Reference: Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analysis 604.699.4621 Chris Stannell, Public Relations Manager 604.699.4368
Teck Resources Limited
TSX: TECK.A, TECK.B NYSE: TECK www.teck.com
News Release
For Immediate Release Date: February 21, 2023 23-17-TR
Teck Reports Unaudited Fourth Quarter Results for 2022
High commodity prices drive record annual financial performance
Vancouver, B.C. – Teck Resources Limited (TSX: TECK.A and TECK.B, NYSE: TECK) (Teck) today announced its unaudited fourth quarter results for 2022.
"We achieved a number of financial performance records in 2022, driven by the continued strong commodity price environment and the resilience of our teams, who successfully managed through shortterm production challenges in the fourth quarter,” said Jonathan Price, CEO. “We are well positioned to execute on our strategic priorities in 2023 and expect a transformational year with the commissioning and ramp-up of our QB2 project."
Highlights
- Adjusted profit attributable to shareholders1 of $558 million or $1.09 per share in Q4 2022 and a record $4.9 billion or $9.25 per share for the year.
- Profit from continuing operations attributable to shareholders of $247 million or $0.48 per share in Q4 2022 and a record $4.1 billion or $7.77 per share for the year.
- Adjusted EBITDA1 was $1.3 billion in Q4 2022 and a record $9.6 billion for the year. Profit before tax from continuing operations was $594 million in Q4 2022 and $6.6 billion for the year.
- We generated cash flows from operations of $8.0 billion in the year, ending the year with a cash balance of $1.9 billion. Our liquidity as at February 20, 2023 is $8.2 billion, including $2.8 billion of cash.
- We have continued to de-lever our balance sheet, purchasing and redeeming US$1.0 billion of our notes between January 2022 and February 2023.
- On February 18, 2023, the Board approved a $0.625 per share dividend, including a $0.50 per share supplemental dividend, payable on March 31, 2023 to shareholders of record on March 15, 2023, and authorized up to a $250 million share buyback.
- At QB2, we are in commissioning of Line 1 at the concentrator and making final preparations to feed ore to the mills.
- Our QB2 capital cost guidance remains unchanged from our previous disclosures.
- In Q4 2022, our copper business unit gross profit declined by 44% from a year ago due to a decrease in the average realized copper price to US$3.72 per pound and lower sales volumes.
- In Q4 2022, our zinc business unit gross profit decreased by 74% from a year ago primarily due to a decline in the average realized zinc price to US$1.38 per pound and the impact of the extended major maintenance activities on the KIVCET boiler at our Trail Operations.
- Gross profit in our steelmaking coal business unit decreased by 42% in Q4 2022 compared to the same period last year due to a decrease of 21% in realized steelmaking coal prices, a two-month plant outage at our Elkview Operations and the impact of extreme weather events in December on our logistics chain.
- We completed the sale of our interest in Fort Hills to Suncor Energy Inc. (Suncor) and TotalEnergies EP Canada Ltd. (TotalEnergies) for aggregate gross proceeds of approximately $1 billion in cash on February 2, 2023. We do not anticipate any tax payable on the disposal.
All dollar amounts expressed in this news release are in Canadian dollars unless otherwise noted.
Reference: Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analysis 604.699.4621 Chris Stannell, Public Relations Manager 604.699.4368 Additional corporate information is available at www.teck.com Note:
1. This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.
- Our High Potential Incident Frequency for the full year 2022 was the lowest ever at a rate of 0.10, down 23% compared to 2021.
- We were named to the S&P Dow Jones Sustainability World Index for the 13th consecutive year and recognized as the #1 company in the Metals and Mining sector. We were recognized in January as one of the 2022 Global 100 Most Sustainable Corporations by Corporate Knights.
- Teck Resources Limited announced today the reorganization of its business to separate Teck into two independent, publicly-listed companies: Teck Metals Corp. and Elk Valley Resources Ltd. We also announced a proposed six-year sunset for the multiple voting rights attached to the Class A common shares of Teck. Please refer to our separate news releases with respect to these matters.
