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Every Day
2016 Annual Report
Teck Resources Limited
Suite 3300, 550 Burrard Street
Vancouver, British Columbia, Canada
V6C 0B3
+1.604.699.4000 Tel
+1.604.699.4750 Fax
www.teck.com
Setting Possibilities in Motion
Our Business
Teck is a diversified resource company committed to responsible mining and mineral
development with business units focused on steelmaking coal, copper, zinc and energy.
Headquartered in Vancouver, British Columbia (B.C.), Canada, we own or have interests
in 12 operating mines, one large metallurgical complex, and several major development
projects in Canada, the United States, Chile and Peru. We have expertise across a wide
range of activities related to exploration, development, mining and minerals processing,
including smelting and refining, safety, environmental protection, materials stewardship,
recycling and research.
Our corporate strategy is focused on exploring for, developing, acquiring and operating
world-class, long-life assets in stable jurisdictions that operate through multiple price
cycles. We maximize productivity and efficiency at our existing operations, maintain a
strong balance sheet, and are nimble in recognizing and acting on opportunities. The
pursuit of sustainability guides our approach to business, and we recognize that our success
depends on our ability to establish safe workplaces for our people and collaborative
relationships with communities.
Mineral reserve and resource estimates for our properties are disclosed in our most recent Annual Information Form, which is
available on our website at www.teck.com, on the Canadian Securities Administrators website at www.sedar.com (SEDAR), and on
the EDGAR section of the United States Securities and Exchange Commission (SEC) website at www.sec.gov.
Forward-Looking Statements
This annual report contains forward-looking statements. Please refer to the “Cautionary Statement on Forward-Looking Information”
on page 49.
All dollar amounts expressed throughout this report are in Canadian dollars unless otherwise noted.
In This Report
Our Business
2016 Highlights
Letter from the Chairman
Letter from the CEO
Responsibility
Management’s Discussion and Analysis
Steelmaking Coal
Copper
1
2
3
5
7
9
12
16
Zinc
Energy
Exploration
Financial Overview
Consolidated Financial Statements
Board of Directors
Officers
Corporate Information
21
25
27
28
51
114
114
115
Corporate Information
2016 Share Prices and Trading Volume
Class B subordinate voting shares–TSX–CAD$/share
Q1
Q2
Q3
Q4
$
$
$
$
Class B subordinate voting shares–NYSE–US$/share
Q1
Q2
Q3
Q4
Class A common shares–TSX–CAD$/share
Q1
Q2
Q3
Q4
$
$
$
$
$
$
$
$
Stock Exchanges
Our Class A common shares and Class B subordinate voting
shares are listed on the Toronto Stock Exchange under the
symbols TECK.A and TECK.B, respectively.
Our Class B subordinate voting shares are also listed on the
New York Stock Exchange under the symbol TECK.
Dividends Declared on Class A and B Shares
Amount per share
$0.05
$0.05
Payment Date
June 30, 2016
December 30, 2016
These dividends are eligible for both the federal and provincial
enhanced dividend tax credits.
Shares Outstanding at December 31, 2016
Class A common shares
Class B subordinate voting shares
9,353,470
567,546,513
Shareholder Relations
Karen L. Dunfee, Corporate Secretary
Annual Meeting
Our annual meeting of shareholders will be held at 11:00 a.m.
on Wednesday, April 26, 2017, in the Waterfront Ballroom,
Fairmont Waterfront Hotel, 900 Canada Place Way, Vancouver,
British Columbia.
Transfer Agents
Inquiries regarding change of address, stock transfer,
registered shareholdings, dividends or lost certificates should
be directed to our Registrar and Transfer Agent:
CST Trust Company
1600 – 1066 West Hastings Street,
Vancouver, British Columbia V6E 3X1
High
11.99
17.09
24.89
35.67
High
9.25
13.20
19.07
26.60
High
14.51
18.05
25.00
36.49
$
$
$
$
$
$
$
$
$
$
$
$
Low
3.65
9.05
16.53
22.38
Low
2.56
6.89
12.62
16.95
Low
5.69
11.90
17.40
22.65
$
$
$
$
$
$
$
$
$
$
$
$
Close
Volume
10.14
16.31
24.59
27.45
386,550,338
414,279,556
278,290,368
226,873,363
1,305,993,625
Close
Volume
7.61
13.17
18.03
20.03
107,412,803
142,055,779
110,330,313
87,626,571
447,425,466
Close
Volume
13.24
18.05
23.59
31.00
206,884
167,709
197,126
523,450
1,095,169
CST Trust Company provides an AnswerLine Service for the
convenience of shareholders:
Toll-free in Canada and the U.S.
+1.800.387.0825
Outside Canada and the U.S.
+1.416.682.3860
Email: inquiries@canstockta.com
American Stock Transfer & Trust Company, LLC
6201 – 15th Avenue,
Brooklyn, New York 11219
+1.800.937.5449 or +1.718.921.8124
Email: info@amstock.com
Website: www.amstock.com
TTY: +1.866.703.9077 or +1.718.921.8386
Auditors
PricewaterhouseCoopers LLP
Chartered Professional Accountants
Suite 700, 250 Howe Street,
Vancouver, British Columbia V6C 3S7
Annual Information Form
We prepare an Annual Information Form (AIF) that is filed
with the securities commissions or similar bodies in all
the provinces of Canada. Copies of our AIF and annual and
quarterly reports are available on request or on our website
at www.teck.com, on the Canadian Securities Administrators
website at www.sedar.com (SEDAR), and on the EDGAR
section of the United States Securities and Exchange
Commission (SEC) website at www.sec.gov.
On the cover: Julia Dick, Utilityperson at Highland Valley Copper Operations.
Corporate Information
115
1
1
2
1
2
2
3
1
*
Steelmaking Coal
We are the world’s second-largest seaborne
exporter of steelmaking coal, with six operations
in Western Canada that have significant
high-quality steelmaking coal reserves.
Copper
We are a significant copper producer in the Americas, with
four operating mines in Canada, Chile and Peru, and copper
development projects in North and South America.
Zinc
We are the world’s third-largest producer of mined zinc,
and operate one of the world’s largest fully integrated zinc
and lead smelting and refining facilities.
Energy
We are creating long-term value by building an energy
business with the development of Canadian oil sands
mining projects.
Operations and Major Projects:
Steelmaking Coal
1 Cardinal River
Zinc
1 Red Dog
2 Steelmaking coal sites in B.C.
2 Trail Operations
· Fording River
· Greenhills
· Line Creek
· Elkview
· Coal Mountain
Copper
1 Highland Valley Copper
2 Antamina
3 Quebrada Blanca (including
Quebrada Blanca Phase 2 project)
4 Carmen de Andacollo
3 Pend Oreille
Energy
1 Frontier
2 Fort Hills
Corporate Head Office
* Vancouver
5 NuevaUnión
Operation
Project
2
3
5
4
Our Business
1
2016 Highlights
Safety
• Achieved year-over-year reductions in Total Reportable Injury Frequency of approximately 13%, Lost-Time Injury
Frequency of 11% and High-Potential Incidents of 12%; we had no fatalities
Financial
• Revenues of $9.3 billion, and gross profit before depreciation and amortization of $3.8 billion
• Cash flow from operations of $3.1 billion
• Profit attributable to shareholders of $1.0 billion; adjusted profit of $1.1 billion, or $1.91 per share
• Retired approximately US$1.1 billion of debt in just over 12 months
• Maintained over $5.4 billion of liquidity at the end of 2016; cash balance of $1.4 billion and a US$3.0 billion unused
line of credit
Operating and Development
• Realized a number of quarterly and annual sales and production records while reducing total costs in each of our
business units
• Attained steelmaking coal production and sales record highs of 27.6 and 27.0 million tonnes, respectively
• Achieved significant cost reductions at our copper operations, substantially reducing the impact of lower production
on our cash unit costs
• Attained annual production records for refined zinc and lead at Trail Operations
• Surpassed 76% completion of construction on the Fort Hills oil sands project
Sustainability
• Named to Dow Jones Sustainability World Index (DJSI) for the seventh consecutive year and ranked as one of the
Best 50 Corporate Citizens in Canada by media and investment research firm Corporate Knights
Revenue
($ in billions)
Adjusted Profit Attributable to Shareholders
($ in billions)
Cash Flow from Operations
($ in billions)
2016
2015
2014
2013
2012
$9.3
$8.3
$8.6
$9.4
$10.3
2016
2015
2014
2013
2012
$1.1
$0.2
$0.5
$1.0
$1.8
2016
2015
2014
2013
2012
$3.1
$2.0
$2.3
$2.9
$3.4
Note: Adjusted profit attributable to shareholders is a non-GAAP financial measure. See “Use of non-GAAP Financial Measures” section on page 47
for further information.
2
Teck 2016 Annual Report | Every Day
Letter from the Chairman
Dr. Norman B. Keevil
Chairman of the Board
To the Shareholders
In this letter a year ago, I began by saying 2015 was the year the chickens came home to roost after the most volatile
pricing cycle for mined commodities in living memory. Commodity and share prices as well as mining company profits
were down across the industry. I expressed hope those chickens had almost finished roosting.
The recent “super-cycle” for mined commodities began a few years into the turn of the millennium. Chinese demand
for many of our industry’s products had grown steadily for two decades, ever since Deng Xiaoping had proclaimed
in 1980 that China would quadruple its GDP in 20 years. When he was asked what this would entail, his colleague
Hu Yaobang had responded that it would require an annual compounded growth rate of 7.2%. By the early 2000s it was
becoming evident to many in the Western world that, remarkably, China had in fact achieved Deng’s target, and was
continuing to grow.
As a result, China became the world’s largest single consumer of many of the commodities that Teck produces, including
metallurgical coal, copper and zinc. Prices naturally rose. By 2006 the price of copper in constant (inflation-adjusted)
dollars had reached its highest level since 1974, 32 years earlier. It would keep rising, except for a year’s hiatus after the
Global Financial Crisis (GFC), until it peaked in 2011. It was one of those “new eras” that we have seen occur from time
to time in the mining business.
The industry naturally responded with new or increased production in the ensuing years, as it always does when prices
climb. It is the Aristotelian nature of humanity that managers, as well as entrepreneurs, will rush in to fill any vacuum.
When that occurred, coincident with a sense that growth rates in China were slowing, prices naturally began to decline,
as they generally do. The second, downward leg of the super-cycle took hold. As a result, by the end of 2015 profits and
share prices across the mining industry had fallen dramatically. Woe was throughout the land.
Now, a year later, the situation has improved dramatically. Those chickens do appear to have finished roosting, at least
for now.
Some mining companies that a few years ago were declaring loudly they would increase production at all costs to
preserve market share, exacerbating the price problem for all, now seem to have rediscovered restraint. China itself is
continuing to move logically towards a more balanced economy, and is taking steps to reduce uneconomic overcapacity
in some materials. The industry at large has morphed to one that emphasizes reducing costs and excess debt, as it
generally does in such times.
By the end of 2016, commodity prices, profitability and share valuations had come back a long way for many industry
companies. Our own company achieved all-time record profits in the fourth quarter. Hope and optimism had returned,
tempered with caution as memories of recent difficulties persisted.
There is an interesting story that happened towards the end of 2009, as the world was recovering from the GFC. Bob,
an American friend who knew me socially but not professionally, told me his broker had put him into a Canadian stock a
year earlier. It had become one of the hottest stocks on the New York Exchange over the course of the year, making him
a bundle, and he asked if I’d ever heard of it. It was Teck Resources. Talk about “know your shareholders”.
Letter from the Chairman
3
Teck was again the best performing stock in 2016, this time on the Toronto Exchange. We received plaudits from traders
and it is tempting to bask in the glow. But we need to recognize that in both cases the amount of recovery was
proportional to the amount of lost value in the previous years.
In the earlier situation, Teck’s management did a yeoman’s job of dealing with it effectively and, within a year of the GFC,
the company was back in solid condition. Beginning early in 2016 Don Lindsay and his team, with the active assistance
of Board members, once again dealt with it effectively through ongoing cost control, refinancing near-term debt into
longer maturities, and buying back $1 billion of our outstanding bonds. We are continuing to focus on cost control, and
plan to continue deploying part of our operating cash flow to reduce debt further.
Historically, the problem with too high a debt load goes beyond the obvious one of survival in a crisis. Teck is in fine
shape in that respect. The more insidious one is the cost of lost opportunity, especially in weak economic times when
the best opportunities are most likely to occur. As I wrote here two years ago, each of our Hemlo gold, Bullmoose coal
and Antamina copper-zinc mines, transformational for the company at the time, were acquired and/or built in the middle
of a financial crisis, and each was possible because we were in a financial position to do so.
Now, we are fortunate to have the Fort Hills oil sands, and the Quebrada Blanca Phase 2 and NuevaUnión copper
projects as a similar part of our mining pipeline for the future. Fort Hills should be producing oil less than a year from
now, permitting and feasibility studies at Quebrada Blanca 2 are advancing well, and NuevaUnión should not be far
behind. But as we have seen, taking a mining project from discovery through permitting and into production takes time,
and it is never too early to be acting on early-stage, potential new projects that can augment that pipeline and be the
next tier of mines of the future. We can never rest on our ores.
So this is our plan: to continue controlling debt as well as costs at current operations, to focus all hands on deck to get
our existing portfolio of development projects off the ground (or out of it, to be more precise), and to seek out opportunities
to augment the pipeline cost-effectively with good prospects that may become the next generation of new mines. That
in a nutshell is how the company was built, and must go on.
And we must continue to do it professionally, as the partner of choice as well as the employer of choice within the industry
and the communities in which we operate.
In closing, I’m sorry to report that Jack Cockwell will be retiring from the Board at the upcoming AGM. Jack joined us in
the aftermath of the GFC and was a quiet but strong voice in the recovery. He has been a pleasure to work with and will
be missed, although I have a feeling he will still be as close as the telephone as we go on.
Nominated to join the Board at the AGM is Una Power from Calgary, who brings a strong knowledge of finance and the
oil business from her years as Chief Financial Officer of Nexen Energy. Una will continue the renewal process of the past
few years that has seen several new directors with outstanding experience in finance and/or mining engineering add to
the depth of our Board.
On behalf of the Board of Directors,
Dr. Norman B. Keevil
Chairman
Vancouver, B.C., Canada
February 23, 2017
4
Teck 2016 Annual Report | Every Day
Letter from the CEO
Donald R. Lindsay
President and Chief Executive Officer
To the Shareholders
The year 2016 was one of extremes. After entering the year with commodity prices at historic lows during one of the
longest and deepest downturns in our industry’s history, we saw unprecedented rallies, particularly in steelmaking coal,
in the second half of the year. Today, it’s abundantly clear that the steps we took over the last five years to reduce costs,
increase efficiency and improve productivity positioned us well to create real benefits for our shareholders as the
markets improved.
At the beginning of the downturn, we set out a company-wide strategy focused on five key objectives that we believed
would allow us to emerge stronger from those difficult times — and we have delivered against each of them:
• We did not sell any core operating assets;
• We did not issue equity;
• We continued with our investment in Fort Hills;
• We maintained strong liquidity; and,
• We reduced debt.
We knew that if we remained focused on these objectives, our company would be better positioned than our competitors
when commodity markets improved. As a result, we are emerging from this cycle with all of our operating assets intact,
in a stronger financial position, and poised to deliver increased production per share.
While the market rally at the end of the year is fresh in our minds, the volatility we witnessed in 2016 was reflected
in the significant shifts in prices for our key commodities over short periods of time. In steelmaking coal, spot prices
ranged from historically low levels of US$74 per tonne in February to over US$300 per tonne in November. Our annual
average realized price rose by 24% to US$115 per tonne, compared to 2015. The increase was largely due to a number
of supply-side factors, and, as current coal prices have since come down from that peak, we still face a volatile price
environment. In copper, prices ranged from a low of US$1.96 per pound in January to a high of US$2.69 per pound in
November. Average prices fell by 11% to US$2.21 per pound, compared to last year. In zinc, prices again ranged from
US$0.66 per pound in January to US$1.32 per pound in November as the global zinc deficit finally took hold in the
market. Average prices rose by 9% to US$0.95 per pound, compared to 2015.
These significant price swings demonstrate the kind of volatility that is becoming the “new normal” for our industry,
with commodity cycles that have the potential to be faster moving and more extreme. This makes it more important
than ever that we build resilience into our business to weather the dramatic lows in the commodity price cycle, while
remaining ready to capitalize on high prices when they occur.
The tenet that has guided us through the downturn has been “controlling the controllable”: ensuring safety, remaining
focused on sustainability, driving down costs, controlling capital spending and maintaining strong production. In that
respect, our operations continued to perform well in 2016, with 11 of our 13 operations increasing production while
decreasing unit costs compared with a year ago. We also set a number of quarterly and year-to-date sales and production
records. This included achieving record annual production and sales of steelmaking coal of 27.6 million tonnes and
27.0 million tonnes, respectively, as well as record annual production of refined zinc and lead at Trail Operations.
Letter from the CEO
5
We generated significant free cash flow in 2016, particularly from our steelmaking coal and zinc operations. Our gross
profit before depreciation and amortization in 2016 was $3.8 billion, compared with $2.6 billion in 2015, with the increase
due mainly to higher commodity prices. One of our key objectives has been to reduce debt, and we are delivering on
that by applying some of the additional free cash flow from higher commodity prices to strengthen our balance sheet.
In just over 12 months, we reduced our debt by approximately US$1.1 billion, bringing our total debt down to $8.3 billion
at year-end. Our financial position and liquidity remain strong. At December 31, 2016, we had CAD$1.4 billion of cash
and US$3.0 billion (CAD$4.0 billion) of unused lines of credit, providing us with CAD$5.4 billion of liquidity. We will
continue to consider opportunities to opportunistically reduce debt.
We are close to adding a fourth major commodity to our business, with construction of the Fort Hills oil sands project
now surpassing 76% completion. Project execution is now effectively site-based, as the module program has been
completed and all remaining construction components are now substantially on-site. While the project has seen some
modest capital cost escalation, it remains on schedule to produce first oil in late 2017. The project’s economics are
robust, and significant free cash flow is expected over its 44-year mine life.
We remain focused on our core value of safety across every aspect of our business. In 2016, we reduced Total Reportable
Injury Frequency by approximately 13% compared with 2015, and we had zero fatalities. Lost-Time Injury Frequency fell by
11% and High-Potential Incidents by 12%. We continue to be vigilant in pursuing our vision of everyone going home safe
and healthy every day. This past year, we rolled out the fourth phase of our Courageous Safety Leadership program, and
we continue our focus on reducing High-Potential Incidents — those incidents that have the greatest potential to seriously
injure someone.
Our 2016 progress in sustainability was recognized by a number of prominent international ranking institutes. We were
named to the Dow Jones Sustainability World Index (DJSI) for the seventh consecutive year, and ranked as one of the
Best 50 Corporate Citizens in Canada by media and investment research firm Corporate Knights. Following the successful
completion of our first set of short-term goals in our Sustainability Strategy in 2015, we are now pursuing our next set of
short-term goals that will guide our progress through to 2020, with added focus on air quality and climate change.
Looking ahead, we will continue to stay focused on delivering on our production and cost targets for each of our
steelmaking coal and base metals business units in 2017. We will also continue to focus on improving operating excellence
and increasing our margins to take advantage of the current positive price environment — particularly in steelmaking coal.
In addition, following project optimization work in 2016, we will continue to advance permitting in light of the updated
feasibility study for our Quebrada Blanca Phase 2 project in 2017. We will also advance the NuevaUnión joint-venture project
in Chile with an emphasis on technical and exploration drilling, completion of a prefeasibility study, and community
relations. We will also continue to contribute to the successful completion of the Fort Hills oil sands project.
As previously announced, we had a number of senior executives retire in 2016, and I am pleased to say that the transition
to our new realigned organizational structure has been a smooth one. As part of these changes, Dale Andres, Senior
Vice President, Copper assumed responsibility for our zinc business, becoming Senior Vice President, Base Metals; Alex
Christopher was promoted to Senior Vice President, Exploration, Projects and Technical Services; and Robin Sheremeta
was promoted to Senior Vice President, Coal. The tremendous experience Dale, Alex and Robin bring to their new roles
has already proven beneficial as we navigated through a volatile 2016.
We have come a long way this year. Thanks to the hard work of our employees, we have come through some of the most
challenging market conditions in recent history and emerged stronger. By maintaining our focus every day on the factors
within our control — safety, sustainability, costs, productivity and efficiency — I know our team is ready to take advantage
of any opportunities and tackle any challenges that come our way in 2017.
Donald R. Lindsay
President and Chief Executive Officer
Vancouver, B.C., Canada
February 23, 2017
6
Teck 2016 Annual Report | Every Day
Responsibility
Health and Safety
Safety is a core value of our company and we believe all
incidents that could cause serious harm to our employees
and contractors are preventable. That is why we are
committed to providing strong leadership and resources
to our people so we can effectively manage health and
safety risks to ensure a safe workplace. Through leadership,
empowerment and continuous improvement, we know it
is possible to achieve our vision of everyone going home
safe and healthy every day.
In 2016, we continued to see improvements in our safety
performance and we had no fatalities. Total Reportable
Injury Frequency was reduced by approximately
13% compared with 2015. Lost-Time Injury Frequency
decreased by 11% and our High-Potential Incidents
(HPIs) were 12% lower compared to last year.
Additionally, we had a 23% reduction in medical aid
frequency, compared to 2015.
In early 2016, we conducted a company-wide safety
culture survey. The feedback we received from our people
has informed the development of the fourth phase of our
Courageous Safety Leadership (CSL) program, which
focuses on enhancing a positive culture of safety. The
launch of this next phase of CSL across our operations
and offices began in late 2016 and will be a major part of
our efforts in 2017.
Throughout the year, we continued to implement our
Occupational Health and Hygiene strategy. We completed
comprehensive occupational exposure risk assessments
at 10 operations and developed a company-wide standard
for hygiene programs. We plan to undertake additional
assessments in 2017.
In 2017, we will continue our focus on reducing HPIs by
continuing to advance our High-Potential Risk Control
strategy. We will also make improvements to our
occupational health and hygiene monitoring and exposure
controls to protect the longer-term health of workers.
Our People
Our nearly 10,000 employees and contractors worldwide
have expertise across a wide range of activities related
to mining and mineral processing, including exploration,
development, smelting, refining, safety, environmental
protection, product stewardship, recycling and research.
In response to the sustained downturn in commodity
markets, we began implementing workforce reductions
across our offices and operations in 2014, primarily
through attrition. In total, we reduced our labour force
by approximately 13% by the end of 2016.
In 2016, we continued to work towards strengthening
diversity across our company. We believe that a range of
backgrounds and perspectives allows for more informed
decision-making and, ultimately, a stronger company. As
part of our commitment to supporting an inclusive and
diverse workplace that recognizes and values difference,
we established a formal Inclusion and Diversity Policy
in 2016. Guided by this policy, we are implementing
initiatives and training programs to further enhance
inclusion and diversity at Teck, including working towards
increasing the number of women and Indigenous Peoples
in our workforce to better reflect the communities in
which we operate.
Sustainability
We produce materials that are essential to a modern,
sustainable society and help improve the quality of life
for people throughout the world. To do this responsibly,
we focus on meeting the expectations of communities,
Indigenous Peoples and others while taking into account
the broader environmental, social and economic context
in which we operate.
Our approach to responsible resource development is
outlined in our sustainability strategy, which sets short-
term goals out to 2020 and long-term goals stretching out
to 2030 in six areas of focus representing the most
significant sustainability issues and opportunities facing
our company: Water, Biodiversity, Energy and Climate
Change, Air, Our People, and Community.
In 2016, all of our operations, projects and exploration
sites continued to demonstrate a high level of social and
environmental performance. Our achievements in these
areas resulted in Teck being named to the Dow Jones
Sustainability World Index for the seventh consecutive
year, and we ranked as one of the Best 50 Corporate
Citizens in Canada by media and investment research
firm Corporate Knights.
Our 2016 Sustainability Report, to be released in April
2017, will cover a variety of material topics aligned with
our sustainability strategy, including Health and Safety of
our Workforce, Economic Performance and Contributions,
Water Management, Tailings and Mine Waste Management,
Relationships with Indigenous Peoples, Community
Engagement, and Emergency Preparedness.
Responsibility
7
Moving forward, we are focused on working to achieve
our 2020 goals, managing emerging risks and embracing
opportunities created by developing issues — such as the
transition to a low-carbon economy — and supporting
sustainable development on the world stage through the
SDGs and other frameworks.
More information on our sustainability strategy
and performance can be found on our website at
www.teck.com/responsibility.
Sustainability (continued)
We take into consideration external standards and best
practices in our governance of sustainability. Through our
membership and involvement with several external
organizations, we are able to contribute to, and engage
with, others on the development of best practice in areas
of sustainability performance and global sustainability
trends. This includes the United Nations Global Compact,
the International Council on Mining and Metals Sustainable
Development Framework, the Mining Association of
Canada’s Towards Sustainable Mining Initiative and the
United Nations Sustainable Development Goals (SDGs).
Teck is working to support progress on the SDGs. We
recognize that the mining industry has an opportunity to
contribute positively to all 17 SDGs. Teck has chosen to
focus on four goals in particular:
• Goal 3 — Ensure healthy lives and promote well-
being for all at all ages
• Goal 5 — Achieve gender equality and empower all
women and girls
• Goal 8 — Promote sustainable and inclusive
economies
• Goal 13 — Take urgent action to combat climate
change and its impacts
8 Teck 2016 Annual Report | Every Day
Management’s Discussion
and Analysis
Our business is exploring for, acquiring, developing and producing natural resources. We are organized into business
units focused on steelmaking coal, copper, zinc and energy. These are supported by our corporate offices, which
manage our corporate growth initiatives and provide marketing, administrative, technical, financial and other services.
Through our interests in mining and processing operations in Canada, the United States (U.S.), Chile and Peru, we are
the world’s second-largest seaborne exporter of steelmaking coal, an important producer of copper and one of the
world’s largest producers of mined zinc. We also produce lead, silver, molybdenum and various specialty and other
metals, chemicals and fertilizers. In addition, we own a 20% interest in the Fort Hills oil sands project and interests
in other oil sands assets in the Athabasca region of Alberta. We actively explore for copper, zinc and gold.
This Management’s Discussion and Analysis of our results of operations is prepared as at February 23, 2017 and
should be read in conjunction with our audited consolidated financial statements as at and for the year ended
December 31, 2016. Unless the context otherwise dictates, a reference to Teck, Teck Resources, the Company, us,
we, or our, refers to Teck Resources Limited and its subsidiaries including Teck Metals Ltd. and Teck Coal Partnership.
All dollar amounts are in Canadian dollars, unless otherwise stated, and are based on our consolidated financial
statements that are prepared in accordance with International Financial Reporting Standards (IFRS). In addition, we
use certain financial measures, which are identified throughout the Management’s Discussion and Analysis in this
report, that are not measures recognized under IFRS in Canada and do not have a standardized meaning prescribed by
IFRS or by Generally Accepted Accounting Principles (GAAP) in the U.S. See “Use of Non-GAAP Financial Measures”
on page 47 for an explanation of these financial measures and reconciliation to the most directly comparable financial
measures under IFRS.
This Management’s Discussion and Analysis contains certain forward-looking information and forward-looking
statements. You should review the cautionary statement on forward-looking information under the heading
“Cautionary Statement on Forward-Looking Information” on page 49, which forms part of this Management’s
Discussion and Analysis, as well as the risk factors discussed in our most recent Annual Information Form.
Additional information about us, including our most recent Annual Information Form, is available on our website at
www.teck.com, on the Canadian Securities Administrators website at www.sedar.com (SEDAR), and on the EDGAR
section of the United States Securities and Exchange Commission (SEC) website at www.sec.gov.
Management’s Discussion and Analysis
9
Business Unit Results
The table below shows a summary of our production of our major commodities for the last five years and estimated
production for 2017.
Five-Year Production Record and Our Estimated Production in 2017
Units in 000’s
(excluding steelmaking coal and molybdenum)
Principal Products
Steelmaking coal
million
tonnes
2012
2013
2014
2015
2016
estimate
2017(2)
24.7
25.6
26.7
25.3
27.6
27.5
tonnes
373
364
333
358
324
282
Copper (1)
Zinc
Contained in concentrate
Refined
Other Products
Lead
Contained in concentrate
Refined
Molybdenum contained
in concentrate
tonnes
tonnes
million
pounds
tonnes
tonnes
598
284
623
290
660
277
658
307
662
312
128
99
670
302
112
95
95
88
97
86
123
82
124
84
12.7
8.3
5.9
4.4
7.7
11.2
Notes:
(1) We include 100% of the production and sales from Quebrada Blanca and Carmen de Andacollo mines in our production and sales volumes,
even though we own 76.5% and 90%, respectively, 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 interest in Antamina.
(2) Production estimate for 2017 represents the mid-range of our production guidance.
10 Teck 2016 Annual Report | Every Day
Average commodity prices and exchange rates for the past three years, which are key drivers of our profit, are
summarized in the following table.
US$
CAD$
2016 % chg 2015 % chg 2014
2016 % chg 2015 % chg 2014
Steelmaking coal
(realized — $/tonne)
Copper (LME cash — $/pound)
Zinc (LME cash — $/pound)
Exchange rate (Bank of Canada)
US$1 = CAD$
CAD$1 = US$
115 +24%
93
-19%
115
153 +31%
117
-7%
126
2.21
0.95
1.33
0.75
-11%
2.49
-20%
3.11
2.94
-8%
3.19
-7%
3.43
+9%
0.87
-11%
0.98
1.26 +14%
1.11
+3%
1.08
+4%
1.28 +16%
1.10
-4%
0.78
-14%
0.91
Our revenues and gross profit before depreciation and amortization, and gross profit, by business unit for the past
three years are summarized in the following table.
Revenues
Gross Profit Before
Depreciation and Amortization(1)
Gross Profit (Loss)
($ in millions)
2016
2015
2014
2016
2015
2014
2016
2015
2014
Steelmaking coal
$ 4,144 $ 3,049 $ 3,335 $ 2,007 $ 906 $
920 $ 1,379 $
200 $ 208
Copper
Zinc
Energy
Total
2,007
2,422
2,586
3,147
2,784
2,675
2
4
3
788
984
2
931
1,177
805
3
779
3
190
830
(3)
426
655
(2)
678
649
–
$ 9,300 $ 8,259 $ 8,599 $ 3,781 $ 2,645 $ 2,879 $ 2,396 $ 1,279 $ 1,535
Note:
(1) Gross profit before depreciation and amortization is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” section for
further information.
Management’s Discussion and Analysis
11
Steelmaking Coal
In 2016, our steelmaking coal operations produced 27.6 million tonnes of steelmaking coal, with sales of 27.0 million
tonnes. The majority of our sales are to the Asia-Pacific region, with lesser amounts going primarily to Europe and the
Americas. Our current production capacity is approximately 28 million tonnes, and we have total proven and probable
reserves of 962 million tonnes of steelmaking coal.
During the third quarter of 2016, our Elkview Operations was granted an environmental assessment certificate for the
Baldy Ridge Extension project, which is expected to extend the life of the mine by approximately 23 years. Capital
spending for this project is currently estimated to be approximately $60 million over the next five years. First
steelmaking coal production from these mining areas is planned for early 2018. In 2015, our Fording River Operations
was granted all the necessary permits to begin mining the Swift area of Greenhills Ridge, which will extend the life of
the mine by approximately 25 years.
New five-year collective labour agreements were reached in 2016 at Fording River and Elkview operations, and a
four-year agreement was ratified at Coal Mountain Operations.
In 2016, our steelmaking coal business unit accounted for 44% of revenue and 53% of gross profit before depreciation
and amortization.
($ in millions)
Revenues
Gross profit before depreciation and amortization(1)
Gross profit
Production (million tonnes)
Sales (million tonnes)
2016
2015
2014
$
$
$
4,144
2,007
1,379
$
$
$
27.6
27.0
3,049
906
200
25.3
26.0
$
$
$
3,335
920
208
26.7
26.2
Note:
(1) Gross profit before depreciation and amortization is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” section for further information.
Operations
Gross profit before depreciation and amortization increased in 2016, primarily due to higher steelmaking coal prices.
Our average realized selling price in 2016 increased to US$115 per tonne, compared with US$93 per tonne in 2015
and US$115 per tonne in 2014. The results of our steelmaking coal business unit for 2016 were strongly affected by a
dramatic increase in prices in the fourth quarter.
Sales volumes of 27.0 million tonnes in 2016, a new record high, were 1.0 million tonnes higher than in 2015, mainly due
to strong market conditions arising from a combination of tightness in supply and robust demand in all market areas.
Our 2016 production of 27.6 million tonnes was up 2.3 million tonnes from 2015, primarily due to strong production performance
from the business unit. We set a new production record with annual records at our Elkview and Line Creek operations.
12 Teck 2016 Annual Report | Every Day
The cost of product sold in 2016, before transportation, depreciation and one-time collective agreement settlement
charges, was $43 per tonne, compared with $45 per tonne in 2015. This cost reduction was achieved through
significantly increased production rates, the impacts of initiatives undertaken to improve productivity, improved
maintenance and supply management, and lower energy prices, partially offset by the strengthening U.S. dollar on
some inputs. During the fourth quarter, we incurred one-time labour settlement charges of $49 million as a result
of new collective agreements at Fording River and Elkview operations.
Capital spending in 2016 included $38 million for sustaining capital, $33 million for major enhancements to increase
productive capacity and $277 million on stripping activities.
Elk Valley Water Management
We continue to implement the water quality management measures required by the Elk Valley Water Quality Plan
(the “Plan”), which was approved in the fourth quarter of 2014 by the B.C. Minister of Environment.
In 2016, we spent approximately $40 million towards implementation of the Plan and, in 2017, we expect to spend
approximately $100 million.
Our West Line Creek active water treatment facility is operating consistent with design parameters and in compliance
with permit limits. We are continuing to investigate an issue regarding selenium compounds in effluent. Work is
ongoing to assess the potential implications of this issue and, if associated environmental impacts are identified,
modifications to operating parameters or facilities may be required. The cost of modifications may be material.
Permitting of future mine expansions may be delayed, and design and construction of additional water treatment
facilities will likely be delayed while we determine the significance of the issue and how to address it. We are
reviewing the design of the proposed Fording River active water treatment facility, the next facility contemplated by
the Plan to ensure that the same selenium compound issue does not arise.
We expect that, in order to maintain water quality, water treatment will need to continue for an indefinite period after
mining operations end. The Plan contemplates ongoing monitoring of the regional environment to ensure that the
water quality targets set out in the Plan are in fact protective of the environment and human health, and provide
for adjustments if warranted by monitoring results. This ongoing monitoring, as well as our continued research into
treatment technologies, could reveal unexpected environmental implications or technical issues or advances
associated with potential treatment technologies that could increase or decrease both capital and operating costs
associated with water quality management.
Rail
Rail transportation of product from our five steelmaking coal mines in southeast B.C. to Vancouver port terminals is
provided under a 10-year agreement with Canadian Pacific Railway (CP Rail) that expires March 31, 2021. Most of
Teck’s eastbound coal deliveries to North American customers are shipped pursuant to an agreement with CP Rail.
The remaining portion of Teck’s eastbound coal deliveries are shipped via the Burlington Northern Santa Fe (BNSF)
railway. Our Cardinal River Operations in Alberta is served by Canadian National Railway, which transports our product
to ports on the west coast.
Ports
We maintain access to terminal loading capacity in excess of our planned 2017 shipments. Neptune Bulk Terminals,
in which we have a 46% ownership interest, received the final permit required for execution of a project to expand
steelmaking coal throughput capacity. Work is now underway to update engineering, which was previously suspended
in 2013, to increase throughput capacity to approximately 18.5 million tonnes. The potential for greater throughput is
being studied. If sanctioned in 2017, the project is scheduled to be completed by early 2020.
