Teck Resources Ltd

NYSE:TECK

Earnings Call Analysis

Teck Resources Reports Strong Q3 Results with Strategic Shareholder Returns

Teck Resources achieved a strong financial performance in Q3 2024, with adjusted EBITDA more than doubling year-over-year, primarily driven by robust copper and zinc prices. The company returned $720 million to shareholders, totaling over $1.3 billion year-to-date, while significantly reducing debt by $1.5 billion, achieving a net cash position of $1.8 billion. Revised production guidance for copper is now 420,000 to 455,000 tonnes, down from 435,000 to 500,000 tonnes. Molybdenum guidance also decreased to 3,000 to 4,000 tonnes from 4,300 to 5,500 tonnes. Teck is focused on optimizing operations and expects improved recoveries and cash flows in 2025.

Strategic Shift Towards Energy Transition Metals

Teck Resources has recently transitioned into a pure-play energy transition metals company following the sale of their remaining steelmaking coal interest. This sale provided a substantial cash influx of $7.3 billion, which not only strengthened their balance sheet but also enabled the return of $720 million to shareholders in the third quarter through dividends and share buybacks. Year-to-date, over $1.3 billion has been returned to shareholders, reinforcing the company's commitment to enhancing shareholder value.

Robust Financial Performance

The company's financial performance for the third quarter was notably robust. Adjusted EBITDA more than doubled from the previous year, attributed to strong copper and zinc prices along with increased copper sales volumes. The adjusted earnings per share (EPS) showed a remarkable nearly quadrupling year-over-year. Despite higher finance expenses and impairment charges, the underlying operational improvements fueled significant financial growth.

Operational Highlights and Production Guidance

Teck set another record for copper production this quarter, with a notable increase due to ongoing ramp-up operations at the QB project. However, production guidance has been refined, now expecting annual copper production to be between 420,000 to 455,000 tonnes, down from a previous range of 435,000 to 500,000 tonnes. For molybdenum, guidance has been lowered to 3,000 to 4,000 tonnes from 4,300 to 5,500 tonnes due to operational constraints.

Cost Management and Future Projections

Despite the production guidance adjustments, Teck maintained its cash unit cost guidance at $1.87 per pound. Moreover, the net cash unit cost guidance has been improved to between $0.45 to $0.55 per pound, a reduction of $0.10, indicating effective cost management amidst the challenges faced. The company is focusing on optimizing recovery processes and expects to begin achieving design throughput rates by the end of 2024.

Commitment to Operational Safety and Community Engagement

Amidst these operational and financial changes, Teck has expressed a commitment to safety, health, and sustainability. The company reported a significant improvement in safety metrics, with a 33% reduction in high-potential incident frequency. Additionally, Teck is focusing on community engagement through extensive communication and adherence to regulations, especially regarding its operations in Mexico.

Future Growth and Capital Projects

Teck is actively pursuing growth possibilities, specifically in copper projects slated for potential sanctioning in 2025. The company is poised to advance several projects but is simultaneously cognizant of regulatory conditions and permitting processes. They will continue to prioritize capital deployment for growth while balancing cash returns to shareholders, underpinned by a strong balance sheet with $1.8 billion in net cash as of September 30.

Summary and Investor Outlook

In summary, Teck Resources is maintaining a forward-looking stance, balancing aggressive growth with a strong commitment to shareholders. With the copper market presenting structural deficits, Teck anticipates a favorable pricing environment. Their strategic focus and disciplined management approach are key to driving future performance and creating shareholder value, making them an attractive option for investors focused on the energy transition metals sector.

Earnings Call Transcript 2024-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to Teck's Third Quarter 2024 Earnings Release Conference Call. [Operator Instructions]. This conference call is being recorded on Thursday, October 24, 2024. I would now like to turn the conference over to Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analysis. Please go ahead.

[Unknown Analyst]

Thanks, Damien. Good morning, everyone, and thank you for joining us for Teck's Third Quarter 2024 Conference Call. Please note today's call contains forward-looking statements. Various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statements. Please refer to Slide 2 for the assumptions underlying our forward-looking statements.

In addition, we will reference various non-GAAP measures throughout this call. Explanations and reconciliations regarding these measures can be found in our MD&A and the latest press release on our website.

Turning to the agenda on Slide 3. Jonathan Price, our CEO, will begin today's call with an overview of our third quarter results. Crystal Prystai, our CFO, will follow with additional color on the quarter, and then Jonathan will conclude today's session with closing remarks, followed by a Q&A session.

With that, over to you, Jonathan.

[Jonathan Price, executive]

Thank you, Fraser, and good morning, everyone.

Starting on Slide 5. Our shift to a pure play energy transition metals company was marked by the close of the sale of our remaining interest in the steel leading car business on July 11. And at that time, we received USD 7.3 billion of cash and announced our planned use of proceeds, including the largest tax return to shareholders in the company's history. Through the remainder of progress deployment of those proceeds as we returned $720 million to shareholders through dividends and share buybacks in the quarter and over $1.3 billion in returns to shareholders year-to-date as of yesterday. Reduced debt by USD 1.5 billion, putting us in a net cash position of $1.8 billion as of September 30.

Retained funding for our value-accretive needs in projects in preparation for our next phase of copper growth. We also achieved several operational highlights in the quarter. We continue to grow our copper production and set another consecutive record quarter, copper production as QB continues to ramp up. And our operational focus resulted in higher [indiscernible] concentrate production on resell compared to the same period last year.

We are now nearing the final stages of the QB ramp-up. We completed the QB2 project in the quarter and demobilize the construction workforce. Substantially, all our claims were closed out and accrued forward in our project capital guidance range of USD 8.6 billion to $8.8 billion. At the same time, we continue to progress our well-funded capital-efficient copper growth portfolio, moving on near-term projects towards potential sanction in 2025. Overall, we made significant progress in the delivery of our value-driven strategy.

