approximately one month for repairs. The operation has been running at full rates since it successfully restarted at the end of June. Our net cash unit cost improved by 14 cents US per pound to $2.02 US per pound. Valley, and QB, as well as much lower self-sufficiency costs. In order, we signed labor agreements at QB and Carmen de Andacoyo. QB's third labor union filed a new three-year collective bargaining agreement in early April, completing all labor negotiations for QB's workforce and ensuring that labor agreements are now in place through 2028 across our QB operations. At CDA, both unit contracts were ratified in June and July, with each covering a three-year period. Looking forward, we continue to target design rates at QV by the end of this year. We also continue to expect higher quarterly copper production at Highland Valley through the balance of this year as we process increasing proportions of higher-grade Lornex ore. As mentioned earlier, we've updated our annual production and unit cost guidance based on our revised look. Copper production has been revised to 470 to 525,000 tons, and copper net cash unit costs have been revised to $1.90 to $2.05 U.S. per pound. Turning now to our zinc segment on slide 14. Performance in our zinc segment was very strong in the second quarter. Our profitability in zinc improved substantially, with 108 compared to the same trade last year to 159 million. This improvement was driven by higher byproduct revenues as a result of our updated operating strategy at Trail and lower operating costs. Red Dog performed well despite lower grades that we expected in the mine plan. Red Dog sales of 35.1 thousand tons were higher than our guidance range of 25 to 35 thousand tons due to the timing of sales. Our net cash unit cost for zinc improved significantly increasing by 20 cents U.S. per pound to U.S. 49 cents per pound, primarily due to lower smelter processing charges and higher byproduct credit. At trail operations, profitability was strong in the quarter, reflecting our updated operating plan to improve profitability and capital generation in challenging smelter market conditions. We have curtailed our refined zinc production and increased production of byproducts such as silver, germanium, and other critical metals compared to the same period last year. We also implemented cost reductions in Q4 of 2024, the benefit of which continued into Q2. Overall, this strong performance led to a 13% improvement in our gross profit margin before depreciation and amortization for our zinc segment, 28%, compared to the same period last year. Looking forward to the third quarter, we expect zinc in concentration And with Red Dog shipping season commencing on July 11th, we expect reductions in Red Dog inventory in the third quarter, reflecting the normal seasonality of sales. Our annual production and unit cost guidance for our zinc segment is unchanged. The zinc and concentrate production of 525 to 575,000 tons, refined zinc production of 190 to 230,000 tons, and net cash unit costs of US 45 to 55 cents per pound. Looking at our cash returns to shareholders on slide 15, we continue to build on our strong history of cash returns to shareholders. We have returned a total of approximately 6 billion since 2020. This includes over 1.1 billion year-to-date, reflecting elevated daily share buyback levels in the second quarter. We have now completed 2.2 billion, or approximately 70% of our 3.25 billion authorized buyback, leaving approximately 1 billion remaining. And with a strong cash flow generation potential of our business, we can 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. Looking now at our balance sheet on slide 16. We remain focused on maintaining the resilience of our business, including the strength of our balance sheet. As of yesterday, our cash balance remains significant at $4.8 billion, and our liquidity is strong at $8.9 billion. We also continue to maintain investment-grade credit ratings. We have moved into a small net debt position in the quarter, as we've continued to deploy the proceeds from the sales and steelmaking coal business to shareholder returns. But we do expect a release of working capital bills of Red Dog inventory to unwind in the third quarter, reflecting the normal shipping season. Since 2024, we have reduced our debt by $2 billion U.S., and our $1 billion U.S. outstanding term notes are long-dated. We made a semi-annual repayment of $147 million U.S. on the QB project finance facility in the quarter, and through these payments, we are further deleveraging our balance sheet on an ongoing basis. Our near-term growth projects, including the HVC MLE project, remain well-funded, and we are strongly positioned for continued value creation as we execute on our strategy. With that, I'll turn it back to Jonathan.