Financial Summary Q4 2022
| Financial Metrics | ||
| Q4 2022 | Q4 2021 | |
| (CAD$ in millions, except per share data) | ||
| Revenue Gross profit Gross profit before depreciation and amortization1 Profit from continuing operations before taxes Adjusted EBITDA1 Profit from continuing operations attributable to shareholders Adjusted profit attributable to shareholders1 Basic earnings per share from continuing operations Diluted earnings per share from continuing operations Adjusted basic earnings per share1 Adjusted diluted earnings per share1 | $ 3,140 $ 1,154 $ 1,538 $ 594 $ 1,333 $ 247 $ 558 $ 0.48 $ 0.47 $ 1.09 $ 1.07 | $ 4,196 $ 2,114 $ 2,489 $ 2,246 $ 2,521 $ 1,534 $ 1,377 $ 2.88 $ 2.83 $ 2.58 $ 2.54 |
Note:
1. This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.
Key Updates
Executing on our Copper Growth strategy – QB2 a long-life, low-cost operation with major expansion potential
- QB2 is in commissioning of Line 1 at the concentrator and making final preparations to feed ore to the mills. Our focus continues to be on system completion and handover as part of the continuous commissioning and ramp-up plan through 2023.
- Our QB2 construction capital cost guidance remains unchanged from our prior disclosure.
- We continue to expect QB2 to reach full capacity by end of 2023. As a result of recent changes to IFRS, we are required to recognize sales proceeds and related costs associated with products sold during the ramp-up and commissioning phase of QB2 through earnings rather than capitalizing these amounts. We expect this to increase our unit operating costs1 for QB2 during ramp-up. Once QB2 is running at full production rates, we expect the average net cash unit costs1 will be between US$1.40 per pound and US$1.60 per pound.
- Copper production from 2024 to 2026 is expected to be between 545,000 and 640,000 tonnes per year, including QB2.
2 Teck Resources Limited 2022 Fourth Quarter News Release Note:
1. This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.
Sustainability leadership
- Teck is currently ranked #1 in the Metals and Mining Industry on the S&P Corporate Sustainability Assessment, #3 in the Diversified Metals industry by Sustainalytics, #1 among North America Metals and Mining Companies by Moody's ESG and ranked AA by MSCI for ESG performance.
- We announced a long-term clean power purchase agreement with AES Andes to provide 1,069 Gigawatt hours per year of energy that will result in QB2 having 100% clean renewable power starting in 2025.
Guidance
- On January 30, 2023, we disclosed our 2023 guidance. Guidance disclosed in this news release is unchanged from our previous disclosures.
- Summary guidance for 2023 is outlined below and our usual guidance tables, including three-year production guidance, can be found on pages 27 — 32.
| 2023 Guidance – Summary | Current |
| Production Guidance Copper (000’s tonnes) Zinc (000’s tonnes) Refined zinc (000’s tonnes) Steelmaking coal (million tonnes) Sales Guidance – Q1 2023 Red Dog zinc in concentrate sales (000’s tonnes) Steelmaking coal sales (million tonnes) Unit Cost Guidance Copper net cash unit costs (US$/lb.)1 Zinc net cash unit costs (US$/lb.)1 Steelmaking coal adjusted site cash cost of sales (CAD$/tonne)1 Steelmaking coal transportation costs (CAD$/tonne) | 390 - 445 645 - 685 270 - 290 24.0 - 26.0 165 - 185 6.0 - 6.4 1.60 - 1.80 0.50 - 0.60 88 - 96 45 - 48 |
3 Teck Resources Limited 2022 Fourth Quarter News Release
This news release is dated as at February 21, 2023. Unless the context otherwise dictates, a reference to “the company” or “us,” “we” or “our” refers to Teck and its subsidiaries. Additional information, including our Annual Information Form and Management’s Discussion and Analysis for the year ended December 31, 2022, is available on SEDAR at www.sedar.com.
