Teck Resources Ord Shs Class A T.TECK.A

RE:TD Upgrade

[Red_Deer]

retiredcf wrote:

Teck Resources Ltd.

(TECK.B-T, TECK-N) C$42.11 | US$33.64

2022 will be a Transformational Year for Teck Event

We have updated our target price and estimates based on our new 2022-2026 commodity price deck. We also take a closer look at various potential catalysts for the share price over the next 12-18 months.

Impact: NEUTRAL

We see a number of company-specific catalysts in 2022 that will make this year a transformational one for the company as it starts to deliver on one of the best copper production growth stories in the mining sector:

• QB2 revised capex estimate and COVID-19 costs; project completion H2/22. Management has already indicated that the base capex will increase by ~5% from US$5.2bln. COVID-19-related costs, currently ~US$600mm, are also expected to increase. We believe that these cost increases are largely reflected in expectations. Management remains highly confident that the project will see first production in H2/22.

• Capital return announcement with Q4/21 results; we expect a supplemental capital return of at least $400mm. Teck has and continues to generate significant FCF from record-high steelmaking coal prices. We estimate FCF of ~$1.1bln in Q4/21 alone and at current coal prices, Q1/22 FCF would be $1.4bln.

• Fort Hills production optimization; Teck could lay out the pathway to exit the project this year. Fort Hills has returned to two-train capacity (194 mbbl/d gross, 105 mbbl/d net), which was a precondition for management before it would consider next steps for the operation within the Teck portfolio. We believe that Teck's Board could consider an exit strategy (spin-off/sale) in H1/22. We value Teck's stake in the operation at ~$2.0bln.

   Project Satellite to finally pay off — one or both of Zafranal and San Nicolas could be sold and/or joint ventured in 2022. We understand that Teck is considering a joint-venture development model for the San Nicolas project; we could see progress on this front in H1/22. We believe that a sale of the Zafranal project is possible; however, it would likely be a H2/22 event. We carry a combined value of $2bln ($3.70/share) for the two projects in our net asset value.

  TD Investment Conclusion

  We are maintaining our ACTION LIST BUY recommendation; our target price increases to $56.00 (from $47.00).

MY CONCLUSION is that THIS WILL BE AnOther HUGE WINNER for MOI !!!!!!!