In addition, our contract with Westshore Terminals provides us with 19 million tonnes of annual capacity through to
March 2021, and we have contracted capacity at Ridley Terminals near Prince Rupert to provide for steelmaking coal
shipments from our Cardinal River Operations in Alberta.
Management’s Discussion and Analysis
13
Sales
Our steelmaking coal marketing strategy is focused on maintaining and building relationships with our traditional customers
while establishing new customers in markets where we anticipate long-term growth in steel production and demand for
seaborne steelmaking coal. In 2016, we continued to focus our marketing in areas with the greatest demand growth,
increasing sales to India and Vietnam, as well as increasing sales volume to areas such as Japan, Korea and Taiwan.
Markets
In late 2016, there was a dramatic increase in steelmaking coal prices due to tightness in supply. This was the result
of numerous factors, including: the implementation of production curtailments that began in 2014 that have depleted
global production capacity and inventories, a reduction in Chinese domestic production resulting from the
implementation of a 276-day operating policy for steelmaking coal mines, production disruptions at key Australian
mines, and increased seaborne demand from most market areas.
The benchmark price for our highest-quality products increased from US$81 per tonne in early 2016 to US$285 per
tonne for the first quarter of 2017. Spot price assessments trended up for most of 2016, starting after the Lunar New
Year holiday in China. After a short correction in May, price assessments resumed their progression upwards from
June and exceeded US$200 in mid-September, crossing US$300 in early November and then fell in December. As of
mid-February 2017, spot price assessments have dropped below the reported benchmark level by more than 45% at
approximately US$155 per tonne. The proportion of our steelmaking coal sales priced on a spot basis remained stable
in 2016 at approximately 60% of total volumes.
Market expectations are that global steel production and demand for steelmaking coal will continue to increase in
2017, but there is uncertainty on where prices will ultimately settle. The high price environment observed from
September to November 2016 encouraged increased supply from existing producers and a number of mine restarts.
While it is unclear how long the price correction that started in December will last, we are well positioned and
prepared to be highly successful in numerous future market scenarios.
The following graphs show key metrics affecting steelmaking coal sales: spot price assessments and quarterly
benchmark pricing, hot metal production (each tonne of hot metal, or pig iron, produced requires approximately
650–700 kilograms of steelmaking coal), and China’s steelmaking coal imports by source.
Daily Steelmaking Coal Assessments
Source: Argus
Hot Metal (Pig Iron) Production
Source: World Steel Association, National
Bureau of Statistics of China
China Steelmaking Coal Imports
Source: GTIS, China’s Customs
$350
$300
$250
$200
$150
$100
$50
2011
2012
2013
2014
2015
2016
1996
2000
2004
2008
2012
2016
1,200
1,000
800
600
400
200
0
Tonnes
80
70
60
50
40
30
20
10
2008
2010
2012
2014
2016
0
Tonnes
Spot price assessments
(US$ per tonne FOB Australia)
Quarterly benchmark
(US$ per tonne FOB Australia)
Rest of the world (tonnes in millions)
China (tonnes in millions)
Mongolia (tonnes in millions)
Seaborne (tonnes in millions)
14 Teck 2016 Annual Report | Every Day
Outlook
Steelmaking coal production in 2017 is expected to be between 27 and 28 million tonnes. As in prior years, annual
volumes produced will be adjusted if necessary to reflect market demand for our products. Meeting this production
target will require adequate rail and port service. Assuming that current market conditions persist, production from
2018 to 2020 is expected to remain similar to 2017, despite the closure of the Coal Mountain Operations in late 2017
as reserves become depleted in the current mining area.
We are expecting sales volumes in the first quarter of 2017 to be approximately 6.0 million tonnes. As steel mills draw
down on inventories built up in the fourth quarter, we are expecting sales to be weighted towards the back of the
quarter, with the result that we expect our first quarter realized price to be approximately 75% of the benchmark price.
Our sales volumes in the first quarter of each year are typically lower than other quarters in the year due to winter
weather-related issues and Lunar New Year holidays in China.
Vessel nominations for quarterly contract shipments are determined by customers and final sales and average prices
for the quarter will depend on product mix, market direction for spot priced sales and timely arrival of vessels, as well
as the performance of the rail transportation network and port loading facilities. Poor rail performance in the fourth
quarter of 2016 and in 2017 to date has reduced port inventories and has required production cutbacks as mine
inventories reached critical levels at some sites.
We intend to replace the approximately 2.25 million tonnes of annual steelmaking coal production from Coal Mountain
by increasing production at our other Elk Valley mines. We received permits in the latter half of 2016 to commence
mining in new areas at the Fording River, Elkview and Greenhills operations, which will extend the lives of these mines
and allow us to increase production. This will require some investment in the processing plants and the transfer of
mining assets from Coal Mountain in order to develop the recently permitted mining areas at each of the sites. The
strip ratios in these new areas will be higher as they are developed and we may require some additional mining
capacity to balance coal production targets.
With this additional mining activity, we expect our site costs in 2017 to be in the range of $46 to $50 per tonne
(US$35 to US$39). This range is higher than in 2016, primarily as the result of the efforts described above to maintain
total production after the closure of Coal Mountain, which will require use of additional equipment and labour. We also
anticipate increased costs for inputs, including diesel. Additionally, as we did in the fourth quarter of 2016, we plan to
spend funds as required to maximize production and sales in the current market environment, while maintaining
appropriate cost discipline.
Transportation costs in 2017 are expected to be approximately $35 to $37 per tonne (US$27 to US$29).
Strip ratios vary as mining progresses, and with the accelerated mining activity as described above, we expect our
overall mining costs to increase from 2016 levels and a higher proportion of mining costs are expected to relate to
capitalized stripping as we enter into the new mining areas at Fording River, Elkview, Greenhills and Line Creek
operations in preparation for the mine life extensions. As a result, we expect an increase in capitalized stripping from
$277 million in 2016 to $430 million in 2017.
Capital spending planned for 2017 also includes $140 million for sustaining capital and $120 million for major
enhancement projects, the latter of which largely relates to the initial development costs to enter into the new mining
areas mentioned above at our Elk Valley operations.
Management’s Discussion and Analysis
15
Copper
In 2016, we produced 324,200 tonnes of copper from our Highland Valley Copper Operations in B.C., our 22.5%
interest in Antamina in Peru, and our Quebrada Blanca and Carmen de Andacollo operations in Chile. Copper
production fell 9% from 2015, primarily due to lower grades and recoveries at Highland Valley Copper, partially
offset by higher grades and recoveries at Antamina.
In 2016, our copper operations accounted for 22% of our revenue and 21% of our gross profit before depreciation
and amortization.
Revenues
Gross Profit (Loss) Before
Depreciation and Amortization(1)
Gross Profit (Loss)
($ in millions)
2016
2015
2014
2016
2015
2014
2016
2015
2014
Highland Valley
Copper
Antamina
Carmen de
Andacollo
Quebrada Blanca
Duck Pond
Other
Total
$
750 $
999 $
943 $
268 $
449 $
419 $
86 $
278 $
627
634
659
409
412
450
305
304
401
229
–
–
442
288
53
6
504
375
96
9
86
24
–
1
86
(19)
(3)
6
164
118
16
10
(211)
(141)
9
–
1
(4)
(17)
6
265
373
(16)
67
(21)
10
$ 2,007 $ 2,422 $ 2,586 $
788 $
931 $ 1,177 $
190 $
426 $
678
Note:
(1) Gross profit before depreciation and amortization is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” section for
further information.
(000’s tonnes)
2016
2015
2014
2016
2015
2014
Production
Sales
Highland Valley Copper
Antamina
Carmen de Andacollo
Quebrada Blanca
Duck Pond
Total
119
97
73
35
–
324
152
88
73
39
6
358
121
78
72
48
14
333
122
95
73
35
–
325
150
87
72
40
8
357
124
78
74
49
13
338
16 Teck 2016 Annual Report | Every Day
Operations
Highland Valley Copper
Highland Valley Copper Operations is located in south-central B.C. We increased our interest in the mine to 100%
in the third quarter of 2016 by acquiring the remaining 2.5% minority stake. Gross profit before depreciation and
amortization was $268 million in 2016, compared to $449 million in 2015 and $419 million in 2014, resulting from
lower metal prices and a decline in sales volumes, despite significant operating cost reductions. Highland Valley
Copper’s 2016 production was 119,300 tonnes of copper in concentrate, compared to 151,400 tonnes in 2015 and
121,500 tonnes in 2014. The decrease was primarily due to lower copper grades and lower recoveries, partially offset
by higher mill throughput. Molybdenum production was 59% higher in 2016 at 5.4 million pounds, compared to
3.4 million pounds in 2015, primarily due to higher grades.
Ore is currently mined from the Valley, Lornex and Highmont pits. The transition to mining more of the lower grade
Lornex ores progressed during the final quarter of 2016 as the current high-grade phase of the Valley pit was exhausted.
Our labour agreement at Highland Valley Copper expired at the end of the third quarter of 2016 and negotiations
are ongoing.
As anticipated in the mine plan, production at Highland Valley Copper will vary significantly over the next few years
due to significant fluctuations in ore grades and hardness in the three active pits. The production plan relies primarily
on Lornex ore in 2017, supplemented by the similarly low-grade Highmont pit and lower grade sources in the Valley
pit, which is now in a heavier stripping phase over the next three to four years. Copper production in 2017 is
anticipated to be between 95,000 and 100,000 tonnes, with lower production in the first half of the year, before
gradually recovering in 2018 and 2019. Annual copper production from 2018 to 2020 is expected to be between
115,000 and 135,000 tonnes per year. Copper production is anticipated to return to above life of mine average levels
of 140,000 tonnes per year after 2020, through to the end of the current mine plan in 2026. Molybdenum production
in 2017 is expected to be approximately 9.0 to 9.5 million pounds contained in concentrate, before declining to
approximately 7.0 million pounds contained in concentrate annually from 2018 to 2020.
Antamina
We have a 22.5% share interest in Antamina, a copper-zinc mine in Peru. The other shareholders are BHP Billiton
plc (33.75%), Glencore plc (33.75%) and Mitsubishi Corporation (10%). In 2016, our share of gross profit before
depreciation and amortization was $409 million, compared with $412 million in 2015 and $450 million in 2014. Gross
profit in 2016 remained similar to a year ago as higher production and sales levels were offset by lower copper prices.
Antamina’s copper production (100% basis) in 2016 was 431,100 tonnes, compared to 390,600 tonnes in 2015, with
the increase primarily as a result of higher grades and recovery. Zinc production decreased by 16% to 198,000 tonnes
in 2016, primarily due to a lower portion of copper-zinc ore processed, partially offset by higher zinc grades and recoveries.
Molybdenum production totalled 10.3 million pounds, which was 134% higher than in 2015, due to higher grades.
Pursuant to a long-term streaming agreement made in 2015, Teck has agreed to deliver an equivalent to 22.5% of
payable silver sold by Compañía Minera Antamina S.A., using a silver payability factor of 90%, to a subsidiary of
Franco-Nevada Corporation (FNC). FNC pays a cash price of 5% of the spot price at the time of each delivery. In 2016,
approximately 4.4 million ounces of silver were delivered under the agreement. After 86 million ounces of silver have
been delivered under the agreement, the stream will be reduced by one-third.
In January 2016, a new labour agreement was ratified that expires in the third quarter of 2018.
Our 22.5% share of Antamina’s 2017 production is expected to be in the range of 88,000 to 92,000 tonnes of copper,
75,000 to 80,000 tonnes of zinc and approximately 2.0 million pounds of molybdenum in concentrate. Our share of
copper production is expected to be between 90,000 and 100,000 tonnes from 2018 to 2020. Zinc production is
expected to remain strong as the mine enters a phase with high zinc grades and a higher proportion of copper-zinc
ore processed. Our share of zinc production is anticipated to average 80,000 tonnes per year during the same 2018
to 2020 period; however, annual production will fluctuate due to feed grades and the amount of copper-zinc ore
processed, as anticipated in the mine plan. Our share of annual molybdenum production is expected to be between
2.5 and 3.0 million pounds between 2018 and 2020.
Management’s Discussion and Analysis
17
Carmen de Andacollo
We have a 90% interest in the Carmen de Andacollo mine in Chile, which is located in the Coquimbo Region of central
Chile. The remaining 10% is owned by Empresa Nacional de Minería (ENAMI), a state-owned Chilean mining company.
Gross profit before depreciation and amortization was $86 million in 2016, the same as in 2015, and $164 million in 2014.
Despite lower copper prices in 2016, gross profit was unchanged as a result of our cost reduction initiatives.
Carmen de Andacollo produced 69,500 tonnes of copper contained in concentrate in 2016, similar to 2015. Copper
cathode production was 3,700 tonnes in 2016, compared with 4,700 tonnes in 2015. Gold production, on a 100%
basis, of 53,300 ounces was 12% higher than production of 47,600 ounces in 2015, with 100% of the gold produced
for the account of RGLD Gold AG (RGLDAG), a wholly owned subsidiary of Royal Gold, Inc., pursuant to an agreement
made in 2015. RGLDAG pays a cash price of 15% of the monthly average gold price at the time of each delivery.
Consistent with the mine plan, copper grades are expected to continue to gradually decline in 2017 and in future
years, which we expect to largely offset with planned throughput improvements in the mill. Carmen de Andacollo’s
production in 2017 is expected to be similar to 2016 and in the range of 68,000 to 72,000 tonnes of copper in
concentrate and 3,000 to 4,000 tonnes of copper cathode. Copper concentrate production is expected to be in the
range of 65,000 to 70,000 tonnes for the subsequent three-year period, with cathode production volumes uncertain
past 2017, although there is potential to extend.
Quebrada Blanca
Quebrada Blanca is located in the Tarapacá Region of northern Chile. We own a 76.5% interest in Quebrada Blanca.
The other shareholders are Inversiones Mineras S.A. (13.5%) and ENAMI (10%). ENAMI’s interest is a carried interest
and, as a result, ENAMI is generally not required to contribute further funding to Quebrada Blanca. The operation
mines ore from an open pit and leaches the ore to produce copper cathodes via a conventional solvent extraction and
electrowinning (SX-EW) process.
Quebrada Blanca’s gross profit before depreciation and amortization was $24 million in 2016, compared with a gross
loss before depreciation and amortization of $19 million in 2015 and a gross profit before depreciation and amortization
of $118 million in 2014. The improvement in 2016 was primarily due to significant reductions in operating costs
compared to 2015, partially offset by lower copper prices and declining copper cathode production and sales volumes.
In 2016, Quebrada Blanca produced 34,700 tonnes of copper cathode, compared to 39,100 tonnes in 2015, with the
reduction primarily as a result of ore availability and declining ore grades as the supergene deposit is depleted.
During the third quarter of 2016, we received our updated environmental permits for the existing facilities. During the
first quarter of 2017, the agglomeration circuit will be halted with all remaining supergene ore sent to the dump
leach circuit, further reducing operating costs, although with a longer leaching cycle. Work is continuing on
optimizing the mine plan based on the lower operating cost profile and current copper price. Opportunities to
recover additional copper from previously processed material continue to be evaluated.
In February 2017, we extended the life of two of the three labour agreements at Quebrada Blanca into the first quarter
of 2019, leaving only one labour agreement expiring in 2017 at the end of November.
We expect production of approximately 20,000 to 24,000 tonnes of copper cathode in 2017. Future production plans
will depend on copper prices and further cost reduction efforts, although we currently anticipate cathode production
to continue until mid-2019 at reduced cathode production rates as the supergene deposit is exhausted.
Quebrada Blanca Phase 2
In early 2017, we completed an updated feasibility study on our Quebrada Blanca Phase 2 project, which incorporates
recent project optimization and certain scope changes, including a revised tailings facility located closer to the mine.
This project has the potential to be a large-scale, long-life copper asset for Teck in the stable mining jurisdiction of Chile,
with a large resource base and the potential to significantly extend the mine life beyond the feasibility case. The project
is expected to generate strong economic returns with all-in cash costs very well placed on the cost curve. Sustaining
capital is expected to be quite low for this project due to the low strip ratio and shorter initial mine life of 25 years,
hence a reduced need for replacement mobile equipment. Annual tailings construction costs are included as operating
costs, with minimal sustaining capital requirements. Major process equipment as well as infrastructure, such as the
18 Teck 2016 Annual Report | Every Day
water supply pipeline from the coast, have been designed to last the life of mine without significant capital investment.
The project is currently undergoing environmental permitting, with permit approval anticipated in early 2018.
The updated study estimates a capital cost for the development of the project on a 100% basis of US$4.7 billion (in
first quarter of 2016 dollars, not including working capital or interest during construction), of which our funding share
would be US$4.0 billion. This compares to the 2012 feasibility study estimate of US$5.6 billion (in January 2012 dollars).
The study is based upon an initial mine life of 25 years, consistent with the capacity of the new tailings facility.
The mine plan includes 1.259 billion tonnes of proven and probable mineral reserves grading 0.51% copper and
0.019% molybdenum. The project scope includes the construction of a 140,000 tonne-per-day concentrator and
related facilities connected to a new port facility and desalination plant by 165 kilometre-long concentrate and
desalinated water pipelines.
The project contemplates annual production of 275,000 tonnes of copper and over 7,700 tonnes of molybdenum in
concentrate for the first full five years of mine life. On the basis of copper equivalent production of approximately
301,000 tonnes per year over the first full five years of mine life this equates to a capital intensity of less than
US$16,000 per annual tonne.
As part of the regulatory process, we submitted the Social and Environmental Impact Assessment to the Region of
Tarapacá Environmental Authority in the third quarter of 2016. A decision to proceed with development would be
contingent upon regulatory approvals and market conditions, among other considerations. Given the timeline of the
regulatory process, we do not expect to be in a position to consider such a decision before mid-2018. Assuming a
mid-2018 full construction start, the project schedule anticipates first ore processed in the latter half of 2021.
NuevaUnión (formerly Project Corridor)
In October 2016, work began on a pre-feasibility study concurrently with early and ongoing engagement with Indigenous
Peoples and non-Indigenous communities to gather feedback and help inform project design. In addition, the first
environmental baseline campaign was completed in December 2016. Planned 2017 activities include 16,750 metres
of technical drilling on the Relincho and La Fortuna (El Morro) deposits in support of the studies. We expect to complete
the pre-feasibility study at the end of the third quarter of 2017.
Other Copper Projects
In 2016, we completed a prefeasibility study at the Zafranal copper-gold project, located in southern Peru. The project
is held by Compañía Minera Zafranal S.A.C. In January 2017, we increased our ownership of Compañía Minera Zafranal
S.A.C. to 80% through an acquisition of all of the outstanding shares of AQM Copper Inc., not already owned by us.
The remaining 20% share is held by Mitsubishi Materials Corporation. Additional drilling and a feasibility study are
planned to start in 2017 along with additional community engagement activities, environmental studies and archeological
studies, and permitting work necessary to prepare and submit an Environmental Impact Assessment.
Markets
Copper prices on the London Metal Exchange (LME) averaged US$2.21 per pound in 2016, down US$0.28 per pound
or 11% from the average of 2015. Copper was the worst performer of all the LME metals through the first 10 months
of 2016, before rebounding in early November back above US$2.50 per pound.
Global demand for copper metal grew by 2.0% in 2016 to reach an estimated 22.3 million tonnes. Copper consumption
growth was lower than initially projected, but at 2.0% was higher than the 1.3% growth rate in 2015. Stronger than
expected construction and automotive growth have partially offset declines in manufacturing. Demand growth in both
the U.S. and Europe was above previous forecasts on better automotive sales, while a stronger U.S. dollar has had an
impact on U.S. manufacturing exports. The availability of copper scrap remains constrained, with imports of scrap into
China down an estimated 8% in 2016.
Copper stocks on the LME rose by 36% to 322,000 tonnes in 2016, while Shanghai stocks fell by 18% to 147,000
tonnes and COMEX warehouse stocks increased 18% to 76,000 tonnes. Combined exchange stocks increased
66,850 tonnes during the year and ended the year at 544,200 tonnes. Total reported global stocks — including producer,
consumer, merchant and terminal stocks — stood at an estimated 22 days of global consumption versus the 25-year
average of 28 days.
Management’s Discussion and Analysis
19
In 2016, global copper mine production increased 3.8% to reach 19.9 million tonnes. Operational issues at copper
mines had less of an impact on mine production in 2016 than in years past, with estimates of only 2.7% net production
lost over initial projections. While the pace of disruptions increased in the second half of 2016, several mines achieved
higher than projected output during the year by adjusting mine plans, high-grading, and increasing throughput to keep
costs down. Mine production growth is expected to slow in 2017 after two years of above-trend growth. According to
Metal Bulletin, copper spot treatment charges have fallen from US$103 per tonne in July 2016 to US$83 per tonne by
the end of the year. Market fundamentals remain positive over the medium to long term, with supply constrained by
lower grades, ongoing operational difficulties, and project delays or deferrals due to low prices during most of 2016.
In China, estimated copper mine production in 2016 fell 4.5% compared to 2015 levels, while refined production
increased 13.1% over the previous year. This was achieved through a 27% increase in imported concentrates into
China in the first 11 months of 2016, setting a new record for concentrate imports of 4.4 million tonnes of copper
contained in concentrate.
Wood Mackenzie, a commodity research consultancy, is forecasting a 0.7% decrease in base case global mine
production in 2017 to 19.8 million tonnes. Scrap supply is expected to remain constrained through 2017 following a
year of weak manufacturing production.
With global copper metal demand projected by Wood Mackenzie to increase by 2.1% in 2017, projected supply is now
expected to be slightly below demand, placing the refined market in a small deficit in 2017.
Copper Price and LME Inventory
Source: LME
Global Demand for Copper
Source: ICSG, Wood Mackenzie
Global Copper Inventories
Source: ICSG, LME, CME, SHFE
1,400
1,200
1,000
800
600
400
200
0
Tonnes
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
750
600
450
300
150
25
20
15
10
5
35
30
25
20
15
10
5
2011
2012
2013
2014
2015
2016
0
Tonnes
1996
2000
2004
2008
2012
2016
0
0
Tonnes Days
2011
2012
2013
2014
2015
2016
LME inventory (tonnes in thousands)
Copper price (US$ per pound)
Rest of the world (tonnes in millions)
China (tonnes in millions)
Inventories (tonnes in thousands)
Days of global consumption
25-year average days inventory
Outlook
We expect 2017 copper production to be in the range of 275,000 to 290,000 tonnes, a decline of approximately
13% from 2016 production levels. The lower production is primarily due to continued lower grades and recoveries at
Highland Valley Copper and further planned production declines at Quebrada Blanca as it nears the end of its life for
the supergene deposit.
In 2017, we expect our copper unit costs to be in the range of US$1.75 to US$1.85 per pound before margins from
by-products and US$1.40 to US$1.50 per pound after by-products based on current production plans, by-product
prices and exchange rates.
We expect copper production to be in the range of 280,000 to 300,000 tonnes from 2018 to 2020.
20 Teck 2016 Annual Report | Every Day
Zinc
We are one of the world’s largest producers of mined zinc, primarily from our Red Dog Operations in Alaska, as a
co-product from the Antamina copper mine in northern Peru, and from our Pend Oreille mine in Washington state.
Our metallurgical complex in Trail, B.C. is one of the world’s largest integrated zinc and lead smelting and refining
operations. In total, we produced 661,600 tonnes of zinc in concentrate, while our Trail Operations produced a record
311,600 tonnes of refined zinc in 2016.
In 2016, our zinc business unit accounted for 34% of revenue and 26% of gross profit before depreciation and amortization.
Revenues
Gross Profit (Loss) Before
Depreciation and Amortization(1)
Gross Profit (Loss)
($ in millions)
2016
2015
2014
2016
2015
2014
2016
2015
2014
Red Dog
$ 1,444 $ 1,220 $ 1,240 $
749 $ 600 $
638 $ 668 $
537 $ 574
Trail Operations
2,049
1,847
1,699
241
Pend Oreille
Other
77
7
47
7
–
11
Inter-segment
(430)
(337)
(275)
–
(6)
–
205
(9)
9
–
142
–
(1)
–
178
(10)
(6)
–
124
(15)
9
–
76
–
(1)
–
Total
$ 3,147 $ 2,784 $ 2,675 $ 984 $ 805 $
779 $
830 $
655 $ 649
Note:
(1) Gross profit before depreciation and amortization is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” section for further
information.
Production
Sales
(000’s tonnes)
2016
2015
2014
2016
2015
2014
Refined zinc
Trail Operations
Contained
in concentrate
Red Dog
Pend Oreille
Copper business unit(1)
Total
312
307
277
312
308
277
583
34
45
662
567
31
60
658
596
–
64
660
600
34
43
677
613
31
62
706
594
–
63
657
Note:
(1) Includes zinc production from Antamina and Duck Pond (closed in 2015).
Management’s Discussion and Analysis
21
Operations
Red Dog
Red Dog Operations, located in northwest Alaska, is one of the world’s largest zinc mines. Red Dog’s gross profit
before depreciation and amortization in 2016 was $749 million, compared with $600 million in 2015 and $638 million
in 2014. Gross profit increased from a year ago, primarily due to higher zinc and lead prices.
In 2016, zinc production at Red Dog increased to 583,000 tonnes compared to 567,000 tonnes in 2015, primarily due
to increased mill throughput with softer ores processed. Lead production in 2016 rose to 122,300 tonnes, compared
to 117,600 tonnes in 2015, primarily due to higher mill throughput.
Planned activities in 2017 will include an US$18 million exploration drilling program, with associated study work focused
on extending the life of Red Dog past 2031. In addition, a feasibility study is in progress that aims to increase the mill
throughput rate to help offset future grade declines and harder ores anticipated in the current mine plan.
Red Dog’s location exposes the operation to severe weather and winter ice conditions, which can significantly affect
production, sales volumes and operating costs. In addition, the mine’s bulk supply deliveries and all concentrate
shipments occur during a short ocean shipping season that normally runs from early July to late October. This short
shipping season means that Red Dog’s sales volumes are usually higher in the last six months of the year, resulting
in significant variability in its quarterly profit, depending on metal prices.
In accordance with the operating agreement governing the Red Dog mine between Teck and NANA Regional Corporation,
Inc. (NANA), we pay a 30% royalty on net proceeds of production to NANA. This royalty increases by 5% every fifth
year to a maximum of 50%, with the next adjustment to 35% occurring in October 2017. The NANA royalty charge in
2016 was US$213 million, compared with US$137 million in 2015. NANA has advised us that it ultimately shares
approximately 64% of the royalty, net of allowable costs, with other Regional Alaska Native corporations pursuant to
section 7(i) of the Alaska Native Claims Settlement Act.
A payment in lieu of taxes (PILT) agreement between Teck Alaska and the North West Arctic Borough (the last regional
municipality) expired December 31, 2015. Prior to the expiry of the PILT agreement, the Borough enacted a new tax
ordinance, imposing a severance tax that would have significantly increased local taxes paid by Teck Alaska. Teck Alaska
filed a legal complaint challenging the legality of the severance tax and seeking to compel the Borough to engage in
good faith negotiations with respect to a new PILT agreement. Early in 2017, Teck Alaska and the Borough agreed on
a term sheet, with respect to the terms of a new 10-year PILT agreement. Under the terms contemplated by the term
sheet, PILT payments to the Borough, based on the assessed property value of the mine, would increase by
approximately 30%. In addition, Teck Alaska would make annual payments based on mine profitability to a separate
fund aimed at social investment in villages in the region. This agreement is subject to approvals by the Borough and
Teck Alaska and will not be effective until a definitive PILT agreement and related documents are settled.
Red Dog’s production of contained metal in 2017 is expected to be in the range of 545,000 to 565,000 tonnes of zinc
and 110,000 to 115,000 tonnes of lead. From 2018 to 2020, Red Dog’s production of contained metal is expected to
be in the range of 500,000 to 525,000 tonnes of zinc and 85,000 to 115,000 tonnes of lead.
Pend Oreille
Pend Oreille, located in Washington state, achieved zinc production of 34,100 tonnes in 2016, compared to 30,700
tonnes in 2015.
The current mine plan sustains the operation through to early 2018, although there is still significant potential to extend
the mine life. We identified high-potential areas in the currently producing East Mine area and initiated a major
exploration and drilling program during 2016, which will continue in 2017.
We expect 2017 production to be between 35,000 and 40,000 tonnes of zinc in concentrate. Production rates beyond
2017 are uncertain, although the potential exists to extend the mine life at similar rates for several more years.
22
Teck 2016 Annual Report | Every Day
Trail Operations
Our Trail Operations in B.C. is one of the world’s largest fully integrated zinc and lead smelting and refining complexes.
It also produces a variety of precious and specialty metals, chemicals and fertilizer products. Teck also has a two-thirds
interest in the Waneta hydroelectric dam as well as 100% ownership of the related transmission system. The Waneta
Dam provides low-cost, clean, renewable power to the metallurgical operations.
Trail Operations contributed $241 million to gross profits before depreciation and amortization in 2016, compared with
$205 million in 2015 and $142 million in 2014. The increase was primarily due to higher zinc prices and record
production in 2016.
Refined zinc production in 2016 was an annual record of 311,600 tonnes, compared with 307,000 tonnes the previous
year, primarily due to higher plant availability. Refined lead production also set a new annual record of 99,200 tonnes,
up from 83,500 tonnes in 2015. Silver production rose slightly to 24.2 million ounces in 2016 from 23.5 million ounces
in 2015.
Our recycling process treated 45,500 tonnes of material during the year, and we plan to treat about 43,000 tonnes in
2017. Our focus remains on treating lead acid batteries and cathode ray tube glass, plus small quantities of zinc alkaline
batteries and other post-consumer waste through our recycling program.
In November 2016, we announced that we would invest $174 million in the installation of a second new acid plant to
improve efficiency and environmental performance at Trail Operations. Construction is expected to start in the first
quarter of 2017, with the plant becoming operational in the summer of 2019.
In 2017, we expect Trail Operations to produce in the range of 300,000 to 305,000 tonnes of refined zinc, approximately
95,000 tonnes of refined lead and 23 to 25 million ounces of silver. Zinc and lead production from 2018 to 2020 is
expected to remain at similar levels, while silver production is dependent on the amount of silver contained in the
purchased concentrates.
Other Zinc Projects
In October 2016, we announced an agreement to increase our interest to 100% in the Teena/Reward zinc project by
acquiring the outstanding 49% interest held by Rox Resources Limited. The transaction closed in the first quarter of
2017. Teena is located eight kilometres west of the McArthur River Mine in the Northern Territory of Australia.
Markets
Zinc prices on the LME averaged US$0.95 per pound for the year, up US$0.08 per pound or 8.6% from the 2015 average.
Global mine production fell by 6.7% in 2016 to 12.3 million tonnes of contained zinc, while global smelter production
fell by 0.2% to 13.7 million tonnes. As a result, we believe that the global concentrate market recorded a significant
deficit in 2016, equivalent to 6.8% of global mine production. According to Wood Mackenzie, zinc spot treatment
charges fell from US$200 per tonne in 2015 to US$40 per tonne by the end of 2016.
In China, estimated zinc mine production in 2016 remained relatively flat over 2015, with Wood Mackenzie estimating
an increase of 1.7% to 4.2 million tonnes. Chinese smelter production is estimated to have increased 17% in 2016 to
just over 6.9 million tonnes. China had been able to import 50% more concentrates in 2015 over 2016, building stockpiles
for their new smelter capacity. In 2016, Chinese concentrate imports dropped 41%, forcing Chinese smelters to draw
down on the 2015 stocks as the concentrate market tightened.
In 2016, global refined zinc metal demand increased 2.7% over 2015 levels to 14.3 million tonnes. During 2016, trade
actions by the U.S. government against subsidized imports of coated steels from several countries, including China,
Italy and South Korea, have resulted in a 13% reduction in imports of galvanized steel sheet into the U.S., helping to
increase demand for refined zinc in our key North American markets.
LME stocks fell by 36,550 tonnes in 2016, a 7.9% decline from 2015 levels, finishing the year at 427,850 tonnes and
then dropping below 400,000 tonnes in January 2017. We estimate that total reported global stocks — which include
producer, consumer, merchant and terminal stocks — fell by approximately 87,700 tonnes in 2016 and, at year-end, were
1.1 million tonnes, representing an estimated 29 days of global demand, compared to the 25-year average of 42 days.
Management’s Discussion and Analysis
23
Wood Mackenzie estimates that refined zinc production will be limited to a 3% increase over 2016 levels, to 14.1 million
tonnes, and that the refined metal market will remain in deficit with global consumption estimated to grow by 2% to
14.6 million tonnes. Global zinc mine production is expected to grow to 13.6 million tonnes, largely attributable to Indian
mine production returning to normal levels in 2017, higher zinc production from Antamina, an 8% increase in Chinese
mine production, and the potential restart of the Glencore zinc mines in the second half of 2017. Global smelter capacity
will increase in 2017; however, refined production of zinc metal will again be limited by a lack of concentrates, despite
the increases to mine production noted above.
Wood Mackenzie is also forecasting an increase in global zinc refined metal demand in 2017 of 2.1% to 14.6 million tonnes,
keeping the refined market in deficit and further reducing global stockpiles of zinc metal.
Zinc Price and LME Inventory
Source: LME
Global Demand for Zinc
Source: ILZSG, Wood Mackenzie
Global Zinc Inventories
Source: ILZSG, LME, SHFE
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
1,400
1,200
1,000
800
600
400
200
0
Tonnes
2011
2012
2013
2014
2015
2016
20
16
12
8
4
60
50
40
30
20
10
1996
2000
2004
2008
2012
2016
0
0
Tonnes Days
2011
2012
2013
2014
2015
2016
2,200
1,925
1,650
1,375
1,100
825
550
275
0
Tonnes
LME inventory (tonnes in thousands)
Zinc price (US$ per pound)
Rest of the world (tonnes in millions)
China (tonnes in millions)
Inventories (tonnes in thousands)
Days of global consumption
25-year average days inventory
Outlook
We expect zinc in concentrate production in 2017, including co-product zinc production from our copper business
unit, to be in the range of 660,000 to 680,000 tonnes.
For the 2018 to 2020 period, we expect total zinc in concentrate production to be in the range of 580,000 to 605,000 tonnes
excluding Pend Oreille, which has an uncertain production profile beyond 2017.
24 Teck 2016 Annual Report | Every Day
Energy
Located in the Athabasca oil sands region of northeastern Alberta, our energy assets include a 20% interest in the
Fort Hills oil sands project, a 100% interest in the Frontier oil sands project and a 50% interest in various other oil
sands leases in the exploration phase, including the Lease 421 Area.
Our proved and probable reserves totalled 573 million barrels from Fort Hills and our best estimate of unrisked
contingent bitumen resources totalled 3.2 billion barrels from Frontier at the end of 2016. These valuable long-term
assets are located in a politically stable jurisdiction and are expected to be mined using conventional technologies that
build on our core skills in large-scale truck and shovel operations.
We recognize that there are concerns over the potential environmental effects of developing oil sands projects. We
are researching methods to improve extraction and processing to enhance the sustainability of our projects. We are
proud to be one of the founding members of Canada’s Oil Sands Innovation Alliance (COSIA) and are encouraged by
the progress of the industry towards improving environmental performance, reducing water consumption, improving
tailings management, and increasing land reclamation and revegetation.
The disclosure regarding our oil sands assets includes references to reserves and contingent bitumen resource
estimates. Further information about these resource estimates, the related risks and uncertainties, and contingencies
that prevent the classification of resources as reserves is set out on page 50 under the heading “Contingent Resource
Disclosure”. For further information about these reserve estimates, see our most recent Annual Information Form,
which is available on our website at www.teck.com, on the Canadian Securities Administrators website at www.sedar.com
(SEDAR), and under cover of Form 40-F on the EDGAR section of the Securities Exchange Commission (SEC)
website at www.sec.gov.
Fort Hills Oil Sands Project
The Fort Hills oil sands project is located in northern Alberta. We hold a 20% interest in the Fort Hills Energy Limited
Partnership (Fort Hills Partnership), which owns Fort Hills, with 29.2% held by Total E&P Canada Ltd. (Total) and the
remaining 50.8% held by Suncor Energy Inc. (Suncor). An affiliate of Suncor is the operator of the project.