This document contains forward-looking statements. Please refer to the cautionary language under the heading “CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION” below.
Overview
- Fourth quarter profitability and cash flow from operations declined from the same period a year ago as a result of lower prices for all our principal products, as shown in the table below, reduced steelmaking coal sales volumes and lower by-product volumes. In addition, unit operating costs1 were higher across our operations due to expected ongoing inflationary pressures and the effect of lower production levels. These items were partially offset by a weaker Canadian dollar in the fourth quarter as compared with a year ago.
- Base metal prices declined in the fourth quarter, with copper prices down by 18% compared with a year ago and averaging US$3.63 per pound in the fourth quarter, and zinc prices down by 11% and averaging US$1.36 per pound in the fourth quarter.
- Realized steelmaking coal prices in the fourth quarter averaged US$278 per tonne, a decline of 21% from the fourth quarter a year ago.
| Average Prices and Exchange Rates | Three months ended | ||
|---|---|---|---|
| Change | |||
| December 31, | |||
| 2022 | 2021 |
| Copper (LME cash – US$/pound) | $ | 3.63 $ | 4.40 | (18) % |
| Zinc (LME cash – US$/pound) | $ | 1.36 $ | 1.53 | (11) % |
| Steelmaking coal (realized US$/tonne) | $ | 278 $ | 351 | (21) % |
| Average exchange rate (CAD$ per US$1.00) | $ | 1.36 $ | 1.26 | 8 % |
- We faced a number of operating challenges during the fourth quarter and several of our operations experienced severe winter weather in December. Previously disclosed operating challenges in the fourth quarter included the two-month plant outage at our Elkview Operations, a temporary pit closure at Highland Valley Copper as a result of a localized geotechnical event and a one-month extension of major planned maintenance activities on the KIVCET boiler at our Trail Operations.
- Copper sales volumes in the fourth quarter decreased by 10% from the same period a year ago due to the reduced production from Highland Valley Copper. Zinc in concentrate sales volumes in the fourth quarter were the same as a year ago and refined zinc sales volumes from Trail were 18% lower than a year ago due to the extended major planned maintenance on the KIVCET boiler. Steelmaking coal sales volumes of 4.3 million tonnes were 16% lower than a year ago as a result of lower production levels and the impacts of severe winter weather in December.
- On February 18, 2023, Teck’s Board of Directors approved an eligible dividend of $0.625 per share. The $0.625 per share dividend consists of $0.125 per share quarterly base dividend and a supplemental dividend of $0.50 per share on our Class A common and Class B subordinate voting shares, to be paid on March 31, 2023 to shareholders of record at the close of business on March 15, 2023. We also announced that our Board of Directors has authorized the repurchase of $250 million of Class B subordinate voting shares under our Normal Course Issuer Bid.
4 Teck Resources Limited 2022 Fourth Quarter News Release
- Although we remain highly focused on managing our controllable operating expenditures, we continue to experience inflationary pressures across our business units, which impacted results in the fourth quarter. Our operating costs increased by 10% compared to the same period last year. Approximately half of the increase in operating costs relates to diesel costs at our operations and in our transportation costs. The increase in the cost of certain key supplies, including mining equipment, fuel, tires and explosives, is being driven largely by price increases for underlying commodities such as steel, crude oil and natural gas. While our underlying key mining drivers remain relatively stable, inflationary pressures on diesel prices and other key input costs are expected to continue to put upward pressure on our unit costs1 and sustaining capital expenditures in 2023.
- We completed the sale of our interest in Fort Hills to Suncor and TotalEnergies for aggregate gross proceeds of approximately $1 billion in cash on February 2, 2023 and do not expect any tax payable on the disposition. Results from our interest in Fort Hills have been classified as a discontinued operation and assets held for sale beginning in the fourth quarter of 2022.