On to Slide 6, we continue our focus on safety, health and sustainability leadership. We are deeply sad by an employee fatality at times due to [ anemia ] during container assembly in the warehouse area on July 24. In response, the joint venture management team at Antamina, supported by the joint venture partners, including Teck, conducted a start investigation to identify recauses and implement any required actions. And to share learnings across the industry to help prevent future incident.

Over the third quarter, our high potential incident frequency rate remained low at $0.10, which is a 33% reduction from the same period last year. We continue to progress and rollouts with mental health first aid training for frontline leaders across our operations towards our targets of 50% completion by year-end and full completion by the end of next year.

And earlier this month, we were recognized on the fit of the world's best employers 2024. It is to be meaningful as it's an employee-driven ranking of multi-capital companies and institutions from over 50 countries worldwide.

Turning now to an update on the ramp-up of QB operations on Slide 7. Copper production at QB improved quarter-over-quarter to 52,500 tonnes from 51.3 tonnes in Q2. However, production was impacted by lower grade ore mines as expected following the geotechnical issues that restricted our access to high-grade material. This degree has been consistent with prior quarters at 0.50% and based on the throughput and recovery that we achieved, our production would have been 56,000 tonnes.

The localized [indiscernible] that we had identified and disclosed last quarter, there's now been a result with controls in place and we're continuing to advance the mine plan. We expect higher grades in the fourth quarter and going forward, normal growth variability is expected within any different period. Mill throughput rates increased quarter-over-quarter, confirming the robustness of our plant design. As you can see in the chart on the left, throughput has been ramping up steady quarter-over-quarter towards nameplate capacity and is currently near design throughput rents.

We expect to achieve design throughput rates by the end of this year. We've also seen evidence of our ability to operate above design throughput rates. We're working hard on mill optimization to push performance part nameplate and on our plans for debottlenecking. Recoveries also continue to improve, as shown in the chart on the right, with an increase quarter-over-quarter and increasing stability. However, our monthly copper production did decline marginally in September primarily the result of additional planned and unplanned maintenance. We've proactively taken downtime and readiness for planned test work on the grinding and flotation circuits to ensure improved continuity during the test period.

The test was successful, and we've seen improved grind size coupled with selective reagents that enhance processing of ore in the transition zone between the supergene and [indiscernible] mineralization, which has highly safe on that. As a result, we expect improved recovery going forward. We also have unplanned downtime on the sickness and pervasive failure of the mill feed conveyor, reducing our funds mill.

Our focus remains on improving recovery and increasing online time. We expect to see progress following the completion of the test work along with minor equipment modifications to improve reliability, scheduled for the first half of 2025. This is expected to gradually improve molybdenum recovery, copper class stability and equipment reliability through the first half of 2025.

Overall as we close out the QB project and look towards completing the ramp-up of QB operations to design throughput rates, we expect to generate significant cash flows in 2025 and beyond. We have updated certain guidance targets to 2024, which is summarized on Slide 8. In brief, we've improved our net cash unit cost guidance range by $0.10 per pound to $0.45 to $0.55 per pound reflecting the results of strong operational performance, repo. Portion of this reduction was driven by improved operating costs, which allowed us to also improve our total cash unit costs to date by $0.05 per pound to $0.65 to $0.75 per pound.

There is no change to rational production guidance. We've lowered our -- sorry, to refine the guidance for trial operations to 240,000 to 250,000 tonnes due to a localized fire at one of the units in the electrolytic plant in late September. We are looking at operating the other sections in a manner that would allow us to recover some of the production loss. However, this evaluation is still underway. In copper, our total production guidance rate was lower and narrowed with the bottom end of the range reduced by 15,000 tonnes due to lower expected production from buying value.

Our revised guidance is now 420,000 to 455,000 tonnes from 435,000 to 500,000 tonnes previously. Production guidance around the media come under [indiscernible] are both unchanged. Reflecting a slower ramp-up this year, we have narrowed our QB production guidance to 200,000 to 210,000 tonnes for 2024 from 200,000 to 235,000 tonnes. Further, we've provided our 2025 production guidance range for QB to 240,000 to 280,000 tonnes, from 280,000 to 310,000 tonnes reflecting planned activities to improve copper recovery and equipment reliability scheduled to run through the first half of 2025.

[indiscernible] value is now expected to be between 97,000 to 105,000 tonnes from 112,000 to 125,000 tonnes due to the delay in accessing the higher-grade [indiscernible] in Q3. Molybdenum, our production guidance is reduced to 3,000 to 4,000 tonnes from 4.3,000 to 5.5,000 tonnes, in line with the changes to our copper production guidance. We have reduced our QB molybdenum production guidance to 0.80 to 1,200 tonnes for 2024 and to 4,000 to 5,500 tonnes for 2025. And from 1.800 to 2.4000 tonnes and 5,000 to 6.4000 tonnes, respectively.

Despite the lower total money and depot production guidance, our total copy unit cost guidance is unchanged, demonstrating our focus on managing costs across our operations.

Turning to Slide 9. As we continue to progress on the copper projects for potential sanctioning in 2025, all subject to permitting and other works. At QB, the ramp-up continues, and we are progressing the work on defining near-term opportunities for optimization, debottlenecking of the existing at to achieve improved robust recovery. Highland Valley, our revised environmental assessment and permit a negation for the mine life extension was accepted in July, and we continue to regress through the permit process.

We expect substantial completion of engineering and project execution planning in Q2 2025, and the project could be ready for a sanction decision at that time if permits are received. The joint venture of San Nicolas continues to permit application process, and it gave with government and stakeholders is ongoing. Project sanction decision is anticipated to follow a completion of the feasibility study and receipt of necessary permits in the second half of 2025.