Thanks, Crystal. On slide 18, we remain focused on our priorities to create value for our shareholders. Completing the TMS development work at QB and ramping up the operation, targeting design rates by year end. driving operational excellence, including growing our copper production, reducing our unit costs, and improving our margins, continuing to return cash to our shareholders through execution of our authorized share buyback program and through our base dividend, and progressing our value-accretive near-term copper projects to create options for our next phase of copper growth, and maintaining the resilience of our business, including our strong balance sheets. We are committed to continuing to balance investment and growth in copper with cash returns to shareholders. Turning to slide 19, we can continue to significantly impact the accretive growth potential of our metrics on a per share basis. 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. By 2026, our copper production per share could increase by a further 33% to 50% as we stabilize QB at full production while completing the remaining authorized share buyback. And our copper production per share could increase substantially beyond that as we bring on near-term value-accreted growth projects. And this does not consider the impact of any further share buybacks that could be authorized under our capital allocation framework, given the strong cash flow generation potential of our business. Our copper production has the potential to increase rapidly long-term on a per share basis. So thank you. And with that, operator, please open the line for questions.

Certainly. To join the question queue, please press star, then 1 on your touch-tone phone. You will hear a tone acknowledging your request. We ask that you please limit yourself to one question and one follow-up. If you're using a speakerphone, please ensure you lift the handset before pressing any keys. If you wish to remove yourself from the queue, you may press star, then 2. The first question comes from . Please go ahead.

Hi, good morning. Some questions on QB2, please. Firstly, the tailings issue that's limiting throughput and then the new investment required here, is there any knock-on impact to 2026? I mean, will tailings still be a constraint next year?

Thank you for that question. Yes, as you point out, in the current quarter and to some extent as well expected in Q3, the TMS development work has been limiting online time for QB. Actually, throughput at the plant and the recoveries of the plant have been good considering these constraints, but online time is an issue. Our expectation here, Oris, is that we can work through the TMS development issue and put that behind us so that it won't de-constrain operations on an ongoing basis. On that basis and based on what we see in terms of throughput and recoveries and grade, of course, the operation, we have maintained our guidance for 2026. But, of course, you know, as we noted, we'll continue to monitor the progress of the TMS development work through the balance of this year.

Is there potentially more investment required in the tailings next year?

At this point, we've gone into the, you know, to the capital, incremental capital spend for this year. We don't expect additional investment next year. We expect normal operating conditions around the CMF and its ongoing development, but we don't expect to signal additional capital, essentially, as we have done in the current quarter.

Okay. And just, I mean, given the state of the ramp up, I mean, at this point, I'm having trouble understanding how realistic it is for QB to even reach the low end of its guidance for 26. I mean, that would imply monthly production required of 23,000 tons a month. The operation hasn't done that in a single month to date. At this point, what gives you confidence that you can exit the year anywhere close to that kind of run rate?

Yeah, so our view, Orest, is that when we can put the TMS issue behind us and we can therefore improve the online at the plant, that we see from the throughputs, recoveries, and grade perspective, the potential around the guidance for 2026. So these are assumptions that we are able to underpin by operating parameters that we have experienced and delivered at the plant. Of course it requires us to run the operation consistently through the year to achieve those numbers. They're consistent with design of course and at the low end of the range we have seen operating results already that give us confidence that those numbers are achievable. You know, as you can imagine, we continue to interrogate both the operational parameters at QB, and we continue to interrogate the forward guidance for QB. But at this point in time, we don't see any changes to 2026, and believe with a period of consistent operation without the constraints of TMS development that we can move forward and deliver.

Okay. Thank you.

The next question comes from Matthew Murphy with BMO Capital Markets. Please go ahead.

Hi. I have a question just on the pace of CapEx this year. So first half of the year, you've done almost 700 million CapEx. That's growth and sustaining, not including capitalized stripping. And then your guidance is around 2.4 billion. if I'm not mistaken, so you have to spend 1.6 to 1.8, call it, back half of the year. Am I thinking about that right?

Yeah, I'll let Crystal speak to the details behind that. Of course, you know, we have increased our capital guidance for the second half of the year in large part based on the sanctioning of HVC MLE. which goes to both capitalized stripping, but it also, of course, goes directly to the growth capital, as well as some of the additional capital that we've just discussed for TMS development at the QB. Crystal, over to you.

