Executive Summary / Key Takeaways

• Strategic Transformation Underway: Teck Resources has decisively repositioned itself as a pure-play energy transition metals company, divesting its steelmaking coal business to focus on copper and zinc, aligning with robust long-term demand drivers for electrification and industrial growth.
• Copper Growth at the Forefront: The company is aggressively pursuing copper expansion, with the recently sanctioned Highland Valley Copper Mine Life Extension (HVC MLE) project and a pipeline of near-term greenfield projects (Zafranal, San Nicolas) aiming to double copper production to 800,000 tonnes annually by the end of the decade.
• QB Ramp-Up: A Path to Stability: While the Quebrada Blanca (QB) operation has faced ramp-up challenges, including tailings management facility (TMF) development and shiploader issues, management is confident these are temporary, with design rates targeted by year-end 2025 and significant optimization potential for future throughput increases.
• Financial Resilience and Shareholder Returns: Teck maintains a strong balance sheet with substantial liquidity, actively returning capital to shareholders through a $3.25 billion share buyback program (70% complete) and base dividends, while funding its growth initiatives.
• Zinc Segment's Strategic Role: Despite an impairment charge at Trail Operations, the zinc segment, anchored by the world-class Red Dog mine and Trail's critical mineral production (e.g., germanium), remains a profitable and strategically important component of Teck's diversified portfolio.

Teck's Strategic Pivot: Powering the Energy Transition

Teck Resources Limited, founded in 1913, has undergone a profound transformation, shedding its legacy as a diversified miner to emerge as a pure-play energy transition metals company. This strategic pivot, solidified by the sale of its steelmaking coal business in July 2024 for $8.6 billion, positions Teck to capitalize on the surging global demand for copper and zinc. These metals are foundational to global manufacturing, industrial policy, electrification infrastructure, and the burgeoning digital economy, creating robust long-term demand fundamentals despite short-term macroeconomic volatility.

The company's strategy is clear: grow copper production, enhance margins, and return cash to shareholders, all while maintaining a resilient balance sheet. This approach is particularly pertinent in a market characterized by extreme tightness in concentrate markets and historically low benchmark treatment charges for both copper and zinc. Teck's diversified product offerings and agile commercial strategy are designed to navigate these dynamic market conditions.

Competitive Landscape and Differentiated Approach

In the global mining arena, Teck faces formidable competition from industry giants such as BHP Group (BHP), Rio Tinto (RIO), Vale S.A. (VALE), and Glencore (GLNCY). While these competitors often boast greater scale and broader global footprints, Teck carves out its niche through a focused portfolio and regional strengths. For instance, BHP and Rio Tinto generally exhibit stronger financial resilience, with historically higher profitability margins and better capital efficiency, and are often perceived as leaders in operational execution and technological innovation. Vale benefits from cost advantages and large-scale reserves, primarily in South America, while Glencore excels in global trading and supply chain agility.

Teck's competitive advantages stem from its diversified portfolio across copper and zinc, which helps mitigate risks from commodity price fluctuations. Its established regional presence, particularly in North and South America, provides a unique value proposition. While specific proprietary technologies with quantifiable performance metrics are not extensively detailed in public disclosures, Teck emphasizes continuous operational optimization and process improvements. This includes the "robust design" of its Quebrada Blanca (QB) operation, ongoing efforts to enhance sand dredging rates and optimize grind size at its tailings management facility (TMF), and grinding circuit upgrades at Highland Valley Copper (HVC). These initiatives, while not always branded as "proprietary technology," represent a commitment to leveraging engineering and process innovation to improve efficiency, recoveries, and throughput. The strategic intent behind these efforts is to drive down costs, improve margins, and secure Teck's competitive standing against rivals who may lead in broader technological integration.

QB: The Cornerstone of Copper Growth Faces Ramp-Up Realities

The Quebrada Blanca (QB) operation in Chile is envisioned as a Tier 1 asset and a cornerstone of Teck's copper portfolio for generations. Its ramp-up, however, has encountered notable challenges. In Q2 2025, QB's performance was impacted by ongoing TMF development work, with initial design assumptions for sand dredging rates proving "unachievable". This necessitated additional mechanical movement of sand and extended planned maintenance shutdowns in Q2 and Q3 2025, affecting mill online time. Consequently, Teck revised its 2025 production outlook for QB to 210,000 tonnes to 230,000 tonnes, down from the previously noted lower end of around 230,000 tonnes.

Despite these setbacks, management remains confident that the TMF development is a "onetime milestone related to the ramp-up" and will be "behind us for the life of facility" once completed, enabling steady-state operations without constraints in 2026 and beyond. The company targets design rates by year-end 2025, expecting consistent grades of approximately 0.61% and improved recoveries in the second half of the year, aided by more consistent mill runtime. Furthermore, an outage of QB's shiploader, extending into the first half of 2026, is not expected to impact production due to alternative shipping arrangements, though these logistics are anticipated to add approximately USD 0.10 per pound to net cash unit costs. Teck is also exploring optimization and low-capital debottlenecking opportunities at QB, which could collectively increase throughput by a further 15% to 25%. The successful achievement of completion testing requirements under QB's USD 2.5 billion project finance facility provides independent verification of its design and operational capacity.