Of course, we are closely monitoring the evolving political situation in Mexico. For [indiscernible] whilst we have received the main environmental permit required, we are being disciplined in advancing works and progressing detailed engineering. We see more clarity on construction and associated capital before we sanction the project. We continue with the construction permit application development through Q3 2025. The project could be ready for sanctioning in late 2025, following receipt of construction permits and completion of detailed engineering.

We look forward to creating additional value for our shareholders through these low capital intensities, high-returning copper projects.

I'll now now over the call to Crystal to provide further details on our third quarter results.

[Crystal Prystai, executive]

Thanks, Jonathan. Good morning, everyone. Starting on Slide 11 with our financial performance in the third quarter of 2024. As Jonathan noted, we began to deploy the proceeds received from the sale of our remaining interest in steelmaking coal business, to shareholders through significant cost refers only reducing debt and strengthening our balance sheet.

We returned a total of $720 million to shareholders in the quarter, including $322 million in dividends and $398 million share buyback. We -- in total, we have returned over $1.3 billion to shareholders year-to-date as of yesterday, and we continue to execute our previously announced share buyback program of $3.25 billion. As a result of the completion of the sale of our remaining interest in the steelmaking coal business on July 1, [ CVR ] results have been presented as discontinued operations for all periods reported in our Q3 financial statements and MD&A.

We have strong financial performance in the quarter with our adjusted EBITDA more than doubling and our adjusted EPS nearly quadrupled compared to the same period in the previous year, due to strong copper and zinc prices and increased copper sales volumes, reflecting the benefit of the ramp-up of QB operations.

In Q3, we had higher finance expense and depreciation and amortization expense compared to the same period last year. as most of the QB assets were considered available for use at the end of 2023 and depreciation starts in 2024, and we are no longer capitalizing interest on the QB2 project. Our third quarter financial results were also impacted by a noncash after-tax impairment charge of $828 million on our trail operations. As required under IFRS, we regularly assess whether impairment indicators are present and impaired usage is required. The [indiscernible] trail is a result of a challenging environment for treatment charges due to a global age of at concentrate continued operating losses, combined with the recent fire in the electrolytic zinc plant, which is expected to affect fourth quarter operations.

Importantly, we remain committed to our trail operations as a core part of our strategy of providing critical minerals, particularly given its strong integration with Red Dot. Trail remains an important asset in our portfolio, and we remain highly focused on improving its profitability and cash generation through a range of initiatives that are currently being deployed. Overall, excluding the impairment charge, we saw significant improvement in our financial performance in the third quarter compared with the same period last year.

Slide 12 summarizes the key drivers of our financial performance in the third quarter. The increase in adjusted EBITDA in the quarter compared to the same period last year was primarily driven by strong copper zinc pricing as well as higher copper sales volumes. Operating costs increased due to the inclusion of QB operating costs this year. In Q3 last year, QB costs were generally included in capitalized ramp-up costs. We continue to focus on managing our controllable costs across our business.

Now looking at each of our reporting segments in greater detail and starting with copper on Slide 13. Our gross profit before depreciation and amortization from our copper segment more than double compared to the same period last year. to $604 million as we realize the benefit of QB RampUp. The increase was driven by higher sales volumes, higher prices and an increase in byproduct credits and partially offset by the inclusion of QB operating costs this year. We had another consecutive record quarter of copper production with increased production across all of our operations.

QB ramp-up continues to support increased quarterly copper production. Higher copper production at Antamina was driven by increased copper-only ore as expected in the mine life as well as higher mill recoveries. Water availability at promise an oil improved, resulting in higher mill throughput and production. And while have production also increased, it was lower than expected due to delays in accessing the Lornex Pit, which has higher rates. This delay was attributable to lower hall talk availability and challenges with labor availability on the autonomous system of new haul trucks. This has been largely resolved, and we expect to process more ones ore in the fourth quarter.

Our cost of sales was higher year-over-year as expected and reflects the ramp-up of QB and depreciation of its operating assets. Excluding Hub, our net cash unit costs remained the same as in Q3 last year at USD 1.87 per pound. As Jonathan outlined, we have updated our annual copper production guidance to 420,000 to 455,000 tonnes from 435,000 to 500,000 tonnes. At our total molybdenum production guidance to 3.0 to 4.0 thousand tons from 4.3, 000 to 5.5 thousand tons. Despite the reduction in our annual copper and molybdenum production guidance, our copper net cash unit cost guidance remains unchanged.

Turning now to our segment on Slide 14. Overall, our gross profit before depreciation and amortization from our [indiscernible] segment was $358 million, an increase of 49% in the quarter compared to the same quarter last year, reflecting higher zinc prices and substantially higher silver and lead byproduct revenues as well as lower treatment charges. [indiscernible] had another very strong quarter of operating performance. Higher zinc and live production was driven by higher mill throughput, reflecting our operational focus to improve mill availability and minimize unplanned maintenance.

Zinc sales volumes were strong and in line with our guidance despite difficult weather conditions. In September, we achieved a monthly record for concentrate loaded onto vessels reflecting the close integration between our operations and commercial teams. The shipping season has continued into the fourth quarter with shipments dependent upon weather conditions and we expect to complete our shipping season as planned. [indiscernible] net cash unit costs improved compared to the same period last year, reflecting strong operating performance, lower smelter processing charges and higher solar and likewise product credits.

At Trail operations, while we did record an impairment in the third quarter, our new chipset border operated well and achieved near-record online time and throughput. However, our refining at production was impacted by the fire in the electrolytic same plant in September. Looking forward, we expect the can concentrate sales from Red Dog of 155,000 to 185,000 tonnes in the fourth quarter, reflecting the normal seasonal put.