Suncor has provided an update regarding its recently completed review of schedule, project costs and throughput.
Suncor advises that the review, at this advanced stage of project development, provides a high degree of confidence
on schedule and project costs to completion. A review of the plant throughput conducted in parallel has confirmed
the steady state production target and expected ramp up. Suncor has announced an 8% increase in the nameplate
capacity to 194,000 barrels per day (100% basis). We anticipate an average production rate of 186,000 barrels per
day over the life of the project.
Management’s Discussion and Analysis
25
Construction at the end of 2016 has surpassed 76% of completion, with two of the six major project areas (mining
and infrastructure) turned over to operations. All major plant equipment and materials are on-site, and all major vessels
and process modules have been installed. Shovels, trucks and equipment are mobilizing for operations. As at December
31, 2016, 58% of operations personnel have been hired. Our share of capital expenditures for 2016 was $987 million.
The project remains on track to produce first oil in late 2017. The majority of project scope areas are progressing in line
with the original plan and budget, but effects of the 2016 Fort McMurray wild fire, as well as productivity challenges,
have caused an increase in the capital cost estimate for the secondary extraction facility. The revised total project
capital forecast is approximately 10% above the project sanction estimate, excluding foreign exchange impacts. Our
share of project capital costs through to completion (including foreign exchange) is now expected to be $805 million,
of which approximately $640 million will be spent in 2017. We recorded an impairment charge of $222 million in our
fourth quarter results that was triggered by an increase in the expected development costs for the project.
Oil production from the first of three secondary extraction units is still expected by the end of 2017. The other
two secondary extraction units are scheduled to be completed and commissioned in the first half of 2018, and it
is expected that production will reach 90% nameplate capacity by the end of 2018. Suncor is also exploring the
opportunity to reduce the ramp-up period.
Frontier Project
We hold a 100% interest in the Frontier project, which is located in northern Alberta. A federal-provincial hearing panel
is reviewing the environmental impact assessment for the project and other information filed to date. The regulatory
application review process for Frontier is continuing, with a federal-provincial hearing panel reviewing information filed
to date. This process is expected to continue through 2017, making 2018 the earliest a federal decision statement is
expected. Our expenditures on Frontier are limited to supporting this process. We are evaluating the future project
schedule and development options as part of our ongoing capital review and prioritization process.
As of December 31, 2016, our best estimate of unrisked contingent bitumen resources for the Frontier project is
approximately 3.2 billion barrels. The project has been designed for a total nominal production of approximately
260,000 barrels per day of bitumen. The Frontier contingent resources have been subcategorized as “development
pending” and “economically viable”. There is uncertainty that it will be commercially viable to produce any portion
of the resources.
Lease 421 Area
We hold a 50% interest in the Lease 421 Area, which is located east of the Fort Hills project in northern Alberta.
To date, a total of 89 core holes have been completed in the Lease 421 Area.
Wintering Hills Wind Power Facility
Wintering Hills Wind Power Facility is located near Drumheller, Alberta. At December 31, 2016, we held a 49% interest
in Wintering Hills with TransAlta Corporation, the current project operator, holding the remaining 51%. In January 2017,
we announced that we had entered into an agreement to sell our interest in Wintering Hills for $59 million. TransAlta
has also agreed to sell its interest pursuant to the same agreement. The transaction is expected to close in the first
quarter of 2017. Following closing, we will retain 265,000 tonnes of CO2-equivalent offset credits earned during our
ownership of the operation that will be used to reduce emissions from our Cardinal River Operations. During the sale
process, we recorded a $19 million charge ($26 million pre-tax) to earnings in the third quarter of 2016 to write down
our investment in Wintering Hills to the expected net realizable value.
26 Teck 2016 Annual Report | Every Day
Exploration
Throughout 2016, we conducted exploration around the world through our eight regional offices. Expenditures of
$51 million in 2016 were focused on copper, zinc and gold.
Exploration plays three critical roles at Teck: discovery of new orebodies through early stage exploration and acquisition;
pursuit, evaluation and acquisition of development opportunities; and delivery of geoscience solutions and services to
create value at our existing mines and development projects.
Our copper exploration is focused primarily on porphyry copper deposits and, during 2016, we continued to advance
porphyry copper projects in Canada, Chile, Peru, the United States and Turkey. Significant exploration work was again
focused in and around our existing operations and advanced projects in 2016. In 2017, we plan to drill several early
stage copper projects, and we will continue to explore around our existing operations and advanced projects.
Zinc exploration remains focused on four areas: the Red Dog mine district in Alaska, western Canada, northeastern
Australia, and Ireland. In Alaska, Australia and Canada, the targets are large, high-grade, sediment-hosted deposits
similar to major world-class deposits such as Red Dog in Alaska and Century or McArthur River in Australia. We
continued to drill on the Noatak project near our existing Red Dog mine, where we completed 11 kilometres of drilling
on high-quality targets with continued good results. Exploration programs will continue in these regions in 2017.
We have ongoing exploration for, and partnerships in, gold opportunities. Our plan is to explore, find and advance gold
resources through targeted exploration in select jurisdictions. Once an opportunity has been recognized, the strategy
is to optimize that opportunity or asset through further definition drilling and engineering studies, then capture value
through periodic divestitures. Our current exploration efforts and drill testing for gold are primarily focused in Turkey,
Canada and Peru.
In addition to exploring for copper, zinc and gold, we continue to support our steelmaking coal operations by providing
exploration and geoscience services to our existing operations and projects.
Management’s Discussion and Analysis
27
Financial Overview
Financial Summary
($ in millions, except per share data)
2016
2015
2014
Revenues and profit
Revenues
Gross profit before depreciation and amortization(1)
Gross profit
EBITDA(1)
Profit (loss) attributable to shareholders
Cash flow
Cash flow from operations
Property, plant and equipment expenditures
Capitalized production stripping costs
Investments
Balance sheet
Cash balances
Total assets
Debt, including current portion
Per share amounts
Profit (loss) attributable to shareholders
Dividends declared per share
$
$
9,300
3,781
$ 2,396
$
$
$
$
$
$
3,350
1,040
3,056
1,416
477
114
$
$
$
$
$
$
$
$
$
8,259
2,645
1,279
$
$
$
8,599
2,879
1,535
(1,633)
$ 2,348
(2,474)
$
362
1,962
1,581
663
82
$
$
$
$
2,278
1,498
715
44
$
1,407
$
1,887
$
2,029
$ 35,629
$ 34,688
$ 36,839
$ 8,343
$
9,634
$
8,441
$
$
1.80
0.10
$
$
(4.29)
0.20
$
$
0.63
0.90
Note:
(1) Gross profit before depreciation and amortization and EBITDA are non-GAAP financial measures. See “Use of Non-GAAP Financial Measures”
section for further information.
Our revenue and profit depend on the prices for the commodities we produce, sell and use in our production
processes. Commodity prices are determined by the supply of and demand for those commodities, which are
influenced by global economic conditions. We normally sell the products that we produce at prevailing market prices
or, in the case of steelmaking coal, at negotiated prices under term contracts or on a spot basis. Prices for our
products can fluctuate significantly and that volatility can have a material effect on our financial results.
28 Teck 2016 Annual Report | Every Day
Foreign exchange rate movements can also have a significant effect on our results and cash flows, as a substantial
portion of our operating costs are incurred in Canadian and other currencies, and most of our revenue and debt are
denominated in U.S. dollars. We determine our financial results in local currency and report those results in Canadian
dollars and, accordingly, our reported operating results and cash flows are affected by changes in the Canadian dollar
exchange rate relative to the U.S. dollar, as well as the Peruvian sol and Chilean peso.
In 2016, our profit attributable to shareholders was $1.0 billion, or $1.80 per share. This compares with a loss of
$2.5 billion or $4.29 per share in 2015, and a profit of $362 million or $0.63 per share in 2014. The changes are due
mainly to varying commodity prices and sales volumes, partially offset by the effect of the strengthening U.S. dollar
and our cost reduction initiatives. The results from 2015 also include $2.7 billion of after-tax impairment charges.
Our profit over the past three years has included items that we segregate for presentation to investors so that the
ongoing profit of the company may be more clearly understood. These are described below and summarized in the
table that follows.
In 2016, we recorded an impairment of our investment in the Fort Hills oil sands project as a result of increased
development costs. We also recorded asset impairments relating to a project at our Trail Operations and our interest in
the Wintering Hills Wind Power Facility. These non-cash charges totalled $294 million on a pre-tax basis and $217 million
on an after-tax basis.
In 2015, we recorded asset and goodwill impairment charges on a number of our operating assets, including our
investment in the Fort Hills project, the Carmen de Andacollo copper mine, the Pend Oreille zinc mine and a number
of our steelmaking coal mines, as a result of lowered expectations for commodity prices in both the short and long
term. These non-cash charges totalled $3.6 billion on a pre-tax basis and $2.7 billion on an after-tax basis. In 2014,
the only unusual item was a $58 million tax charge as a result of a Chilean tax reform bill being signed into law.
The table below shows the effect of these items on our profit.
($ in millions, except per share data)
2016
2015
2014
Profit (loss) attributable to shareholders as reported
$
1,040
$
(2,474)
$
362
Add (deduct) the after-tax effect of:
Asset sales and provisions
Foreign exchange (gains) losses
Debt repurchase gains
Debt prepayment options gain
Collective agreement charges
Impairments
Tax items and other items
Adjusted profit(1)
Adjusted earnings per share (1)
(53)
(45)
(44)
(84)
42
217
30
(107)
80
–
–
10
2,691
(12)
$
1,103
$
1.91
$
$
188
0.33
$
$
13
8
–
–
–
7
62
452
0.78
Note:
(1) Adjusted profit and adjusted earnings per share are non-GAAP financial measures. See “Use of Non-GAAP Financial Measures” section for
further information.
Cash flow from operations in 2016 was $3.1 billion, compared with $2.0 billion in 2015 and $2.3 billion in 2014. The
changes in cash flow from operations are mainly due to varying commodity prices and sales volumes, offset to some
extent by changes in the currency exchange rates.
At December 31, 2016, our cash balance was $1.4 billion. Total debt was $8.3 billion and our net-debt to net-debt-plus-
equity ratio was 28% at December 31, 2016, compared with 32% at December 31, 2015 and 25% at the end of 2014.
Management’s Discussion and Analysis
29
Gross Profit
Our gross profit is made up of our revenue less the operating, depreciation and amortization expenses at our
producing operations. Income and expenses from our business activities that do not produce commodities for sale
are included in our other operating income and expenses or in our non-operating income and expenses.
Our principal commodities are steelmaking coal, copper and zinc, which accounted for 44%, 20% and 19% of revenue
respectively in 2016. Silver and lead are significant by-products of our zinc operations, accounting for 7% and 6%,
respectively, of our 2016 revenue. We also produce a number of other by-products, including molybdenum, various
specialty metals, and chemicals and fertilizers, which in total accounted for 4% of our revenue in 2016.
Our revenue is affected by sales volumes, which are determined by our production levels and by demand for the
commodities we produce, commodity prices and currency exchange rates.
Our revenue was $9.3 billion in 2016, compared with $8.3 billion in 2015 and $8.6 billion in 2014. The increase in 2016
revenue was due mainly to higher steelmaking coal and zinc prices, higher sales volumes of steelmaking coal and zinc,
and a stronger U.S. dollar. The reduction in 2015 over 2014 was due mainly to lower commodity prices and marginally
lower sales volumes of steelmaking coal, partially offset by a stronger U.S. dollar.
Our cost of sales includes all of the expenses required to produce our products, such as labour, energy, operating
supplies, concentrates purchased for our Trail Operations’ refining and smelting activities, royalties, and marketing and
distribution costs required to sell and transport our products to various delivery points. Our cost of sales also includes
depreciation and amortization expense. Due to the geographic locations of many of our operations, we are highly
dependent on third parties for the provision of rail, port and other distribution services. In certain circumstances, we
negotiate prices and other terms for the provision of these services where we may not have viable alternatives to
using specific providers, or may not have access to regulated rate-setting mechanisms or appropriate remedies for
service failures. Contractual disputes, demurrage charges, rail and port capacity issues, availability of vessels and
railcars, weather problems and other factors can have a material effect on our ability to transport materials from our
suppliers and to our customers in accordance with schedules and contractual commitments.
Our costs are dictated mainly by our production volumes, by the costs for labour, operating supplies and concentrate
purchases, and by strip ratios, haul distances, ore grades, distribution costs, commodity prices, foreign exchange rates
and costs related to non-routine maintenance projects. Production volumes mainly affect our variable operating and
our distribution costs. In addition, production affects our sales volumes and, when combined with commodity prices,
affects profitability and, ultimately, our royalty expenses.
2016 Revenue by Business Unit
2016 Gross Profit by Business Unit
(Before depreciation and amortization)
2016 Revenue by Commodity
44%
Steelmaking
Coal
34%
Zinc
53%
Steelmaking
Coal
22%
Copper
44%
Steelmaking
Coal
26%
Zinc
21%
Copper
20%
Copper
19%
Zinc
6%
Lead
4%
Other
7%
Silver
30 Teck 2016 Annual Report | Every Day
Our cost of sales was $6.9 billion in 2016, compared with $7.0 billion in 2015 and $7.1 billion in 2014. Despite higher
sales volumes, our cost of sales decreased in 2016 from 2015, primarily due to our cost reduction program, partly
offset by the stronger U.S. dollar and its effect on costs at our foreign operations. Comparing 2015 with 2014, lower
costs were due primarily to our cost reduction program and the staggered three-week shutdowns at our steelmaking
coal operations, partly offset by the stronger U.S. dollar.
Other Expenses
($ in millions)
General and administration
Exploration
Research and development
Asset impairments
Other operating expense (income)
Finance income
Finance expense
Non-operating expense (income)
Share of losses (income) of associates
2016
2015
2014
$
99
51
30
294
197
(16)
354
(239)
(2)
$
108
$
119
76
47
3,631
335
(5)
316
89
2
60
29
12
267
(4)
304
21
3
$
768
$
4,599
$
811
Our general and administrative costs were reduced a further $9 million in 2016, following an $11 million reduction in
2015. The 17% decrease over the two years is the result of cost reduction measures at our head office.
We must continually replace our reserves as they are depleted in order to maintain production levels over the long
term. We try to do this through our exploration and development programs and through acquisition of interests in new
properties or in companies that own them. Exploration for minerals and oil is highly speculative and the projects
involve many risks. The vast majority of exploration projects are unsuccessful and there are no assurances that current
or future exploration programs will find deposits that are ultimately brought into production.
Our research and development expenditures are primarily focused on advancing our proprietary CESL hydrometallurgical
technology, the development of internal and external growth opportunities, and the development and implementation
of process and environmental technology improvements at operations.
During 2016, we recorded an impairment of our investment in the Fort Hills oil sands project as a result of increased
development costs. We also recorded asset impairments relating to a project at our Trail Operations and our interest in
the Wintering Hills Wind Power Facility. These charges totalled $294 million on a pre-tax basis and $217 million on an
after-tax basis and primarily related to Fort Hills. The economic model used in determining the amount of impairment
charges to record for Fort Hills used the current price in the initial year and transitioned to a longer-term price in years
three to five. The long-term assumption used in the Fort Hills model for Western Canadian Select (WCS) oil price was
US$57 per barrel. A 5.5% real, 7.6% nominal, post-tax discount rate was used to discount the Fort Hills cash flow
projections. The discount rate is based on the weighted average cost of capital for an oil sands peer group.
During 2015, we recorded asset and goodwill impairment charges on a number of our operating assets, including our
investment in the Fort Hills project, the Carmen de Andacollo copper mine, the Pend Oreille zinc mine and a number
of our steelmaking coal mines. These charges totalled $3.6 billion on a pre-tax basis and $2.7 billion on an after-tax
basis. The write-downs were triggered primarily by lowered expectations for commodity prices in both the short- and
long-term. The key inputs used in determining the recoverable amounts of these assets are outlined on pages 39 to 42
in this Management’s Discussion and Analysis.
Management’s Discussion and Analysis
31
The impairment charges were as follows:
($ in millions)
2016
2015
2014
Steelmaking coal operations and goodwill
Copper — Carmen de Andacollo and goodwill
Zinc — Pend Oreille
Energy — Fort Hills
Other
$
$
–
–
–
222
72
294
$
2,032
$
506
31
1,062
–
$
3,631
$
–
–
–
–
12
12
Other operating income and expenses include items we consider to be related to the operation of our business, such
as final pricing adjustments (which are further described in the next paragraph), share-based compensation, gains or
losses on commodity derivatives, gains or losses on the sale of operating or exploration assets, and provisions for
various costs at our closed properties. Significant items in 2016 included $171 million expense for share-based
compensation, $153 million of positive pricing adjustments, $106 million change in our decommissioning and reclamation
provisions, $48 million charge for take-or-pay contracts and $38 million of environmental costs. Significant items in
2015 included $280 million of negative pricing adjustments, $49 million of environmental costs and $13 million for
share-based compensation. Significant items in 2014 included $130 million of negative pricing adjustments, $52 million
of environmental costs and $12 million for share-based compensation.
Sales of metals in concentrate or copper cathodes are recognized in revenue on a provisional pricing basis when the
rights, obligations, risks and benefits of ownership pass to the customer, which usually occurs upon shipment. However,
final pricing is typically not determined until a subsequent date, often in the following quarter. Revenue in a quarter is
based on prices at the date of sale. These pricing adjustments result in gains in a rising price environment and losses in a
declining price environment, and are recorded as other operating income or expense. The extent of the pricing adjustments
also takes into account the actual price participation terms as provided in certain concentrate sales agreements. It should be
noted that these effects arise on the sale of concentrates, as well as on the purchase of concentrates at our Trail Operations.
The following table outlines our outstanding receivable positions, which were provisionally valued at December 31,
2016 and 2015, respectively.
Outstanding at
December 31, 2016
Outstanding at
December 31, 2015
(payable pounds in millions)
Pounds
US$/lb.
Pounds
US$/lb.
Copper
Zinc
114
231
2.50
1.17
257
162
2.13
0.73
Our finance expense includes the interest expense on our debt, financing fees and amortization, and the interest
components of our pension obligations and accretion on our decommissioning and restoration provisions, less any
interest that we capitalize against the cost of our development projects. Debt interest expense increased in 2016 due
to the effect of the stronger U.S. dollar, as all of our debt and related interest expense is U.S. dollar denominated. In
addition, fees for our letters of credit increased in 2016. These items were partially offset by an increase of our capitalized
interest, which totalled $266 million in 2016, compared with $222 million in 2015.
Non-operating income (expense) includes items that arise from financial and other matters and includes such items
as foreign exchange gains or losses, debt refinancing costs, gains or losses on the revaluation of debt prepayment
options, and realized gains or losses on marketable securities. In 2016, other non-operating expenses included
$113 million of gains on debt prepayment options, $46 million of foreign exchange gains, $49 million of gains on debt
repurchases and $34 million of gains on sale of investments. In 2015, other non-operating expenses included $21 million
for provisions on marketable securities and $76 million of foreign exchange losses. In 2014, other non-operating
expenses included $8 million for provisions on marketable securities and $9 million of foreign exchange losses.
32 Teck 2016 Annual Report | Every Day
Provision for income and resource taxes was $587 million, or 36% of pre-tax profits. This rate is higher than the
Canadian statutory rate of 26% primarily as a result of resource taxes, higher rates in foreign jurisdictions, inclusive of
the newly enacted Peruvian corporate tax increases, and the tax impact of impairments. These were partially reduced
by the lower effective tax rate on the gain on debt purchases. Due to available tax pools, we are currently shielded
from cash income taxes, but not resource taxes, in Canada. We remain subject to cash taxes in foreign jurisdictions.
Profit attributable to non-controlling interests relates to the ownership interests that are held by third parties in our
Quebrada Blanca, Carmen de Andacollo and Elkview operations.
Financial Position and Liquidity
Our financial position and liquidity have improved from our strong position at the beginning of the year. At December 31,
2016, we had $1.4 billion of cash and US$3.0 billion of unused lines of credit, providing us with $5.4 billion of liquidity.
Our outstanding debt was $8.3 billion at December 31, 2016, compared with $9.6 billion at the end of 2015 and
$8.4 billion at the end of 2014. The decrease is due primarily to the US$759 million of notes that we repurchased
and retired in September and October of 2016. A further US$34 million was repaid in January 2017. In total, in just
over 12 months, we have retired approximately US$1.1 billion of our term notes to take the principal outstanding
to US$6.1 billion.
Our debt positions and credit ratios are summarized in the following table:
Term notes face value
Unamortized fees and discounts
Other
Total debt (US$ in millions)
Canadian $ equivalent(1)
Less cash balances
Net debt
Debt to debt-plus-equity ratio(2)(3)
Net-debt to net-debt-plus-equity ratio(2)
Average interest rate
December 31, December 31, December 31,
2016
2015
2014
$
6,141
$ 6,900
$
7,200
(50)
122
(61)
122
(68)
144
$
6,213
$
6,961
$
7,276
$ 8,343
$
9,634
$
8,441
(1,407)
(1,887)
(2,029)
$
6,936
$
7,747
$
6,412
32%
28%
5.7%
37%
32%
4.8%
31%
25%
4.8%
Notes:
(1) Translated at period end exchange rates.
(2) Non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” section for further information.
(3) Our revolving credit facility requires us to maintain a debt to debt-plus-equity ratio not greater than 50%.
At December 31, 2016, the weighted average maturity of our consolidated indebtedness is approximately 13 years and
the weighted average coupon rate is approximately 5.7%.
Our primary sources of liquidity and capital resources are our cash and temporary investments, cash flow provided
from operations, and funds available under our committed and uncommitted bank credit facilities, of which approximately
US$3.2 billion is currently available. Further information about our liquidity and associated risks is outlined in Notes 16
and 26 to our 2016 annual consolidated financial statements.
Our cash position decreased from $1.9 billion at the end of 2015 to $1.4 billion at December 31, 2016. Significant
outflows included $987 million for our share of the Fort Hills project and amounts associated with the purchase of
US$759 million of notes during 2016.
Management’s Discussion and Analysis
33
We maintain various committed and uncommitted credit facilities for liquidity and for the issuance of letters of credit.
Our US$3.0 billion revolving credit facility matures in July 2020 and has a letter of credit sub-limit of US$1.0 billion.
There were no drawings on this facility in 2016 and it remains fully available as at February 23, 2017.
We also have a US$1.2 billion facility, of which US$1.14 billion matures in June 2019 and US$60 million matures
in June 2017. As at December 31, 2016, there are US$981 million of letters of credit issued on this facility.
Borrowing under our primary committed credit facilities is subject to our compliance with the covenants in the
agreement and our ability to make certain representations and warranties at the time of the borrowing request.
In addition to our two primary revolving committed credit facilities, we also maintain surety bond capacity and
uncommitted bilateral credit facilities with various banks and with Export Development Canada for the issuance of
letters of credit, primarily to support our future reclamation obligations. At December 31, 2016, these bilateral credit
facilities totalled $1.4 billion and $1.1 billion of letters of credit were issued thereunder, and our surety bond capacity
was $250 million, with $214 million outstanding.
The cost of funds under certain of our credit facilities depends on our credit ratings. Our current credit ratings from
Moody’s, S&P, Fitch and DBRS are Ba3, BB, BB (high) and B+, respectively. Moody’s rating has a positive outlook,
S&P’s outlook is stable, and Fitch and DBRS have negative outlooks.
Under the terms of the silver streaming agreement relating to Antamina, if there is an event of default under the
agreement or Teck insolvency, Teck Base Metals Ltd., our subsidiary that holds our interest in Antamina, is restricted
from paying dividends or making other distributions to Teck to the extent that there are unpaid amounts under
the agreement.
On February 21, 2017, we commenced cash tender offers to purchase up to US$650 million aggregate principal amount
of the following series of notes: 3.000% Notes due 2019; 8.000% Notes due 2021; 4.500% Notes due 2021; 4.750%
Notes due 2022; and 8.500% Notes due 2024. In conjunction with the tender offers, we are soliciting consents from
holders of certain of the notes to amend the indentures governing those notes to shorten the minimum notice period
for optional redemption. The tender offers and consent solicitations are scheduled to expire on March 20, 2017, and may
expire earlier in certain circumstances. We have reserved the right to amend, extend, terminate and otherwise modify
the tender offers and consent solicitations.
Operating Cash Flow
Cash flow from operations was $3.1 billion in 2016, compared with $2.0 billion in 2015 and $2.3 billion in 2014. The
increase in 2016 compared to 2015 was mainly due to varying commodity prices and sales volumes, offset to some
extent by changes in currency exchange rates. The decrease in 2015 compared to 2014 was due mainly to lower gross
profits at our steelmaking coal and copper operations from lower commodity prices, particularly steelmaking coal.
Investing Activities
Capital expenditures were $1.9 billion in 2016, as summarized in the table below:
($ in millions)
Sustaining
Major
Enhancement
New Mine
Development
Subtotal
Capitalized
Stripping
Steelmaking coal
$
Copper
Zinc
Energy
Corporate
38
106
142
5
6
$
33
$
8
–
–
–
$
–
69
4
1,005
–
71
183
146
1,010
6
$
277
156
44
–
–
Total
$
348
339
190
1,010
6
$
297
$
41
$ 1,078
$
1,416
$
477
$ 1,893
The largest components of sustaining capital included $85 million at Trail Operations, $61 million for our share of
spending at Antamina, $46 million at Red Dog Operations and $38 million at our steelmaking coal operations.
34 Teck 2016 Annual Report | Every Day
Major enhancement expenditures included $33 million at our steelmaking coal operations to increase production capacity.
New mine development included $68 million for the Quebrada Blanca Phase 2 project, $987 million for our share of
spending on the Fort Hills oil sands project and $18 million on the Frontier oil sands project.
Investments in 2016 and 2015 were $114 million and $82 million, respectively. Included in 2016 was our $33 million
purchase of the remaining 2.5% minority interest stake in Highland Valley Copper Operations.
Cash proceeds from the sale of assets and investments were $170 million in 2016, $1.2 billion in 2015 and $34 million in 2014.
Significant items in 2016 were proceeds of $122 million from the sale of marketable securities and various royalty interests.
Financing Activities
In June 2016, we made certain amendments to the terms of our US$1.2 billion credit facility, including a maturity
extension from June 2017 to June 2019 for US$1.0 billion of commitments, with a further extension to 2019 for
US$140 million obtained since then. Both of our committed credit facilities received guarantees from certain subsidiaries.
These amendments are described in Note 16 to our annual consolidated financial statements. There were no
amendments to the terms of our US$3.0 billion credit facility, which matures in July 2020.
Immediately following the amendments to the US$1.2 billion credit facility, we issued US$650 million of senior
unsecured notes due June 2021 with a coupon of 8.00% and US$600 million of senior unsecured notes due June
2024 with a coupon of 8.50%. These notes are guaranteed on a senior unsecured basis by various wholly owned
subsidiaries of Teck and are described in Note 16 to our annual consolidated financial statements.
The net proceeds from these issuances and available cash were used to finance the purchase of US$1.25 billion
aggregate principal amount of our outstanding notes pursuant to cash tender offers. The purchased notes comprise
US$266 million of 3.15% notes due 2017, US$284 million of 3.85% notes due 2017, US$478 million of 2.50% notes
due 2018, and US$222 million of 3.00% notes due 2019. The tender offer is described in Note 16 in our annual
consolidated financial statements.
In September and early October 2016, we purchased US$759 million aggregate principal amount of our outstanding
notes through private and open market purchases at a total cost of US$693 million, which was funded from cash
on hand. The principal amount of notes purchased was US$80 million of 3.75% notes due 2023, US$91 million
of 6.125% notes due 2035, US$159 million of 6.00% notes due 2040, US$205 million of 6.25% notes due 2041,
US$101 million of 5.20% notes due 2042, and US$123 million of 5.40% notes due 2043. The purchases are discussed
further in Note 16 to our annual consolidated financial statements.
We repurchased 200,000 Class B subordinate voting shares for cancellation pursuant to normal course issuer bids at
a cost of $5 million in 2014. We have not repurchased any shares since 2014 and our last normal course issuer bid
expired on July 1, 2015.
Quarterly Earnings and Cash Flow
($ in millions except per share data)
2016
2015
Revenue
Gross profit
EBITDA
Profit (loss) attributable
to shareholders
Basic earnings
(loss) per share
Diluted earnings
(loss) per share
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
$ 3,557 $ 2,305 $ 1,740 $ 1,698
$ 2,135 $ 2,101 $ 1,999 $ 2,024
1,577
1,561
452
804
212
468
155
517
281
339
(269)
(2,506)
311
596
348
546
697
234
15
94
(459)
(2,146)
63
68
$ 1.21 $ 0.41 $ 0.03 $ 0.16
$ (0.80) $ (3.73) $ 0.11 $ 0.12
$ 1.19 $ 0.40 $ 0.03 $ 0.16
$ (0.80) $ (3.73) $ 0.11 $ 0.12
Cash flow from operations
1,490
854
339
373
693
560
335
374
Management’s Discussion and Analysis
35
Gross profit from our steelmaking coal business unit in the fourth quarter was $1.2 billion compared with $29 million
a year ago. Gross profit before depreciation and amortization increased by $1.1 billion in the fourth quarter compared
with the same period in 2015 due to significantly higher realized steelmaking coal prices.
Fourth quarter production of 7.3 million tonnes was 14% higher than the same period a year ago and set a second
consecutive quarterly production record. Annual production of 27.6 million tonnes also represents an all-time production
record. This performance in the quarter and year was the result of record fourth quarter production from four of our six
operations and record annual production from Elkview, Greenhills and Line Creek. We also settled five-year collective
agreements at Fording River and Elkview during the quarter.
Sales volumes of 6.9 million tonnes in the fourth quarter were 6% higher than the same period in 2015 and represented
the third-highest quarterly sales in our history and best ever fourth quarter. Annual sales of 27.0 million tonnes also
represents an all-time record high. This strong performance resulted from a combination of tightness in supply and
robust demand in all market areas.
Gross profit in the fourth quarter from our copper business unit was $52 million compared with $76 million a year ago.
Gross profit before depreciation and amortization from our copper business unit increased by $23 million in the fourth
quarter compared with the same period in 2015. This was primarily due to successful cost reduction efforts and higher
realized copper and by-product prices, which more than offset significantly lower sales volumes. In addition, due to the
improving copper price environment and reduced unit costs, we reversed $23 million of previously recorded inventory
write-downs in the quarter compared with $20 million of write-downs a year ago. These inventory adjustments were
primarily related to Quebrada Blanca Operations.
Fourth quarter copper production decreased by 24% from a year ago primarily due to reduced production at Highland
Valley Copper as a result of lower ore grades, as anticipated in the mine plan. Significant cost reduction efforts at our
operations substantially reduced the effect of lower copper production on our cash unit costs, after by-product margins,
which only increased by 6% to US$1.45 per pound compared with the same period in 2015.
Gross profit from our zinc business unit in the fourth quarter was $348 million compared with $176 million a year ago.
Gross profit before depreciation and amortization from our zinc business unit increased by $181 million compared to the
fourth quarter of 2015 primarily due to significantly higher zinc prices.
Zinc in concentrate production in the fourth quarter was 7% higher than the fourth quarter of 2015. A year-end inventory
correction recorded in the quarter resulted in reported production being 8% lower than a year ago. Trail Operations set
a new annual refined zinc production record, as refined zinc production continued to be strong in the fourth quarter and
rose 2% compared to the same quarter in 2015 due to better plant availability and operational improvements.
During the fourth quarter of 2016, we recorded asset impairment charges primarily relating to our investment in the
Fort Hills oil sands project. These charges totalled approximately $268 million on a pre-tax basis (after-tax $198 million),
of which $222 million related to Fort Hills, but also include the write-off of costs relating to the halted fuming furnace
project at Trail Operations.
Our profit attributable to shareholders was $697 million, or $1.21 per share, in the fourth quarter compared with a loss
of $459 million, or $0.80 per share, in the same period a year ago, which included asset impairment charges on our
investment in Fort Hills, and on our Coal Mountain and Carmen de Andacollo operations. These charges in 2015 totalled
$736 million on a pre-tax basis and $536 million on an after-tax basis. The write-downs were triggered by lower market
expectations for some future commodity prices and capital market conditions. In addition, profit in the fourth quarter of
2015 was lower due to substantially lower U.S. dollar prices for our primary products, partly offset by reduced operating
costs and the positive effect of a stronger U.S. dollar. Declining metal prices resulted in after-tax negative pricing
adjustments of approximately $42 million in the fourth quarter of 2015. We also had after-tax profits of $91 million
derived from royalty sales and a gain on the formation of NuevaUnión (formerly Project Corridor).
Cash flow from operations was $1.5 billion in the fourth quarter compared with $ 693 million a year ago. This
performance was a result of significantly higher realized steelmaking coal prices in the quarter and, to a lesser extent,
higher zinc prices.
36 Teck 2016 Annual Report | Every Day
Outlook
Prices for our key commodities have recently improved and are contributing additional revenue and cash flows. Tight
steelmaking coal supply and increased demand from steel mills during the fourth quarter of 2016 drove prices up rapidly.
Steelmaking coal inventories are now being reduced, driving the large price correction, which started in December 2016.
With increased supply from existing producers and a number of mine restarts, it is unclear how long the price correction
will last. In addition, contributing to the volatility in steelmaking coal prices were changes in the Chinese government’s
working day policy for coal mines, future changes in that policy, or other Chinese government action, may have a
significant positive or negative effect on steelmaking coal prices. Commodity markets have historically been volatile and
prices can change rapidly, which we have seen recently with the sharp rise and fall in steelmaking coal prices since
the third quarter of 2016, and customers can alter shipment plans. This volatility can have a substantial effect on our
business. We are also significantly affected by foreign exchange rates. Over the past year, the U.S. dollar average has
strengthened by approximately 4% against the Canadian dollar. This has had a positive effect on the profitability of our
Canadian operations and translation of profits from our foreign operations. It will, to a lesser extent, put upward pressure
on the portion of our operating costs and capital spending that is denominated in U.S. dollars.
Our labour agreement at Highland Valley Copper expired at the end of the third quarter, and negotiations are continuing.
Our labour agreements at Trail Operations and at Cardinal River expire in May 2017 and June 2017, respectively. In
February 2017, we extended the life of two of the three labour agreements at Quebrada Blanca into the first quarter
of 2019, leaving only one labour agreement expiring in 2017 at the end of November.
Commodity Prices and 2017 Production
Commodity prices are a key driver of our profit and cash flows. On the supply side, the depleting nature of ore reserves,
difficulties in finding new orebodies, the permitting processes, the availability of skilled resources to develop projects, as
well as infrastructure constraints, political risk and significant cost inflation may continue to have a moderating effect on
the growth in future production for the industry as a whole. We believe that, over the longer term, the industrialization of
emerging market economies will continue to be a major positive factor in the future demand for commodities. Therefore,
we believe that the long-term price environment for the products that we produce and sell remains favourable.
The sensitivity of our annual profit attributable to shareholders and EBITDA to changes in the Canadian/U.S. dollar
exchange rate and commodity prices, before pricing adjustments, based on our current balance sheet, our expected
2017 mid-range production estimates, current commodity prices and a Canadian/U.S. dollar exchange rate of $1.30,
are as follows:
2017 Mid-Range
Production
Estimates(1)
Estimated Effect
of Change
on Profit(2)
Change
Estimated
Effect on
EBITDA(2)
US$ exchange
CAD$0.01
$ 42 million
$ 68 million
Steelmaking coal (000’s tonnes)
27,500
US$1/tonne
$ 21 million
$ 32 million
Copper (tonnes)
Zinc (tonnes)(3)
280,000
US$0.01/lb.
972,000
US$0.01/lb.
$
$
5 million
$
7 million
9 million
$ 14 million
Notes:
(1) All production estimates are subject to change based on market and operating conditions.