Yes. Thanks, Matt, for the question. You're right. So, year-to-date, we spent $700 million on capital expenditures, including capitalized stripping, and our total for the year is, at the low end, $2.3 billion. So, that, you know, that's a reasonable, run rates in terms of what you're thinking. That would put us around $1.6 billion over the second half of the year. Again, a large portion of that is in relation to growth, and that number, again, has increased because it previously didn't include the sanction capital associated with HVC MLE over the balance of the year. So, we have now embedded that spending for the second half of the year, and that's why I think we're seeing that increase in the run rate. Of course, we also have embedded the TMF

in the first quarter itself okay um yeah it's just the magnitude of the step up um i mean do you worry about being able to get that done this year or are there some big ticket items in there that you're confident uh you'll see that that spend and it is a lot of the tailings spend therefore um you know yet to come in the back half of the year

Yeah, I think the run rate is reasonable. We've done a detailed scrub through the project to understand exactly what, you know, what is remaining ongoing. We do have a few larger projects in the sustaining side that we expect to kick off, including, you know, the Antamina tailings list associated with the MyLife extension. We have the QB truck shop that we're continuing construction on. We also have some demobilization of QB facilities as we move into the next phase of of mining there so that in addition to HPP MLE which of course we have a you know a rigorous schedule associated with the project and the capex that we've articulated is uh is in line with that schedule uh and then in the context of TMF we have uh we have spent cash to date we haven't disclosed what that figure is but we can get that out to folks as required but do you expect that spending to continue through the second half of the year and really, you know, maybe to articulate a bit more about why that number is the number that it is. We did have spend associated with TMF embedded in our sustaining capital guidance for this year, but the amount and distance of mechanical movement of spend related to the TMF and the related cost of that work has increased that expected cost, and hence we didn't get our guidance in relation to that.

Okay, thank you. Thanks, Pat.

The next question comes from Carlos de Alba with Morgan Stanley. Please go ahead.

Yeah, thank you. Good morning, everyone. Just on QV, could you please provide a little bit more comments around the ship loader repairs? How long would it take if you have already started? And also, if there is any, maybe you mentioned this, but I had missed it, if there is any impact on CAPEX, that are material because of the repairs.

Yeah, Carlos, thank you. Thank you for that question. You know, as you know, we disclosed the challenge with the shiploader back in June of last year as essentially the cause for that was a brake failure on the shuttle, which caused an overextension of the shiploader and, of course, some damage associated with that. It took some time to be able to access the shiploader to even assess some submarine permits. The assessment of that damage is ongoing, and the repair plans are being finalized associated with that work as well. As we've said, we do think that's going to be an extended shutdown now that will extend the first half of 2026. We haven't got a finalized capital number for that repair at this point in time because that assessment is ongoing. know importantly as we've said the work on the shiploader and the downtime of the shiploader is not impacting our production here as you'll recall previously we had in place trucking arrangements while we were awaiting the completion of the shiploader originally that was allowing us to move material to either smelters in Chile or to other ports in Chile we've just reactivated that and we have that truck in place operating daily so no production constraints and that's allowed us to to minimize any buildup and inventory of the port.

Fair enough. And then just, if I may, a second question. Just on the sequence of the projects for Safran Al and San Nicolas, while both are likely to be sanctioned or may be sanctioned by the end of this year, the earliest, is it fair to think that Safran Al probably is ahead and maybe will be developed earlier?

I mean I think it's fair to say that Zafran Al is more advanced in terms of its in terms of the permitting status in terms of the construction readiness of that team for example however you know we consider both of those to be options while we're saying we would like to get them ready for sanction by the end of the year of course those are decisions that are are yet to be taken, and there's a, you know, a range of factors that will play into those decisions. So, you know, I wouldn't give any particular guidance now on the sequencing of those projects. Think of them as options that we have in the portfolio as we look to de-risk and progress those options to the point that we could take sanctioned decisions when ready. All right. Thank you very much, Jonathan. Thanks, Carl.

Next question comes from Craig Hutchinson with TD Cohen. Please go ahead.

Hi, good morning, guys. Just on the Highland Valley extension, now that you guys have made a final investment decision, is there a plan to file a technical report? And just maybe as an interim, can you give me a sense of what throughput you're looking at to achieve that annual production rate of 132,000 tons a year, sorry?

Yeah, so we will publish a technical report. We expect that to happen in August of this year. And, of course, you'll get all the detail associated with that. The throughput throughout the life of the future mine will be variable, of course. It's going to be a product of the ore we're mining. You'll see in our disclosure that we go through various phases here where we're mining different pits. Of course, there's different ore harvesters. associated with the ore coming from those pits. So, there'll be variable throughput is the answer and variable grade, of course, that goes with that.

And, Craig, we did disclose in our investor day in November of what a production profile would look like for HVC Emily. So, I just encourage you to go back and look at that as you think about it. It shows the variability.