For the full year, we've improved our full year guidance range resets net cash unit costs by USD 0.10 per pound to USD 0.45 to $0.55 per pound from USD 0.55 to $0.55 per pound. A portion of this reduction is driven by improved operating costs. As a result, we've also improved our a total cash unit cost guidance US 0.05 per pound to USD 0.65 to $0.75 per pound from USD 0.70 to $0.80 per pound.

Our guidance for making concentrate production is unchanged and our guidance for where production was lower to 240,000 to 250,000 tonnes from 275,000 to 290,000 tonnes due to the fire in electrolytics [indiscernible] trail.

Turning now to Slide 15 and our resilient balance sheet. Since we close of the EDR transaction on July 11, we've made significant progress in deployment of the transaction proceeds to the balance sheet and to shareholders. We've reduced our debt by USD 1.5 billion to date, including a cash tender offer for USD 1.4 billion of our outsizing terms repayment of USD 120 million of short-term loans at [indiscernible] and open market repurchases of an additional USD 9 million of terminals.

Overall, we strengthened our balance sheet in the third quarter, and we are in a net cash position of CAD 1.8 billion as of September 30. Our finance income increased in the quarter due to interest earned on our higher cash balance, which is currently CAD 7.8 billion. The quality of our balance sheet, along with confidence in our business outlook and a focus on lowering our financing costs, resulted in us reducing the size of our sustainability linked revolving credit facility by USD 1 billion last week to USD 3.0 billion.

In the quarter, we returned significant cash to shareholders through the payment of our regular base quarterly dividend of $0.125 per share and a supplemental dividend of $0.50 per share for a total of $322 million and a purchase of 6.3 million Class B shares or $398 million under our normal course insured. We have currently returned over $1.3 billion to shareholders year-to-date, including a purchase of 13.6 million Class B shares. This builds on our strong track record of shareholder returns, which totaled over $5 billion since 2019. With our resilient balance sheet, we are strongly positioned to execute on our growth strategy and create value for our shareholders.

With that, I'll turn it back over to Jonathan.

[Jonathan Price, executive]

Thanks, Crystal. To wrap up, starting with Slide 17. As we shift to a pure-play energy transition metals company, we remain true to our purpose and values and guided by our capital allocation framework that balances growth with cash returns to shareholders. Our strategy is focused around 4 key pillars, which drive our [indiscernible] for responsible growth and value creation.

On Slide 18, we are delivering on our strategy. Completing the sign of EVR means that we now have a portfolio that is 100% energy transition levels. We continue to focus on driving operational performance. Our copper production continues to grow -- we've closed out the QB2 project and are progressing towards the final phase of the ramp-up of QB operations as the key driver of our near-term copper growth. And our focus on operational performance enabled a reduction in our full year guidance range for zinc net cash unit costs. We continue to balance cash returns to shareholders with our highly competitive copper growth opportunities. So far this year, we've returned over $1.3 billion to shareholders and deployed $302 million towards responsing our portfolio of growth projects. And we submitted, strengthened our resilient balance sheet in the third quarter.

With the EVR sales proceeds, we've paid down USD 1.5 billion of debt we had a net cash position of $1.8 billion as of September 30.

To conclude with Slide 19. As an energy transition apples company, our focus remains on creating value for our shareholders. We will drive strong operational and financial performance embedded by our focus on core excellence. And we're putting part towards the final stages of the QB ramp-up, which should set us up for strong cash generation financial performance. We are maintaining the balance between growth and shareholder service. We continue to progress our record returns to shareholders to $3.25 billion authorized by the Board this year.

And with our resilient balance sheet, we are well positioned to continue to progress our well-funded capital vision near-term copper projects for potential planting in 2022. Thank you.

With that, operator, please open the line to questions.

[Operator]

[Operator Instructions] Our first question is from Orest Wowkodaw with Scotiabank.

[Orest Wowkodaw, analyst]

Question on QB2. So second consecutive quarter of guidance cuts here for '24. You've now cut 25 by 12%. I mean at this point, what -- can you share what gives you any confidence that these numbers are achievable in '25 just given all the cuts we've seen this year? And I'm curious also what you're anticipating in terms of that guidance range for 25%, how much of that improvement over '24 is driven by throughput versus grades versus recoveries?

[Jonathan Price, executive]

Thanks for the question. So just to start there with a bit of context around 2024 and then the reduction to guidance, and then I'll go on to your question around 2025. As I said, the [indiscernible] designed at QB is robust, and we have continued to make very good progress on mill throughput. And you can see that improvement quarter-over-quarter. We do expect to be operating at design of throughput rates by the end of '24.

The key for us here is to ensure that we achieve these design rates more consistently through maximizing our online time. On recovery, we expected some challenges in Q3 as we worked through higher amounts of plays in those transitionals between supergene and hypogene. Despite that, we did make some progress through higher recovery rates quarter-over-quarter. And as I mentioned, we have completed testing of dosage and reagent mixes, which have shown both improved recoveries and better stability in the plant, will be ongoing in that regard, both through the fourth quarter of this year, and in 2025.

The other component, of course, aside from throughput and recovery in grade, and we're seeing a good level of accuracy in the grade of material we mine versus what we expect in our plans. We have expected lower growth in Q3, as we said, and we do expect an improvement in grade into Q4, and as I mentioned, if all else have been equal, I think if we have the same grade in Q3 as we had in Q1 and Q2 and we operate it with the throughput and recoveries that we did in the third quarter, we would have produced 56,000 tonnes [indiscernible]. So growing being there is the big driver of lower production in Q3 relative to expectations.