(2) The effect on our profit attributable to shareholders and on EBITDA of commodity price and exchange rate movements will vary from quarter to quarter depending
on sales volumes. Our estimate of the sensitivity of profit and EBITDA to changes in the U.S. dollar exchange rate is sensitive to commodity price assumptions.
(3) Zinc includes 300,000 tonnes of refined zinc and 670,000 tonnes of zinc contained in concentrate.
The increase in our estimated foreign exchange sensitivity from previous estimates is primarily due to the effect of
higher commodity prices, which are all denominated in U.S. dollars.
Our steelmaking coal production in 2017 is expected to be in the range of 27 to 28 million tonnes compared with
27.6 million tonnes produced in 2016. Our actual production will depend primarily on customer demand for deliveries
of steelmaking coal. Depending on market conditions and the sales outlook, we may adjust our production plans.
Management’s Discussion and Analysis
37
Our copper production for 2017 is expected to decrease and be in the range of 275,000 to 290,000 tonnes compared
with 324,200 tonnes produced in 2016. Copper production at Highland Valley Copper is expected to decline as a result
of mining lower ore grades. Quebrada Blanca copper cathode production is expected to decline, as the agglomeration
circuit will be halted, with all remaining supergene ore mined sent to the dump leach circuit. Our share of production
from Antamina is anticipated to decline by approximately 7,000 tonnes due to a decrease in copper-only ore processed
in 2017, while copper-zinc ore increases.
Our zinc in concentrate production in 2017 is expected to be in the range of 660,000 to 680,000 tonnes, compared
with 661,600 tonnes produced in 2016. Red Dog’s production is expected to decrease by approximately 28,000 tonnes
primarily due to lower ore grades. Our share of Antamina’s zinc production is expected to increase by 33,000 tonnes
as a result of processing additional copper-zinc ores. Refined zinc production in 2017 from our Trail Operations is
expected to be in the range of 300,000 to 305,000 tonnes, compared with a record 311,600 tonnes produced in 2016.
Capital Expenditures
Our forecast approved capital expenditures for 2017, before capitalized stripping costs, are approximately $1.6 billion
and are summarized in the table below. We expect to fund our 2017 capital expenditures from cash on hand and cash
flow from operations.
($ in millions)
Sustaining
Major
Enhancement
New Mine
Development
Subtotal
Capitalized
Stripping
Steelmaking coal
$
Copper
Zinc
Energy
Corporate
140
130
210
50
–
$
120
$
–
$
20
15
–
–
200
20
675
–
260
350
245
725
–
$
430
140
50
–
–
$
Total
690
490
295
725
–
$
530
$
155
$
895
$
1,580
$
620
$ 2,200
New mine development includes $200 million for Quebrada Blanca Phase 2, $640 million for Fort Hills and $26 million
for permitting activities on the Frontier oil sands project. In 2017, the planned sustaining capital expenditures for Fort
Hills are spread across a number of areas in the project. The costs are associated with activities that will benefit the
future development of the operation and technology initiatives, for example: tailings management technology and
autonomous hauling. The amount and timing of actual capital expenditures is also dependent upon being able to secure
permits, equipment, supplies, materials and labour on a timely basis and at expected costs to enable the projects to
be completed as currently anticipated. We may change capital spending plans in 2017, depending on commodity
markets, our financial position, results of feasibility studies and other factors.
Foreign Exchange and Debt Revaluation
The sales of our products are denominated in U.S. dollars, while a significant portion of our expenses are incurred
in local currencies, particularly the Canadian dollar and the Chilean peso. Foreign exchange fluctuations can have a
significant effect on our operating margins, unless such fluctuations are offset by related changes to commodity prices.
Our U.S. dollar denominated debt is subject to revaluation based on changes in the Canadian/U.S. dollar exchange
rate. As at December 31, 2016, $5.4 billion of our U.S. dollar denominated debt is designated as a hedge against our
foreign operations that have a U.S. dollar functional currency. As a result, any foreign exchange gains or losses arising
on that amount of our U.S. dollar debt are recorded in other comprehensive income, with the remainder being
charged to profit.
38 Teck 2016 Annual Report | Every Day
Other Information
Carbon Taxes
The Province of B.C. imposes a carbon tax on virtually all fossil fuels used in B.C. at a tax rate of $30 per tonne of
CO2-emission equivalent. For 2016, our seven B.C.-based operations incurred $48 million in provincial carbon tax,
primarily from our use of coal, diesel fuel and natural gas.
Following the adoption of the Paris Agreement in 2015, both the Provinces of B.C. and Alberta completed reviews
of their climate change plans, including a re-examination of their primary carbon price policies, the Carbon Tax (B.C.)
and the Specified Gas Emitters Regulation (Alberta). In 2016, the Province of B.C. announced a freeze in the carbon
tax at the current rate until other jurisdictions in Canada raise their carbon prices to comparable levels. Additionally,
the Province of Alberta announced an economy-wide carbon levy (excluding large industrial facilities) along with a
100 million-tonne GHG emissions cap on oil sands operations and a framework to address emission intensive, trade
exposed industries.
Also in 2016, the Government of Canada announced a national pan-Canadian framework that includes a national floor
price on carbon. Canadian provinces will be given until 2018 to implement a carbon pricing policy, starting with a
minimum price of $10 per tonne in 2018, increasing $10 per year to $50 per tonne by 2022.
We will continue to assess the potential implications of the updated policies on our operations and projects.
Financial Instruments and Derivatives
We hold a number of financial instruments, derivatives and contracts containing embedded derivatives, which are
recorded on our balance sheet at fair value with gains and losses in each period included in other comprehensive
income and profit for the period as appropriate. The most significant of these instruments are marketable securities,
commodity swap contracts, metal-related forward contracts, settlements receivable and payable, embedded debt
prepayment options, and gold stream and silver stream embedded derivatives. Some of our gains and losses on
metal-related financial instruments are affected by smelter price participation and are taken into account in determining
royalties and other expenses. All are subject to varying rates of taxation, depending on their nature and jurisdiction.
Further information about our financial instruments, derivatives and contracts containing embedded derivatives and
associated risks is outlined in Note 26 to our 2016 annual consolidated financial statements.
Critical Accounting Estimates and Judgments
In preparing consolidated financial statements, management makes estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses across all reportable segments. Management makes estimates
and judgments that are believed to be reasonable under the circumstances. Our estimates and judgments are based
on historical experience and other factors we consider to be reasonable, including expectations of future events.
Critical accounting estimates and judgments are those that could affect the consolidated financial statements materially,
are highly uncertain and where changes are reasonably likely to occur from period to period. The judgments and other
sources of estimation uncertainty that have a risk of resulting in a material adjustment to the carrying amounts of
assets and liabilities within the next year are outlined below.
Impairment Testing
Judgment is required in assessing whether certain factors would be considered an indicator of impairment or impairment
reversal. We consider both internal and external information to determine whether there is an indicator of impairment
or impairment reversal present and, accordingly, whether impairment testing is required. When impairment testing is
required, discounted cash flow models are used to determine the recoverable amount of respective assets. These
models are prepared internally with assistance from third-party advisors when required. When market transactions for
comparable assets are available, these are considered in determining the recoverable amount of assets. Significant
assumptions used in preparing discounted cash flow models include commodity prices, reserves and resources, mine
plans, operating costs, capital expenditures, discount rates, foreign exchange rates and inflation rates. These inputs
are based on management’s best estimates of what an independent market participant would consider appropriate.
Management’s Discussion and Analysis
39
Changes in these inputs may alter the results of impairment testing, the amount of the impairment charges or reversals
recorded in the income statement and the resulting carrying values of assets.
We allocate goodwill arising from business combinations to the cash-generating unit (CGU) or group of CGUs acquired
that is expected to receive the benefits from the business combination. When performing annual goodwill impairment
tests, we are required to determine the recoverable amount of each CGU or group of CGUs to which goodwill has been
allocated. The recoverable amount of each CGU or group of CGUs is determined as the higher of its fair value less costs
of disposal (FVLCD) and its value in use.
Year Ended December 31, 2016
In 2016, we performed our annual goodwill impairment testing at October 31 for our steelmaking coal operations and
Quebrada Blanca, as these are the CGUs with goodwill balances. We did not identify any impairment losses for these
CGUs in 2016 based on their FVLCD, which was calculated using a discounted cash flow methodology taking into
account assumptions likely to be made by market participants.
Our annual goodwill impairment test resulted in the total recoverable amount of our steelmaking coal operations
exceeding their carrying value by approximately $4.9 billion. The recoverable amount is most sensitive to the long-
term steelmaking coal price assumption. The recoverable amount is based on a long-term steelmaking coal price of
US$130 per tonne. An 11% decrease in the long-term price assumption would result in the recoverable amount of
our steelmaking coal operations equalling their carrying value.
The recoverable amount of Quebrada Blanca exceeded the carrying amount at the date of our annual goodwill
impairment test, and significant changes to key inputs would be required to result in the recoverable amount being
equal to the carrying value.
During the year ended December 31, 2016, we recorded asset impairments of $294 million, of which $222 million
related to the Fort Hills oil sands project, $46 million related to a project at our Trail Operations that will not be
completed, and $26 million related to the Wintering Hills Wind Power Facility.
As a result of the changes in reported reserves and resources at Carmen de Andacollo and increased development
costs associated with the Fort Hills oil sands project, we performed a detailed review of the recoverable amounts of
these CGUs on a FVLCD basis using a discounted cash flow methodology and taking into account assumptions likely
to be made by market participants as at December 31, 2016.
We have determined that the estimated recoverable amount of Carmen de Andacollo exceeded its carrying value as
at December 31, 2016 and accordingly, no impairment charge was recorded.
We have estimated a post-tax recoverable amount for Fort Hills of $2.52 billion, which was lower than the carrying
value as at December 31, 2016. Accordingly, we have recorded a pre-tax impairment of $222 million (after-tax
$164 million) of the Fort Hills project.
The key inputs used to estimate the FVLCD of Carmen de Andacollo and Fort Hills as at December 31, 2016, were
determined as follows:
Commodity Prices
Commodity price assumptions are based on a number of factors, including forward curves in the near term, and are
benchmarked with external sources of information, including information published by our peers and, where possible,
market transactions, to ensure they are within the range of values used by market participants.
Our key commodity price assumptions are based on a current price in the initial year and gradually escalated to an
assumed real long-term price in 2021. For copper and WCS oil prices, we started with a 2016 current price in the initial
year and gradually escalated that over the following three years, reaching real long-term prices in 2021 of US$3.00 per
pound for copper and US$57 per barrel for oil.
40 Teck 2016 Annual Report | Every Day
Reserves and Resources
Future mineral production is included in projected cash flows based on mineral reserve and resource estimates and
exploration and evaluation work, undertaken by appropriately qualified persons.
Operating Costs and Capital Expenditures
Operating costs and capital expenditures are based on life of mine plans and internal management forecasts. Cost
estimates incorporate management experience and expertise, current operating costs, the nature and location of each
operation, and the risks associated with each operation. Future capital expenditures are based on management’s best
estimate of expected future capital requirements, which are generally for the extraction and processing of existing
reserves and resources. All committed and anticipated capital expenditures based on future cost estimates have been
included in the projected cash flows. Operating cost and capital expenditure assumptions are continuously subjected
to ongoing optimization and review by management.
Discount Rates
A 6.0% real, 8.1% nominal, post-tax discount rate was used to discount cash flow projections for Carmen de Andacollo
as at December 31, 2016, based on a mining weighted average cost of capital.
A 5.5% real, 7.6% nominal, post-tax discount rate was used to discount cash flow projections for the Fort Hills project,
based on an oil sands weighted average cost of capital.
Foreign Exchange Rates
Foreign exchange rates are benchmarked with external sources of information based on a range used by market
participants. The long-term Canadian-U.S. dollar foreign exchange rate assumption used as at December 31, 2016 was
CAD$1.25 to US$1.00.
Inflation Rates
Inflation rates are based on average historical inflation for the location of each operation and long-term government
bond yields. The inflation rate for all FVLCD calculations as at December 31, 2016 was 2%.
Sensitivity Analysis
We noted impairment indicators at Carmen de Andacollo and Fort Hills and the recoverable amounts of the associated
CGUs have been estimated. The recoverable amount of Carmen de Andacollo exceeded its carrying value and we did
not record an impairment charge as at December 31, 2016. We have adjusted the carrying value of Fort Hills down to
its recoverable amount as at December 31, 2016.
These recoverable amounts are most sensitive to changes in long-term copper and WCS oil prices, the Canadian-U.S.
dollar exchange rates (for Fort Hills) and discount rates. The key inputs used in our determination of recoverable
amounts interrelate significantly with each other and with our operating plans. For example, a decrease in long-term
commodity prices would result in us making amendments to the mine plans that would partially offset the effect of
lower prices through lower operating and capital costs. It is difficult to determine how all of these factors would
interrelate, but in estimating the effect of changes in these assumptions on fair values, we believe that all of these
factors need to be considered together. In addition, variations in assumptions could potentially cause some assets
to be fully written off and not be subject to further impairment. Therefore, once an asset is fully impaired, a further
decrease in these assumptions does not necessarily correspond with a proportionate increase in a potential impairment
charge and a linear extrapolation of these effects becomes less meaningful as the change in assumption increases.
Fort Hills has been written down to its recoverable amount. Ignoring the above-described interrelationships, in isolation
a US$1 decrease per barrel in the long-term WCS oil price would result in an additional reduction in the recoverable
amount of $120 million. A $0.01 strengthening of the Canadian dollar against the U.S. dollar would result in an
additional reduction in the recoverable amount of $42 million. A 25 basis point increase in the discount rate would
result in an additional reduction in the recoverable amount of approximately $120 million.
Management’s Discussion and Analysis
41
Carmen de Andacollo was written down to its recoverable amount as at December 31, 2015 and the estimated
recoverable amount has not changed significantly since that date. Accordingly, the recoverable amount is sensitive
to any change in the long-term copper price assumption or discount rate. Ignoring the above-described interrelationships,
in isolation a US$0.01 decrease in the long-term copper price and a 25 basis point increase in the discount rate
would result in a reduction in the recoverable amount of approximately $13 million and $19 million, respectively.
Year Ended December 31, 2015
In light of economics in the third and fourth quarters of 2015, we identified CGUs with carrying values that exceeded
their estimated recoverable amounts and recorded impairments. The FVLCD was estimated using a discounted cash
flow methodology taking into account assumptions likely to be made by market participants. For the year ended
December 31, 2015, we recorded pre-tax impairment adjustments of $3.6 billion. The details of the impairment
adjustments are outlined on page 31 of this Management’s Discussion and Analysis.
The key inputs used to estimate the FVLCD of each CGU as at December 31, 2015, where applicable, were derived
in the same manner as those noted above for our December 31, 2016 impairment testing and were as follows:
Commodity Prices
Our key commodity price assumptions were based on current prices over the first three years escalating to an
assumed real long-term price. For steelmaking coal, copper, zinc and Western Canadian Select oil prices, we started
with a 2015 current price in the initial year and gradually escalated that over the next three years, reaching real
long-term prices in 2020 of US$130 per tonne for steelmaking coal, US$3.00 per pound for copper, US$1.00 per
pound for zinc and US$60 per barrel for oil.
Discount Rates
A 6.2% real, 8.3% nominal, post-tax discount rate was used to discount cash flow projections in all of our FVLCD
discounted cash flows as at December 31, 2015.
Foreign Exchange Rates
The long-term Canadian-U.S. dollar foreign exchange rate assumption used as at December 31, 2015 was CAD$1.25
to US$1.00.
Inflation Rates
The inflation rate for all FVLCD calculations as at December 31, 2015 was 2%.
Joint Arrangements
We are a party to a number of arrangements in which we do not have control. Judgment is required in determining
whether joint control over these arrangements exists and, if so, which parties have joint control and whether each
arrangement is a joint venture or joint operation. In assessing whether we have joint control, we analyze the activities
of each arrangement and determine which activities most significantly affect the returns of the arrangement over its
life. These activities are determined to be the relevant activities of the arrangement. If unanimous consent is required
over the decisions about the relevant activities, the parties whose consent is required would have joint control over
the arrangement. The judgments around which activities are considered the relevant activities of the arrangement are
subject to analysis by each of the parties to the arrangement and may be interpreted differently. When performing this
assessment, we generally consider decisions about activities such as managing the asset while it is being constructed,
during its operating life and during the closure period. We may also consider other activities, including the approval of
budgets, expansion and disposition of assets, financing, significant operating and capital expenditures, appointment
of key management personnel, representation on the board of directors, and other items. When circumstances or
contractual terms change, we reassess the control group and the relevant activities of the arrangement.
If we have joint control over the arrangement, an assessment of whether the arrangement is a joint venture or joint
operation is required. This assessment is based on whether we have rights to the assets, and obligations for the
liabilities, relating to the arrangement, or whether we have rights to the net assets of the arrangement. In making this
determination, we review the legal form of the arrangement, the terms of the contractual arrangement, and other
42 Teck 2016 Annual Report | Every Day
facts and circumstances. In a situation where the legal form and the terms of the contractual arrangement do not give
us rights to the assets and obligations for the liabilities, an assessment of other facts and circumstances is required,
including whether the activities of the arrangement are primarily designed for the provision of output to the parties
and whether the parties are substantially the only source of cash flows contributing to the arrangement. In such
circumstances, we may consider the application of other facts and circumstances to conclude that a joint arrangement
is a joint operation. This conclusion requires judgment and is specific to each arrangement. We have applied the use
of other facts and circumstances to conclude that Antamina and Fort Hills are joint operations for the purposes of our
consolidated financial statements. The other facts and circumstances considered for both of these arrangements are
the provisions for output to the parties of the joint arrangements. For both Antamina and Fort Hills, we will take our
share of the output from the assets directly over the life of the arrangement. We have concluded that this, combined
with other factors, gives us direct rights to the assets and obligations for the liabilities of these arrangements,
proportionate to our ownership interests.
Streaming Transactions
When we enter into long-term streaming arrangements linked to production at specific operations, judgment is
required in assessing the appropriate accounting treatment of the transaction on the closing date and in future periods.
We consider the specific terms of each arrangement to determine whether we have disposed of an interest in the
reserves and resources of the respective operation. This assessment considers what the counterparty is entitled to,
and the associated risks and rewards attributable to them over the life of the operation, including the contractual terms
related to the total production over the life of the arrangement as compared to the expected production over the life of
the mine, the percentage being sold, the percentage of payable metals produced, the commodity price referred to in
the ongoing payment, and any guarantee relating to the upfront payment if production ceases.
Estimated Recoverable Reserves and Resources
Mineral reserve and resource estimates are based on various assumptions relating to operating matters as set forth
in National Instrument 43-101. These include production costs, mining and processing recoveries, cut-off grades,
long-term commodity prices and, in some cases, exchange rates, inflation rates and capital costs. Cost estimates are
based on feasibility study estimates or operating history. Estimates are prepared by appropriately qualified persons,
but will be affected by forecasted commodity prices, inflation rates, exchange rates, and capital and production costs
and recoveries, amongst other factors. Estimated recoverable reserves and resources are used to determine the
depreciation of property, plant and equipment at operating mine sites, in accounting for capitalized production stripping
costs, in performing impairment testing, and for forecasting the timing of the payment of decommissioning and
restoration costs. Therefore, changes in the assumptions used could change the carrying value of assets, depreciation
and impairment charges recorded in the income statement, and the carrying value of the decommissioning and
restoration provision.
Decommissioning and Restoration Provisions
The decommissioning and restoration provision is based on future cost estimates using information available at the
balance sheet date. The decommissioning and restoration provision is adjusted at each reporting period for changes
to factors such as the expected amount of cash flows required to discharge the liability, the timing of such cash flows
and the discount rate. The decommissioning and restoration provision requires other significant estimates and
assumptions, including the requirements of the relevant legal and regulatory framework and the timing, extent and
costs of required decommissioning and restoration activities. To the extent the actual costs differ from these estimates,
adjustments will be recorded and the income statement may be affected.
Current and Deferred Income Taxes
We calculate current and deferred tax provisions for each of the jurisdictions in which we operate. Actual amounts
of income tax expense are not final until tax returns are filed and accepted by the relevant authorities. This occurs
subsequent to the issuance of our financial statements and the final determination of actual amounts may not be
completed for a number of years. Therefore, profit in subsequent periods will be affected by the amount that
estimates differ from the final tax return.
Management’s Discussion and Analysis
43
Judgment is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognized on
the balance sheet and what tax rate is expected to be applied in the year when the related temporary differences
reverse, particularly in regard to the utilization of the tax loss carryforwards. We also evaluate the recoverability of
deferred tax assets based on an assessment of our ability to use the underlying future tax deductions before they
expire against future taxable income. Deferred tax liabilities arising from temporary differences on investments in
subsidiaries, joint ventures and associates are recognized unless the reversal of the temporary differences is not
expected to occur in the foreseeable future and can be controlled. Assumptions about the generation of future taxable
profits and repatriation of retained earnings depend on management’s estimates of future production and sales
volumes, commodity prices, reserves and resources, operating costs, decommissioning and restoration costs, capital
expenditures, dividends and other capital management transactions. Judgment is also required on the application
of income tax legislation. These estimates and judgments are subject to risk and uncertainty and could result in an
adjustment to the deferred tax provision and a corresponding credit or charge to profit.
Adoption of New Accounting Standards and Accounting Developments
Accounting Developments
New IFRS pronouncements that have been issued but are not yet effective are listed below. We plan to apply the new
standard or interpretation in the annual period for which it is required.
Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers (IFRS 15) as a result of a joint revenue
project with the Financial Accounting Standards Board (FASB).
The new revenue standard introduces a single principles-based five-step model for the recognition of revenue when
control of goods is transferred to, or a service is performed, for the customer. The five steps are to: identify the
contract(s) with the customer, identify the performance obligations in the contract, determine the transaction price,
allocate the transaction price, and recognize revenue when the performance obligation is satisfied. IFRS 15 also
requires enhanced disclosures about revenue to help investors better understand the nature, amount, timing and
uncertainty of revenue and cash flows from contracts with customers, and improves the comparability of revenue
from contracts with customers.
The standard initially had an effective date of January 1, 2017 but was subsequently deferred by one year to January 1,
2018. Early application of IFRS 15 is still permitted.
We are currently assessing the effect of this standard on our financial statements.
Financial Instruments
IFRS 9, Financial Instruments (IFRS 9), addresses the classification, measurement and recognition of financial assets
and financial liabilities. The July 2014 publication of IFRS 9 is the completed version of the standard, replacing earlier
versions of IFRS 9 and superseding the guidance relating to the classification and measurement of financial instruments
in IAS 39, Financial Instruments: Recognition and Measurement (IAS 39).
IFRS 9 requires financial assets to be classified into three measurement categories on initial recognition: those measured
at fair value through profit and loss, those measured at fair value through other comprehensive income and those
measured at amortized cost. Investments in equity instruments are required to be measured by default at fair value
through profit or loss. However, there is an irrevocable option for each equity instrument to present fair value changes
in other comprehensive income. Measurement and classification of financial assets is dependent on the entity’s business
model for managing the financial assets and the contractual cash flow characteristics of the financial asset. For financial
liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value
option is taken for financial liabilities, the part of a fair value change relating to an entity’s own credit risk is recorded in
other comprehensive income rather than the income statement, unless this creates an accounting mismatch.
44 Teck 2016 Annual Report | Every Day
IFRS 9 introduces a new three-stage expected credit loss model for calculating impairment for financial assets. IFRS 9
no longer requires a triggering event to have occurred before credit losses are recognized. An entity is required to
recognize expected credit losses when financial instruments are initially recognized and to update the amount of
expected credit losses recognized at each reporting date to reflect changes in the credit risk of the financial instruments.
In addition, IFRS 9 requires additional disclosure requirements about expected credit losses and credit risk.
The new hedge accounting model in IFRS 9 aligns hedge accounting with risk management activities undertaken by
an entity. Components of both financial and non-financial items will now be eligible for hedge accounting, as long as
the risk component can be identified and measured. The hedge accounting model includes eligibility criteria that must
be met, but these criteria are based on an economic assessment of the strength of the hedging relationship. New
disclosure requirements relating to hedge accounting will be required and are meant to simplify existing disclosures.
The IASB currently has a separate project on macro hedging activities; until the project is completed, the IASB has
provided a policy choice for entities to either apply the hedge accounting model in IFRS 9 or IAS 39 in full. Additionally,
there is a hybrid option to use IAS 39 to account for macro hedges only and to use IFRS 9 for all other hedges.
The completed version of IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early
adoption permitted. We are currently assessing the effect of this standard and its related amendments on our
financial statements.
Leases
In January 2016, the IASB issued IFRS 16, Leases (IFRS 16), which eliminates the classification of leases as either
operating or finance leases for a lessee. Under IFRS 16, all leases are considered finance leases and will be recorded on
the balance sheet. The only exemptions to this classification will be for leases that are 12 months or less in duration or
for leases of low-value assets. The requirement to record all leases as finance leases under IFRS 16 will increase lease
assets and financial liabilities on an entity’s financial statements. IFRS 16 will also change the nature of expenses relating
to leases, as the straight-line lease expense previously recognized for operating leases will be replaced with depreciation
expense for lease assets and finance expense for lease liabilities. IFRS 16 includes an overall disclosure objective and
requires a company to disclose (a) information about lease assets and expenses and cash flows related to leases; (b) a
maturity analysis of lease liabilities; and (c) any additional company-specific information that is relevant to satisfying
the disclosure objective. IFRS 16 is effective from January 1, 2019 and can be applied before that date, but only if IFRS
15 is also applied. We are currently assessing the effect of this standard on our financial statements.
Outstanding Share Data
As at February 23, 2017, there were 567,846,944 Class B subordinate voting shares and 9,353,470 Class A common
shares outstanding. In addition, there were 22,551,735 employee stock options outstanding, with exercise prices ranging
between $4.15 and $58.80 per share. More information on these instruments and the terms of their conversion are
set out in Note 21 to our 2016 consolidated financial statements.
Management’s Discussion and Analysis
45
Contractual and Other Obligations
($ in millions)
Less than
1 Year
2–3
Years
4–5
Years
More than
5 Years
Total
Principal and interest payments on debt
$
538
$
1,337
$
2,423
$ 10,328
$ 14,626
Operating leases
Capital leases
Road and port lease at Red Dog(1)
Minimum purchase obligations(2)
Concentrate, equipment,
supply and other purchases
Shipping and distribution
Energy contracts
Pension funding(3)
Other non-pension
post-retirement benefits(4)
Decommissioning and
restoration provision(5)
Other long-term liabilities(6)
Contributions to the
Fort Hills oil sands project
56
34
24
912
342
124
38
18
55
16
127
42
26
47
137
545
305
–
39
97
47
–
24
11
47
29
506
320
–
43
75
8
–
6
64
291
62
247
1,882
–
438
993
–
–
128
135
409
1,140
1,640
2,631
38
538
1,220
71
127
$
2,284
$
2,622
$ 3,486
$ 14,311 $ 22,703
Notes:
(1) We lease road and port facilities from the Alaska Industrial Development and Export Authority, through which it ships metal concentrates
produced at the Red Dog mine. Minimum lease payments are US$18 million for the next 14 years and US$6 million for the following nine years
and are subject to deferral and abatement for force majeure events.
(2) The majority of our minimum purchase obligations are subject to continuing operations and force majeure provisions.
(3) As at December 31, 2016, the company had a net pension asset of $178 million, based on actuarial estimates prepared on a going concern basis.
The amount of minimum funding for 2017 in respect of defined benefit pension plans is $38 million. The timing and amount of additional funding
after 2017 is dependent upon future returns on plan assets, discount rates and other actuarial assumptions.
(4) We had a discounted, actuarially determined liability of $538 million in respect of other non-pension post-retirement benefits as at December 31,
2016. Amounts shown are estimated expenditures in the indicated years.
(5) We accrue environmental and reclamation obligations over the life of our mining operations, and amounts shown are estimated expenditures in
the indicated years at fair value, assuming credit-adjusted risk-free discount rates between 6.33% and 7.33% and an inflation factor of 2.00%.
(6) Other long-term liabilities include amounts for post-closure, environmental costs and other items.
Disclosure Controls and Internal Control Over Financial Reporting
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that information required to be
disclosed in reports filed or submitted by us under U.S. and Canadian securities legislation is recorded, processed,
summarized and reported within the time periods specified in those rules, and include controls and procedures
designed to ensure that information required to be disclosed in reports filed or submitted by us under U.S. and
Canadian securities legislation is accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate, to permit timely decisions regarding required disclosure.
Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of
the design and operation of our disclosure controls and procedures, as defined in the rules of the U.S. Securities
and Exchange Commission and the Canadian Securities Administrators, as at December 31, 2016. Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and
procedures were effective as at December 31, 2016.
46 Teck 2016 Annual Report | Every Day
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Any
system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore,
even those systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation. Management has used the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) 2013 framework to evaluate the effectiveness of our internal control over financial
reporting. Based on this assessment, management has concluded that as at December 31, 2016, our internal control
over financial reporting was effective.
The effectiveness of our internal controls over financial reporting has been audited by PricewaterhouseCoopers LLP,
an independent registered public accounting firm, who have expressed their opinion in their report included with our
annual consolidated financial statements.
Use of Non-GAAP Financial Measures
Our financial results are prepared in accordance with International Financial Reporting Standards (IFRS). This document
refers to gross profit before depreciation and amortization, gross profit margins before depreciation, EBITDA, adjusted
EBITDA, adjusted profit, adjusted earnings per share, cash unit costs, adjusted cash costs of sales, cash margins for
by-products, adjusted revenue, net debt, debt to debt-plus-equity ratio, and the net-debt to net-debt-plus-equity ratio,
which are not measures recognized under IFRS in Canada and do not have a standardized meaning prescribed by IFRS
or Generally Accepted Accounting Principles (GAAP) in the United States, and therefore may not be comparable to
similar measures presented by other issuers.
Gross profit before depreciation and amortization is gross profit with the depreciation and amortization expense added
back. EBITDA is profit attributable to shareholders before net finance expense, income and resource taxes, and
depreciation and amortization. Adjusted EBITDA is EBITDA before impairment charges. For adjusted profit, we adjust
profit attributable to shareholders as reported to remove the effect of certain types of transactions that in our judgment
are not indicative of our normal operating activities or do not necessarily occur on a regular basis. This both highlights
these items and allows us to analyze the rest of our results more clearly. We believe that disclosing these measures
assists readers in understanding the cash-generating potential of our business in order to provide liquidity to fund
working capital needs, service outstanding debt, fund future capital expenditures and investment opportunities, and
pay dividends.
Gross profit margins before depreciation are gross profit before depreciation and amortization, divided by revenue for
each respective business unit.
Cash unit costs are calculated by dividing the cost of sales for the principal product by sales volumes. We include this
information, as it is frequently requested by investors and investment analysts who use it to assess our cost structure
and margins and compare it to similar information provided by many companies in our industry.
We sell both copper concentrates and refined copper cathodes. The price for concentrates sold to smelters is based
on average LME prices over a defined quotational period, from which processing and refining deductions are made.
In addition, we are paid for an agreed percentage of the copper contained in concentrates, which constitutes payable
pounds. Adjusted revenue excludes the revenue from co-products and by-products, but adds back the processing and
refining allowances to arrive at the value of the underlying payable pounds of copper. Readers may compare this on a
per unit basis with the price of copper on the LME.
The adjusted cash cost of sales for our steelmaking coal operations is defined as the cost of the product as it leaves
the mine excluding depreciation and amortization charges. Adjusted cash cost of sales for our copper operations is
defined as the cost of the product delivered to the port of shipment, excluding depreciation and amortization charges.
It is common practice in the industry to exclude depreciation and amortization, as these costs are ‘non-cash’ and
discounted cash flow valuation models used in the industry substitute expectations of future capital spending for
these amounts. In order to arrive at adjusted cash costs of sales for copper, we also deduct the costs of by-products
and co-products. Total cash unit costs include the smelter and refining allowances added back in determining adjusted
revenue. This presentation allows a comparison of unit costs, including smelter allowances, to the underlying price
Management’s Discussion and Analysis
47
of copper in order to assess the margin. Unit costs, after deducting co-product and by-product margins, are also a
common industry measure. By deducting the co-product and by-product margin per unit of the principal product,
the margin for the mine on a per unit basis may be presented in a single metric for comparison to other operations.
Readers should be aware that this metric, by excluding certain items and reclassifying cost and revenue items,
distorts our actual production costs as determined under GAAP.
Net debt is total debt less cash and cash equivalents. The debt to debt-plus-equity ratio takes total debt as reported
and divides that by the sum of total debt plus total equity. The net-debt to net-debt-plus-equity ratio is net debt divided
by the sum of net debt plus total equity, expressed as a percentage. These measures are disclosed as we believe that
they provide readers with information that allows them to assess our credit capacity and the ability to meet our
short- and long-term financial obligations.
The measures described above do not have standardized meanings under IFRS, may differ from those used by other
issuers, and may not be comparable to such measures as reported by others. These measures have been derived
from our financial statements and have been applied on a consistent basis as appropriate. We disclose these measures
because we believe that they assist readers in understanding the results of our operations and financial position; they
are also meant to provide further information about our financial results to investors. These measures should not be
considered in isolation or used in substitute for other measures of performance prepared in accordance with IFRS.
Reconciliation of Gross Profit Before Depreciation and Amortization
($ in millions)
Gross profit
Depreciation and amortization
2016
2015
2014
$
2,396
$
1,279
$
1,535
1,385
1,366
1,344
Gross profit before depreciation and amortization
$
3,781
$
2,645
$
2,879
Reported as:
Steelmaking coal
Copper
Highland Valley Copper
Antamina
Quebrada Blanca
Carmen de Andacollo
Duck Pond
Other
Zinc
Trail Operations
Red Dog
Pend Oreille
Other
Energy
Gross profit before depreciation and amortization
48 Teck 2016 Annual Report | Every Day
$
2,007
$
906
$
920
268
409
24
86
–
1
449
412
(19)
86
(3)
6
419
450
118
164
16
10
$
788
$
931
$
1,177
241
749
–
(6)
984
2
3,781
$
$
$
205
600
(9)
9
805
3
2,645
$
$
$
142
638
–
(1)
779
3
2,879
$
$
$
Quarterly Reconciliation
($ in millions)
2016
2015
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Profit (loss) attributable
to shareholders
$ 697
$ 234
$
15
$
94
$
(459) $ (2,146) $
63
$
68
Finance expense
net of finance income
82
86
82
88
79
76
78
Provision (recovery of)
for income taxes
Depreciation
395
119
47
26
(222)
(767)
90
78
63
and amortization
387
365
324
309
333
331
365
337
EBITDA
Impairments
$ 1,561
$ 268
$
$
804
$ 468
$
517
$
(269) $ (2,506) $ 596
$ 546
26
–
–
$
736
$ 2,895
–
–
Adjusted EBITDA
$ 1,829
$ 830
$ 468
$
517
$ 467
$
389
$
596
$ 546
Cautionary Statement on Forward-Looking Information
This document contains certain forward-looking information and forward-looking statements as defined in applicable securities
laws. All statements other than statements of historical fact are forward-looking statements. These forward-looking statements,
principally under the heading “Outlook”, but also elsewhere in this document, include estimates, forecasts and statements as to
management’s expectations with respect to, among other things, anticipated future production at our business units and individual
operations (including our long-term production guidance), cost and spending guidance for our business units and individual
operations, our expectation that we will meet our production guidance, sales volume and selling prices for our products (including
settlement of coal contracts with customers), forecast capital expenditures, expected prices and demand for our products,
expected receipt of regulatory approvals and timing thereof, expected receipt of pre-feasibility studies, feasibility studies and other
studies and the timing thereof, plans and expectations for our development projects, including resulting increases in forecast operating
costs and costs of product sold, expected production, expected progress, planned activities, costs and outcomes of our various
projects and investments, including, but not limited to, those described in the discussions of our operations, the sensitivity of our
estimated profit and EBITDA to changes in commodity prices and exchange rates, the effect of currency exchange rates, our
strategies and objectives, our expectations for the general market for our commodities, future trends for the company, costs
associated with the Elk Valley Water Quality Plan and goals of that plan, anticipated mine life for our operations, expected copper
and zinc production rates at Antamina, expectations that the agglomeration circuit at Quebrada Blanca will be halted in 2017 and that
this will reduce operating costs, expectations regarding the Quebrada Blanca Phase 2 project, including that the project has the
potential to be a large-scale, long-life copper asset, has the potential to significantly extend mine life beyond the feasibility case,
expectations that the project is expected to generate strong economic returns with operating cash costs well placed on the long-term
copper C1 cost curve, capital cost and mine life and production estimates for the project, expectations regarding regulatory approvals
for the Quebrada Blanca Phase 2 project and timing of any development decision in respect thereof and first ore, the potential to
expand the Pend Oreille mine life at rates similar to its 2017 anticipated production for several more years, planned exploration
activities at NuevaUnión, planned exploration activities and feasibility studies at Red Dog and any aim to increase mine life or mill
throughput as a result, any anticipated extension to the Pend Oreille mine life, planned construction of a new acid plant at our Trail
Operations and the timing thereof, our ability to continue our cost reduction initiatives and the anticipated results of the initiatives,
the expected timing and amount of production at the Fort Hills oil sands project, capital costs and our remaining capital commitment
at Fort Hills, Fort Hills anticipated production rate, timing expectations regarding the Frontier review and permitting process as well
as anticipated cost to achieve first commercial production, reserve and resources estimates, the availability of our credit facilities,
sources of liquidity and capital resources forecast and demand and market outlook for commodities. These forward-looking statements
involve numerous assumptions, risks and uncertainties and actual results may vary materially.
