Teck's Shift in Strategy Amid Challenges

Teck Resources, Canada’s largest diversified mining company, is putting the brakes on its major expansion projects as it tackles critical output problems at its flagship Quebrada Blanca (QB) copper mine in Chile. After a costly overhaul that came in a staggering $4 billion over budget and years behind schedule, Teck's CEO, Jonathan Price, recently had to revise production forecasts downward.

Addressing Tailings Storage Problems

The primary concern for Teck currently hinges on tailings storage. A thorough operational review initiated in August, which is expected to wrap up by October, aims to enhance overall performance at QB. This plan includes significant upgrades to the mine’s tailings facility, where slow sand drainage has persistently hindered both development and production since the last expansion.

Major Upgrades on the Horizon

To counter the storage issues, Teck intends to mechanically elevate the dam wall, incorporate new rock benches to increase height, and expedite drainage improvements. BMO Capital Markets analysts view this operations review as a crucial but challenging phase that may lead to shifts in personnel and future guidance. However, they suggest that the market has been somewhat prepared for these adjustments.

Management Changes and Project Delays

In the midst of these challenges, Teck has announced changes in its management, including the retirement of Chief Operating Officer Shehzad Bharmal and the onboarding of a seasoned industry advisor to assist senior leadership. Meanwhile, approval for further large-scale projects will remain on hold until Quebrada Blanca stabilizes and meets its production targets.

Impact on Production Projections

Quebrada Blanca is pivotal to Teck's strategy of transitioning towards metals essential for energy production, following the divestment of its coal operations. The mine is projected to reach an output of 800,000 tonnes of copper annually by 2030. However, projections for 2025 have now been adjusted downwards to between 210,000 and 230,000 tonnes.

Future Outlook Under Review

Earlier this year, Teck had initially aimed for total copper production between 490,000 and 565,000 tonnes but recently revised this figure to between 470,000 and 525,000 tonnes. As the company prepares for its third-quarter results, further adjustments are anticipated.

Strategic Collaborations Ahead

With over 200,000 tonnes of copper produced at QB last year, where Teck holds a 60% stake alongside Japan's Sumitomo Corp. (30%) and Chile's Codelco (10%), the company is also exploring potential synergies with the nearby Collahuasi mine, jointly owned by Anglo American and Glencore. Such moves aim to align Teck’s future operations more closely within the energy transition landscape.