5 Teck Resources Limited 2022 Fourth Quarter News Release
Profit Attributable to Shareholders and Adjusted Profit Attributable to Shareholders
In the fourth quarter, profit from continuing operations attributable to shareholders was $247 million, or $0.48 per share, compared to $1.5 billion, or $2.88 per share, in the same period last year. The decrease compared to the same period last year is primarily due to lower prices and sales volumes for our principal products and higher operating costs.
Adjusted profit attributable to shareholders1 in the fourth quarter, taking into account the items identified in the table below, was $558 million, or $1.09 per share, compared with $1.4 billion, or $2.58 per share, in the fourth quarter of 2021. The most significant fourth quarter adjustment to profit, reflected in the table below, was $203 million of environmental costs primarily relating to a decrease in the rate used to discount our decommissioning and restoration provisions for closed operations and increased expected future remediation costs.
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| (CAD$ in millions) | 20222 | 20213 | 20225 | 20213 |
Profit attributable to shareholders2 $ 247 $ 1,487 $ 4,089 $ 2,868 Add (deduct) on an after-tax basis:
| Asset impairment (impairment reversal) | — | (150) | 952 | (150) |
| Loss (gain) on debt purchase | (4) | — | 42 | — |
| QB2 variable consideration to IMSA and ENAMI | 7 | (16) | 115 | 124 |
| Environmental costs | 203 | 19 | 99 | 79 |
| Inventory write-downs (reversals) | (2) | 8 | 36 | 2 |
| Share-based compensation | 67 | 32 | 181 | 94 |
| Commodity derivatives | (18) | 10 | (25) | 15 |
Loss from discontinued operations for the nine
| months ended September 30, 20224 | — | — | (791) | — | |
| Other | 58 | (13) | 175 | 25 | |
| Adjusted profit attributable to shareholders1 | $ | 558 $ | 1,377 $ | 4,873 $ | 3,057 |
| Basic earnings per share | $ | 0.48 $ | 2.79 $ | 7.77 $ | 5.39 |
| Diluted earnings per share | $ | 0.47 $ | 2.74 $ | 7.63 $ | 5.31 |
| Adjusted basic earnings per share1 | $ | 1.09 $ | 2.58 $ | 9.25 $ | 5.74 |
| Adjusted diluted earnings per share1 | $ | 1.07 $ | 2.54 $ | 9.09 $ | 5.66 |
Notes:
2. Amounts for the three months and year ended December 31, 2022 are for continuing operations only.
3. Amounts for the three months and year ended December 31, 2021 are as previously reported.
4. Adjustment required to remove the effect of discontinued operations for the nine months ended September 30, 2022.
5. Adjustments for the year ended December 31, 2022 are the nine months ended September 30, 2022 as previously reported plus the three months ended December 31, 2022 for continuing operations.
In addition to the items identified in the table above, our results include gains and losses due to changes in market prices in respect of pricing adjustments. Pricing adjustments resulted in $38 million of after-tax gains ($60 million, before tax) in the fourth quarter, or $0.07 per share.