These statements are based on a number of assumptions, including, but not limited to, assumptions regarding general business,
regulatory and economic conditions, the supply and demand for, deliveries of, and the level and volatility of prices of zinc, copper
and steelmaking coal and other primary metals and minerals as well as oil, and related products, the timing of the receipt of regulatory
and governmental approvals for our development projects and other operations, our costs of production, and production and productivity
Management’s Discussion and Analysis
49
levels, as well as those of our competitors, power prices, continuing availability of water and power resources for our operations,
market competition, the accuracy of our reserve and resource estimates (including with respect to size, grade and recoverability)
and the geological, operational and price assumptions on which these are based, conditions in financial markets, the future financial
performance of the company, our ability to attract and retain skilled staff, our ability to procure equipment and operating supplies,
positive results from the studies on our expansion projects, our steelmaking coal and other product inventories, our ability to secure
adequate transportation for our products, our ability to obtain permits for our operations and expansions, and our ongoing relations
with our employees, business partners and joint venturers. Assumptions regarding capital costs, mine life and other parameters for
Quebrada Blanca Phase 2 are based on assumptions in the feasibility study. Statements regarding the availability of our credit
facilities are based on assumptions that we will be able to satisfy the conditions for borrowing at the time of a borrowing request
and that the credit facilities are not otherwise terminated or accelerated due to an event of default. The sensitivity of our project
profit and EBITDA to changes in the Canadian/U.S. dollar exchange rate and commodity prices, before pricing adjustments, is based
on our current balance sheet, our expected 2017 mid-range production estimates, current commodity prices and a Canadian/U.S.
dollar exchange rate of $1.30. The foregoing list of assumptions is not exhaustive. Events or circumstances could cause actual
results to vary materially.
Factors that may cause actual results to vary materially include, but are not limited to, changes in commodity and power prices,
changes in market demand for our products, changes in interest and currency exchange rates, acts of foreign or domestic
governments and the outcome of legal proceedings, inaccurate geological and metallurgical assumptions (including with respect to
the size, grade and recoverability of mineral reserves and resources), unanticipated operational difficulties (including failure of plant,
equipment or processes to operate in accordance with specifications or expectations, cost escalation, unavailability of materials and
equipment, government action or delays in the receipt of government approvals, changes in tax or royalty rates, industrial disturbances
or other job action, adverse weather conditions and unanticipated events related to health, safety and environmental matters), union
labour disputes, political risk, social unrest, failure of customers or counterparties to perform their contractual obligations, changes
in our credit ratings, unanticipated increases in costs to construct our development projects, difficulty in obtaining permits, inability
to address concerns regarding permits or environmental impact assessments, and changes or further deterioration in general
economic conditions. The amount and timing of actual capital expenditures is dependent upon, among other matters, being able
to secure permits, equipment, supplies, materials and labour on a timely basis and at expected costs to enable the related capital
project to be completed as currently anticipated. Our Fort Hills project is not controlled by us and construction and production
schedules may be adjusted by our partners.
Statements concerning future production costs or volumes, and the sensitivity of the company’s profit to changes in commodity
prices and exchange rates, are based on numerous assumptions of management regarding operating matters and on assumptions
that demand for products develops as anticipated, that customers and other counterparties perform their contractual obligations,
that operating and capital plans will not be disrupted by issues such as mechanical failure, unavailability of parts and supplies, labour
disturbances, interruption in transportation or utilities, and adverse weather conditions, and that there are no material unanticipated
variations in the cost of energy or supplies.
We assume no obligation to update forward-looking statements except as required under securities laws. Further information
concerning risks and uncertainties associated with these forward-looking statements and our business can be found in our Annual
Information Form for the year ended December 31, 2016, filed under our profile on SEDAR (www.sedar.com) and on EDGAR
(www.sec.gov) under cover of Form 40-F.
Quebrada Blanca Phase 2 reserve and grade information was approved by Mr. Rodrigo Alves Marinho, P.Geo., an employee of
Teck. Mr. Marinho is a qualified person, as defined under National Instrument (NI) 43-101.
Contingent Resource Disclosure
The contingent bitumen resources at Frontier have been prepared by Sproule Unconventional Limited, a qualified resources
evaluator, in accordance with the guidelines set out in the Canadian Oil and Gas Evaluation Handbook. There is uncertainty that
any of these resources will be commercially viable to produce any portion of the resources. Contingent bitumen resources are
defined for this purpose as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known
accumulations using established technology or technology under development, but which are not currently considered to be
commercially recoverable due to one or more contingencies. The entire contingent bitumen resources for Frontier oil sands mine
are sub-classified into the development pending project maturity sub-class as extensive pre-development work has been
completed. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or a lack of
markets. Contingent resources do not constitute, and should not be confused with, reserves. There is no certainty that the Frontier
project will produce any portion of the volumes currently classified as contingent resources. The primary contingencies that
currently prevent the classification of the contingent resources disclosed above for the Frontier project as reserves include project
economics due to the uncertainty in oil price and uncertainty in exchange rate; uncertainties around receiving regulatory approval
to develop the project; potential issues regarding social licence for oil sands mining generally and climate change policy costs. In
addition, there would be a need for approval of a decision to proceed to construction of the project by Teck. The Frontier project is
based on a development study. The recovery technology at Frontier is expected to be a paraffinic froth treatment process. The total
cost required to achieve first commercial production has been estimated by the resources evaluator at$16.2 billion.
50 Teck 2016 Annual Report | Every Day
Consolidated
Financial
Statements
For the Years Ended December 31, 2016 and 2015
Consolidated Financial Statements
51
Consolidated Financial Statements
For the Years Ended December 31, 2016 and 2015
Management’s Responsibility for Financial Reporting
Management is responsible for the integrity and fair presentation of the financial information contained in this annual
report. Where appropriate, the financial information, including financial statements, reflects amounts based on the
best estimates and judgments of management. The financial statements have been prepared in accordance with
International Financial Reporting Standards as issued by the International Accounting Standards Board. Financial
information presented elsewhere in the annual report is consistent with that disclosed in the financial statements.
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Any system
of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation
and presentation. The system of controls is also supported by a professional staff of internal auditors who conduct periodic
audits of many aspects of our operations and report their findings to management and the Audit Committee.
Management has a process in place to evaluate internal control over financial reporting based on the criteria
established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013 framework.
The Board of Directors oversees management’s responsibility for financial reporting and internal control systems
through an Audit Committee, which is composed entirely of independent directors. The Audit Committee meets
periodically with management, our internal auditors and independent auditors to review the scope and results of the
annual audit, and to review the financial statements and related financial reporting and internal control matters before
the financial statements are approved by the Board of Directors and submitted to the shareholders.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, appointed by the shareholders, have
audited our financial statements in accordance with Canadian generally accepted auditing standards and have expressed
their opinion in the Independent Auditor’s Report.
Donald R. Lindsay
President and Chief Executive Officer
Ronald A. Millos
Senior Vice President, Finance and Chief Financial Officer
February 23, 2017
52 Teck 2016 Annual Report | Every Day
Independent Auditor’s Report
To the Shareholders of Teck Resources Limited
We have completed integrated audits of Teck Resources Limited’s (the Company) December 31, 2016 and
December 31, 2015 consolidated financial statements and its internal control over financial reporting as at
December 31, 2016. Our opinions, based on our audits are presented below.
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Teck Resources Limited, which comprise
the consolidated balance sheets as at December 31, 2016 and December 31, 2015 and the consolidated statements
of income (loss), comprehensive income (loss), cash flows and changes in equity for the years then ended, and the
related notes, which comprise a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards as issued by the International Accounting Standards
Board and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement. Canadian generally accepted auditing standards also require that we comply with ethical requirements.
An audit involves performing procedures to obtain audit evidence, on a test basis, about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that
are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting principles
and policies used and the reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis
for our audit opinion on the consolidated financial statements.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Teck Resources Limited as at December 31, 2016 and December 31, 2015 and its financial performance and its cash
flows for the years then ended in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
Report on Internal Control Over Financial Reporting
We have also audited Teck Resources Limited’s internal control over financial reporting as at December 31, 2016,
based on criteria established in Internal Control — Integrated Framework (2013), issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
Consolidated Financial Statements
53
Management’s Responsibility for Internal Control Over Financial Reporting
Management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting included in Management’s Report on Internal Control
Over Financial Reporting.
Auditor’s Responsibility
Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our
audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
An audit of internal control over financial reporting includes obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control, based on the assessed risk, and performing such other procedures
as we consider necessary in the circumstances.
We believe that our audit provides a reasonable basis for our audit opinion on the company’s internal control over
financial reporting.
Definition of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
Generally Accepted Accounting Principles (GAAP). A company’s internal control over financial reporting includes those
policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
Inherent Limitations
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance with the policies or procedures
may deteriorate.
Opinion
In our opinion, Teck Resources Limited maintained, in all material respects, effective internal control over financial
reporting as at December 31, 2016, based on criteria established in Internal Control — Integrated Framework (2013)
issued by COSO.
Chartered Professional Accountants
February 23, 2017
Vancouver, B.C.
54 Teck 2016 Annual Report | Every Day
Consolidated Statements of Income (Loss) Years ended December 31
(CAD$ in millions, except for share data)
Revenues
Cost of sales
Gross profit
Other operating expenses
General and administration
Exploration
Research and development
Asset impairments (Note 13(a))
Other operating income (expense) (Note 6)
Profit (loss) from operations
Finance income (Note 7)
Finance expense (Note 7)
Non-operating income (expense) (Note 8)
Share of income (losses) of associates and joint ventures (Note 12)
Profit (loss) before taxes
(Provision for) recovery of income taxes (Note 17)
2016
2015
$
9,300
$
8,259
(6,904)
(6,980)
2,396
1,279
(99)
(51)
(30)
(294)
(197)
1,725
16
(354)
239
2
1,628
(587)
(108)
(76)
(47)
(3,631)
(335)
(2,918)
5
(316)
(89)
(2)
(3,320)
836
Profit (loss) for the year
$
1,041
$
(2,484)
Profit (loss) attributable to:
Shareholders of the company
Non-controlling interests
Profit (loss) for the year
Earnings (loss) per share (Note 21(f))
Basic
Diluted
Weighted average shares outstanding (millions)
Shares outstanding at end of year (millions)
The accompanying notes are an integral part of these financial statements.
$
1,040
$
(2,474)
1
(10)
$
1,041
$
(2,484)
$
$
1.80
1.78
576.4
576.9
$
$
(4.29)
(4.29)
576.2
576.3
Consolidated Financial Statements
55
Consolidated Statements of Comprehensive Income (Loss) Years ended December 31
(CAD$ in millions)
Profit (loss) for the year
2016
2015
$
1,041
$
(2,484)
Other comprehensive income (loss) in the year
Items that may be reclassified to profit (loss)
Currency translation differences (net of taxes of $ (27) and $163)
Change in fair value of available-for-sale financial instruments
(net of taxes of $(2) and $(2))
Cash flow hedges (net of taxes of $nil and $(1))
Share of other comprehensive income of associates and joint ventures
Items that will not be reclassified to profit (loss)
Remeasurements of retirement benefit plans (net of taxes of $(7) and $(18))
Total other comprehensive income for the year
(21)
202
16
–
1
(4)
19
15
7
4
3
216
40
256
Total comprehensive income (loss) for the year
$
1,056
$
(2,228)
Total other comprehensive income attributable to:
Shareholders of the company
Non-controlling interests
Total comprehensive income (loss) attributable to:
Shareholders of the company
Non-controlling interests
The accompanying notes are an integral part of these financial statements.
$
$
15
–
15
$
$
241
15
256
$
1,055
$
(2,233)
1
5
$
1,056
$
(2,228)
56 Teck 2016 Annual Report | Every Day
Consolidated Statements of Cash Flows Years ended December 31
(CAD$ in millions)
2016
2015
Operating activities
Profit (loss) for the year
Depreciation and amortization
Provision for (recovery of) income taxes
Asset impairments
Gain on sale of investments and assets
Foreign exchange (gains) losses
Gain on debt repurchase
Gain on debt prepayment options
Finance expense
Income taxes paid
Other
Net change in non-cash working capital items
Investing activities
Property, plant and equipment
Capitalized production stripping costs
Expenditures on investments and other assets
Proceeds from the sale of investments and other assets
Financing activities
Issuance of debt
Repayment of debt
Debt interest and finance charges paid
Issuance of Class B subordinate voting shares
Dividends paid
Distributions to non-controlling interests
Effect of exchange rate changes on cash and cash equivalents
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
$
1,041
1,385
587
294
(96)
(46)
(49)
(113)
354
(272)
331
(360)
3,056
(1,416)
(477)
(114)
170
$
(2,484)
1,366
(836)
3,631
(120)
76
–
–
316
(255)
54
214
1,962
(1,581)
(663)
(82)
1,222
(1,837)
(1,104)
1,567
(2,560)
(571)
8
(58)
(21)
28
(476)
(455)
–
(374)
(27)
(1,635)
(1,304)
(64)
(480)
304
(142)
1,887
2,029
Cash and cash equivalents at end of year
$
1,407
$
1,887
Supplemental cash flow information (Note 9)
The accompanying notes are an integral part of these financial statements.
Consolidated Financial Statements
57
Consolidated Balance Sheets
(CAD$ in millions)
Assets
Current assets
Cash and cash equivalents (Note 9)
Current income taxes receivable
Trade accounts receivable
Inventories (Note 10)
Financial and other assets (Note 11)
Investments in associates and joint ventures (Note 12)
Property, plant and equipment (Note 13)
Deferred income tax assets (Note 17)
Goodwill (Note 14)
Liabilities and Equity
Current liabilities
Trade accounts payable and other liabilities (Note 15)
Current income taxes payable
Debt (Note 16)
Debt (Note 16)
Deferred income tax liabilities (Note 17)
Deferred consideration (Note 18)
Retirement benefit liabilities (Note 19)
Other liabilities and provisions (Note 20)
Equity
Attributable to shareholders of the company
Attributable to non-controlling interests
Contingencies (Note 23)
Commitments (Note 24)
Subsequent event (Note 30)
Approved on behalf of the Board of Directors
December 31, December 31,
2016
2015
$
1,407
97
1,585
1,673
4,762
1,034
1,012
27,595
112
1,114
$
1,887
183
1,115
1,620
4,805
858
1,017
26,791
90
1,127
$
35,629
$
34,688
$
1,902
199
99
2,200
8,244
4,896
723
643
1,322
$
1,673
25
28
1,726
9,606
4,828
785
626
480
18,028
18,051
17,442
159
16,407
230
17,601
16,637
$
35,629
$
34,688
Tracey L. McVicar
Chair of the Audit Committee
Warren S. R. Seyffert, Q.C.
Director
The accompanying notes are an integral part of these financial statements.
58 Teck 2016 Annual Report | Every Day
Consolidated Statements of Changes in Equity Years ended December 31
(CAD$ in millions)
Class A common shares (Note 21)
Class B subordinate voting shares (Note 21)
Beginning of year
Issued on exercise of options
Reversal of tax provision
End of year
Retained earnings
Beginning of year
Profit (loss) for the year attributable to shareholders of the company
Dividends declared
Gain on purchase of non-controlling interest (Note 22(a))
Remeasurements of retirement benefit plans
2016
2015
$
7
$
7
6,627
10
–
6,637
9,174
1,040
(58)
8
19
6,502
1
124
6,627
11,723
(2,474)
(115)
–
40
End of year
10,183
9,174
Contributed surplus
Beginning of year
Share option compensation expense (Note 21(c))
Transfer to Class B subordinate voting shares on exercise of options
End of year
Accumulated other comprehensive income (loss) (Note 21(e))
Beginning of year
Other comprehensive income
Less remeasurements of retirement benefit plans recorded in retained earnings
End of year
Non-controlling interests (Note 22)
Beginning of year
Profit (loss) for the year attributable to non-controlling interests
Other comprehensive income attributable to non-controlling interests
Purchase of non-controlling interest (Note 22(a))
Other
Dividends or distributions
End of year
Total equity
The accompanying notes are an integral part of these financial statements.
173
22
(2)
193
426
15
(19)
422
230
1
–
(46)
(5)
(21)
159
149
24
–
173
225
241
(40)
426
230
(10)
15
–
22
(27)
230
$
17,601
$
16,637
Consolidated Financial Statements
59
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
1. Nature of Operations
Teck Resources Limited and its subsidiaries (Teck, we, us or our) are engaged in mining and related activities including
research, exploration and development, processing, smelting, refining and reclamation. Our major products are
steelmaking coal, copper, zinc and lead. We also produce precious metals, molybdenum, electrical power, fertilizers
and other metals. Metal products are sold as refined metals or concentrates. Our energy assets include a partnership
interest in an oil sands development project now under construction and certain oil sands leases.
Teck Resources Limited is a Canadian corporation and our registered office is at 550 Burrard Street, Vancouver,
British Columbia, Canada, V6C 0B3.
2. Basis of Preparation and New IFRS Pronouncements
a) Basis of Preparation
These annual consolidated financial statements have been prepared by management in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and were
approved by the Board of Directors on February 23, 2017.
b) New IFRS Pronouncements
New IFRS pronouncements that have been issued but are not yet effective are listed below. We plan to apply the new
standards or interpretations in the annual period for which they are first required.
Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers (IFRS 15) as a result of a joint revenue
project with the Financial Accounting Standards Board (FASB).
The new revenue standard introduces a single principles-based five-step model for the recognition of revenue when
control of goods is transferred to, or a service is performed, for the customer. The five steps are to: identify the
contract(s) with the customer, identify the performance obligations in the contract, determine the transaction price,
allocate the transaction price, and recognize revenue when the performance obligation is satisfied. IFRS 15 also
requires enhanced disclosures about revenue to help investors better understand the nature, amount, timing and
uncertainty of revenue and cash flows from contracts with customers.
The standard initially had an effective date of January 1, 2017 but was subsequently deferred by one year to
January 1, 2018. Early application of IFRS 15 is still permitted. We are currently assessing the effect of this standard
on our financial statements.
Financial Instruments
IFRS 9, Financial Instruments (IFRS 9), addresses the classification, measurement and recognition of financial assets
and financial liabilities. The July 2014 publication of IFRS 9 is the completed version of the standard, replacing earlier
versions of IFRS 9 and superseding the guidance relating to the classification and measurement of financial
instruments in IAS 39, Financial Instruments: Recognition and Measurement (IAS 39).
IFRS 9 requires financial assets to be classified into three measurement categories on initial recognition: those measured
at fair value through profit and loss, those measured at fair value through other comprehensive income and those
measured at amortized cost. Investments in equity instruments are required to be measured by default at fair value
through profit or loss. However, there is an irrevocable option for each equity instrument to present fair value changes in
other comprehensive income. Measurement and classification of financial assets is dependent on the entity’s business
model for managing the financial assets and the contractual cash flow characteristics of the financial asset. For financial
liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value
option is taken for financial liabilities, the part of a fair value change relating to an entity’s own credit risk is recorded in
other comprehensive income rather than the income statement, unless this creates an accounting mismatch.
60 Teck 2016 Annual Report | Every Day
IFRS 9 introduces a new three-stage expected credit loss model for calculating impairment for financial assets.
IFRS 9 no longer requires a triggering event to have occurred before credit losses are recognized. An entity is required
to recognize expected credit losses when financial instruments are initially recognized and to update the amount of
expected credit losses recognized at each reporting date to reflect changes in the credit risk of the financial instruments.
In addition, IFRS 9 requires additional disclosure requirements about expected credit losses and credit risk.
The new hedge accounting model in IFRS 9 aligns hedge accounting with risk management activities undertaken by
an entity. Components of both financial and non-financial items will now be eligible for hedge accounting, as long as
the risk component can be identified and measured. The hedge accounting model includes eligibility criteria that must
be met, but these criteria are based on an economic assessment of the strength of the hedging relationship. New
disclosure requirements relating to hedge accounting will be required and are meant to simplify existing disclosures.
The IASB currently has a separate project on macro hedging activities and until the project is completed, the IASB has
provided a policy choice for entities to either apply the hedge accounting model in IFRS 9 or IAS 39 in full. Additionally,
there is a hybrid option to use IAS 39 to account for macro hedges only and to use IFRS 9 for all other hedges.
The completed version of IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early
adoption permitted. We are currently assessing the effect of this standard and its related amendments on our
financial statements.
Leases
In January 2016, the IASB issued IFRS 16, Leases (IFRS 16), which eliminates the classification of leases as either
operating or finance leases for a lessee. Under IFRS 16, all leases are considered finance leases and will be recorded
on the balance sheet. The only exemptions to this classification will be for leases that are 12 months or less in duration
or for leases of low-value assets. The requirement to record all leases as finance leases under IFRS 16 will increase
lease assets and lease liabilities on an entity’s financial statements. IFRS 16 will also change the nature of expenses
relating to leases as the straight-line lease expense previously recognized for operating leases will be replaced with
depreciation expense for lease assets and finance expense for lease liabilities. IFRS 16 includes an overall disclosure
objective and requires a company to disclose (a) information about lease assets and expenses and cash flows related
to leases; (b) a maturity analysis of lease liabilities; and (c) any additional company-specific information that is relevant
to satisfying the disclosure objective. IFRS 16 is effective from January 1, 2019 and can be applied before that date
but only if IFRS 15 is also applied. We are currently assessing the effect of this standard on our financial statements.
Consolidated Financial Statements
61
3. Summary of Significant Accounting Policies
The significant accounting policies applied in the preparation of these consolidated financial statements are set out
below. These policies have been consistently applied to all periods presented, unless otherwise stated.
Basis of Presentation
Our consolidated financial statements include the accounts of Teck Resources Limited and all of its subsidiaries.
Our significant operating subsidiaries include Teck Metals Ltd. (TML), Teck Alaska Incorporated (TAK), Teck Highland
Valley Copper Partnership (Highland Valley Copper), Teck Coal Partnership (Teck Coal), Teck Washington Incorporated
(TWI), Compañia Minera Teck Quebrada Blanca S.A. (Quebrada Blanca) and Compañia Minera Teck Carmen de
Andacollo (Carmen de Andacollo).
All subsidiaries are entities that we control, either directly or indirectly. Control is defined as the exposure, or rights,
to variable returns from involvement with an investee and the ability to affect those returns through power over
the investee. Power over an investee exists when our existing rights give us the ability to direct the activities that
significantly affect the investee’s returns. This control is generally evidenced through owning more than 50% of the
voting rights or currently exercisable potential voting rights of a company’s share capital. All of our intra-group balances
and transactions, including unrealized profits and losses arising from intra-group transactions, have been eliminated
in full. For subsidiaries that we control but do not own 100% of, the net assets and net profit attributable to outside
shareholders are presented as amounts attributable to non-controlling interests in the consolidated balance sheet and
consolidated statements of income (loss) and comprehensive income (loss).
Certain of our business activities are conducted through joint arrangements. Our interests in joint operations include
Galore Creek Partnership (Galore Creek, 50% share), Fort Hills Energy Limited Partnership (Fort Hills, 20% share)
and Waneta Dam (66.7% share), which operate in Canada and Compañia Minera Antamina (Antamina, 22.5%),
which operates in Peru. We account for our interests in these joint operations by recording our share of the respective
assets, liabilities, revenue, expenses and cash flows. We also have an interest in a joint venture, NuevaUnión
(50% share), in Chile that we account for using the equity method (Note 12(a)).
All dollar amounts are presented in Canadian dollars unless otherwise specified.
Interests in Joint Arrangements
A joint arrangement can take the form of a joint venture or joint operation. All joint arrangements involve a contractual
arrangement that establishes joint control, which exists only when decisions about the activities that significantly
affect the returns of the investee require unanimous consent of the parties sharing control. A joint operation is a joint
arrangement in which we have rights to the assets and obligations for the liabilities relating to the arrangement. A joint
venture is a joint arrangement in which we have rights to only the net assets of the arrangement.
Joint ventures are accounted for in accordance with the policy “Investments in Associates and Joint Ventures”.
Joint operations are accounted for by recognizing our share of the assets, liabilities, revenue, expenses and cash flows
of the joint operation in our consolidated financial statements.
62 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015 Investments in Associates and Joint Ventures
Investments over which we exercise significant influence but do not control or jointly control are associates.
Investments in associates are accounted for using the equity method, except when classified as held for sale.
Investments in joint ventures as determined in accordance with the policy “Interests in Joint Arrangements”
are also accounted for using the equity method.
The equity method involves recording the initial investment at cost and subsequently adjusting the carrying value of
the investment for our proportionate share of the profit or loss, other comprehensive income or loss and any other
changes in the associate’s or joint venture’s net assets such as dividends.
Our proportionate share of the associate’s or joint venture’s profit or loss and other comprehensive income or loss
is based on its most recent financial statements. Adjustments are made to align any inconsistencies between our
accounting policies and our associate’s or joint venture’s policies before applying the equity method. Adjustments are
also made to account for depreciable assets based on their fair values at the acquisition date of the investment and
for any impairment losses recognized by the associate or joint venture.
If our share of the associate’s or joint venture’s losses were equal to or exceeded our investment in the associate
or joint venture, recognition of further losses would be discontinued. After our interest is reduced to zero, additional
losses would be provided for and a liability recognized only to the extent that we have incurred legal or constructive
obligations to provide additional funding or make payments on behalf of the associate or joint venture. If the associate
or joint venture subsequently reports profits, we resume recognizing our share of those profits only when we have a
positive interest in the entity.
At each balance sheet date, we consider whether there is objective evidence of impairment in associates and joint
ventures. If there is such evidence, we determine the amount of impairment to record, if any, in relation to the
associate or joint venture.
Foreign Currency Translation
The functional currency of each of our subsidiaries and our joint operations, joint ventures and associates is the
currency of the primary economic environment in which the entity operates. Transactions in foreign currencies are
translated to the functional currency of the entity at the exchange rate in existence at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated at the
period end date exchange rates.
The functional currency of Teck Resources Limited, the parent entity, is the Canadian dollar, which is also the
presentation currency of our consolidated financial statements.
Foreign operations are translated from their functional currencies into Canadian dollars on consolidation. Items in the
statement of income (loss) are translated using weighted average exchange rates that reasonably approximate the
exchange rate at the transaction date. Items in the balance sheet are translated at the closing spot exchange rate.
Exchange differences on the translation of the net assets of entities with functional currencies other than the Canadian
dollar, and any offsetting exchange differences on net debt used to hedge those assets, are recognized in a separate
component of equity through other comprehensive income (loss).
Exchange differences that arise relating to long-term intra-group balances that form part of the net investment in a
foreign operation are also recognized in this separate component of equity through other comprehensive income (loss).
On disposition or partial disposition of a foreign operation, the cumulative amount of related exchange differences
recorded in a separate component of equity is recognized in the statement of income (loss).
Consolidated Financial Statements
63
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
3. Summary of Significant Accounting Policies (continued)
Revenue
Recognition
Sales of product, including by-product, are recognized in revenue when there is persuasive evidence that all of
the following criteria have been met: the significant risks and rewards of ownership pass to the customer, neither
continuing managerial involvement nor effective control remains over the goods sold, the selling price and costs to
sell can be measured reliably, and it is probable that the economic benefits associated with the sale will flow to us.
All of these criteria are generally met by the time the significant risks and rewards of ownership pass to the customer.
Royalties related to production are recorded in cost of sales.
For sales of steelmaking coal and a majority of sales of metal concentrates, significant risks and rewards of ownership
pass to the customer when the product is loaded onto a carrier specified by the customer. We generally retain title
to these products until we receive the first contracted payment, solely to protect the collectibility of the amounts due
to us, which are typically received shortly after loading. A minority of metal concentrate sales are made on consignment.
For these transactions, significant risks and rewards of ownership pass to the customer at the time the product is
consumed in the customer’s processes.
For sales of refined metal, significant risks and rewards of ownership generally pass to the customer when the product
is loaded onto a carrier specified by the customer. For these products, loading generally coincides with the transfer
of title.
Pricing agreements
Steelmaking coal is sold under spot, quarterly or annual pricing contracts, and pricing is final when the product
is delivered.
The majority of our cathode and metal concentrates are sold under pricing arrangements where final prices are
determined by quoted market prices in a period subsequent to the date of sale. For these sales, the price is determined
on a provisional basis at the date of sale and revenue is recorded at that time based on current market prices.
Adjustments are made to the customer receivables in subsequent periods based on movements in quoted market
prices up to the date of final pricing. As a result, the value of our cathode and concentrate sales receivables changes
as the underlying commodity market prices vary and this adjustment mechanism has the characteristics of a derivative.
Accordingly, the fair value of the embedded derivative is adjusted each reporting period by reference to forward market
prices and the changes in fair value are recorded as an adjustment to other operating income (expense).
Streaming transactions
The treatment of upfront and ongoing payments received from counterparties under streaming arrangements
depends on the specific terms of the arrangement. For arrangements we have entered into to date, we consider these
transactions to be a disposition of a portion of the associated mineral properties, and therefore do not recognize
revenue for payments received under these arrangements. Any deferred consideration recorded for streaming
transactions and any ongoing payments received from our streaming transactions are recognized in profit (loss) as
a reduction of cost of sales as deliveries are made under the respective streaming transaction.
64 Teck 2016 Annual Report | Every Day
Financial Instruments
We recognize financial assets and liabilities on the balance sheet when we become a party to the contractual
provisions of the instrument.
Cash and cash equivalents
Cash and cash equivalents include cash on account, demand deposits and money market investments with maturities
from the date of acquisition of three months or less, which are readily convertible to known amounts of cash and are
subject to insignificant changes in value. Cash is classified as loans and receivables. Cash equivalents are classified as
available-for-sale.
Trade receivables and payables
Trade receivables and payables are non-interest bearing if paid when due and are recognized at face amount, except
when fair value is materially different, and are subsequently measured at amortized cost. Where necessary, trade
receivables are net of allowances for uncollectible amounts.
Investments in marketable securities
Investments in marketable securities are classified as available-for-sale and recorded at fair value. Fair values are
determined by reference to quoted market prices at the balance sheet date. Unrealized gains and losses on available-
for-sale investments are recognized in other comprehensive income until investments are disposed of or when there
is objective evidence of an impairment in value. Investment transactions are recognized on the trade date with
transaction costs included in the underlying balance.
At each balance sheet date, we assess for any objective evidence of an impairment in value of our investments and
record such impairments in non-operating income (expense) for the period. If an impairment of an investment in
a marketable equity security has been recorded in profit (loss), that loss cannot be reversed through profit (loss) in
future periods prior to sale.
Debt
Debt is initially recorded at fair value, less transaction costs. Debt is subsequently measured at amortized cost,
calculated using the effective interest rate method.
Derivative instruments
Derivative instruments, including embedded derivatives, are classified as at fair value through profit or loss and,
accordingly, are recorded on the balance sheet at fair value. Unrealized gains and losses on derivatives held for trading
are recorded as part of other operating income (expense) or non-operating income (expense) in profit depending
on the nature of the derivative. Fair values for derivative instruments are determined using inputs based on market
conditions existing at the balance sheet date or settlement date of the derivative. Derivatives embedded in non-derivative
contracts are recognized separately unless they are closely related to the host contract.
Hedging
Certain derivative investments may qualify for hedge accounting. For fair value hedges, any gains or losses on both
the hedged item and the hedging instrument are recognized in the same line item in profit (loss).
For cash flow hedges, any unrealized gains and losses on the hedging instrument relating to the effective portion of the
hedge are initially recorded in other comprehensive income. Gains and losses are recognized in profit (loss) upon settlement
of the hedging instrument, when the hedged item ceases to exist, or when the hedge is determined to be ineffective.
For hedges of net investments in foreign operations, any foreign exchange gains or losses on the hedging instrument
relating to the effective portion of the hedge are initially recorded in other comprehensive income. Gains and losses are
recognized in profit (loss) on the ineffective portion of the hedge, or when there is a disposition or partial disposition of
a foreign operation being hedged.
Consolidated Financial Statements
65
3. Summary of Significant Accounting Policies (continued)
Inventories
Finished products, work in-process, raw materials and supplies inventories are valued at the lower of weighted average
cost and net realizable value. Raw materials include concentrates for use at smelting and refining operations. Work
in-process inventory includes inventory in the milling, smelting or refining process and stockpiled ore at mining operations.
For work in-process and finished product inventories, cost includes all direct costs incurred in production, including
direct labour and materials, freight, depreciation and amortization and directly attributable overhead costs. Production
stripping costs that are not capitalized are included in the cost of inventories as incurred. Depreciation and amortization
of capitalized production stripping costs are included in the cost of inventory.
When inventories have been written down to net realizable value, we make a new assessment of net realizable value
in each subsequent period. If the circumstances that caused the write-down no longer exist, the remaining amount of
the write-down is reversed.
We use both joint-product and by-product costing for work in-process and finished product inventories. Joint-product
costing is applied where the profitability of the operations is dependent upon the production of a number of primary
products. Joint-product costing allocates total production costs based on the relative values of the products. Where
by-product costing is used, by-products are allocated only the incremental costs of processes that are specific to the
production of that product.
Supplies inventory is valued at the lower of weighted average cost and net realizable value. Cost includes acquisition,
freight and other directly attributable costs.
Property, Plant and Equipment
Land, buildings, plant and equipment
Land is recorded at cost and buildings, plant and equipment are recorded at cost less accumulated depreciation and
impairment losses. Cost includes the purchase price and the directly attributable costs to bring the assets to the
location and condition necessary for them to be capable of operating in the manner intended by management.
Depreciation of mobile equipment, buildings used for production, and plant and processing equipment at our mining
operations is calculated on a units-of-production basis. Depreciation of buildings not used for production, and of plant
and equipment at our smelting operations is calculated on a straight-line basis over the assets’ estimated useful lives.
Where components of an asset have different useful lives, depreciation is calculated on each component separately.
Depreciation commences when an asset is ready for its intended use. Estimates of remaining useful lives and residual
values are reviewed annually. Changes in estimates are accounted for prospectively.
The expected useful lives are as follows:
• Buildings and equipment (not used in production)
• Plant and equipment (smelting operations)
2–40 years
3–30 years
66 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
Mineral properties and mine development costs
The cost of acquiring and developing mineral properties or property rights, including pre-production waste rock stripping
costs related to mine development and costs incurred during production to increase future output, are capitalized.