Which is, I guess, to get to the 132,000

tons per year you know i would assume the throughput has to be entirely higher just based on your reserve grade unless i'm missing something i mean i think we are adding uh capacity to to the circuit we're adding mills there um to increase the throughput of material and also to improve recoveries of material I should say. I mean, you know, last year you saw our production at HPC come in, you know, just below 100,000 tons. This year, of course, that production guidance is materially higher, you know, in the sort of 140, 150 range. You see very quickly, year on year, currently, through the operations that HPC HVC and that's been driven this year to the processing of additional Lornex ore and I think that's what you should expect going forward is variability depending on the ore type that's dominating mill feet at any point in time.

Okay and then just on QB, how are the recoveries progressing and are you guys, do you feel like you'll be through the transitional ore this quarter or is that still kind of you know into four?

Yeah, I'll just ask Shazad to talk about that in terms of the transition or where we are on recoveries and the work we're doing there to continue to drive those higher.

Thanks, Craig. Craig, as we have noted last year that we did expect lower recoveries in the first half as we were dealing with more transition ors. And our recovery performance was just, you know, slightly below what we had expected due to the inconsistency in the first half of the down days. We do expect to have better quality ore in the second half with a higher grade and higher recoveries. And the transition ores will be variable, but, yes, we expect a lot less variable transition ore in the second half and in 2026. All right.

Thanks, guys.

Thanks, Greg.

The next question comes from Miles Alsop with UBS. Please go ahead.

Yeah, just a couple of questions. Maybe first on QB and Koloassi, as I mentioned in your presentation. It sounds like discussions are not happening at the moment. Is that right or is there any progress in terms of looking at that option seriously?

Look, there are discussions regarding QB Koyawati. I'm not going to go into those because, of course, they're confidential in nature. But as we've said before, we recognize the potential of the opportunity there for synergies. We will always do what's in the best interest of our shareholders in that regard. As you can see right now, we have our hands full with ramping QB up to the steady state, which has to be our priority here to make sure we get stable production there and the cash generation that this asset is capable of delivering. But, you know, as I mentioned, you know, in parallel, we continue to think about, continue to discuss the potential percentages there, but I won't unpack those discussions given their confidentiality.

That's very nice. And then just going back to the two issues at QUB, Why is it taking a year to fix the ship loader if it's overextended, it's a new ship loader? It seems an awful long time and obviously there is a meaningful OPEX impact. And with the tailings, when are you hoping to get that complete? Is it right to assume that that will be sorted largely by the end of this year or is that going to drag?

So, I'll hand the ship over the question over to Ian Anderson in a moment. I'm just going to talk about tailings. I mean, of course, given the fact that we have maintained our guidance for 2026, our expectation is that we put the TMS issues behind us this year. And, you know, that's what we're providing for in our guidance. So, as I mentioned, you know, it's sort of a one-time event associated with grandfather when we get through. that phase of work, we move into a steady-state operation. So, it's not something, you know, we expect to be plaguing this operation indefinitely at all. It's something we expect is a, you know, it's a discrete piece of work. We'll get that resolved and move past it, and then we'll be able to, you know, secure the online time, essentially, that we need for this operation . Ian, would you like to make some comments just on the shiploader output, please? Sure.

Thank you very much, Myles, for the question. So, despite the fact that we said it would conclude in the first half of 2026, that's not saying that it will, in fact, take a year. At this point, we're really carefully defining the nature of that work. So, as a result of the brake failure, of course, we have to assess all of the structural elements, make sure that that shiploader is returned safely, and similarly, that we complete all the work to get it back into the right condition. And so, we'll progress that project as we go. Of course, you are dealing with maritime authority. That can cause permit delays. We certainly want to be cautious about how we deal with that. So I want to make sure that that continues to pace, but at the same time, the nature of the incident can happen.

Okay.

The next question comes from Bill Peterson with DOP Morgan. Please go ahead.

Yeah, hi, good morning, everyone, and thanks for taking the questions. On the higher CapEx guide for Highland Valley, the mine life extension relative to last year's strategy day, it looks at around 15% to 20% higher. Can you provide additional color or breakdown between materials inflation, contingencies you mentioned, or any other factors? And then is there any read-through for project sanctioning for Zafranau or San Nicolas, for example? Should we expect some more sort of double-digit increase at this stage? just to be prudent or any read through at all. Thanks.