Also important to note because we discussed this in the last quarter that the geotechnical issue that [indiscernible] income is under control, and it gives us confidence to rebox and mine plan. So we're happy with the progress we're making on throughput and recoveries are very much a work in progress with test we're continuing to evolve. And that fee extending to 2025. In 2025, some of the work that we're planning to do around recovery around dosing, but also some of the work that has to be done on the plant will go through the first half of 2025. So -- that will involve some additional downtime in 2025 to drive those improvements in the first half. But we do expect that to translate into a much stronger and more consistent recovery performance through the balance of the year. the throughput, we are very encouraged by that.

We do see periods where we're operating above name and as I mentioned, that's all about driving more consistency in the uptime and on line time associated with the plant and again, there are some modifications that will be made 2 areas of the plant through the back end of this year, but also through the first half of of 2025. So we've looked very hard at all the operational performance drivers here. We believe that the 25% guidance that we put forward here is very much achievable. But you'll note in the range that we've put around that with the $240 million to $280 million is relatively broad, and that's to reflect some level of ongoing uncertainty associated with an asset that is still in the ramp-up phase.

[Orest Wowkodaw, analyst]

And just as a follow-up, in your presentation slide, Page 7, you show design recoveries of 86% to 92%. Is that a revised life of mine assumption? Or do you still think you can get to 92% on a consistent basis?

[Jonathan Price, executive]

Yes. There's no revision there, Orest. That has been designed and we still think that's achievable here. I'll hand over to Shehzad to talk about that in just a moment. But to say as we benchmark the performance of the ramp-up of QB against other major ramp-ups that have occurred, we are bang in line with the ramp-up [indiscernible] attempts to throughput. Recovery is the area where, as I mentioned, we have more work to do. But even so, we're not encountering some of the recovering issues that some of the major projects have been counted over time.

So again, that's what gives us the confidence to continue to push higher. And I'll hand over to our Chief Operating Officer, Shehzad, is a to give a bit more color on recovery specifically because that's a very important point.

[Sherhzad Bharmal, executive]

Thanks, Jonathan. We have achieved pretty decent recoveries when we -- with our typical ore types, but have struggled with some of the transition orders which have the higher place. And I think our performance has been 83% to 84% over the last quarters, and we are seeing better numbers now. But the most important part is as we introduced the more circuit as well, that had some impact as well.

And Teck [indiscernible] that Jonathan mentioned has given us a good resolution on what reagents to use, and that is being implemented here in late October and November. And we will then fine-tune that run into the first half of 2025. And the range that you mentioned of [ $86 million to $92 million, ] it depends on what types are being fit. And we do expect some transition ores well into the first half of 2025. So we won't get to those numbers of 92% in the first half and hence, some of the impacts on the 2025 on the 2025 guidance. And of course, the 86% to 92% over a longer-term period, not in any quarter or any year over the life of mine. So you'll see variability of that as well.

[Operator]

The next question is from Bryce Adams with CIBC.

[Bryce Adams, analyst]

Thanks, all. Appreciate the presentation. I wanted to ask on San Nicolas in open pit mining in Mexico. Jonathan, I think you mentioned in the comments that you're monitoring the situation. Is there anything that you can add to that? Recently, it looks like the tone has shifted towards being more positive. Would you agree with that? And could the asset be reconsidered as an underground operation. Is that something that's been evaluated?

[Jonathan Price, executive]

Bryce, thanks very much for the question. As mentioned, we are still monitoring the situation in Mexico. I think it's fair to say there's still a level of uncertainty there, but I would agree with your assertion that the [indiscernible] has moved to a slightly more positive position for alternatively a slightly less negative position, depending on how you look at. We've done a lot of work on what is the optimal path for development of this asset. I think your question is geared around trying to avoid the open cut issue, we still think that the open cut mine is going to deliver the best returns associated with our assets.

We continue on the [indiscernible] process on that basis, and we continue on our feasibility study in engineered with on that basis. And we are hopeful of a resolution for open cut mining, particularly in the context of San Nicolas in due course. But I think we have to be realistic and not that there is uncertainty in regards to that still in the environment today.

[Operator]

The next question is from Carlos De Alba with Morgan Stanley.

[Carlos de Alba, analyst]

Two questions. One on San Nicolas and another on QB. San Nicolas, maybe just a follow-up, Jonathan, can you remind us if you already have a open pit mining concession for the project? Or do you have only an exploration license? What exactly do you have yesterday one of the biggest local corporate producers mentioned that for one of their projects, they are not worried about any changes in the legislation because they already have the concession. So I just wanted to understand exactly what do you have?

[Jonathan Price, executive]

Yes, we believe that we do have protection under the concession that we have costs associated with San Nicolas, whether or not through this consideration around the future of open cut mining, that converts into a permit to development is really the open question at present. So the extent to which there is a grandfathering of those prior rights into the current situation is something we still have to work our way through. good engagement by the San Nicolas JV and then also both partners, ourselves and [indiscernible] with the Mexican authorities as we try to figure out the appropriate path forward for projects.

[Carlos de Alba, analyst]

All right. That may sort of sense. And then on QB, how much -- how many days in September was the operation down for the maintenance that you mentioned in the release was taken. And I think I heard you mentioned that in the first half of next year, there's going to be also some downtime. Can you maybe provide a little bit more color what month do you have a sense of how many days in those months, the operation will be down?

[Jonathan Price, executive]

Yes. I'll pass you to Shehzad on that. As you know, we've had a cadence of major shutdowns, if you like, every quarter. And then in addition to that, there been some additional more opportunistic shutdowns that we've taken on specific areas of plant equipment. So Shehzad, if maybe you can comment on September and then broadly speaking on next year.