Waste rock stripping costs incurred in the production phase of a surface mine are recorded as capitalized production
stripping costs within property, plant and equipment when it is probable that the stripping activity will improve access
to the orebody when the component of the orebody or pit to which access has been improved can be identified, and
when the costs relating to the stripping activity can be measured reliably. When the actual waste-to-ore stripping ratio
in a period is greater than the expected life-of-component waste-to-ore stripping ratio for that component, the excess
is recorded as capitalized production stripping costs.
Once available for use, mineral properties and mine development costs are depreciated on a units-of-production basis
over the proven and probable reserves to which they relate. Since the stripping activity within a component of a mine
generally only improves access to the reserves of the same component, capitalized production stripping costs incurred
during the production phase of a mine are depreciated on a units-of-production basis over the proven and probable
reserves expected to be mined from the same component.
Underground mine development costs are depreciated using the block depreciation method, where development
costs associated with each distinct section of the mine are depreciated over the reserves to which they relate.
Exploration and evaluation costs
Property acquisition costs are capitalized. Other exploration and evaluation costs are capitalized if they relate to specific
properties for which resources, as defined under National Instrument 43-101, exist or are near a specific property with
a defined resource and it is expected that the expenditure can be recovered by future exploitation or sale. All other
costs are charged to profit (loss) in the year in which they are incurred. Capitalized exploration and evaluation costs are
considered to be tangible assets. These assets are not depreciated as they are not currently available for use. When
proven and probable reserves are determined and development is approved, capitalized exploration and evaluation costs
are reclassified to mineral properties within property, plant and equipment.
Development costs of oil sands properties
The costs of acquiring, exploring, evaluating and developing oil sands properties are capitalized when it is expected
that these costs will be recovered through future exploitation or sale of the property. Capitalized development costs of
oil sands properties are tangible assets. These assets are not depreciated as they are not currently available for use.
When proven and probable reserves are determined and development is approved, capitalized development costs for
oil sands properties are reclassified to mineral properties within property, plant and equipment.
Construction in-progress
Assets in the course of construction are capitalized as construction in-progress. On completion, the cost of construction
is transferred to the appropriate category of property, plant and equipment, and depreciation commences when the
asset is available for its intended use.
Impairment of non-current assets
The carrying amounts of assets included in property, plant and equipment are reviewed for impairment whenever facts
and circumstances indicate that the carrying amounts are less than the recoverable amounts. If there are indicators
of impairment, the recoverable amount of the asset is estimated in order to determine the extent of any impairment.
Where the asset does not generate cash flows that are independent from other assets, the recoverable amount of the
cash-generating unit (CGU) to which the asset belongs is determined. The recoverable amount of an asset or CGU is
determined as the higher of its fair value less costs of disposal and its value in use. An impairment loss exists if the
asset’s or CGU’s carrying amount exceeds the recoverable amount, and is recorded as an expense immediately.
Consolidated Financial Statements
67
3. Summary of Significant Accounting Policies (continued)
Fair value is the price that would be received from selling an asset in an orderly transaction between market
participants at the measurement date. Costs of disposal are incremental costs directly attributable to the disposal of
an asset. For mining assets, when a binding sale agreement is not readily available, fair value less costs of disposal is
estimated using a discounted cash flow approach. Estimated future cash flows are calculated using estimated future
commodity prices, mineral reserves and resources, and operating and capital costs. All inputs used are those that
an independent market participant would consider appropriate. Value in use is determined as the present value of the
future cash flows expected to be derived from continuing use of an asset or CGU in its present form. These estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset or CGU for which estimates of future
cash flows have not been adjusted.
Indicators of impairment and impairment of exploration and evaluation assets or oil sands development costs are
assessed on a project-by-project basis or as part of the existing operation to which they relate.
Tangible assets that have been impaired in prior periods are tested for possible reversal of impairment whenever
events or significant changes in circumstances indicate that the impairment has reversed. Indicators of a potential
reversal of an impairment loss mainly mirror the indicators present when the impairment was originally recorded.
If the impairment has reversed, the carrying amount of the asset is increased to its recoverable amount, but not
beyond the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognized for the asset in the prior periods. A reversal of an impairment loss is recognized into profit immediately.
Repairs and maintenance
Repairs and maintenance costs, including shutdown maintenance costs, are charged to expense as incurred, except
when these repairs significantly extend the life of an asset or result in a significant operating improvement. In these
instances, the portion of these repairs relating to the betterment is capitalized as part of plant and equipment.
Borrowing costs
We capitalize borrowing costs that are directly attributable to the acquisition, construction or production of an asset
that takes a substantial period of time to construct or prepare for its intended use. We begin capitalizing borrowing
costs when there are general or specific borrowings, expenditures are incurred, and activities are undertaken to
prepare the asset for its intended use. The amount of borrowing costs capitalized cannot exceed the actual amount
of borrowing costs incurred during the period. All other borrowing costs are expensed as incurred.
We discontinue the capitalization of borrowing costs when substantially all of the activities necessary to prepare the
qualifying asset for its intended use or sale are complete. In addition, we cease capitalization of borrowing costs when
there is suspension of activities to prepare an asset for its intended use or sale. Capitalization recommences when
the activities are restarted. Capitalized borrowing costs are amortized over the useful life of the related asset.
Leased assets
Leased assets from which we receive substantially all of the risks and rewards of ownership of the asset are
capitalized as finance leases at the lower of the fair value of the asset or the estimated present value of the minimum
lease payments. The corresponding lease obligation is recorded within debt on the balance sheet.
Assets under operating leases are not capitalized, and rental payments are expensed based on the terms of the lease.
68 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015 Goodwill
We allocate goodwill arising from business combinations to each CGU or group of CGUs that are expected to receive
the benefits from the business combination. The carrying amount of the CGU or group of CGUs to which goodwill
has been allocated is tested annually for impairment or when there is an indication that the goodwill may be impaired.
Any impairment is recognized as an expense immediately. Should there be a recovery in the value of a CGU, any
impairment of goodwill previously recorded is not subsequently reversed.
Income Taxes
Taxes, comprising both income taxes and resource taxes, are accounted for as income taxes under IAS 12, Income
Taxes and are recognized in the statement of income (loss), except where they relate to items recognized in other
comprehensive income (loss) or directly in equity, in which case the related taxes are recognized in other
comprehensive income (loss) or equity.
Current taxes receivable or payable are based on estimated taxable income for the current year at the statutory tax
rates enacted or substantively enacted less amounts paid or received on account.
Deferred tax assets and liabilities are recognized based on temporary differences (the difference between the tax and
accounting values of assets and liabilities) and are calculated using enacted or substantively enacted tax rates for the
periods in which the differences are expected to reverse. The effect of tax rate changes is recognized in the period of
substantive enactment.
Deferred tax assets are recognized only to the extent that it is probable that future taxable profits of the relevant entity
or group of entities in a particular jurisdiction will be available, against which the assets can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries, joint
ventures and associates. However, we do not recognize such deferred tax liabilities where the timing of the reversal of
the temporary differences can be controlled without affecting our operations or business and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are not recognized if the temporary differences arise from the initial recognition of
goodwill or an asset or liability in a transaction, other than in a business combination, which will affect neither accounting
profit nor taxable profit.
We are subject to assessments by various taxation authorities, who may interpret tax legislation differently than we
do. The final amount of taxes to be paid depends on a number of factors, including the outcomes of audits, appeals or
negotiated settlements. We account for such differences based on our best estimate of the probable outcome of
these matters.
Employee Benefits
Defined benefit pension plans
Defined benefit pension plan obligations are based on actuarial determinations. The projected unit credit method,
which sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit
separately to build up the final obligation, is used to determine the defined benefit obligations, the related current
service costs and, where applicable, the past service costs. Actuarial assumptions used in the determination of
defined benefit pension plan assets and liabilities are based upon our best estimates, including discount rates,
salary escalation, expected health care costs and retirement dates of employees.
Vested and unvested costs arising from past service following the introduction of changes to a defined benefit plan
are recognized immediately as an expense when the changes are made.
Consolidated Financial Statements
69
3. Summary of Significant Accounting Policies (continued)
Actuarial gains and losses can arise from differences between expected and actual outcomes or changes in actuarial
assumptions. Actuarial gains and losses, changes in the effect of asset ceiling rules and return on plan assets are
collectively referred to as remeasurements of retirement benefit plans and are recognized immediately through other
comprehensive income (loss) and directly into retained earnings. Measurement of our net defined benefit asset is
limited to the lower of the surplus in the defined benefit plan and the asset ceiling. The asset ceiling is the funded
status of the plan on an accounting basis, less the present value of the expected economic benefit available to us in
the form of refunds from the plan or reductions in future contributions to the plan.
We apply one discount rate to the net defined benefit asset or liability for the purposes of determining the interest
component of the defined benefit cost. This interest component is recorded as part of finance expense. Depending on
the classification of the salary of plan members, current service costs and past service costs are included in either
operating expenses or general and administration expenses.
Defined contribution pension plans
The cost of providing benefits through defined contribution plans is charged to profit (loss) as the obligation to
contribute is incurred.
Non-pension post-retirement plans
We provide health care benefits for certain employees when they retire. Non-pension post-retirement plan obligations
are based on actuarial determinations. The cost of these benefits is expensed over the period in which the employees
render services. We fund these non-pension post-retirement benefits as they become due.
Termination benefits
We recognize a liability and an expense for termination benefits when we have demonstrably committed to either
terminate employees before their normal retirement date or provide termination benefits as a result of an offer made
in order to encourage voluntary retirement. We are demonstrably committed to a termination when, and only when,
there is a formal plan for the termination with no realistic possibility of withdrawal. The plan should include, at a
minimum, the location, function and approximate number of employees whose services are to be terminated, the
termination benefits for each job classification or function, and the time at which the plan will be implemented without
significant changes.
Share-Based Payments
The fair value method of accounting is used for share-based payment transactions. Under this method, the cost of
share options and other equity-settled share-based payment arrangements is recorded based on the estimated fair
value at the grant date, including an estimate of the forfeiture rate, and charged to other operating income (expense)
over the vesting period. For employees eligible for normal retirement prior to vesting, the expense is charged to other
operating income (expense) over the period from the grant date to the date they are eligible for retirement.
Share-based payment expense relating to cash-settled awards, including deferred, restricted and performance share
units, is accrued over the vesting period of the units based on the quoted market value of Class B subordinate voting
shares. Performance share units have an additional vesting factor determined by our total shareholder return in
comparison to a group of specified companies. As these awards will be settled in cash, the expense and liability are
adjusted each reporting period for changes in the underlying share price. Our performance share units are also adjusted
by the vesting factor relating to our total shareholder return in comparison to the group of specified companies.
70 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015 Share Repurchases
Where we repurchase any of our equity share capital, the excess of the consideration paid over book value is
deducted from contributed surplus and retained earnings on a pro rata basis.
Provisions
Decommissioning and restoration provisions
Future obligations to retire an asset and to restore a site, including dismantling, remediation and ongoing treatment
and monitoring of the site related to normal operations are initially recognized and recorded as a provision based
on estimated future cash flows discounted at a credit-adjusted risk-free rate. This decommissioning and restoration
provision is adjusted at each reporting period for changes to factors including the expected amount of cash flows
required to discharge the liability, the timing of such cash flows and the discount rate.
The provisions are also accreted to full value over time through periodic charges to profit. This unwinding of the
discount is charged to finance expense in the statement of income (loss).
The amount of the decommissioning and restoration provision initially recognized is capitalized as part of the related
asset’s carrying value. The method of depreciation follows that of the underlying asset. For a closed site or where
the asset that generated a decommissioning and restoration provision no longer exists, there is no longer any future
benefit related to the costs and, as such, the amounts are expensed through other operating income (expense).
For operating sites, a revision in estimates or a new disturbance will result in an adjustment to the provision with an
offsetting adjustment to the capitalized asset retirement cost.
During the operating life of an asset, events such as infractions of environmental laws or regulations may occur.
These events are not related to the normal operation of the asset. The costs associated with these provisions are
accrued and charged to other operating income (expense) in the period in which the event giving rise to the liability
occurs. Changes in the estimated liability resulting in an adjustment to the provision are also charged to other
operating income (expense) in the period in which the estimate changes.
Other provisions
Provisions are recognized when a present legal or constructive obligation exists as a result of past events, and it is
probable that an outflow of resources that can be reliably estimated will be required to settle the obligation. Where
the effect is material, the provision is discounted using an appropriate credit-adjusted risk-free rate.
Research and Development
Research costs are expensed as incurred. Development costs are only capitalized when: the product or process is
clearly defined; the technical feasibility has been established; the future market for the product or process is clearly
defined; and we are committed, and have the resources, to complete the project.
Earnings per Share
Earnings per share is calculated based on the weighted average number of shares outstanding during the year.
For diluted earnings per share, dilution is calculated based upon the net number of common shares issued should
“in-the-money” options and warrants be exercised and the proceeds be used to repurchase common shares at
the average market price in the year.
Consolidated Financial Statements
71
4. Critical Accounting Estimates and Judgments
In preparing these consolidated financial statements, we make estimates and judgments that affect the amounts
recorded. Actual results could differ from our estimates. Our estimates and judgments are based on historical
experience and other factors we consider to be reasonable, including expectations of future events. The judgments
and other sources of estimation uncertainty that have a risk of resulting in a material adjustment to the carrying
amounts of assets and liabilities within the next year are outlined below.
Impairment Testing
Judgment is required in assessing whether certain factors would be considered an indicator of impairment or
impairment reversal. We consider both internal and external information to determine whether there is an indicator
of impairment or impairment reversal present and, accordingly, whether impairment testing is required. When
impairment testing is required, discounted cash flow models are used to determine the recoverable amount of
respective assets. These models are prepared internally with assistance from third-party advisors when required.
When market transactions for comparable assets are available, these are considered in determining the recoverable
amount of assets. Significant assumptions used in preparing discounted cash flow models include commodity prices,
reserves and resources, mine plans, operating costs, capital expenditures, discount rates, foreign exchange rates
and inflation rates. Notes 13(a) and 14 outline the significant inputs used when performing goodwill and other asset
impairment testing. These inputs are based on management’s best estimates of what an independent market
participant would consider appropriate. Changes in these inputs may alter the results of impairment testing, the
amount of the impairment charges or reversals recorded in the statement of income (loss) and the resulting carrying
values of assets.
Joint Arrangements
We are a party to a number of arrangements over which we do not have control. Judgment is required in determining
whether joint control over these arrangements exists and, if so, which parties have joint control and whether each
arrangement is a joint venture or joint operation. In assessing whether we have joint control, we analyse the activities
of each arrangement and determine which activities most significantly affect the returns of the arrangement over its
life. These activities are determined to be the relevant activities of the arrangement. If unanimous consent is required
over the decisions about the relevant activities, the parties whose consent is required would have joint control over
the arrangement. The judgments around which activities are considered the relevant activities of the arrangement are
subject to analysis by each of the parties to the arrangement and may be interpreted differently. When performing this
assessment, we generally consider decisions about activities such as managing the asset while it is being designed,
developed and constructed, during its operating life, and during the closure period. We may also consider other
activities including the approval of budgets, expansion and disposition of assets, financing, significant operating and
capital expenditures, appointment of key management personnel, representation on the board of directors, and other
items. When circumstances or contractual terms change, we reassess the control group and the relevant activities of
the arrangement.
72 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015 If we have joint control over the arrangement, an assessment of whether the arrangement is a joint venture or joint
operation is required. This assessment is based on whether we have rights to the assets, and obligations for the
liabilities, relating to the arrangement or whether we have rights to the net assets of the arrangement. In making this
determination, we review the legal form of the arrangement, the terms of the contractual arrangement, and other
facts and circumstances. In a situation where the legal form and the terms of the contractual arrangement do not give
us rights to the assets and obligations for the liabilities, an assessment of other facts and circumstances is required,
including whether the activities of the arrangement are primarily designed for the provision of output to the parties and
whether the parties are substantially the only source of cash flows contributing to the arrangement. In such circumstances,
we may consider the application of other facts and circumstances to conclude that a joint arrangement is a joint operation.
This conclusion requires judgment and is specific to each arrangement. Other facts and circumstances have led us to
conclude that Antamina and Fort Hills are joint operations for the purposes of our consolidated financial statements.
The other facts and circumstances considered for both of these arrangements are the provisions for output to the
parties of the joint arrangements. For both Antamina and Fort Hills, we will take our share of the output from the assets
directly over the life of the arrangement. We have concluded that this, combined with other factors, gives us direct
rights to the assets and obligations for the liabilities of these arrangements, proportionate to our ownership interests.
Streaming Transactions
When we enter into a long-term streaming arrangement linked to production at specific operations, judgment is
required in assessing the appropriate accounting treatment of the transaction on the closing date and in future periods.
We consider the specific terms of each arrangement to determine whether we have disposed of an interest in the
reserves and resources of the respective operation. This assessment considers what the counterparty is entitled to
and the associated risks and rewards attributable to them over the life of the operation. These include the contractual
terms related to the total production over the life of the arrangement as compared to the expected production over the
life of the mine, the percentage being sold, the percentage of payable metals produced, the commodity price referred
to in the ongoing payment and any guarantee relating to the upfront payment if production ceases.
As for both of the streaming arrangements entered into in 2015 (Note 13(b) and Note 18), there is no guarantee
associated with the upfront payment and we have concluded that we have effectively disposed of the interest in the
gold and silver mineral interests at each of these operations over the life of the arrangement. Accordingly, we consider
these arrangements a disposition of a mineral interest.
When the ongoing payment we receive is based on future commodity prices at the date deliveries are made, this may
be considered an embedded derivative (Note 26(c)). The valuation of embedded derivatives in these arrangements is
an area of estimation and is determined using discounted cash flow models. These models require a variety of inputs,
including, but not limited to, contractual terms, market prices, forward curve prices, mine plans and discount rates.
Changes in these assumptions could affect the carrying value of derivative assets or liabilities and the amount of
unrealized gains or losses recognized in other operating income (expense).
Estimated Recoverable Reserves and Resources
Mineral reserve and resource estimates are based on various assumptions relating to operating matters as set forth in
National Instrument 43-101, Standards of Disclosure for Mineral Projects. These include production costs, mining and
processing recoveries, cut-off grades, long-term commodity prices and, in some cases, exchange rates, inflation rates
and capital costs. Cost estimates are based on feasibility study estimates or operating history. Estimates are prepared
by appropriately qualified persons, but will be affected by forecasted commodity prices, inflation rates, exchange rates,
capital and production costs, and recoveries, among other factors. Estimated recoverable reserves and resources
are used to determine the depreciation of property, plant and equipment at operating mine sites, in accounting for
capitalized production stripping costs, in performing impairment testing, and in forecasting the timing of the payment
of decommissioning and restoration costs. Therefore, changes in the assumptions used could affect the carrying value
of assets, depreciation and impairment charges recorded in the statement of income (loss) and the carrying value of
the decommissioning and restoration provision.
Consolidated Financial Statements
73
4. Critical Accounting Estimates and Judgments (continued)
Decommissioning and Restoration Provisions
The decommissioning and restoration provision is based on future cost estimates using information available at the
balance sheet date. The decommissioning and restoration provision is adjusted at each reporting period for changes
to factors such as the expected amount of cash flows required to discharge the liability, the timing of such cash flows
and the discount rate. The decommissioning and restoration provision requires other significant estimates and
assumptions, including the requirements of the relevant legal and regulatory framework and the timing, extent and
costs of required decommissioning and restoration activities. To the extent the actual costs differ from these estimates,
adjustments will be recorded and the income statement may be affected.
Current and Deferred Taxes
We calculate current and deferred tax provisions for each of the jurisdictions in which we operate. Actual amounts
of income tax expense are not final until tax returns are filed and accepted by the relevant authorities. This occurs
subsequent to the issuance of our financial statements and the final determination of actual amounts may not be
completed for a number of years. Therefore, profit (loss) in subsequent periods will be affected by the amount that
estimates differ from the final tax return.
Judgment is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognized on
the balance sheet and what tax rate is expected to be applied in the year when the related temporary differences
reverse, particularly in regard to the utilization of tax loss carry-forwards. We also evaluate the recoverability of
deferred tax assets based on an assessment of our ability to use the underlying future tax deductions before they
expire against future taxable income. Deferred tax liabilities arising from temporary differences on investments in
subsidiaries, joint ventures and associates are recognized unless the reversal of the temporary differences is not
expected to occur in the foreseeable future and can be controlled. Assumptions about the generation of future taxable
profits and repatriation of retained earnings depend on management’s estimates of future production and sales
volumes, commodity prices, reserves and resources, operating costs, decommissioning and restoration costs, capital
expenditures, dividends and other capital management transactions. Judgment is also required on the application
of income tax legislation. These estimates and judgments are subject to risk and uncertainty and could result in an
adjustment to the deferred tax provision and a corresponding credit or charge to profit (loss).
74 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015 5. Expenses by Nature
(CAD$ in millions)
Wage-related costs:
Wages and salaries
Employee benefits and other wage-related costs
Bonus payments
Post-employment benefits and pension costs
Transportation
Depreciation and amortization
Raw material purchases
Fuel and energy
Operating supplies consumed
Maintenance and repair supplies
Contractors and consultants
Overhead costs
Royalties
Other operating costs
Less:
Capitalized production stripping costs
Change in inventory
Total cost of sales, general and administration,
exploration and research and development expenses
2016
2015
$
$
858
250
162
112
1,382
1,270
1,385
876
596
558
586
427
293
312
13
913
243
125
94
1,375
1,292
1,366
741
646
596
599
482
270
198
76
7,698
7,641
(477)
(137)
(663)
233
$
7,084
$
7,211
Approximately 29% (2015 — 28%) of our costs are incurred at our foreign operations where the functional currency
is the U.S. dollar.
6. Other Operating Income (Expense)
(CAD$ in millions)
Settlement pricing adjustments (Note 26(b))
Share based compensation
Environmental and care and maintenance costs
Social responsibility and donations
Gain on sale of assets
Gain on formation of NuevaUnión (Note 12(a))
Commodity derivatives (Note 26(b) and Note 26(c))
Restructuring
Take or pay contract costs
Other
2016
2015
$
153
$
(280)
(171)
(144)
(25)
62
–
32
(8)
(48)
(48)
(13)
(49)
(10)
74
37
(12)
(22)
(13)
(47)
$
(197)
$
(335)
Consolidated Financial Statements
75
7. Finance Income and Finance Expense
(CAD$ in millions)
Finance income
Investment income
Total finance income
Finance expense
Debt interest
Letters of credit and standby fees
Net interest expense on retirement benefit plans
Accretion on decommissioning and restoration provisions (Note 20(a))
Other
Less capitalized borrowing costs (Note 13(e))
2016
2015
$
$
16
16
$
$
5
5
$
476
$
442
62
14
55
13
620
(266)
20
13
59
4
538
(222)
Total finance expense
$
354
$
316
8. Non-Operating Income (Expense)
(CAD$ in millions)
Foreign exchange gains (losses)
Provision for marketable securities
Gain on debt prepayment options (Note 26(c))
Gain on sale of investments
Gain on debt repurchases (Note 16(a) and Note 16(b))
$
$
2016
46
(3)
113
34
49
2015
(76)
(21)
–
8
–
$
239
$
(89)
76 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
Investments with maturities from the date of acquisition of three months or less
1,153
9. Supplemental Cash Flow Information
(CAD$ in millions)
Cash and cash equivalents
Cash
(CAD$ in millions)
Net change in non-cash working capital items
Trade accounts receivable
Inventories
Trade accounts payable and other liabilities
Non-cash financing and investing transactions
Formation of NuevaUnión (Note 12(a))
10. Inventories
(CAD$ in millions)
Supplies
Raw materials
Work in-process
Finished products
Less long-term portion (Note 11)
December 31, December 31,
2016
2015
$
254
$
247
1,640
$
1,407
$
1,887
2016
2015
$
(480)
$
(86)
206
(360)
$
18
242
(46)
214
–
$
486
$
$
December 31, December 31,
2016
2015
$
$
586
204
521
449
1,760
(87)
638
198
432
408
1,676
(56)
$
1,673
$
1,620
Cost of sales of $6.9 billion (2015 — $7.0 billion) include $6.3 billion (2015 — $6.5 billion) of inventories recognized as
an expense during the year.
Total inventories held at net realizable value amounted to $53 million at December 31, 2016 (December 31, 2015 —
$352 million). Total inventory write-downs in 2016 were $7 million (2015 — $127 million), and were included as part
of cost of sales. Of the $127 million of inventory write-downs in 2015, $6 million was included as part of other
operating expenses as they related to the closed Duck Pond mine. Total reversals of inventory write-downs previously
recorded were $23 million in 2016 (2015 — $nil) as a result of an increase in net realizable value primarily relating to
commodity price increases. These reversals were included as part of cost of sales.
Long-term inventories consist of ore stockpiles and other in-process materials that are not expected to be processed
within one year.
Consolidated Financial Statements
77
11. Financial and Other Assets
(CAD$ in millions)
December 31, December 31,
2016
2015
Long-term receivables and deposits
$
Available-for-sale marketable equity securities carried at fair value
Debt prepayment options (Note 26(c))
Pension plans in a net asset position (Note 19(a))
Long-term portion of inventories (Note 10)
Intangibles
Other
$
241
163
139
283
87
74
47
221
198
–
272
56
79
32
12. Investments in Associates and Joint Ventures
(CAD$ in millions)
At January 1, 2015
Contributions
Changes in foreign exchange rates
Share of losses
Share of other comprehensive income
At December 31, 2015
Contributions
Changes in foreign exchange rates
Share of income
Share of other comprehensive income
$
1,034
$
858
NuevaUnión (a)
Other
Total
$
–
$
$
923
36
–
–
959
13
(28)
2
–
$
32
17
8
(2)
3
32
940
44
(2)
3
$
58
$
1,017
8
(1)
–
1
21
(29)
2
1
At December 31, 2016
$
946
$
66
$
1,012
a) NuevaUnión
On November 24, 2015, we combined our Relincho project and the El Morro project owned by Goldcorp Inc.
(Goldcorp) into a single project named NuevaUnión. We accounted for this transaction as a disposition of a subsidiary
in exchange for an investment in a joint venture. This was a non-cash transaction (Note 9). We measured the fair
value of NuevaUnión using a combination of a discounted cash flow model and a market transaction approach based
on management’s best estimates of what inputs a market participant would consider appropriate. We applied the
requirements of IAS 28, Investments in Associates and Joint Ventures and, accordingly, we recognized a gain of
$37 million on this transaction (Note 6), which is only to the extent of Goldcorp’s interest in the joint venture.
We did not remeasure our retained interest in Relincho to fair value on closing of the transaction.
78 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
13. Property, Plant and Equipment
(CAD$ in millions)
At December 31, 2014
Exploration
and
Evaluation
Land, Capitalized
Buildings, Production
Plant and
Properties Equipment
Mineral
Stripping Construction
In-Progress
Costs
Total
Cost
$ 2,268
$ 19,561
$ 12,021
$
2,916
$ 2,977
$ 39,743
Accumulated depreciation
–
(4,151)
(5,553)
(1,114)
–
(10,818)
Net book value
$ 2,268
$ 15,410
$ 6,468
$ 1,802
$ 2,977
$ 28,925
Year ended December 31, 2015
Opening net book value
$ 2,268
$ 15,410
$ 6,468
$ 1,802
$ 2,977
$ 28,925
Additions
39
129
374
726
1,048
2,316
Disposals (Note 12(a) and
Note 13(b))
Impairment (a)
Depreciation and amortization
Decommissioning and restoration
provision change in estimate
Capitalized borrowing costs
Other
Changes in foreign
exchange rates
(827)
–
–
–
–
–
(206)
(1,885)
(404)
(476)
80
(3)
(12)
(10)
(571)
(38)
–
(12)
–
–
(464)
–
–
–
–
(1,062)
–
–
142
–
(1,045)
(2,957)
(1,439)
(514)
222
(15)
120
580
435
82
81
1,298
Closing net book value
$ 1,600
$ 13,225
$ 6,634
$
2,146
$
3,186
$ 26,791
At December 31, 2015
Cost
1,600
18,001
13,208
Accumulated depreciation
–
(4,776)
(6,574)
3,761
(1,615)
3,186
39,756
–
(12,965)
Net book value
$ 1,600
$ 13,225
$ 6,634
$
2,146
$
3,186
$ 26,791
Consolidated Financial Statements
79
13. Property, Plant and Equipment (continued)
(CAD$ in millions)
Year ended December 31, 2016
Exploration
and
Evaluation
Land, Capitalized
Buildings, Production
Plant and
Properties Equipment
Mineral
Stripping Construction
In-Progress
Costs
Total
Opening net book value
$ 1,600
$ 13,225
$ 6,634
$
2,146
$
3,186
$ 26,791
Additions
Disposals
Impairment (a)
Depreciation and amortization
Transfers between classifications
Decommissioning and restoration
provision change in estimate
Capitalized borrowing costs
Other
Changes in foreign
exchange rates
24
–
–
–
–
–
–
(9)
(2)
47
–
–
(356)
–
633
91
–
173
(10)
(26)
(657)
276
26
–
(6)
531
1,112
1,887
–
–
–
(268)
(10)
(294)
(500)
–
(1,513)
–
–
–
–
(276)
–
–
175
–
659
266
(15)
(78)
(58)
(16)
(22)
(176)
Closing net book value
$
1,613
$ 13,562
$ 6,352
$
2,161
$ 3,907
$ 27,595
At December 31, 2016
Cost
$
1,613
$ 18,667
$ 13,517
$ 4,269
$ 3,907
$ 41,973
Accumulated depreciation
–
(5,105)
(7,165)
(2,108)
–
(14,378)
Net book value
$
1,613
$ 13,562
$ 6,352
$
2,161
$ 3,907
$ 27,595
a) Asset Impairments
Year Ended December 31, 2016
During the year ended December 31, 2016, we recorded asset impairments of $294 million, of which $222 million
related to the Fort Hills project, $46 million related to a project at our Trail Operations that will not be completed and
$26 million related to the Wintering Hills Wind Power Facility, which we have entered into an agreement to sell and
expect to close in the first quarter of 2017.
As a result of changes in reported reserves and resources at Carmen de Andacollo and an increase in future
development costs associated with the Fort Hills project, we performed a detailed review of the recoverable amounts
of these CGUs as at December 31, 2016. We estimated the recoverable amount of these CGUs on a fair value less
costs of disposal basis (FVLCD) using a discounted cash flow methodology and taking into account assumptions likely
to be made by market participants. This is classified as a Level 3 measurement within the fair value measurement
hierarchy (Note 27).
We have determined that the estimated recoverable amount of Carmen de Andacollo exceeded its carrying value as at
December 31, 2016 and accordingly, no impairment charge was recorded.
We have estimated a post-tax recoverable amount for Fort Hills of $2.52 billion, which was lower than the carrying
value as at December 31, 2016. Accordingly, we have recorded a pre-tax impairment of our property, plant and equipment
through profit (loss) of $222 million (post-tax $164 million). This affects the profit (loss) of our Energy segment (Note 25).
Cash flow projections were based on current life of mine plans and exploration potential for both CGUs. For Carmen
de Andacollo, the cash flows cover a period of 44 years. Fort Hills cash flows cover a period of 44 years.
80 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
The key inputs used to estimate the FVLCD of Carmen de Andacollo and Fort Hills as at December 31, 2016 were
derived in the same manner as those inputs used in our 2016 goodwill impairment testing as outlined in Note 14
and include the following:
Commodity Prices
For copper and Western Canadian Select (WCS) oil prices, we used the current price in the initial year and gradually
escalated that over the following three years, reaching real long-term prices in 2021 of US$3.00 per pound and US$57
per barrel for WCS oil.
Discount Rates
A 6.0% real, 8.1% nominal post-tax discount rate was used to discount cash flow projections for Carmen de Andacollo
based on a mining weighted average cost of capital. A 5.5% real, 7.6% nominal post-tax discount rate was used to
discount cash flow projections for the Fort Hills project based on an oils sands weighted average cost of capital.
Foreign Exchange Rates
The long-term Canadian-U.S. dollar foreign exchange rate assumption used from 2021 onwards was 1 U.S. dollar to
1.25 Canadian dollars.
Inflation Rates
The inflation rate for all FVLCD calculations was 2%.
Sensitivity Analysis
We noted impairment indicators at Carmen de Andacollo and Fort Hills and the recoverable amounts of the associated
CGUs have been estimated. The recoverable amount of Carmen de Andacollo exceeded its carrying value and we did
not record an impairment charge. We have adjusted the carrying value of Fort Hills down to its recoverable amount as
at December 31, 2016.
These recoverable amounts are most sensitive to changes in long-term copper and WCS oil prices, the Canadian-U.S.
dollar exchange rates (for Fort Hills) and discount rates. The key inputs used in our determination of recoverable
amounts interrelate significantly with each other and with our operating plans. For example, a decrease in long-term
commodity prices would result in us making amendments to the mine plans that would partially offset the effect of
lower prices through lower operating and capital costs. It is difficult to determine how all of these factors would
interrelate, but in estimating the effect of changes in these assumptions on fair values, we believe that all of these
factors need to be considered together. A linear extrapolation of these effects becomes less meaningful as the
change in assumption increases.
Fort Hills has been written down to its recoverable amount. Ignoring the above described interrelationships, in
isolation a US$1 decrease in the long-term WCS oil price would result in an additional reduction in the recoverable
amount of $120 million. A $0.01 strengthening of the Canadian dollar against the U.S. dollar would result in an
additional reduction in the recoverable amount of $42 million. A 25 basis point increase in the discount rate would
result in an additional reduction in the recoverable amount of approximately $120 million.
Carmen de Andacollo was written down to its recoverable amount as at December 31, 2015 and the estimated
recoverable amount has not changed significantly since that date. Accordingly, the recoverable amount is sensitive to
any change in the long-term copper price assumption or discount rate. Ignoring the above described interrelationships,
in isolation a US$0.01 decrease in the long-term copper price and a 25 basis point increase in the discount rate would
result in a reduction in the recoverable amount of approximately $13 million and $19 million, respectively.
Consolidated Financial Statements
81
13. Property, Plant and Equipment (continued)
Year Ended December 31, 2015
In light of economic conditions in the third and fourth quarters of 2015, we identified CGUs with carrying values that
exceeded the estimated recoverable amounts and recorded impairments. The FVLCD was estimated using a discounted
cash flow methodology taking into account assumptions likely to be made by market participants, which is classified
as a Level 3 estimate within the fair value measurement hierarchy (Note 27).
The impairment charges recorded during the year ended December 31, 2015 in each reportable segment are as follows:
Reportable Segment
Steelmaking Coal
Copper
Zinc
Energy
Cash-generating unit
Nature of the asset
(CAD$ in millions)
Steelmaking Coal
Assets CGU
Carmen de
Andacollo
Pend
Oreille
Steelmaking Coal
Mines in Canada
Copper Mine
in Chile
Zinc Mine
in U.S.
Fort Hills
Oil Sands
in Canada
Post-tax recoverable amount
$
9,969
$
954
$
49
$
1,786
Post-tax impairment of property, plant
and equipment
Post-tax impairment of goodwill (Note 14)
$
$
981
501
$
231
174
Total post-tax impairment
$
1,482
$
405
$
19
–
19
$
$
785
–
785
Steelmaking Coal
Assets CGU
Carmen de
Andacollo
Pend
Oreille
Fort Hills
Total
(CAD$ in millions)
Impairment recorded in
profit (loss)
Less tax effect — recovery
(550)
(101)
Post-tax impairment recorded
$
2,032
$
506
$
31
(12)
$
1,062
$
3,631
(277)
(940)
in profit (loss)
$
1,482
$
405
$
19
$
785
$
2,691
The key inputs used to estimate the FVLCD of each CGU as at December 31, 2015, when indicators were identified,
were derived in the same manner as those inputs used in our 2016 goodwill impairment testing as outlined in
Note 14 and include the following:
Commodity Prices
For steelmaking coal, copper, zinc and WCS oil prices, we used the 2015 current price in the initial year and gradually
escalated that over the following three years, reaching real long-term prices in 2020 of US$130 per tonne for
steelmaking coal, US$3.00 per pound for copper, US$1.00 per pound for zinc and US$60 per barrel for WCS oil.