6 Teck Resources Limited 2022 Fourth Quarter News Release
| Three months ended | Year ended | |||
|---|---|---|---|---|
| FINANCIAL OVERVIEW | ||||
| December 31, | December 31, | |||
| (CAD$ in millions, except per share data) | 2022 | 2021 | 2022 | 2021 |
Revenue and profit
Revenue $ 3,140 $ 4,196 $ 17,316 $ 12,766 Gross profit $ 1,154 $ 2,114 $ 8,571 $ 5,214 Gross profit before depreciation and amortization1 $ 1,538 $ 2,489 $ 10,245 $ 6,701 Profit from continuing operations before taxes $ 594 $ 2,246 $ 6,565 $ 4,688 Adjusted EBITDA1 $ 1,333 $ 2,521 $ 9,568 $ 6,573 Profit attributable to shareholders $ 266 $ 1,487 $ 3,317 $ 2,868 Profit from continuing operations attributable to shareholders $ 247 $ 1,534 $ 4,089 $ 3,123
Cash flow
| Cash flow from operations | $ | 930 $ | 2,098 $ | 7,983 $ | 4,738 |
| Property, plant and equipment expenditures | $ | 1,416 $ | 1,066 $ | 4,423 $ | 3,966 |
| Capitalized stripping costs | $ | 345 $ | 186 $ | 1,042 $ | 667 |
| Investments | $ | 34 $ | 26 $ | 199 $ | 160 |
Balance Sheet
Cash balances $ 1,883 $ 1,427 Total assets $ 52,359 $ 47,368 Debt and lease liabilities, including current portion $ 7,738 $ 8,068
Per share amounts
| Basic earnings per share | $ | 0.52 $ | 2.79 $ | 6.30 $ | 5.39 |
| Diluted earnings per share | $ | 0.51 $ | 2.74 $ | 6.19 $ | 5.31 |
| Basic earnings per share from continuing operations | $ | 0.48 $ | 2.88 $ | 7.77 $ | 5.87 |
| Diluted earnings per share from continuing operations $ | 0.47 $ | 2.83 $ | 7.63 $ | 5.78 | |
| Dividends declared per share | $ | 0.125 $ | 0.05 $ | 1.00 $ | 0.20 |
PRODUCTION, SALES AND PRICES Production (000’s tonnes, except steelmaking coal)
| Copper2 | 65 | 72 | 270 | 287 |
| Zinc in concentrate | 143 | 148 | 650 | 607 |
| Zinc – refined | 46 | 68 | 249 | 279 |
| Steelmaking coal (million tonnes) | 4.9 | 6.3 | 21.5 | 24.6 |
Sales (000’s tonnes, except steelmaking coal)
| Copper2 | 64 | 71 | 276 | 280 |
| Zinc in concentrate | 164 | 165 | 675 | 549 |
| Zinc – refined | 57 | 70 | 257 | 281 |
| Steelmaking coal (millions tonnes) | 4.3 | 5.1 | 22.2 | 23.4 |
Average prices and exchange rates
| Copper (LME cash – US$/pound) | $ | 3.63 $ | 4.40 $ | 3.99 $ | 4.23 |
| Zinc (LME cash – US$/pound) | $ | 1.36 $ | 1.53 $ | 1.58 $ | 1.36 |
| Steelmaking coal (realized US$/tonne) | $ | 278 $ | 351 $ | 355 $ | 209 |
| Average exchange rate (CAD$ per US$1.00) | $ | 1.36 $ | 1.26 $ | 1.30 $ | 1.25 |
Notes:
1. This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.
2. We include 100% of production and sales from our Quebrada Blanca and Carmen de Andacollo mines in our production and sales volumes, even though we do not own 100% of these operations, because we fully consolidate their results in our financial statements. We include 22.5% of production and sales from Antamina representing our proportionate ownership interest in this operation.
7 Teck Resources Limited 2022 Fourth Quarter News Release
BUSINESS UNIT RESULTS
Our revenue, gross profit, and gross profit before depreciation and amortization1 by business unit are summarized in the table below.
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| (CAD$ in millions) | 2022 | 2021 | 2022 | 2021 |