Doubling Down on Copper: Highland Valley and Greenfield Projects

Teck's ambition to double copper production by the end of the decade is underpinned by the recently sanctioned Highland Valley Copper Mine Life Extension (HVC MLE) project in British Columbia. This brownfield project, 100% owned by Teck, is "foundational" to its copper growth strategy. It extends the mine's life to 2046, with an expected average annual copper production of 132,000 tonnes over the life of mine. The capital estimate for HVC MLE is CAD 2.1 billion to CAD 2.4 billion, an increase from prior estimates, reflecting project-level contingencies, inflation, input cost escalation, potential tariffs on construction materials, and accelerated procurement of mobile equipment to de-risk the project. Construction mobilization is underway, with the project expected to generate compelling returns.

Beyond HVC, Teck is progressing its high-returning greenfield projects: Zafranal in Peru and San Nicolas in Mexico. These projects are described as "significantly less complex and smaller in scope than QB with lower capital intensities, attractive project economics and well-balanced risk return profiles". Both are targeting sanction readiness by year-end 2025, with Zafranal being more advanced in its permitting process. These initiatives collectively provide a clear path to achieving annual copper production of up to 800,000 tonnes before the end of the decade.

Zinc Segment: A Resilient Contributor

The zinc segment, anchored by the world-class Red Dog mine and Trail Operations, remains a significant contributor to Teck's profitability and strategic positioning. In Q2 2025, the zinc segment's gross profit before depreciation and amortization increased by a substantial 137% to $159 million, driven by higher byproduct revenues and lower operating costs. Net cash unit costs improved significantly to USD 0.49 per pound.

Trail Operations, despite incurring an $828 million impairment charge in Q3 2024 due to challenging treatment charges and a localized fire, is undergoing a strategic overhaul. Management has implemented initiatives to improve profitability and cash flow, including curtailing refined zinc production and increasing the output of valuable byproducts such as silver, germanium, and indium. Trail is particularly strategic as it is estimated to be the fourth-largest producer of germanium globally and the only primary producer in North America, a critical metal in a period of restricted supply from other regions. The zinc segment's annual production guidance for 2025 remains unchanged, with concentrate production of 525,000 tonnes to 575,000 tonnes and refined zinc production of 190,000 tonnes to 230,000 tonnes.

Financial Strength and Shareholder Returns

Teck's financial position is robust, characterized by a strong balance sheet and significant liquidity. As of Q2 2025, the company held $8.9 billion in liquidity, including $4.8 billion in cash. Since 2024, Teck has reduced its debt by $2 billion and made a semiannual repayment of $147 million on the QB project finance facility. While the company moved into a small net debt position in Q2 2025 due to capital deployment, a release of working capital from Red Dog inventory is expected in Q3.

Teck is committed to returning between 30% and 100% of future available cash flows to shareholders. The company has actively executed its $3.25 billion authorized share buyback program, completing approximately 70% or $2.2 billion year-to-date. In Q2 2025 alone, $487 million was returned through share buybacks, representing 9.8 million Class B shares. This disciplined capital allocation framework, combined with strong cash flow generation potential, positions Teck to balance investment in growth with consistent shareholder returns.

Outlook and Risks

Teck's outlook is firmly centered on its copper growth strategy, aiming for a substantial increase in production by the end of the decade. The revised 2025 copper production guidance of 470,000 tonnes to 525,000 tonnes and net cash unit costs of USD 1.90 to USD 2.05 per pound reflect the updated QB outlook. Management expects corporate overhead costs to be lower in 2025 compared to 2024, reflecting ongoing cost reduction efforts.

However, investors must consider several risks. The ongoing TMF development work at QB and the extended shiploader outage into H1 2026 present operational challenges that could impact the ramp-up timeline and costs. While management is confident these are temporary, any further delays could affect production targets. Geopolitical tensions and potential tariffs, particularly between the US and China, could impact zinc concentrate sales from Red Dog, although Teck's diversified customer base and agile commercial strategy aim to mitigate this. The permitting process for greenfield projects like San Nicolas in Mexico carries inherent uncertainties, as Teck awaits "certainty of permitting and the support of the government" before committing significant investment. Commodity price volatility remains a fundamental risk, impacting revenue and profitability across both segments.

Conclusion

Teck Resources is undergoing a profound and deliberate transformation, evolving into a focused energy transition metals powerhouse. The company's strategic divestiture of its coal assets has provided the financial muscle to aggressively pursue copper growth, with the HVC MLE project and a pipeline of greenfield developments poised to significantly expand its copper output by the end of the decade. While the ramp-up of its flagship QB operation has presented operational complexities, management's detailed action plans and confidence in resolving these temporary issues underscore a commitment to realizing the asset's full potential.

The investment thesis for Teck hinges on its ability to execute this copper-centric growth strategy while maintaining financial discipline and delivering consistent shareholder returns. Its strong balance sheet provides a crucial buffer against market uncertainties and funds its ambitious growth pipeline. The zinc segment, particularly the strategic value of Trail Operations and its critical mineral production, adds a layer of resilience and diversification. Investors should closely monitor the progress at QB, the permitting and development of its greenfield projects, and the broader dynamics of copper and zinc markets, as these factors will be pivotal in shaping Teck's trajectory as a leading supplier of the metals essential for a decarbonized future.