Discount Rates
A 6.2% real, 8.3% nominal post-tax discount rate was used to discount cash flow projections for all of our FVLCD
discounted cash flow models as at December 31, 2015.
82 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
Foreign Exchange Rates
The long-term Canadian-U.S. dollar foreign exchange rate assumption used from 2020 onwards was 1 U.S. dollar
to 1.25 Canadian dollars.
Inflation Rates
The inflation rate for all FVLCD calculations was 2%.
b) Gold Stream Agreement
In 2015, Carmen de Andacollo sold an interest in gold reserves and resources from the Carmen de Andacollo mine
(Andacollo mine) to RGLD Gold AG (RGLDAG), a wholly owned subsidiary of Royal Gold, Inc. Under the terms of the
agreement, RGLDAG is entitled to an amount of gold equal to 100% of the payable gold produced from the Andacollo
mine until 900,000 ounces have been delivered, and 50% thereafter. RGLDAG pays a cash price of 15% of the monthly
average gold price at the time of each delivery. Carmen de Andacollo and Royal Gold Chile Limitada, a wholly owned
subsidiary of Royal Gold, Inc., terminated an earlier agreement entered into in 2010. Under the terminated agreement,
Royal Gold Chile Limitada was entitled to a payment based on 75% of payable gold produced from Andacollo mine
until 910,000 ounces had been delivered, and 50% thereafter.
We received cash proceeds of $206 million (US$162 million) as a result of Carmen de Andacollo entering into the new
agreement and terminating the separate agreement from 2010. We recorded the transaction on a net basis as a sale of
an incremental mineral property interest, and the net consideration was accounted for as a recovery of mineral property
costs. Accordingly, no gain or loss was recognized on the transaction. We account for the 15% ongoing payment as a
reduction of our cost of sales and not as revenue, as we consider it to be payment for the mineral interest and mining
and refining services. The 15% ongoing payment contains an embedded derivative relating to the gold price that is
marked to market each period with changes flowing through profit (loss) (Note 26(c)).
c) Exploration and Evaluation
Significant exploration and evaluation projects include Galore Creek and oil sands properties.
d) Finance Leases
The carrying value of property, plant and equipment held under finance lease at December 31, 2016 is $220 million
(2015 — $166 million). Ownership of leased assets remains with the lessor.
e) Borrowing Costs
Borrowing costs are capitalized at a rate based on our weighted average cost of borrowing or at the rate on the
project-specific debt, as applicable. These projects are shown as part of mineral properties and leases, land,
buildings, plant and equipment, or construction in-progress. Our weighted average borrowing rate used for
capitalization of borrowing costs in 2016 was 5.7% (2015 — 5.0%).
14. Goodwill
(CAD$ in millions)
January 1, 2015
Changes in foreign exchange rates
Impairment (Note 13(a))
December 31, 2015
Changes in foreign exchange rates
December 31, 2016
Steelmaking
Coal Operations
Quebrada
Blanca
Carmen de
Andacollo
$
1,203
$
356
$
–
(501)
702
$
–
69
–
425
(13)
$
702
$
412
$
$
$
Total
$
1,710
92
(675)
151
23
(174)
–
–
–
$
1,127
(13)
$
1,114
Consolidated Financial Statements
83
14. Goodwill (continued)
The allocation of goodwill to CGUs or groups of CGUs reflects how goodwill is monitored for internal management
purposes.
In the third and fourth quarters of 2015, in light of market conditions, we recorded goodwill impairment of $675 million.
The key inputs used in determining the impairments in 2015 were determined on a basis consistent with those
outlined below and are summarized in Note 13(a).
In 2016, we performed our annual goodwill impairment testing at October 31 and did not identify any impairment
losses. The recoverable amounts for our goodwill impairment testing were determined based on a FVLCD approach.
The FVLCD was calculated using a discounted cash flow methodology taking account of assumptions that would be
made by market participants.
Cash flow projections are based on expected mine life. For our steelmaking coal operations, the cash flows cover periods
of 16 to 45 years with a steady state thereafter until reserves and resources are exhausted. For Quebrada Blanca, the
cash flows cover a period of 25 years, with a steady state thereafter until reserves and resources are exhausted.
Given the nature of expected future cash flows used to determine the recoverable amount, a material change could
occur over time as the cash flows are significantly affected by the key assumptions described below.
The key inputs, where applicable, used to estimate the FVLCD were determined as follows:
Commodity Prices
Commodity price assumptions are based on a number of factors, including forward curves in the near term, and are
benchmarked with external sources of information, including information published by our peers and market transactions,
where possible, to ensure they are within the range of values used by market participants.
For steelmaking coal, we used the current price in the initial year and gradually de-escalated the price, reaching a real
long-term price in 2021 of US$130 per tonne. For copper, we used the current price in the initial year and gradually
escalated the price, reaching a real long-term price in 2021 of US$3.00 per pound.
Reserves and Resources
Future mineral production is included in projected cash flows based on mineral reserve and resource estimates and
on exploration and evaluation work undertaken by appropriately qualified persons.
Operating Costs and Capital Expenditures
Operating costs and capital expenditures are based on life of mine plans and internal management forecasts. Cost
estimates incorporate management experience and expertise, current operating costs, the nature and location of each
operation, and the risks associated with each operation. Future capital expenditures are based on management’s best
estimate of expected future capital requirements, which are generally for the extraction and processing of existing
reserves and resources. All committed and anticipated capital expenditures based on future cost estimates have been
included in the projected cash flows. Operating cost and capital expenditure assumptions are continuously subjected
to ongoing optimization and review by management.
Discount Rates
A 5.8% real, 7.9% nominal post-tax discount rate was used to discount cash flow projections for our goodwill FVLCD
discounted cash flow models.
84 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015 Foreign Exchange Rates
Foreign exchange rates are benchmarked with external sources of information based on a range used by market
participants. The long-term Canadian-U.S. dollar foreign exchange assumption used from 2021 onwards was
1 U.S. dollar to 1.25 Canadian dollars.
Inflation Rates
Inflation rates are based on average historical inflation for the location of each operation and long-term government
targets. The inflation rate for all FVLCD calculations was 2%.
Sensitivity Analysis
Our annual goodwill impairment test carried out as at October 31, 2016 resulted in the recoverable amount of Teck
Coal exceeding its carrying value by approximately $4.9 billion. The recoverable amount of Teck Coal is most sensitive
to the long-term Canadian dollar steelmaking coal price assumption. In isolation, an 11% decrease in the long-term
Canadian dollar steelmaking coal price would result in the recoverable amount of Teck Coal being equal to the
carrying value.
The recoverable amount of Quebrada Blanca exceeded the carrying amount at the date of our annual goodwill
impairment test and significant changes to key inputs would be required to result in the recoverable amount being
equal to the carrying value.
15. Trade Accounts Payable and Other Liabilities
(CAD$ in millions)
December 31, December 31,
2016
2015
Trade accounts payable and accruals
$
Capital project accruals
Payroll-related liabilities
Accrued interest
Commercial and government royalties
Customer deposits
Current portion of provisions (Note 20(a))
Current portion of deferred consideration (Note 18)
Other
$
986
142
252
148
246
18
71
32
7
810
222
206
179
129
31
58
31
7
$
1,902
$
1,673
Consolidated Financial Statements
85
16. Debt
(CAD$ in millions)
3.15% notes due January 2017
(US$34 million) (b)
3.85% notes due August 2017
(US$16 million) (b)
2.5% notes due February 2018
(US$22 million) (b)
3.0% notes due March 2019
(US$278 million) (b)
4.5% notes due January 2021
(US$500 million)
8.0% notes due June 2021
(US$650 million) (b)
4.75% notes due January 2022
(US$700 million)
3.75% notes due February 2023
(US$670 million) (a)
8.5% notes due June 2024
(US$600 million) (b)
6.125% notes due October 2035
(US$609 million) (a)
6.0% notes due August 2040
(US$491 million) (a)
6.25% notes due July 2041
(US$795 million) (a)
5.2% notes due March 2042
(US$399 million) (a)
5.4% notes due February 2043
(US$377 million) (a)
Antamina term loan due April 2020 (c)
Other
December 31, 2016
December 31, 2015
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
$
45
$
45
$
415
$
380
21
30
372
668
866
936
891
806
804
658
21
30
375
685
963
951
858
935
801
623
413
689
689
688
–
964
1,026
–
952
895
1,055
1,043
1,368
528
500
30
133
477
450
30
133
682
684
31
138
8,343
8,420
9,634
354
534
431
364
–
474
496
–
440
386
623
300
340
31
138
5,291
(28)
Less current portion of debt
(99)
(99)
(28)
$
8,244
$
8,321
$
9,606
$
5,263
The fair values of debt are determined using market values, if available, and using discounted cash flows based on our
cost of borrowing where market values are not available. The latter are considered Level 2 fair value measurements
with significant other observable inputs on the fair value hierarchy (Note 27).
86 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
a) Note Purchases
In September and October 2016, we purchased US$759 million aggregate principal amount of our outstanding notes
through private and open market purchases. The principal amount of notes purchased was US$80 million of 3.75%
notes due 2023, US$91 million of 6.125% notes due 2035, US$159 million of 6.00% notes due 2040, US$205 million
of 6.25% notes due 2041, US$101 million of 5.20% notes due 2042 and US$123 million of 5.40% notes due 2043. The
total cost of the purchases was US$693 million. We recorded a pre-tax accounting gain of $76 million (after-tax $67 million)
in non-operating income (expense) (Note 8) in connection with these purchases for the year ended December 31, 2016.
All private and open market purchases of our outstanding notes during 2016 were funded from cash on hand.
b) Notes Issued and Cash Tender Offers
In June 2016, we issued US$650 million of senior unsecured notes due June 2021 (June 2021 notes) and US$600 million
of senior unsecured notes due June 2024 (2024 notes). The June 2021 notes have a coupon of 8.00% per annum and an
effective interest rate, after taking into account issuance costs and the prepayment option value, of 8.22%. These notes
were issued at par value and are callable on or after June 1, 2018 at predefined prices based on the date of redemption.
Prior to June 1, 2018, the June 2021 notes can be redeemed, in whole or in part, at a redemption price equal to the
principal amount plus accrued interest to, but not including, the date of redemption and a make-whole call premium. The
2024 notes have a coupon of 8.50% per annum and an effective interest rate, after taking into account issuance costs and
the prepayment option value, of 8.49%. These notes were issued at par value and are callable on or after June 1, 2019 at
predefined prices based on the date of redemption. Prior to June 1, 2019, the 2024 notes can be redeemed, in whole or in
part, at a redemption price equal to the principal amount plus accrued interest to, but not including, the date of redemption
and a make-whole call premium. Our obligations under these notes are guaranteed on a senior unsecured basis by TML,
Teck Coal, Teck South American Holdings Ltd. (formerly Teck Financial Corporation Ltd.), TCL U.S. Holdings Ltd., TAK and
Highland Valley Copper, each a wholly owned subsidiary of Teck. The 2016 indenture limits the aggregate amount of
additional indebtedness for borrowed money that the subsidiary guarantors may guarantee or otherwise incur to 10% of
consolidated net tangible assets, subject to certain specified exceptions.
Net proceeds from these issuances, after underwriting and issuance costs, were US$1.227 billion. We used these
proceeds and cash on hand to purchase US$1.25 billion aggregate principal amount of our outstanding notes pursuant
to cash tender offers. The principal amount of notes purchased pursuant to the tender offers was US$266 million of
3.15% notes due 2017, US$284 million of 3.85% notes due 2017, US$478 million of 2.50% notes due 2018 and
US$222 million of 3.00% notes due 2019. The total cost of the purchases, including the premium for the purchase,
was US$1.267 billion. We recorded a pre-tax accounting charge of $27 million (after-tax $23 million) in non-operating
income (expense) on these transactions (Note 8) during the year ended December 31, 2016.
The June 2021 notes and 2024 notes include prepayment options that are considered to be embedded derivatives
(Note 26(c)).
c) Antamina Term Loan
The Antamina term loan is our proportionate share of Antamina’s U.S. dollar denominated term loan, with full repayment
due at maturity in April 2020. The Antamina term loan is the obligation of Antamina and is non-recourse to us and the
other Antamina project sponsors. The term loan bears interest with reference to the London Interbank Offered Rate
(LIBOR) plus an applicable margin.
d) Optional Redemptions
All of our outstanding notes, except the June 2021 notes and 2024 notes, are redeemable at any time by repaying
the greater of the principal amount and the present value of the sum of the remaining scheduled principal and interest
amounts discounted at a comparable treasury yield plus a stipulated spread, plus, in each case, accrued interest to,
but not including, the date of redemption. In addition, the 2023, 2042 and 2043 notes issued in 2012 are callable at
100% (plus accrued interest to, but not including, the date of redemption) at any time on or after November 1, 2022,
September 1, 2041, and August 1, 2042, respectively. The 2022 and 2041 notes issued in 2011 are callable at 100%
at any time on or after October 15, 2021, and January 15, 2041, respectively. The January 2021 notes are callable at
100% on or after October 15, 2020, and the 2040 notes are callable at 100% on or after February 15, 2040. The June
2021 notes and 2024 notes issued during the year ended December 31, 2016 can be redeemed as described in (b).
Consolidated Financial Statements
87
16. Debt (continued)
e) Revolving Facilities
At December 31, 2016, we had two committed revolving credit facilities in the amounts of US$3.0 billion and US$1.2
billion, respectively. The US$3.0 billion facility is available until July 2020, includes a letter of credit sub-limit of US$1.0
billion and is undrawn at December 31, 2016. The US$1.2 billion facility can be fully drawn for cash or letters of credit,
and has an aggregate of US$981 million in outstanding letters of credit at December 31, 2016.
In June 2016, we made certain amendments to the terms of our US$1.2 billion credit facility, including an extension of
the maturity date from June 2017 to June 2019. Lenders holding aggregate commitments of US$200 million declined
to extend at that time. In connection with the extension, Teck agreed to provide subsidiary guarantees for the benefit
of the credit facility and as a result our obligations under this agreement are guaranteed on a senior unsecured basis
by TML, Teck Coal, Teck South American Holdings Ltd. (formerly Teck Financial Corporation Ltd.), TCL U.S. Holdings
Ltd., TAK and Highland Valley Copper, each a wholly owned subsidiary of Teck. The amended credit facility contains
covenants in addition to those contained in the original facility, including restrictions on new liens and guaranteed
indebtedness. In December 2016, an aggregate of US$140 million of the US$200 million non-extending commitments
were assigned to new lenders who agreed to extend the maturity of the assigned commitments to June 2019. As a
result, the size of the facility will reduce to US$1.14 billion in June 2017.
The amended US$1.2 billion facility includes restrictions regarding the amount of secured debt and guaranteed debt
that Teck may issue. The maximum amount of secured debt that Teck and the guarantor subsidiaries may incur
without securing the credit facility is equal to 4% of Teck’s consolidated net tangible assets, or US$1 billion, whichever
is greater. The maximum amount of debt (including secured debt) permitted to be guaranteed or incurred by the
guarantor subsidiaries and other material subsidiaries (not including subsidiaries organized in Chile) is equal to 9%
of Teck’s consolidated net tangible assets, or US$2.25 billion, whichever is greater. There are specific exemptions to
each of the restrictions. Teck is also subject to covenants regarding asset sales and future subsidiary guarantors.
Teck has provided the same subsidiary guarantees noted above to our obligations under the US$3.0 billion credit
facility maturing July 2020, our uncommitted credit facilities and certain hedging lines. At December 31, 2016, Teck’s
consolidated net tangible assets were $32 billion (US$24 billion).
Any amounts drawn under the committed revolving credit facilities can be repaid at any time and are due in full at
maturity. Amounts outstanding under the US$3.0 billion facility bear interest at LIBOR plus an applicable margin based
on our credit ratings, which is 225 basis points when our credit ratings are below investment grade. Amounts
outstanding under the US$1.2 billion facility bear interest at LIBOR plus an applicable margin based on our leverage
ratio. Based on our December 31, 2016 leverage ratio, the applicable margin is 275 basis points. Both facilities require
that our total debt-to-capitalization ratio, which was 0.32 to 1.0 at December 31, 2016, not exceed 0.5 to 1.0.
As a result of the loss of our investment grade ratings, we have been required to deliver letters of credit to satisfy
financial security requirements under power purchase contracts at Quebrada Blanca and transportation, tank storage
and pipeline capacity agreements for our interest in Fort Hills. At December 31, 2016, we had an aggregate of US$869
million in outstanding letters of credit for these contracts, of which US$672 relates to the Quebrada Blanca power
purchase contracts. These letters of credit will be terminated if and when we regain investment grade ratings or
reduced if and when certain project milestones are reached.
88 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015 We also maintain uncommitted bilateral credit facilities primarily for the issuance of letters of credit to support our
future reclamation obligations. As at December 31, 2016, we were party to various uncommitted credit facilities
providing for a total of $1.4 billion of capacity and the aggregate outstanding letters of credit issued thereunder were
$1.1 billion. In addition to the letters of credit outstanding under these uncommitted credit facilities, we also had
stand-alone letters of credit of $261 million outstanding at December 31, 2016, which were not issued under a credit
facility. These uncommitted credit facilities and stand-alone letters of credit are typically renewed on an annual basis.
From time to time, at our election, we may reduce the fees paid to banks issuing letters of credit by making short-term
deposits of excess cash with those banks. The deposits earn a market rate of interest and are generally refundable on
demand. At December 31, 2016, we had $555 million (2015 — $732 million) of such deposits.
In November 2016, we established $250 million in surety bond capacity to support current and future reclamation
obligations. At December 31, 2016, an aggregate of $214 million in surety bonds were outstanding thereunder.
f) Scheduled Principal Payments
At December 31, 2016, the scheduled principal payments during the next five years and thereafter are as follows:
($ in millions)
2017
2018
2019
2020
2021
Thereafter
g) Debt Continuity
($ in millions)
As at January 1
Cash flows
Issuance of debt
Scheduled debt repayments
Debt repurchases
Non-cash changes
Changes in foreign exchange rates
Other
As at December 31
$
US$
49
22
278
23
1,150
4,654
CAD$
Equivalent
$
66
30
374
30
1,544
6,249
$
6,176
$
8,293
US$
CAD$ Equivalent
2016
2015
2016
2015
$
6,961
$
7,276
$
9,634
$
8,441
1,227
(22)
(1,960)
–
7
23
(363)
–
–
25
1,567
(29)
(2,531)
(308)
10
28
(476)
–
1,609
32
$
6,213
$
6,961
$
8,343
$
9,634
Consolidated Financial Statements
89
17. Income Taxes
a) Provision for Income Taxes
(CAD$ in millions)
Current
Current taxes on profits for the year
Adjustments for current taxes of prior periods
Total current taxes
Deferred
Origination and reversal of temporary differences
Adjustments to deferred taxes of prior periods
Tax losses not recognized (recognition of previously unrecognized losses)
Effect of newly enacted change in tax rates
Total deferred taxes
2016
2015
$
551
(14)
537
$
161
(5)
156
42
(2)
(10)
20
50
587
$
(1,103)
23
76
12
$
$
(992)
(836)
$
$
$
$
$
b) Reconciliation of income taxes calculated at the Canadian statutory income tax rate to the actual provision for
income taxes is as follows:
(CAD$ in millions)
Tax (recovery) expense at the Canadian statutory income tax rate of
26.10% (2015 — 26.04%)
Tax effect of:
Resource taxes
Resource and depletion allowances
Non-temporary differences including one-half of capital gains and losses
Tax pools not recognized (recognition of previously unrecognized tax pools)
Effect of newly enacted change in tax rates
Withholding taxes
Difference in tax rates in foreign jurisdictions
Tax settlements
Revisions to prior year estimates
Other
2016
2015
$
425
$
(865)
170
(110)
(15)
(10)
20
40
90
–
(5)
(18)
55
(76)
42
76
12
(76)
46
10
(15)
(45)
$
587
$
(836)
The Canadian statutory tax rate increased to 26.10% due to an updated provincial allocation.
90 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
c) The analysis of deferred tax assets and deferred tax liabilities is as follows:
(CAD$ in millions)
Deferred tax assets
Expected to be reversed after more than a year
Expected to be reversed within a year
Deferred tax liabilities
Expected to be reversed after more than a year
Expected to be reversed within a year
Net deferred tax liabilities
December 31, December 31,
2016
2015
$
$
$
$
$
106
$
6
112
$
90
–
90
5,318
$
4,727
(422)
4,896
4,784
$
$
101
4,828
4,738
d) The amount of deferred tax expense charged (credited) to the income statement is as follows:
(CAD$ in millions)
Net operating loss carryforwards
Capital allowances in excess of depreciation
Decommissioning and restoration provisions
Amounts relating to phase-out of partnership deferrals
Unrealized foreign exchange losses
Withholding taxes
Retirement benefit plans
Other temporary differences
2016
$
(154)
$
311
(212)
–
113
4
2
(14)
2015
289
(868)
88
(288)
(203)
(76)
17
49
$
50
$
(992)
Consolidated Financial Statements
91
17. Income Taxes (continued)
e) Temporary differences giving rise to deferred income tax assets and liabilities are as follows:
(CAD$ in millions)
Net operating loss carryforwards
Property, plant and equipment
Other temporary differences
Deferred income tax assets
Net operating loss carryforwards
Property, plant and equipment
Decommissioning and restoration provisions
Unrealized foreign exchange
Withholding taxes
Retirement benefit plans
Other temporary differences
Deferred income tax liabilities
f) The general movement in the net deferred income taxes account is as follows:
(CAD$ in millions)
As at January 1
Income statement change
Amounts recognized in equity
Tax charge relating to components of other comprehensive income
Foreign exchange and other differences
As at December 31
g) Deferred Tax Liabilities Not Recognized
December 31, December 31,
2016
2015
$
$
$
$
$
$
32
35
45
112
(1,218)
6,881
(439)
(224)
89
(92)
(101)
17
29
44
90
(1,085)
6,583
(227)
(337)
86
(94)
(98)
$
4,896
$
4,828
2016
2015
$
4,738
$
5,730
50
6
37
(47)
(992)
(124)
(145)
269
$ $ 4,784
$
4,738
Deferred tax liabilities of $604 million (2015 — $610 million) have not been recognized on the unremitted earnings
associated with investments in subsidiaries and interests in joint arrangements where we are in a position to control
the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the
foreseeable future.
h) Loss Carryforwards and Canadian Development Expenses
At December 31, 2016, we had $4.57 billion of Canadian federal net operating loss carryforwards (2015 — $4.32 billion).
These loss carryforwards expire at various dates between 2027 and 2036. We have $1.33 billion of cumulative Canadian
development expenses at December 31, 2016 (2015 — $1.77 billion), which are deductible for income tax purposes
on a declining balance basis at a maximum rate of 30% per year. The deferred tax benefits of these pools have been
recognized. In addition, we have $99 million of Canadian federal investment tax credits that expire at various dates
between 2020 and 2036.
92 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
i) Deferred Tax Assets Not Recognized
We have not recognized $270 million (2015 — $283 million) of deferred tax assets associated with unused tax
credits and tax pools in entities and jurisdictions that do not have established sources of taxable income.
18. Deferred Consideration
In 2015, we entered into a long-term streaming agreement with a subsidiary of Franco-Nevada Corporation
(Franco-Nevada) linked to our share of silver production at the Antamina mine.
We received a payment of $789 million (US$610 million) from Franco-Nevada on closing of the transaction and we
receive 5% of the spot price at the time of delivery for each ounce of silver delivered under the agreement. We deliver
silver to Franco-Nevada equivalent to 22.5% of payable silver sold by Antamina, which represents our proportionate
share of silver produced by Antamina. In the event that 86 million ounces of silver has been delivered under the
agreement, the stream will be reduced by one-third to 15% of payable silver sold by Antamina.
Antamina is not a party to the agreement with Franco-Nevada and our rights as a shareholder of Antamina are
unaffected by the agreement.
The following table summarizes the movements in deferred consideration for the years ended December 31, 2016
and 2015:
(CAD$ in millions)
As at January 1
Additions
Recognized in profit (loss)
Changes in foreign exchange rates
As at December 31
Less current portion of deferred consideration (Note 15)
Long-term deferred consideration
19. Retirement Benefit Plans
2016
2015
$
816
$
–
(36)
(25)
755
(32)
$
723
$
$
$
–
789
(22)
49
816
(31)
785
We have defined contribution pension plans for certain groups of employees. Our share of contributions to these
plans is expensed in the year earned by employees.
We have multiple defined benefit pension plans registered in various jurisdictions that provide benefits based
principally on employees’ years of service and average annual remuneration. These plans are only available to certain
qualifying employees and some are now closed to additional employees. The plans are “flat-benefit” or “final-pay”
plans and may provide for inflationary increases in accordance with certain plan provisions. All of our registered
defined benefit pension plans are governed and administered in accordance with applicable pension legislation in
either Canada or the United States. Actuarial valuations are performed at least every three years to determine
minimum annual contribution requirements as prescribed by applicable legislation. For the majority of our plans,
current service costs are funded based on a percentage of pensionable earnings or as a flat dollar amount per active
member depending on the provisions of the pension plans. For these plans, solvency deficits that are determined on
an actuarial basis are funded over a period not to exceed five years. All of our defined benefit pension plans were
actuarially valued within the past three years. While the majority of benefit payments are made from held-in-trust
funds, there are also several unfunded plans where benefit payment obligations are met as they fall due.
We also have several post-retirement benefit plans that provide post-retirement medical, dental and life insurance
benefits to certain qualifying employees and surviving spouses. These plans are unfunded and we meet benefit
obligations as they come due.
Consolidated Financial Statements
93
19. Retirement Benefit Plans (continued)
a) Actuarial Valuation of Plans
(CAD$ in millions)
2016
2015
Defined benefit obligation
Balance at beginning of year
Current service cost
Past service costs arising from plan improvements
Benefits paid
Interest expense
Obligation experience adjustments
Effect from change in financial assumptions
Effect from change in demographic assumptions
Changes in foreign exchange rates
Balance at end of year
Fair value of plan assets
Fair value at beginning of year
Interest income
Return on plan assets, excluding amounts
included in interest income
Benefits paid
Contributions by the employer
Changes in foreign exchange rates
Fair value at end of year
Funding surplus (deficit)
Less effect of the asset ceiling
Balance at beginning of year
Interest on asset ceiling
Change in asset ceiling
Balance at end of year
Defined Non-Pension
Post-
Benefit
Retirement
Pension
Plans Benefit Plans
Defined Non-Pension
Post-
Benefit
Retirement
Pension
Plans Benefit Plans
$
2,112
$
518
$
2,089
$
494
46
7
(151)
79
(8)
33
(6)
(6)
2,106
2,312
87
63
(151)
36
(5)
2,342
236
36
1
21
58
21
1
(19)
21
2
8
(13)
(1)
538
–
–
–
(19)
19
–
–
(538)
–
–
–
–
47
–
(131)
80
–
(3)
–
30
2,112
2,228
85
71
(131)
33
26
2,312
200
10
–
26
36
22
–
(23)
19
(11)
1
–
16
518
–
–
–
(23)
23
–
–
(518)
–
–
–
–
Net accrued retirement benefit asset (liability)
$
178
$
(538)
$
164
$
(518)
Represented by:
Pension assets (Note 11)
Accrued retirement benefit liability
Net accrued retirement benefit asset (liability)
$
$
283
$
–
$
272
$
(105)
(538)
(108)
178
$
(538)
$
164
$
–
(518)
(518)
A number of the plans have a surplus totalling $58 million at December 31, 2016 (December 31, 2015 — $36 million),
which is not recognized on the basis that future economic benefits are not available to us in the form of a reduction in
future contributions or a cash refund.
94 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
We expect to contribute $38 million to our defined benefit pension plans in 2017 based on minimum funding
requirements. The weighted average duration of the defined benefit pension obligation is 12 years and the weighted
average duration of the non-pension post-retirement benefit obligation is 14 years.
Defined contribution expense for 2016 was $44 million (2015 — $46 million).
b) Significant Assumptions
The discount rate used to determine the defined benefit obligations and the net interest cost was determined by
reference to the market yields on high-quality debt instruments at the measurement date with durations similar to the
duration of the expected cash flows of the plans.
Weighted average assumptions used to calculate the defined benefit obligation at the end of each year are as follows:
Discount rate
Rate of increase in future compensation
Initial medical trend rate
Ultimate medical trend rate
Years to reach ultimate medical trend rate
2016
2015
Defined Non-Pension
Post-
Benefit
Retirement
Pension
Plans Benefit Plans
Defined Non-Pension
Post-
Benefit
Pension
Retirement
Benefit Plans
Plans
3.74%
3.25%
–
–
–
3.79%
3.25%
5.50%
5.00%
2
3.84%
3.25%
–
–
–
3.94%
3.25%
6.00%
5.00%
3
c) Sensitivity of the defined benefit obligation to changes in the weighted average assumptions:
2016
Effect on Defined Benefit Obligation
Change in
Assumption
Increase in
Assumption
Decrease in
Assumption
Discount rate
Rate of increase in future compensation
Medical cost claim trend rate
1.0%
1.0%
1.0%
Decrease by 13%
Increase by 15%
Increase by 1%
Decrease by 1%
Increase by 2%
Decrease by 2%
2015
Effect on Defined Benefit Obligation
Change in
Assumption
Increase in
Assumption
Decrease in
Assumption
Discount rate
Rate of increase in future compensation
Medical cost claim trend rate
1.0%
1.0%
1.0%
Decrease by 12%
Increase by 14%
Increase by 1%
Decrease by 1%
Increase by 2%
Decrease by 2%
The above sensitivity analyses are based on a change in each actuarial assumption while holding all other assumptions
constant. The sensitivity analyses on our defined benefit obligation are calculated using the same methods as those
used for calculating the defined benefit obligation recognized on our balance sheet. The methods and types of
assumptions used in preparing the sensitivity analyses did not change from the prior period.
Consolidated Financial Statements
95
19. Retirement Benefit Plans (continued)
d) Mortality Assumptions
Assumptions regarding future mortality are set based on management’s best estimate in accordance with published
mortality tables and expected experience. These assumptions translate into the following average life expectancies
for an employee retiring at age 65:
2016
2015
Male
Female
Male
Female
Retiring at the end of the reporting period
85.1 years
87.6 years
85.1 years
87.5 years
Retiring 20 years after the end of the reporting period
86.3 years
88.6 years
86.2 years
88.5 years
e) Significant Risks
The defined benefit pension plans and post-retirement benefit plans expose us to a number of risks, the most significant
of which include asset volatility risk, changes in bond yields, and an increase in life expectancy.
Asset volatility risk
The discount rate used to determine the defined benefit obligations is based on AA-rated corporate bond yields.
If our plan assets underperform this yield, the deficit will increase. Our strategic asset allocation includes a significant
proportion of equities that increases volatility in the value of our assets, particularly in the short term. We expect
equities to outperform corporate bonds in the long-term.
Changes in bond yields
A decrease in bond yields increases plan liabilities, which are partially offset by an increase in the value of the plans’
bond holdings.
Life expectancy
The majority of the plans’ obligations are to provide benefits for the life of the member. Increases in life expectancy
will result in an increase in the plans’ liabilities.
f) Investment of Plan Assets
The assets of our defined benefit pension plans are managed by external asset managers under the oversight of the
Teck Resources Limited Executive Pension Committee.
Our pension plan investment strategies support the objectives of each defined benefit plan and are related to each
plan’s demographics and timing of expected benefit payments to plan members. The objective for the plan asset
portfolios is to achieve annualized portfolio returns over five-year periods in excess of the annualized percentage
change in the Consumer Price Index plus a certain premium.
Strategic asset allocation policies have been developed for each defined benefit plan to achieve this objective. The
policies also reflect an asset/liability matching framework that seeks to reduce the effect of interest rate changes on
each plan’s funded status by matching the duration of the bond investments with the duration of the pension liabilities.
We do not use derivatives to manage interest risk. Asset allocation is monitored at least quarterly and rebalanced if
the allocation to any asset class exceeds its allowable allocation range. Portfolio and investment manager performance
is monitored quarterly and the investment guidelines for each plan are reviewed at least annually.
96 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
The defined benefit pension plan assets at December 31, 2016 and 2015 are as follows:
(CAD$ in millions)
2016
2015
Quoted
Unquoted
Total %
Quoted
Unquoted
Total %
Equity securities
Debt securities
Real estate and other
$
$
$
1,124
850
49
$
$
$
–
–
319
48%
36%
16%
$
$
$
1,085
848
62
$
$
$
–
–
317
47%
37%
16%
20. Other Liabilities and Provisions
(CAD$ in millions)
Provisions (a)
Derivative liabilities (net of current portion of $5 million (2015 — $1 million))
Other
a) Provisions
December 31, December 31,
2016
2015
$
1,236
$
21
65
$
1,322
$
438
12
30
480
The following table summarizes the movements in provisions for the year ended December 31, 2016:
(CAD$ in millions)
As at January 1, 2016
Settled during the year
Change in discount rate
Change in amount and timing of cash flows
Accretion
Changes in foreign exchange rates
As at December 31, 2016
Less current provisions (Note 15)
Long-term provisions
Decommissioning and
Restoration Provisions
Other
Total
$
$
415
(17)
601
164
55
2
1,220
(55)
$
81
(19)
–
25
–
–
87
(16)
496
(36)
601
189
55
2
1,307
(71)
$
1,165
$
71
$
1,236
Decommissioning and Restoration Provisions
The decommissioning and restoration provisions represent the present value of estimated costs for required future
decommissioning and other site restoration activities. The majority of the decommissioning and site restoration
expenditures occur at the end of the life of the related operation. Our provision for these expenditures was $725 million
as at December 31, 2016. After the end of the life of certain operations, water management costs may extend for
periods in excess of 100 years. Our provision for these expenditures was $495 million as at December 31, 2016.
In 2016, the decommissioning and restoration provision was calculated using nominal discount rates between 6.33%
and 7.33%. We also used an inflation rate of 2.00% in our cash flow estimates. The decommissioning and restoration
provision includes $194 million (2015 — $92 million) in respect of closed operations.
During the fourth quarter of 2016, we updated the discount rate and cash flow estimates for our decommissioning and
restoration provisions. As a result of the change in estimate and decrease in discount rate, the provision increased by
$224 million compared to the third quarter. Of the $224 million increase in the provision in the fourth quarter, $211 million
was related to changes in estimated cash flows and $13 million was related to a change in the discount rate.
Consolidated Financial Statements
97
21. Equity
a) Authorized Share Capital
Our authorized share capital consists of an unlimited number of Class A common shares without par value, an
unlimited number of Class B subordinate voting shares (Class B shares) without par value and an unlimited number
of preferred shares without par value issuable in series.
Class A common shares carry the right to 100 votes per share. Class B shares carry the right to one vote per share.
Each Class A common share is convertible, at the option of the holder, into one Class B share. In all other respects,
the Class A common shares and Class B shares rank equally.
The attributes of the Class B subordinate voting shares contain so called “coattail provisions” which provide that, in
the event that an offer (an “Exclusionary Offer”) to purchase Class A common shares, which is required to be made
to all or substantially all holders thereof, is not made concurrently with an offer to purchase Class B subordinate voting
shares on identical terms, then each Class B subordinate voting share will be convertible into one Class A common
share at the option of the holder during a certain period provided that any Class A common shares received upon such
conversion are deposited to the Exclusionary Offer. Any Class B subordinate voting shares converted into Class A
common shares pursuant to such conversion right will automatically convert back to Class B subordinate voting shares
in the event that any such shares are withdrawn from the Exclusionary Offer or not otherwise ultimately taken up and
paid for under the Exclusionary Offer.