Revenue
| Copper | $ | 753 $ | 924 $ | 3,381 $ | 3,452 |
| Zinc | 711 | 987 | 3,526 | 3,063 | |
| Steelmaking coal | 1,676 | 2,285 | 10,409 | 6,251 | |
| Total | $ | 3,140 $ | 4,196 $ 17,316 $ 12,766 |
Gross profit
| Copper | $ | 248 $ | 442 $ | 1,399 $ | 1,741 |
| Zinc | 57 | 217 | 771 | 688 | |
| Steelmaking coal | 849 | 1,455 | 6,401 | 2,785 | |
| Total | $ | 1,154 $ | 2,114 $ | 8,571 $ | 5,214 |
Gross profit before depreciation
and amortization1
| Copper | $ | 364 $ | 536 $ | 1,837 $ | 2,126 |
| Zinc | 129 | 285 | 1,044 | 918 | |
| Steelmaking coal | 1,045 | 1,668 | 7,364 | 3,657 | |
| Total | $ | 1,538 $ | 2,489 $ 10,245 $ | 6,701 |
Gross profit margins before depreciation
and amortization1
| Copper | 48 % | 58 % | 54 % | 62 % |
| Zinc | 18 % | 29 % | 30 % | 30 % |
| Steelmaking coal | 62 % | 73 % | 71 % | 59 % |
1. This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.
8 Teck Resources Limited 2022 Fourth Quarter News Release
COPPER BUSINESS UNIT
| Three months ended December 31, | Year ended | |||
|---|---|---|---|---|
| December 31, | ||||
| (CAD$ in millions) | 2022 | 2021 | 2022 | 2021 |
| Copper price (realized – US$/pound) | $ | 3.72 $ | 4.46 $ | 4.00 $ | 4.27 |
| Production (000’s tonnes)1 | 65 | 72 | 270 | 287 | |
| Sales (000’s tonnes)1 | 64 | 71 | 276 | 280 | |
| Gross profit | $ | 248 $ | 442 $ | 1,399 $ | 1,741 |
| Gross profit before depreciation and amortization2 | $ | 364 $ | 536 $ | 1,837 $ | 2,126 |
| Property, plant and equipment expenditures | $ | 1,073 $ | 830 $ | 3,574 $ | 2,867 |
Performance
Gross profit from our copper business unit was $248 million in the fourth quarter compared with $442 million a year ago. Gross profit decreased from a year ago (see table below) primarily due to a decline in realized copper prices, lower production and sales volumes and higher unit operating costs2.
Copper production of 65,400 tonnes in the fourth quarter was 10% lower than a year ago, primarily due to processing of lower grade ore during a temporary pit closure at Highland Valley Copper as a result of a localized geotechnical event that has since been stabilized.
The table below summarizes the change in gross profit in our copper business unit for the quarter:
| Three months ended December 31, | |
| Gross Profit (CAD$ in millions) |
As reported in the fourth quarter of 2021 $ 442 Increase (decrease):
Copper price realized (131) Sales volumes (53) Unit operating costs (54) Royalties 19 Labour settlement (2021) 26 Foreign exchange (CAD$/US$) 21 Depreciation (22)
Net decrease $ (194) As reported in current quarter $ 248
Notes:
1. We include 22.5% of production and sales from Antamina, representing our proportionate ownership interest in this operation. We include 100% of production and sales from our Quebrada Blanca and Carmen de Andacollo mines in our production and sales volumes, even though we do not own 100% of these operations, because we fully consolidate their results in our financial statements.
2. This is a non-GAAP financial measure or ratio. See “Use of Non-GAAP Financial Measures and Ratios” for further information.
9 Teck Resources Limited 2022 Fourth Quarter News Release Property, plant and equipment expenditures in the fourth quarter totaled $1,073 million, including $132 million for sustaining capital and $834 million for project development expenditures for QB2. Capitalized stripping costs were $120 million in the fourth quarter, $58 million higher than a year ago, as expected in the Antamina and Highland Valley Copper mine plans.
Markets
In the fourth quarter, average LME copper prices rose 3% over the previous quarter to US$3.63 per pound, while the average price for 2022 of US$3.99 per pound remained above long-term historic averages. Global demand for copper metal remained well supported in the fourth quarter, with Chinese imports of copper concentrates and cathodes each increasing approximately 8% over the same period in 2021. Year to date, an additional 1.0 million tonnes of copper were imported into China while reported stocks in the country fell 0.1 million tonnes.
Tightness in the copper concentrate market increased towards the end of the fourth quarter with spot treatment charges falling below the 2023 annual contract terms. With China lifting COVID-19 restrictions, concentrate imports have been increasing despite the copper production disruptions in Chile and Peru. Global stocks of copper cathode on exchanges around the world remain below historic levels at 2.8 days of global consumption compared to the long-term average of 10.8 days. Stocks on exchanges and in bonded warehouses in China fell 305,000 tonnes in the second half of the year with the majority of the decrease coming from Chinese bonded warehouses. Total visible stocks, including bonded stocks, are at the lowest levels since 2009 at 3.5 days of consumption, compared to a long-term average of 14.5 days.