[Sherhzad Bharmal, executive]

Carlos, in September, we took an extra 3 days to do some of the work of bellchanges and some of the minor changes that we needed to do ahead of the test work. And then also, as Jonathan mentioned, the picker issues that we had, where we did -- where the mills were down, but they were running at limited rates because of water issues, recovery from the tiers. So -- it's not just a matter of downtime. It's some of the limitations as well, and those issues have been resolved. The [indiscernible] and we continue to address issues as an example on we found that a funnel on our mills were having the lives that we were expecting.

So we went around change in design, change the material and those have been installed. Some of our belting itself did not last. And we changed the material and the design of that to that. So these are the types of things that you encounter in a startup that we are addressing. And the Q1 downtime, the extra downtime, really to address several other items that we have identified, just to increase the design life of those components of the equipment. So no fatal flaw at all. It's just a matter of including the reliability of some of the components, so the Q1 numbers are a few percentage points below our target on availability and then start in Q2 as well, that forms the guidance for 2025.

[Operator]

Next question is from Christopher LaFemina with Jefferies.

[Christopher LaFemina, analyst]

That -- it's Christopher LaFemina. And thanks for the additional insights so far in the Q&A. Just had some follow-up on the QB ramp and how we should think about incremental costs and how that's going to flow through the P&L and the cash flow statement in 2025. So I think, Jonathan, you said that project CapEx is basically done. But with production guidance to for 2025 being lower, you talked about all the additional work that you need to do to get to full capacity. When I hear work in mining, I think costs.

So how do we think about the kind of the cost impact in 2025, and just also wanted to confirm, is project CapEx now done? Or is everything just kind of flowing through kind of asset-level based operating expenses and CapEx? Or am I correct in you saying that earlier?

[Jonathan Price, executive]

Thanks for the question there, Chris. So for the first part, yes, the project CapEx is done like USD 8.6 to 8.8%. We've fallen in that range and as said, there are some claims outstanding, but they've been accrued for and are captured in that range. So -- and we fully demobilize. So we consider the project to be done and in the rearview mirror, to your point on some of the works we're talking about doing next year, I mean these things are are minor in the scheme of things and so small you're unlikely to see in the tool going up in our costs.

This is essentially -- it's a form of preventive maintenance or minor improvement work that we'll be doing around the site. So we don't see that as any significant additional capital or cost. And to your final point, yes, essentially with the project closed, all of these expenditures now will run through the the operation, of course, where there's capital being spent on sustaining work, those things will be capitalized, but other operating costs in the normal course will run through, and then Crystal, anything do you want to add to that?

[Crystal Prystai, executive]

No. I think the only thing, I guess, I would say is we've reiterated our cost guidance for the copper business as well as for QB for 2024 despite seeing some reduction in our our production guidance, I think that just really reiterates the point about our focus on cost, and we're working to demobilize contractors, and we've seen some success in that as well.

[Christopher LaFemina, analyst]

Right. Sorry. So the 2025 reduction in production will be associated with an increase in costs, right? So we should expect, all else equal, unit cost that TV will be higher for 2025 because your volumes are lower. The very at least there was that additional kind of a is that correct?

[Jonathan Price, executive]

Yes. Well, we haven't guided yet, Chris, for 2025, obviously, if you assume that operating costs are the same and you apply a lower production cost of that, then all else being equal to get a higher operating cost, of course, but we need to assess what those costs are for next year will go from a [indiscernible].

[Christopher LaFemina, analyst]

And I guess the key Jonathan, like you said, I mean, it's at like there's a lot of additional CapEx is a matter of ramping the thing up and the operating cost might be a bit higher in the first half of the year, but there's nothing else that we have to really worry about. I guess the second -- the follow-up to that is you've talked in the past about kind of waiting until 2025 before sanctioning your projects.

And I think part of the reason for that was we wanted to get QB2 up to full capacity. So to the extent that this is being delayed in terms of the ramp, does that push back timing on kind of sanctioning of other projects? Or is it still possible to see some of those sanction projects come through in the second half of next year?

[Jonathan Price, executive]

Let me come to that in a second. Just Crystal, [indiscernible] is there anything else you wanted to say on the unit cost piece just to close that?

[Crystal Prystai, executive]

Yes. I mean, Chris, just to really confirm we haven't flowed our guidance for unit cost for 2025, I would expect them to be lower than 2024 because we had -- obviously, factors with the ramp-up with using alternative shipping arrangements. We've had lower moly production, which has an impact on our net cash unit cost because we don't get the moly credit. So those things we should see those resolved in 2025, and we'll put out our guidance as we normally do in January as [indiscernible].

[Jonathan Price, executive]

Yes. On the project sanction, the remaining work we have to do on as Shehzad mentioned, is very much in the first half of next year as we look to optimize conditions of circuit reagents for better online time and improved recoveries. There are the 2 things we're focused on. We expect to have to start in the first half. Even if we achieve all of the permits on the time line we're working to and should [indiscernible] our studies and have positive economics associated with the capital costs of these projects, it wouldn't be sanctioning anything before the second half of next year in any event.

So we remain confident in sort of the full ramp-up of QB in H1, and we'll look at other projects. And I'm talking about greenfield progress growing in the second half of the year. A [indiscernible] mine life extension being a brand field, of course, is one that we will pursue as quickly as possible. But again, I think that runs into the business may here.

[Operator]

The next question is from Liam Fitzpatrick with Deutsche Bank..

[Liam Fitzpatrick, analyst]

First one, just on production guidance. I wanted to clarify whether the update today -- updates for your other assets in terms of 2025 guidance? Or will we be getting further revisions to those in November or January?

[Jonathan Price, executive]

Yes. So the only update we've made for 2025 are the ones we've communicated today. And of course, that just relates to QB, where for the issues we've identified. We understood clearly today that there would be a change to prior guidance for next year. All other assets as we work through the planning process and our associated guidance will be updated in the [indiscernible] quarter of January.

