Teck Resources Ord Shs Class A T.TECK.A

TD

[retiredcf]

Teck Resources Ltd.

(TECK.B-T, TECK-N) C$40.68 | US$31.89

Updated Q4/21, 2022 and QB2 Capex Guidance Event

Teck provided updated Q4/21 coal and copper sales and cost guidance, updated 2022 coal sales guidance and updated COVID-19-related cost guidance for the QB2 project. In our view, management had telegraphed many of the changes to guidance, as a result, we expect investor should not be overly surprised by the update. We have summarized the changes to guidance below.

Impact: MIXED

Coal Business

• Record high clean coal inventories at the mines are expected to result in sales exceeding production by 1.2-1.5 million tonnes in 2022.

• Q4/21 steelmaking coal sales were 5.1 million tonnes, slightly below the low end of the previously revised guidance of 5.2-5.7 million tonnes.

• Logistics challenges and inflationary pressures drove higher Q4/21 adjusted site cash cost of sales and transportation costs of $72 and $49 per tonne, respectively. 2021 unaudited site cash cost of sales and transportation costs are $65 and $44 per tonne, within the previous guidance ranges of $64-$66 and $44-$46 per tonne, respectively.

• Realized steelmaking coal prices in Q4/21 averaged US$351 per tonne. The increase in steelmaking coal prices from Q3/21 further resulted in positive pricing adjustments of approximately $70 million.

  Copper Business/QB2 Project

• Inflationary pressures and workers’ participation related to strong copper prices resulted in Q4/21 net cash unit costs of US$1.52/lb for the copper business unit.

• Management now assume that the impacts of COVID-19 will not end prior to the completion of construction of the QB2 project, as a result, the COVID-19-related cost estimate for the project has been raised to a range of US$900 million to US $1.1 billion (previously US$600 million).

• As previously guided, the base capex estimate for QB2 is expected to increase by ~5% from the current US$5.26 billion forecast.

  TD Investment Conclusion

  We are maintaining our ACTION LIST BUY recommendation. Our target price has declined to $55.00 (from $56.00)