Operations
Highland Valley Copper
Copper production of 27,900 tonnes in the fourth quarter was 5,100 tonnes lower than a year ago, as result of milling lower grade stockpiles during the temporary pit closure in early December, noted above, partly offset by improved mill recoveries. Fourth quarter molybdenum production of 186,000 pounds was similar to a year ago.
Operating costs, before changes in inventory, were $199 million in the fourth quarter or $33 million higher than a year ago. The increase was primarily due to higher consumables costs, most notably diesel, as well as maintenance and repair parts costs and contractor expenses.
Antamina
Copper production (100% basis) of 108,200 tonnes in the fourth quarter was 9,700 tonnes lower than a year ago, primarily due to lower copper grades. The mix of mill feed in the quarter was 59% copper-only ore and 41% copper-zinc ore, compared with 55% copper-only ore and 45% copper-zinc ore, respectively, a year ago. Zinc production (100% basis) of 105,600 tonnes in the fourth quarter was similar to a year ago.
Operating costs, before changes in inventory, were US$92 million (22.5% share) in the fourth quarter, or US$8 million lower than a year ago despite higher consumable costs, particularly for diesel. Operating costs in the fourth quarter last year were higher as they had included a one-time labour settlement cost and higher workers' participation expense.
In 2022, Antamina submitted a MEIA (Modification of Environmental Impact Assessment) to Peruvian regulators to extend its mine life from 2028 to 2036. The regulatory review process is progressing as scheduled, with approval anticipated in the second half of 2023.
Carmen de Andacollo
Copper production of 10,900 tonnes in the fourth quarter was 600 tonnes higher than a year ago, primarily due to higher copper grade, partially offset by lower mill recoveries.
10 Teck Resources Limited 2022 Fourth Quarter News Release Operating costs, before changes in inventory, in the fourth quarter of US$62 million were US$4 million higher than a year ago primarily due to inflationary pressures on consumables.
Quebrada Blanca
Copper cathode production was 2,300 tonnes in the fourth quarter compared with 2,900 tonnes a year ago.
Cost of Sales
Cost of sales was $505 million in the fourth quarter compared with $482 million in the same period last year. Total cash unit costs1 of product sold in the fourth quarter, before cash margins for by-products1, of US$2.18 per pound were US$0.22 per pound higher than the same period a year ago. This was due to the effect of lower production levels and higher consumables costs due to inflation, particularly for diesel, as well as higher maintenance, repair parts, and contractor costs. Cash margins for by-products1 were US$0.42 per pound compared with US$0.44 per pound in the same period a year ago due to lower zinc prices. The resulting net cash unit costs1 for copper, after cash margins for by-products1, of US$1.76 per pound were US$0.24 per pound higher than the same period a year ago.
| Three months ended | Year ended | |||
|---|---|---|---|---|
| December 31, | December 31, | |||
| (amounts reported in US$ per pound) | 2022 | 2021 | 2022 | 2021 |
| Adjusted cash cost of sales1 | $ | 1.98 $ | 1.78 $ | 1.84 $ | 1.63 |
| Smelter processing charges | 0.20 | 0.18 | 0.18 | 0.17 | |
| Total cash unit costs1 | $ | 2.18 $ | 1.96 $ | 2.02 $ | 1.80 |
| Cash margin for by-products1 | (0.42) | (0.44) | (0.46) | (0.41) | |
| Net cash unit costs1 | $ | 1.76 $ | 1.52 $ | 1.56 $ | 1.39 |
Outlook
Our 2023 annual guidance for our copper business unit is outlined in our guidance tables on pages 27 — 32 and is unchanged from our previously issued guidance.