[Liam Fitzpatrick, analyst]

And then on the growth strategy, I mean you're clearly not alone in terms of the challenges in building and ramping up copper assets. Are you still convinced that going ahead with other greenfields further down the line is the right strategy for Teck?

[Jonathan Price, executive]

We are at Liam for a number of reasons. I mean, firstly, the projects that we have in the pipeline ahead of us are significantly smaller in scale, scope and have much lower complexity than the Q3. So we're also doing significantly more work around derisking projects prior to sanction in the year in terms of the level of engineering that we'll be undertaking, for example, which will give us greater certainty to capital spend schedule and execution pathways. And we believe that the low capital -- relatively low capital intensity of these greenfield projects will offer very good returns to [indiscernible].

And to us, it certainly looks like a more attractive strategy than M&A, where a great deal of those the upside can be paid away through premiums to acquire assets. So we do think it's the right strategy. Of course, through going through something like QB in terms of the major construction and development effort there. And then the ramp-up process that we're working through here, we take significant learnings from that and build enormous organizational capability that we can take forward on future projects.

So Liam, we do think it's the right way forward. These projects are not simple. They never are, but we're working very hard on building the capability, capacity, system processes inside the organization to underwrite success with future project development.

[Liam Fitzpatrick, analyst]

And my last quick one, if I may. Just on working capital. So there was a reasonably big build in Q3, about $0.5 billion. Any color on or guidance on how and when that will unwind in the course?

[Jonathan Price, executive]

Yes. Thanks,. Well, I mean along that some of that relates to QB. So I'll pass over to [ Ian Anderson,] our Chief Commercial Officer, who can explain a little bit about the production versus sales profile that we've seen in the operation.

[Ian Anderson, executive]

Yes. Thank you very much for the question, Liam. I may be important just to say at the beginning that, of course, sales and production don't always match and that could occur for a variety of reasons, including cutoffs for the reporting period. in system and in-transit inventory, vessel scheduling, loading windows, things like that. So for example, we currently have just a couple of holes of cargo at the port. Those are scheduled to load imminently, and there's really no excess inventory there.

In terms of the working capital question, though, the difference that you see in the disclosure is attributable to material that's at the mine and they built up through the transition, claim materials challenge that we referred to in disclosure. So this material is being transferred now to filtration plants into the port, and we'll go out for loading and for sales. And we expect a good portion of that to occur in Q4 and the remainder expected in Q1. So on that basis, the volumes were reconciled over time, but important just to come back to the fact that, of course, sales and production will last.

[Crystal Prystai, executive]

And then I'm sorry, I'd just add in relation to timing of sales, we did have very strong bulk copper and zinc sales in the month of September. And so you see some of that built into the AR, which will be closed in a normal course as we go through the rest of -- into Q4.

[Operator]

Next question is from Myles Allsop with UBS.

[Myles Allsop, analyst]

So first of all, maybe on the buyback. Could you just give us a sense, are you maxing out with the buyback during Q3, should we assume that a similar rate can be achieved in Q4 and during 2025, around $400 million a quarter?

[Jonathan Price, executive]

I'd just say on that, Myles, we're not maxed that. We are being value driven in the way we execute against that buyback. So at lower share prices, we're buying back more shares in a higher share prices with we're buying back less. There's nothing at all to indicate that we can't continue running at the the same rate in Q4 that we get in Q3, in fact, would be somewhat accelerated because in July due to a blackout period, we weren't buying back shares. So we would expect, again, all else being even to buy back more shares in Q4 than we did in Q3.

[Myles Allsop, analyst]

Okay. That makes sense. And then just going back to QB, I'm sorry, it's obviously the key question. Obviously, you've talked a bit about optimization and debottlenecking, which is not in the guidance, but some of that upside medium term. When will we get more clarity on this? When will you start building it into guidance? Is this going to be end of next year once you hit steady state or -- how should we think about that? Should we start factoring in throughput above 143,000 tonnes a day? Or should we just stick at 143,000 given the track record over recent quarters?

[Jonathan Price, executive]

Yes. Good question, Myles. I mean, first off, I'll say that at our Investor Day a couple of weeks from now, we'll talk about this path forward for the Q asset in some more detail. I think for the time being, best to stick with the [indiscernible] capacity because our focus is on proving that consistently by getting the online time where it needs to be. We have communicated that we think there is an opportunity to optimize above that. And then we talked about that optimization being up to 10% increase in throughput, which can be accommodated by our existing permits.

Beyond that, any detail upside in the plant will really come through more debottlenecking. Approach, which would require some minor modifications and upgrading to certain plant and equipment. And that could potentially deliver another 15% of upside in terms of throughput. But the studies associated with that work are underway we expect to have a much better line of sight into the path forward by the end of the year, but we will communicate more on some atonal talk about this in some more detail in a couple of weeks' time in the Investor Day.

[Operator]

The next question is from Lucas Pipes with B. Riley Securities.

[Lucas Pipes, analyst]

And Jonathan, when you have your site to at Highland Valley on November 5 and still have labor needs, I might be tempted to fill out job applications. So please remind me of that. But all joking aside, I wanted to touch on Trail for a moment. You mentioned a range of initiatives that you're looking at. to improve the operational stability at that asset? What will it take CapEx-wise time-wise to improve the performance there?

[Jonathan Price, executive]

We were just singling and processing your job application or we missed the asset you were referring to. Could you just repeat that, please?

[Lucas Pipes, analyst]

That is a Trail.

[Jonathan Price, executive]

Yes, we are -- we've seen a recent improvement in performance at Trail. Absolutely. We brought the [indiscernible] back online at performing very well, and we are looking at cost reduction approaches there to further improve. But I'll just get Shehzad to give you a little bit more color on some of the work that we're doing in for it.