Yeah, so on the HPC piece, I mean, I won't specifically, you know, give that breakdown, but as I mentioned, there's a range of things in there. I mean, it's project level contingency, it's inflation, it's cost escalation, it's the potential for tariffs on construction materials, which we think is a real driver, of course, particularly between the US and Canada. So that is something that we've reflected here. Importantly, as I mentioned, it's also the acceleration the procurement of mobile equipment that we brought forward from later project phases and that particularly risks the project and the rate at which we'll be able to essentially access the valley pit for the long term so you know those are important de-risking elements in our view and I'll also ask Crystal just to comment on you know some of the process by which we looked at this capital spend through the, you know, through the investments approach here that we've taken and, you know, our determination to ensure that we give robust capital numbers that can be delivered.

Sure. Thanks, Bill. We've advanced this project through the final stages of our project delivery framework, as well as through our governance processes, including through our investment committee. Those processes embed the final project requirements, the construction readiness, probabilistic modeling around various facets of the estimates involved. As well, we had detailed independent assurance provided on many areas of the business plan, as well as in the context of construction readiness. So, all of those are learnings that we took from the QB project that we submitted to embedding as we go forward into future projects, including an HPC MLE. the conclusion of that work ahead of sanction has led to the capital range that we're disclosing. Of course, in addition to the factors that John noted in the context of what's embedded into that range.

So, I think, Bill, you have any read-through for future?

Yeah, I was just going to pick up on that. Look, you know, every project has its own characteristics. We will take the same approach with future projects that Crystal just outlined in terms of, you know, using independent insurance, taking probabilistic modeling to ensure the full range of, obviously, economic outcomes associated with the project, but also the full range of potential input assumptions here, which go to capital, because we need to ensure that we're reflecting uncertainties or known unknowns in the project as we're setting forth the assumptions here. But again, as I mentioned, each project has its own unique characteristics. So I don't think you should take a direct read-through from that, but what I can say if we will apply the same rigorous approach that we've applied to HVC.

Well understood. Thanks for that.

My next question, not something the team's talked about recently, but as new range, the potential project in the U.S., is there any update on where that project stands in terms of permitting community engagement I guess an opportunity to potentially move faster than what appears to be a pretty strong support within the U.S. in terms of permitting and promoting domestic production.

Yeah, I mean, you know, that remains an interesting option for us. It's clearly further out than the, you know, than Zafranau or San Nicolas here in the schedule. I think the key for us there is to define what is the right project, what is the configuration that will deliver the greatest value in the event that project fails. developed and that's the work that we're doing now. And of course, you have to define that before you can start to approach the permitting process in any detail. So I think that's the conversation for later. Bill, we have our hands full with other things right now, but we do continue to work that in parallel.

Well understood. Thanks for your insights. Thank you.

The next question comes from Chris Lafermino with Jeff Rees. Rees, go ahead.

Hi, thanks for taking my question. I just wanted to ask about first on the incremental CapEx for QB for the TMF. How do you decide whether you're going to include CapEx in the project CapEx or in sustaining? Because I would think if you're spending money to ramp the project to full capacity for whatever reason, that would have been part of the project CapEx. I understand it's really just a question of semantics, but when we think about the capital intensity of the project, why wouldn't that be project CapEx rather than sustaining CapEx?

I will hand the semantics question over to Crystal.

Hi, Chris. Thanks for the question. In the context of TMF, when we thought about the growth capital for the project, of course, there was, you know, construction costs associated with that built in to the project capital that we reported against in our results over years. I think the pieces that I add to why I mean, firstly, We're running the operation, and we're producing copper, so I think, you know, these things are no longer growth capital. We did expect to spend on the TMF, but that amount, as I mentioned, is more significant than we expected as we are now, you know, moving significantly more sand further distances than we expected for mechanical movement, and a related cost to that is the expected cost. Okay, that's fair enough.

And then secondly, just on the shiploader, do you have any insurance related to the issues there, or is it all on you? Thank you.

Ian, do you want to comment on that as well? Yes, certainly we are investigating the root cause, and we'll understand based on that what the next steps will be in terms of insurance. Yes, we do have insurance coverage, and that includes interruption. Okay, great, thanks. Thank you, Chris.

Thank you. We're out of time for further questions. I will now hand the call back over to Jonathan Price for closing lines. Please go ahead.

Thank you, operator, and thanks again to everyone for joining us today. We look forward to welcoming many of you to our QB site visit on November 3rd and 4th of this year. Please reach out to Emma Chapman and our IR team for further information on the site visit or, of course, if you have any follow-up questions on the quarter. So thank you and enjoy the rest of your day.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.