Development Projects
Quebrada Blanca Phase 2
At Quebrada Blanca Phase 2, we are in commissioning of Line 1 at the concentrator and making final preparations to feed ore to the mills. This is part of the continuous commissioning plan for mechanical completion of Line 1 which will be followed by mechanical completion of Line 2 and ramp-up through 2023.
Some of the key milestones achieved since our last quarterly update include:
- Completion and energization of the high voltage transmission lines and substations.
- Production of desalinated water and ongoing commissioning of the pump stations and water delivery system.
- Mine area well advanced with pre-stripping and delivery of ore to the primary crusher.
- Pre-Commissioning of the primary crusher, overland conveyors and reclaim feeders.
11 Teck Resources Limited 2022 Fourth Quarter News Release
- Pre-Commissioning of Ball Mill 1, SAG Mill 1 and the cyclone feed pumps.
- Pre-Commissioning in the Flotation area.
Construction capital cost guidance remains unchanged from our prior disclosure of US$7.4 to US$7.75 billion. We expect to spend approximately US$900 million to US$1.3 billion on Quebrada Blanca Phase 2 development capital in 2023. A portion of this capital is related to items outside of the critical path for first copper, including the ship loader and the molybdenum plant.
Copper Growth
We continue to actively advance our industry-leading Copper Growth portfolio in a prudent and timely manner. The approach is driven by balancing growth and return of capital, value-focused asset de-risking including permitting, optimization of funding sources and prioritization and sequencing of capital investments.
At Highland Valley Copper, work continues on a feasibility study, detailed social baseline studies, community discussions and related environmental permitting work for our HVC 2040 project, which has the potential to extend operations to at least 2040. Completion of the feasibility study, expected in the second half of 2023, which is running in parallel to community discussions and environmental assessment application, which is in progress, with submission planned in the second half of 2023.
At Zafranal, for which a feasibility study has been completed, we received confirmation of Socio-Economic Impact Assessment (SEIA) admissibility, successfully completed a comprehensive virtual public participation session in the first quarter of 2022 and responded to SEIA observations in the third quarter of 2022. We expect to complete the SEIA review process and potentially receive the permit in the first half of 2023, while updating the feasibility study and preparing for detailed engineering.
At San Nicolás, a feasibility study was initiated in early 2022, which we expect to complete in early 2024. Alongside the feasibility study, we continued to advance detailed social, community, and environmental studies to inform an Environmental Impact Assessment, which we are targeting for submission in the first half of 2023.
On September 16, 2022, we announced that Agnico Eagle Mines Limited has agreed to subscribe for a 50% interest in Minas de San Nicolás, S.A.P.I. de C.V., a wholly-owned Teck subsidiary that owns the San Nicolás copper-zinc development project, for US$580 million. Closing of the transaction, subject to customary closing conditions including receipt of regulatory approvals, is expected in the second quarter of 2023.
On July 20, 2022, we announced an agreement with PolyMet Mining Corp (PolyMet) to form a 50:50 joint venture, to advance PolyMet's NorthMet project and Teck's Mesaba mineral deposit. The transaction closed on February 15, 2023. The joint venture is held and operated through a new entity called NewRange Copper Nickel LLC.
We are advancing a feasibility study for the Quebrada Blanca Mill Expansion (QBME) which will entail an increase in concentrator throughput of approximately 50%, with the addition of one identical, semiautogenous grinding line. We believe this configuration optimizes the timeline to progress the development of the orebody, while leveraging existing infrastructure to maximize capital efficiency. A permit application was submitted to the Chilean regulator in early 2023, and the feasibility study is expected to be completed later this year. QBME is expected to be a significant contributor to our near-term copper growth portfolio with potential first production as early as 2026.
At Galore Creek, the prefeasibility study is targeted for the second half of 2023. Strategic, technical and commercial assessments, including focused field programs, permitting and community engagement work, for the advancement of Mesaba, Schaft Creek and NuevaUnión are ongoing.
12 Teck Resources Limited 2022 Fourth Quarter News Release