[Sherhzad Bharmal, executive]

So Lucas, we've made some recent leadership changes there as well and with a renewed focus on cash generation, as Crystal mentioned earlier -- go through the maximizing product margins and cost reductions and particularly in the maintenance and on teamwork area. We are going through a lot of metallurgical work as well in order to improve recoveries from the residues and with real good success right now. And that will help us to be able to take different feeds while maintaining the margins from those fleets with improved recoveries. And of course, coupled that with a strong focus on cost reductions to get us back to profitability.

[Lucas Pipes, analyst]

And CapEx-wise, any ballpark figures to think about?

[Jonathan Price, executive]

No major CapEx associated with these changes.

[Myles Allsop, analyst]

And I wanted to touch on the balance sheet really quickly. Crystal, can you remind us how much more you're looking to allocate towards capital returns? How much more are you looking to allocate towards debt reduction from here going forward? And just kind of bigger picture what do you think do you need in terms of cash to run the business and also be prepared for growth? So if you could comment on that, I would appreciate the color.

[Crystal Prystai, executive]

No problem. Thanks, Lucas. I think in terms of -- maybe I'll start with the debt reduction piece of it. When we announced the use of proceeds, we had allocated USD 2 billion to that. And to date, we've completed over $1.5 billion with the combination of the buyback of our notes as well as the the reduction in the CBA short-term loans. So I think we have around maybe USD 400 million remaining earmarked for debt reduction.

And we're continuing to review how we may deploy that. The options obviously relate to the project financing for as well as some leasing that we have on the balance sheet. So we're exploring those. I think they will take a little bit more time for us to execute because we obviously have partners and things to resolve in that regard. And then in terms of the shareholder return, so we've -- obviously, we paid the supplemental dividend, the $0.50 a share in September. The Board had authorized $3.25 billion of buybacks, if you also include the $500 million from earlier in the year.

Through yesterday, we had executed $882 million of that. So we'll have the remainder to execute. I think it will take us sort of 12 to 18 months longer to complete that. And as Jonathan noted, that will depend on, obviously, the price of our shares and with consideration of value. So that's on the buyback.

And then in terms of the growth projects, we had -- when we issued the use of proceeds again, we had disclose a range of capital for those projects, and that's in our order from July. And we're continuing to review those CapEx numbers and assess those as we go through the detailed engineering work and conclude the studies. And so we'll provide updates in due course as needed. But I think you can refer back I don't have the number at hand, but I -- so 2.6% to 4.3%. You can double check in July and [indiscernible] control up on you offline, but -- so that's in regard to growth, and we hear our proceeds for that, and we're holding it as cash.

We expect QB to generate significant cash flow as we get up to the full production and into 2025. And we as per our capital allocation framework, if we generate cash in excess of our needs, we would return that to shareholders and our capital allocation framework enables us to do that with that minimum 30% of available cash returns return to shareholders. So that's generally how we think about it. And if you have, I guess, follow-up questions, happy to take that.

[Lucas Pipes, analyst]

I look forward to seeing you in November.

[Operator]

Our next question is from Timna Tanners with Wolfe Research.

[Timna Tanners, analyst]

Just had 2 that I hadn't heard addressed if I missed them. One is just on the updated economics of Semi and [indiscernible]. It's been a while since I've seen at least 1 cost estimate, pre-COVID and the size of the asset and all that, will that be something we can hear about in November? Or can you just remind us on the timing of any update there?

[Jonathan Price, executive]

Yes. Thanks for the question. Timna.yes, we will provide more updates on those projects in November.

[Timna Tanners, analyst]

All right. We'll stay tuned. And then my other question, I just want to be appropriate to ping you on the zinc market because as much as we all talk about copper and other commodities, zinc has been this one of the biggest high flyers that we've followed. I know 1 article I read attributed the trail fire maybe to some of those things. But anything you could provide for us in terms of color in your outlook of how sticky this strength may be would be great.

[Jonathan Price, executive]

Thank you for the question, Timna. Interesting that in both the zinc and the copper concentrate markets, you're seeing structural deficits and concentrate I would differentiate those 2. And zinc, what we see is actually a chronic shortage and uninvested in terms of mine and then challenged, of course, both by disruptions that have occurred within the last couple of years and shutdowns as a result of the previously low price.

So looking forward, you're really relying on 3 mines coming online in order to improve that concentrate picture, Kipushi, Ozero and Terra, [indiscernible], has been a bit slow to ramp up. They've been shipping over quarter 3 and have revised their guidance. [indiscernible] uncertain of the condition of that in the future in that material, of course, because the [indiscernible] to China. And then believe in Stara began in Q3 and have begun with a smaller staff complement and look likely not to return to the same production levels that they had previously.

So all of that speaks to us about a chronic shortage of concentrate. You're seeing that reflected in the record low TCs that are occurring. And certainly, the major research houses are looking forward to that PC in 2025 and expecting it to be a significant well as possibly can record lows. So I think that's why you're seeing zinc responding the way that it has in terms of finished metal price. -- finished metal prices in North America at least have come up a little bit in the last while, and that's positive. So we were looking to sink for a bright future in 2025.

[Operator]

I will now hand the call back over to Jonathan Price for closing remarks.

[Jonathan Price, executive]

Thank you, operator, and thanks again to everyone for joining us today. We look forward to seeing many of you in person in Vancouver in a couple of weeks from our Strategy Day and the Highland Valley site business.

All of those presentations will be posted to our website at teck.com, shortly after the event. So thank you once again. And as ever, if you have any further questions, please reach out to Fraser and our IR team. Enjoy the rest of your day.

[Operator]

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