The Class B subordinate voting shares will not be convertible in the event that holders of a majority of the Class A
common shares (excluding those shares held by the offeror making the Exclusionary Offer) certify to Teck that they
will not, among other things, tender their Class A common shares to the Exclusionary Offer.
If an offer to purchase Class A common shares does not, under applicable securities legislation or the requirements of
any stock exchange having jurisdiction, constitute a “take-over bid” or is otherwise exempt from any requirement that
such offer be made to all or substantially all holders of Class A common shares, the coattail provisions will not apply.
b) Class A Common Shares and Class B Subordinate Voting Shares Issued and Outstanding
Shares (in 000’s)
As at January 1, 2015
Options exercised (c)
As at December 31, 2015
Options exercised (c)
As at December 31, 2016
c) Share Options
Class A
Class B
Common Subordinate
Shares Voting Shares
9,353
566,795
–
104
9,353
566,899
–
647
9,353
567,546
Under our current share option plan, at December 31, 2016, 28 million Class B shares have been set aside for the
grant of share options to full-time employees, of which 6 million remain available for grant. The exercise price for each
option is the closing price for our Class B shares on the last trading day before the date of grant. Our share options
are settled through the issuance of Class B shares.
During the year ended December 31, 2016, we granted 8,945,695 Class B share options to employees. These share
options have a weighted average exercise price of $5.48, vest in equal amounts over three years and have a term of
10 years.
98 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
The weighted average fair value of Class B share options granted in the year was estimated at $1.81 per option
(2015 — $4.66) at the grant date based on the Black-Scholes option-pricing model using the following assumptions:
Weighted average exercise price
Dividend yield
Risk-free interest rate
Expected option life
Expected volatility
Forfeiture rate
2016
2015
$
5.48
$
19.12
1.85%
0.72%
4.63%
0.71%
4.2 years
4.2 years
46%
0.96%
40%
1.36%
The expected volatility is based on a statistical analysis of historical daily share prices over a period equal to the
expected option life.
Outstanding share options are as follows:
2016
2015
Share
Options
(in 000’s)
Weighted
Average
Exercise
Price
Share
Options
(in 000’s)
Weighted
Average
Exercise
Price
Outstanding at beginning of year
15,929
$
26.53
10,632
$
Granted
Exercised
Forfeited
Expired
Outstanding at end of year
8,946
(647)
(219)
(1,155)
22,854
5.48
12.15
10.74
35.73
18.38
6,134
(104)
(217)
(516)
15,929
Vested and exercisable at end of year
9,090
29.70
7,285
$
$
31.29
19.12
4.16
22.65
42.55
26.53
32.18
The average share price during the year was $17.59 (2015 — $12.28), with the highest Class B share price at $35.02
(2015 — $20.08) and the lowest Class B share price at $3.80 (2015 — $4.33).
Information relating to share options outstanding at December 31, 2016 is as follows:
Outstanding Share Options (in 000’s)
Exercise
Price Range
Weighted Average Remaining Life
of Outstanding Options (months)
9,406
5,803
2,958
2,778
1,909
22,854
$
4.15 – $ 12.35
$ 12.36 – $ 20.14
$ 20.15 – $ 26.79
$ 26.80 – $ 36.85
$ 36.86 – $ 58.80
$
4.15 – $ 58.80
102
98
86
62
57
90
Total share option compensation expense recognized for the year was $22 million (2015 — $24 million).
Consolidated Financial Statements
99
21. Equity (continued)
d) Deferred Share Units, Restricted Share Units and Performance Share Units
We have issued and outstanding deferred share units, restricted share units and performance share units (collectively
referred to as Units).
Deferred Share Units (DSUs) and Restricted Share Units (RSUs) are granted to both employees and directors.
Preferred Share Units (PSUs) are granted to employees only. The DSUs and RSUs entitle the holder to a cash payment
equal to the market value of one Class B share at the time they are redeemed. The PSUs entitle the holder to a cash
payment equal to a percentage of the weighted average trading price of one Class B share over 10 consecutive trading
days prior to the time they are redeemed. The percentage varies from 0% to 200% and is based on our total shareholder
return ranking compared to a group of specified companies.
RSUs and PSUs vest in three years. DSUs vest immediately for directors and in three years for employees. On retirement,
the units are pro-rated to reflect the period of vesting completed. Units vest on a pro rata basis, should employees be
terminated without cause, and are forfeited if employees resign or are terminated with cause.
DSUs may only be redeemed within 12 months from the date a holder ceases to be an employee or director, while
RSUs and PSUs vest and are redeemed no later than three years measured from the date of the grant.
Additional units are issued to unit holders to reflect dividends paid and other adjustments to Class B shares.
In 2016, we recognized compensation expense of $149 million for our Units (2015 — $11 million recovery). The total
liability and intrinsic value for vested Units as at December 31, 2016 was $128 million (2015 — $11 million).
At December 31, 2016, 2,597,360 DSUs (2015 — 1,519,569), 3,315,781 RSUs (2015 — 1,497,869) and 1,553,654
PSUs (2015 — 664,454) were outstanding, of which 2,118,892 DSUs (2015 — 1,403,980), 1,327,369 RSUs
(2015 — 646,159) and 615,833 PSUs (2015 — 291,794) have vested.
e) Accumulated Other Comprehensive Income (Loss)
(CAD$ in millions)
2016
Accumulated other comprehensive income — beginning of year
$
426
$
2015
225
Currency translation differences:
Unrealized gains (losses) on translation of foreign subsidiaries
(201)
1,375
Foreign exchange differences on debt designated as a hedge of our
investment in foreign subsidiaries (net of taxes of $(27) and $163)
Available-for-sale financial assets:
Unrealized gains (net of taxes of $(6) and $(1))
Gains reclassified to profit (loss) (net of taxes of $4 and$(1))
Derivatives designated as cash flow hedges:
Unrealized losses (net of taxes of $nil and $8)
Losses reclassified to profit (loss) on realization (net of taxes of $nil and $(9))
Share of other comprehensive income of associates and joint ventures
Remeasurements of retirement benefit plans (net of taxes of $(7) and $(18))
Total other comprehensive income
Less remeasurements of retirement benefit plans recorded in retained earnings
180
(21)
45
(29)
16
–
–
–
1
19
15
(19)
Accumulated other comprehensive income — end of year
$
422
$
(1,188)
187
13
(6)
7
(22)
26
4
3
40
241
(40)
426
100 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
f) Earnings (Loss) Per Share
The following table reconciles our basic and diluted earnings per share:
(CAD$ in millions, except per share data)
2016
2015
Net basic and diluted profit (loss) attributable to shareholders of the company
$
1,040
$
(2,474)
Weighted average shares outstanding (000’s)
Dilutive effect of share options
Weighted average diluted shares outstanding (000’s)
Basic earnings (loss) per share
Diluted earnings (loss) per share
576,391
576,224
6,496
–
582,887
576,224
$
$
1.80
1.78
$
$
(4.29)
(4.29)
At December 31, 2016, 13,333,164 potentially dilutive shares were not included in the diluted earnings per share
calculation because their effect was anti-dilutive. At December 31, 2015, there was a net loss attributable to
shareholders of the company and, accordingly, all share options would be considered anti-dilutive and have been
excluded from the calculation of diluted earnings (loss) per share.
g) Dividends
We declared and paid dividends of $0.05 per share in the second and fourth quarters of 2016 and $0.15 and $0.05
per share in the second and fourth quarters of 2015, respectively.
22. Non-Controlling Interests
Set out below is information about our subsidiaries with non-controlling interests and the non-controlling interest
balances included in equity for all comparative periods presented:
Percentage of
Ownership
Interest and
Voting Rights
Held by Non-
(CAD$ in millions)
Principal Place
of Business
Controlling December 31, December 31,
Interest
2016
2015
Highland Valley Copper (a)
British Columbia, Canada
–
$
Carmen de Andacollo
Quebrada Blanca
Elkview Mine Limited
Partnership
Region IV, Chile
Region I, Chile
10%
23.5%
British Columbia, Canada
5%
$
–
45
64
50
$
159
$
43
45
98
44
230
a) During the year ended December 31, 2016, we acquired the 2.5% non-controlling interest stake in Highland Valley
Copper for $33 million. We recorded this transaction as a reduction in our non-controlling interests of $46 million
and an increase to our deferred income tax liabilities of $5 million with the difference of $8 million recorded directly
in retained earnings.
Consolidated Financial Statements
101
23. Contingencies
We consider provisions for all our outstanding and pending legal claims to be adequate. The final outcome with respect
to actions outstanding or pending as at December 31, 2016, or with respect to future claims, cannot be predicted with
certainty. Significant contingencies not disclosed elsewhere in the notes to our financial statements are as follows:
Upper Columbia River Basin
Teck American Inc. (TAI) continues studies under the 2006 settlement agreement with the U.S. Environmental
Protection Agency (EPA) to conduct a remedial investigation on the Upper Columbia River in Washington state.
Residential soil testing within the study site has identified certain properties where remediation is required. TAI and EPA
reached an agreement regarding the remediation to be undertaken in 2015, which has been completed, and additional
sampling has been conducted which suggests that limited additional time-critical remediation will be required.
The Lake Roosevelt litigation involving TML in the Federal District Court for the Eastern District of Washington
continues. In September 2012, TML entered into an agreement with the plaintiffs, agreeing that certain facts were
established for purposes of the litigation. The agreement stipulated that some portion of the slag discharged from
TML’s Trail Operations into the Columbia River between 1896 and 1995, and some portion of the effluent discharged
from Trail Operations, have been transported to and are present in the Upper Columbia River in the United States,
and that some hazardous substances from the slag and effluent have been released into the environment within the
United States. In December 2012, the Court found in favour of the plaintiffs in phase one of the case, issuing a
declaratory judgment that TML is liable under the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA) for response costs, the amount of which will be determined in later phases of the case. A
hearing with respect to the claims of the Tribal plaintiffs in respect of approximately $9 million of past response costs
was held in December. In August the trial court judge ruled in favour of the plaintiffs and the decision is under appeal.
In October 2013, the Confederated Tribes of the Colville Reservation filed an omnibus motion with the District Court
seeking an order stating that they are permitted to seek recovery from TML for environmental response costs, and in
a subsequent proceeding, natural resource damages and assessment costs, arising from the alleged deposition of
hazardous substances in the United States from aerial emissions from TML’s Trail Operations. Prior allegations by the
Tribes related solely to solid and liquid materials discharged to the Columbia River. The motion did not state the
amount of response costs allegedly attributable to aerial emissions, nor did it attempt to define the extent of natural
resource damages, if any, attributable to past smelter operations. In December 2013, the District Court ruled in favour
of the plaintiffs, who subsequently filed amended pleadings in relation to air emissions. The Court dismissed a motion
to strike the air claims on the basis that CERCLA does not apply to air emissions in the manner proposed by the
plaintiffs, and a subsequent TML motion seeking reconsideration of the dismissal. On July 27, 2016 the Ninth Circuit
unanimously ruled in favour of TML on its appeal of the District Court decision. Plaintiffs sought en banc review of the
decision in the Ninth Circuit, which was denied in October.
A hearing with respect to natural resource damages and assessment costs is expected to follow after resolution of
appeals with respect to issues raised in the first phase of the litigation and completion of the remedial investigation
and feasibility study being undertaken by TAI.
There is no assurance that we will ultimately be successful in our defence of the litigation or that we or our affiliates
will not be faced with further liability in relation to this matter. Until the studies contemplated by the EPA settlement
agreement and additional damage assessments are completed, it is not possible to estimate the extent and cost, if
any, of any additional remediation or restoration that may be required or to assess our potential liability for damages.
The studies may conclude, on the basis of risk, cost, technical feasibility or other grounds, that no remediation other
than some residential soil removal should be undertaken. If other remediation is required and damage to resources
found, the cost of that remediation may be material.
102 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015 24. Commitments
a) Capital Commitments
As at December 31, 2016, we had contracted for $473 million of capital expenditures that have not yet been incurred
for the purchase of property, plant and equipment. This amount includes $206 million for Quebrada Blanca Phase 2,
$127 million for our share of Fort Hills, $84 million for our share of Antamina and $56 million for our steelmaking
coal operations. The amount includes $222 million that is expected to be incurred within one year and $251 million
within two to five years.
b) Operating Lease Commitments
We lease office premises, mobile equipment and railcars under operating leases. The lease terms are between
one year and 12 years.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
(CAD$ in millions)
Less than one year
One to five years
Thereafter
$
2016
2015
$
56
66
6
65
84
10
$
128
$
159
Lease rentals amounting to $10 million (2015 — $11 million) for office premises, $36 million (2015 — $43 million) for
mobile equipment and $10 million (2015 — $11 million) for railcars are included in the statement of income (loss).
c) Red Dog Commitments
In accordance with the operating agreement governing the Red Dog mine, TAK pays a royalty to NANA Regional
Corporation, Inc. (NANA) on the net proceeds of production. A 25% royalty became payable in the third quarter of
2007 after we had recovered cumulative advance royalties previously paid to NANA. The net proceeds of production
royalty rate will increase by 5% every fifth year to a maximum of 50%. The increase to 30% of net proceeds of
production occurred in 2012. An expense of US$213 million was recorded in 2016 (2015 — US$137 million) in respect
of this royalty.
TAK leases road and port facilities from the Alaska Industrial Development and Export Authority, through which it
ships all concentrates produced at the Red Dog Operations. The lease requires TAK to pay a minimum annual user fee
of US$18 million for the next 14 years and US$6 million for the following nine years.
d) Antamina Royalty
Our interest in the Antamina mine is subject to a net profits royalty equivalent to 7.4% of our share of the mine’s free
cash flow. An expense of $17 million was recorded in 2016 (2015 — $11 million) in respect of this royalty.
e) Purchase Commitments
We have a number of forward purchase commitments for the purchase of concentrates and other process inputs,
and for shipping and distribution of products, which are incurred in the normal course of business. In addition, we have
contractual arrangements for the purchase of 240 megawatts of power for the expansion of our Quebrada Blanca
Operations. These contracts contain monthly fixed prices and variable prices per hour and are effective from dates
between November 2016 and January 2018, extending for 21 years. The majority of these contracts are subject to
force majeure provisions.
Consolidated Financial Statements
103
25. Segmented Information
Based on the primary products we produce and our development projects, we have five reportable segments —
steelmaking coal, copper, zinc, energy and corporate — which is the way we report information to our Chief Executive
Officer. The corporate segment includes all of our initiatives in other commodities, our corporate growth activities and
groups that provide administrative, technical, financial and other support to all of our business units. Other operating
expenses include general and administration costs, exploration, research and development, and other operating
income (expense). Sales between segments are carried out on terms that arm’s-length parties would use. Total assets
does not include intra-group receivables between segments. Deferred tax assets and liabilities have been allocated
amongst segments.
(CAD$ in millions)
December 31, 2016
Steelmaking
Coal
Copper
Zinc
Energy Corporate
Total
Segment revenues
$
4,144
$ 2,007
$ 3,577
$
Less: Inter-segment revenues
–
–
(430)
4,144
2,007
(2,765)
(1,817)
3,147
(2,317)
Revenues
Cost of sales
Gross profit (loss)
Asset impairments
Other operating
income (expenses)
Profit (loss) from operations
1,305
Net finance expense
Non-operating income
(expenses)
Share of income (losses) of
associates and joint ventures
(21)
6
–
Profit (loss) before taxes
1,290
1,379
–
(74)
348
702
190
–
35
225
(42)
830
(46)
30
814
(27)
(5)
(5)
2
180
339
412
–
782
190
–
$
2
–
2
(5)
(3)
(248)
(30)
(281)
(6)
–
–
–
–
–
–
–
–
(338)
(338)
(242)
$ 9,730
(430)
9,300
(6,904)
2,396
(294)
(377)
1,725
(338)
243
239
–
2
(287)
(337)
1,628
1,010
–
6
–
1,893
1,114
14,894
9,673
3,742
4,129
3,191
35,629
$ 10,071
$ 6,029
$ 2,464
$ 3,648
$
(4,611)
$ 17,601
Capital expenditures
Goodwill
Total assets
Net assets
104 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
(CAD$ in millions)
December 31, 2015
Steelmaking
Coal
Copper
Zinc
Energy Corporate
Total
Segment revenues
$ 3,049
$ 2,422
$
3,121
$
Less: Inter-segment revenues
–
–
(337)
3,049
2,422
2,784
(2,849)
(1,996)
(2,129)
Revenues
Cost of sales
Gross profit (loss)
Asset impairments
Other operating
income (expenses)
Profit (loss) from operations
Net finance expense
Non-operating
income (expenses)
Share of losses of associates
and joint ventures
Capital expenditures
Goodwill
Total assets
Net assets
Profit (loss) before taxes
(1,875)
(338)
$
4
–
4
(6)
(2)
(1,062)
(14)
(1,078)
–
–
–
–
–
–
–
–
–
$ 8,596
(337)
8,259
(6,980)
1,279
(3,631)
(224)
(224)
(238)
(566)
(2,918)
(311)
(149)
(89)
(2)
(2)
(1,078)
(613)
(3,320)
997
–
4
–
2,244
1,127
200
(2,032)
(56)
(1,888)
(26)
39
–
426
(506)
(230)
(310)
(15)
(13)
–
493
702
539
425
655
(31)
(42)
582
(32)
34
–
584
211
–
14,531
9,886
3,406
3,269
3,596
34,688
$ 10,201
$ 6,335
$ 2,590
$ 2,846
$
(5,335)
$ 16,637
Consolidated Financial Statements
105
25. Segmented Information (continued)
The geographical distribution of our non-current assets is as follows:
(CAD$ in millions)
Canada
Chile
Peru
United States
Other
December 31, December 31,
2016
2015
$
20,853
$
20,112
6,332
1,286
1,180
70
6,465
1,301
983
74
$
29,721
$
28,935
Non-current assets attributed to geographical locations exclude deferred income tax assets and financial and
other assets.
Revenue is attributed to regions based on the location of the port of delivery as designated by the customer and is
as follows:
$
2016
2015
1,773
1,319
1,181
553
825
1,314
770
294
354
178
186
553
$
1,786
1,343
966
341
614
1,291
581
197
394
213
9
524
$
9,300
$
8,259
(CAD$ in millions)
Asia
China
Japan
South Korea
India
Other
Americas
United States
Canada
Latin America
Europe
Germany
Finland
Spain
Other
106 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
26. Accounting for Financial Instruments
a) Financial Risk Management
Our activities expose us to a variety of financial risks, which include liquidity risk, foreign exchange risk, interest rate
risk, commodity price risk, credit risk and other risks associated with capital markets. From time to time, we may use
foreign exchange, commodity price and interest rate contracts to manage exposure to fluctuations in these variables.
We do not have a practice of trading derivatives. Our use of derivatives is based on established practices and
parameters to mitigate risk and is subject to the oversight of our Hedging Committee and our Board of Directors.
Foreign Exchange Risk
We operate on an international basis and therefore, foreign exchange risk exposures arise from transactions denominated
in a foreign currency. Our foreign exchange risk arises primarily with respect to the U.S. dollar and to a lesser extent, the
Chilean peso and Peruvian sol. Our cash flows from Canadian, Chilean and Peruvian operations are exposed to foreign
exchange risk, as commodity sales are denominated in U.S. dollars and a substantial portion of operating expenses
are denominated in local currencies.
In the first half of 2015 and in prior years, we hedged a portion of our quarterly U.S. dollar denominated future cash
flows with U.S. dollar forward sales contracts. This hedge was discontinued in the second quarter of 2015.
We also have various investments in U.S. dollar foreign operations, whose net assets are exposed to foreign currency
translation risk. This currency exposure is managed in part through our U.S. dollar denominated debt as a hedge against
net investments in foreign operations. As at December 31, 2016, $5.4 billion of U.S. dollar debt was designated in
this manner.
U.S. dollar financial instruments subject to foreign exchange risk are comprised of U.S. dollar denominated items
held in Canada and is summarized below. This risk is reduced by our policy to apply a hedge against our U.S. dollar net
investments using our U.S. dollar debt.
(US$ in millions)
Cash and cash equivalents
Trade accounts receivable and other assets
Trade accounts payable and other liabilities
Debt
Net investment in foreign operations hedged
Net U.S. dollar exposure
$
2016
521
867
(572)
(6,141)
(5,325)
5,424
$
2015
911
445
(380)
(6,900)
(5,924)
5,552
$
99
$
(372)
As at December 31, 2016, with other variables unchanged, a $0.10 strengthening of the Canadian dollar against the
U.S. dollar would result in a $10 million pre-tax loss (2015 — $37 million pre-tax gain) from our financial instruments.
There would also be an $11 million pre-tax loss (2015 — $nil) in other comprehensive income (loss) from the
translation of our foreign operations. The inverse effect would result if the Canadian dollar weakened by $0.10 against
the U.S. dollar.
Consolidated Financial Statements
107
26. Accounting for Financial Instruments (continued)
Liquidity Risk
Liquidity risk arises from our general and capital financing needs. We have planning, budgeting and forecasting
processes to help determine our funding requirements to meet various contractual and other obligations. Note 16
details our available credit facilities as at December 31, 2016.
Contractual undiscounted cash flow requirements for financial liabilities as at December 31, 2016 are as follows:
(CAD$ in millions)
Trade accounts payable and
other liabilities
Debt (Note 16(f))
Estimated interest payments on debt
$
Interest Rate Risk
Less Than
1 Year
$
1,902
66
472
2–3 Years
4–5 Years
More Than
5 Years
$
$
–
404
933
$
$
–
1,574
849
$
$
–
6,249
4,079
$
$
Total
1,902
8,293
6,333
Our interest rate risk arises mainly in respect of our holdings of cash and cash equivalents. Our interest rate
management policy is generally to borrow at fixed rates. However, floating rate funding may be used to fund short-
term operating cash flow requirements or, in conjunction with fixed to floating interest rate swaps, be used to offset
interest rate risk from our cash. The fair value of fixed-rate debt fluctuates with changes in market interest rates,
but the cash flows, denominated in U.S. dollars, do not.
Cash and cash equivalents have short terms to maturity and receive interest based on market interest rates.
As at December 31, 2016 and 2015, with other variables unchanged, a 1% change in the LIBOR rate would not have
a significant effect on profit (loss). There would be no effect on other comprehensive income (loss).
Commodity Price Risk
We are subject to price risk from fluctuations in market prices of the commodities that we produce. From time to time,
we may use commodity price contracts to manage our exposure to fluctuations in commodity prices. At the balance
sheet date, we had zinc and lead derivative contracts outstanding as described in (b) below.
Our commodity price risk associated with financial instruments primarily relates to changes in fair value caused by final
settlement pricing adjustments to receivables and payables, derivative contracts for zinc and lead, embedded derivatives
in one of our road and port contracts and in the ongoing payments under our silver stream and gold stream arrangements.
The following represents the effect on profit (loss) attributable to shareholders from a 10% change in commodity
prices, based on outstanding receivables and payables subject to final pricing adjustments at December 31, 2016.
There is no effect on other comprehensive income.
Price on December 31, Attributable to Shareholders
Change in Profit (Loss)
(CAD$ in millions, except for US$/lb. data)
2016
2015
2016
2015
Copper
Zinc
Lead
US$2.50/lb. US $ 2.13/lb.
US$1.17/lb. US$ 0.73/lb.
US$0.90/lb. US$0.82/lb.
$
$
$
24
5
–
$
$
$
46
2
(1)
A 10% change in the price of zinc, lead, silver and gold, respectively, would change our net liability relating to
derivatives and embedded derivatives, excluding receivables and payables subject to final pricing adjustments, and
change our pre-tax profit (loss) attributable to shareholders by $45 million (2015 — $32 million). There would be no
effect on other comprehensive income.
108 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
Credit Risk
Credit risk arises from the non-performance by counterparties of contractual financial obligations. Our primary
counterparties related to our cash, money market investments and derivative contracts carry investment grade
ratings as assessed by external rating agencies. There is ongoing review to evaluate the creditworthiness of these
counterparties. We manage credit risk for trade and other receivables through established credit monitoring activities.
Our maximum exposure to credit risk at the reporting date is the carrying value of our cash and cash equivalents,
trade accounts receivable and derivative assets. While we are exposed to credit losses due to the non-performance
of our counterparties, we do not consider this to be a material risk.
b) Derivative Financial Instruments and Hedges
Sale and Purchase Contracts
We record adjustments to our receivable and payable balances for provisionally priced sales and purchases, respectively,
in periods up to the date of final pricing based on movements in quoted market prices. These arrangements have
the characteristics of a derivative instrument, as the value of our receivables and payables will vary as prices for the
underlying commodities vary in the metal markets. These final pricing adjustments result in gains (losses from
purchases) in a rising price environment and losses (gains from purchases) in a declining price environment and are
recorded in other operating income (expense). It should be noted that while these effects arise on the sale of
concentrates, we also purchase concentrates at our Trail Operations where the opposite effects occur. The effect
of gains and losses on these contracts on profit (loss) is mitigated by smelter price participation, royalty interests,
taxes and non-controlling interests.
The table below outlines our outstanding receivable and payable positions, which were provisionally valued at
December 31, 2016 and December 31, 2015.
(Pounds in millions)
Receivable positions
Copper
Zinc
Lead
Payable positions
Zinc payable
Lead payable
Outstanding at
December 31, 2016
Outstanding at
December 31, 2015
Pounds
US$/lb.
Pounds
US$/lb.
114
231
26
114
20
$
$
$
$
$
2.50
1.17
0.90
1.17
0.90
257
162
20
83
35
$
$
$
$
$
2.13
0.73
0.82
0.73
0.82
At December 31, 2016, total outstanding settlements receivable were $795 million (2015 — $684 million) and total
outstanding settlements payable were $43 million (2015 — $25 million). These amounts are included in trade accounts
receivable and trade accounts payable, respectively, on the consolidated balance sheet.
Consolidated Financial Statements
109
26. Accounting for Financial Instruments (continued)
Zinc and Lead Swaps
Due to ice conditions, the port serving our Red Dog mine is normally only able to ship concentrates from July to
October each year. As a result, zinc and lead concentrate sales volumes are generally higher in the third and fourth
quarter of each year than in the first and second quarter. During 2016 and 2015, we purchased and sold zinc and
lead swaps to match our economic exposure to the average zinc and lead prices over our shipping year, which is
from July of one year to June of the following year. We do not apply hedge accounting to the zinc or lead swaps.
The fair value of our commodity swaps is calculated using a discounted cash flow method based on forward metal
prices. A summary of these derivative contracts and related fair values as at December 31, 2016 is as follows:
Average Price
of Purchase
Commitments
Average Price
of Sale
Commitments
Fair Value
Asset (Liability)
(CAD$ in millions)
Quantity
Derivatives not designated
as hedging instruments
Zinc swaps
Lead swaps
181 million lbs.
95 million lbs.
US$1.14/lb.
US$0.96/lb.
US$1.16/lb.
US$0.91/lb.
$
$
4
(5)
(1)
All free-standing derivative contracts mature in 2017.
Free-standing derivatives, not designated as hedging instruments, are recorded in trade accounts receivable and in
trade accounts payable and other liabilities in the amount of $4 million and $5 million, respectively, on the consolidated
balance sheet.
Derivatives Not Designated as Hedging Instruments and Embedded Derivatives
(CAD$ in millions)
Zinc derivatives
Lead derivatives
Settlements receivable and payable
Contingent zinc escalation payment embedded derivative (c)
Gold stream embedded derivative (c)
Silver stream embedded derivative (c)
Amount of Gain (Loss) Recognized
in Other Operating Income (Expense)
$
$
2016
45
(5)
153
(18)
6
4
2015
(2)
(3)
(280)
4
(8)
(3)
$
185
$
(292)
We also recorded a $113 million gain in non-operating income (expense) (Note 8) related to an increase in the value of
debt prepayment options since issuance in June 2016 (c).
110 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
Hedges
Cash flow hedges
At December 31, 2016, we did not have derivative instruments designated as cash flow hedges.
The following table provides information regarding the effect of U.S. dollar forward sales contracts that were derivative
instruments designated as cash flow hedges on our consolidated statements of income and comprehensive income in 2015:
(CAD$ in millions)
Losses reclassified from accumulated other comprehensive
income into profit (loss) (effective portion)
Location of losses reclassified from accumulated other
comprehensive income (loss) into profit
Net investment hedge
2016
2015
$
–
–
$
(34)
Revenues
Our hedges of net investments in foreign operations were effective and no ineffectiveness was recognized in profit
(loss) for the period.
c) Embedded Derivatives
One of our road and port contracts contains a contingent zinc escalation payment that is considered to be an embedded
derivative. The fair value of this embedded derivative was $20 million at December 31, 2016 (2015 — $2 million), and is
included in other liabilities and provisions on the consolidated balance sheet.
The gold stream and silver stream agreements entered into in 2015 (Note 13(b) and Note 18) each contain an embedded
derivative in the ongoing future payments due to Teck from Royal Gold and Franco-Nevada, respectively. The gold
stream’s 15% ongoing payment contains an embedded derivative relating to the gold price. The fair value of this
embedded derivative was $2 million at December 31, 2016 (2015 — $8 million) and is included in other liabilities and
provisions on the consolidated balance sheet. The silver stream’s 5% ongoing payment contains an embedded derivative
relating to the silver price. The fair value of this embedded derivative was $1 million at December 31, 2016 (2015 —
$3 million) and is included in other assets (2015 — other liabilities and provisions) on the consolidated balance sheet.
Our June 2021 and 2024 notes issued in 2016 (Note 16(b)) include prepayment options that are considered to be
embedded derivatives. At December 31, 2016, these prepayment options are recorded as other assets (Note 11) on
the balance sheet at fair values of $61 million and $78 million for the June 2021 and 2024 notes, respectively, based
on current market interest rates for similar instruments and our credit spread. Since the notes were issued in June
2016, the value of the prepayment options increased by $113 million, which has been recorded as a gain in
non-operating income (expense) (Note 8).
27. Fair Value Measurements
Certain of our financial assets and liabilities are measured at fair value on a recurring basis and classified in their entirety
based on the lowest level of input that is significant to the fair value measurement. Certain non-financial assets and
liabilities may also be measured at fair value on a non-recurring basis. There are three levels of the fair value hierarchy
that prioritize the inputs to valuation techniques used to measure fair value, with Level 1 inputs having the highest
priority. The levels and the valuation techniques used to value our financial assets and liabilities are described below:
Level 1 — Quoted Prices in Active Markets for Identical Assets
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted
assets or liabilities.
Cash equivalents and marketable equity securities are valued using quoted market prices in active markets.
Accordingly, these items are included in Level 1 of the fair value hierarchy.
Consolidated Financial Statements
111
27. Fair Value Measurements (continued)
Level 2 — Significant Other Observable Inputs
Quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, or inputs
that are observable, either directly or indirectly, for substantially the full term of the asset or liability.
Derivative instruments and embedded derivatives are included in Level 2 of the fair value hierarchy as they are valued
using pricing models or discounted cash flow models. These models require a variety of inputs, including, but not
limited to, market prices, forward price curves, yield curves, and credit spreads. These inputs are obtained from or
corroborated with the market. Also included in Level 2 are settlements receivable and settlements payable from
provisional pricing on concentrate sales and purchases because they are valued using quoted market prices for forward
curves for copper, zinc and lead.
Level 3 — Significant Unobservable Inputs
Unobservable (supported by little or no market activity) prices.
We include investments in certain debt securities in Level 3 of the fair value hierarchy because they trade infrequently
and have little price transparency. We review the fair value of these instruments periodically and estimate an impairment
charge based on management’s best estimates, which are unobservable inputs.
The fair values of our financial assets and liabilities measured at fair value on a recurring basis at December 31, 2016
and 2015 are summarized in the following table:
(CAD$ in millions)
2016
2015
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Financial assets
Cash equivalents
$ 1,153
$
Marketable equity securities
Debt securities
Settlements receivable
Derivative instruments
95
68
–
$ 1,153
$ 1,640
$
$
–
–
–
–
–
11
–
795
95
79
795
101
97
–
–
$
–
–
–
684
9
–
–
12
–
–
$ 1,640
101
109
684
9
and embedded derivatives
–
142
–
142
$ 1,316
$ 937
$
11
$ 2,264
$ 1,838
$ 693
$
12
$ 2,543
Financial liabilities
Derivative instruments
and embedded derivatives
$
Settlements payable
$
–
–
–
$
$
27
43
$
70
$
–
–
–
$
27
43
$
$
70
$
–
–
–
$
$
16
25
$
41
$
–
–
–
$
$
16
25
41
As at December 31, 2016 and 2015, we measured certain non-financial assets at their recoverable amounts using a
FVLCD basis, which is classified as a Level 3 measurement. Refer to Note 13(a) for information about these fair value
measurements.
112 Teck 2016 Annual Report | Every Day
Notes to Consolidated Financial Statements Years ended December 31, 2016 and 2015
28. Capital Management
The capital we manage is the total of equity and debt on our balance sheet. Our capital management objectives are to
maintain access to the capital we require to operate and grow our business while minimizing the cost of such capital
and providing for returns to our shareholders. Our financial policies have been to maintain, on average over time, a
target debt to debt-plus-equity ratio of approximately 30% and a target ratio of debt-to-EBITDA of approximately 2.5.
These ratios are expected to vary from their target levels from time to time, reflecting commodity price cycles and
corporate activity, including the development of major projects. We may also review and amend such policy targets
from time to time. We maintain two committed revolving credit facilities consisting of a core liquidity facility of US$3
billion and a US$1.2 billion facility which is used for financial letters of credit required while our credit rating is
non-investment grade. These credit facilities include a financial covenant that requires us to maintain a debt-to-
capitalization ratio that does not exceed 50%.
As at December 31, 2016, our debt to debt-plus-equity ratio was 32% (2015 — 37%), our debt-to-EBITDA ratio was 2.5
(2015 — (5.9)) and our debt-to-adjusted-EBITDA ratio, before asset impairments, was 2.3 (2015 — 4.8). We manage
the risk of not meeting our financial targets through the issuance and repayment of debt, our dividend policy, the
issuance of equity capital, assets sales, as well as through the ongoing management of operations, investments and
capital expenditures.
29. Key Management Compensation
The compensation for key management recognized in total comprehensive income (loss) in respect of employee
services is summarized in the table below. Key management includes our directors and senior vice presidents.
(CAD$ in millions)
2016
2015
Salaries, bonuses, director fees and other short-term benefits
$
14
$
Post-employment benefits
Share option compensation expense
Compensation expense (recovery) related to Units (Note 21(d))
6
8
85
$
113
$
14
2
9
(11)
14
30. Subsequent Event
On February 21, 2017, we commenced cash tender offers to purchase up to US$650 million aggregate principal
amount of the following series of notes; 3.000% notes due 2019, 8.000% notes due 2021, 4.500% notes due 2021,
4.750% notes due 2022, and 8.500% notes due 2024. In conjunction with the tender offers, we are soliciting consents
from holders of certain of the notes to amend the indentures governing those notes to shorten the minimum notice period
for optional redemption. The tender offers and consent solicitations are currently scheduled to expire on March 20, 2017,
and may expire earlier in certain circumstances. We have reserved the right to amend, extend, terminate and otherwise
modify the tender offers and consent solicitations.
Consolidated Financial Statements
113
Board of Directors
Norman B. Keevil (1)
Chairman of the Board
Director since: 1963
Warren S. R. Seyffert, Q.C. (1) (2) (3) (4) (5)
Deputy Chairman and Lead Director
Director since: 1989
Donald R. Lindsay (1)
President and Chief Executive Officer
Director since: 2005
Quan Chong
Director since: 2016
Jack L. Cockwell (1) (2) (6)
Director since: 2009
Norman B. Keevil III (5) (6)
Director since: 1997
Takeshi Kubota (5) (6)
Director since: 2012
Laura L. Dottori-Attanasio (2) (4) (5)
Director since: 2014
Tracey L. McVicar (2) (3)
Director since: 2014
Edward C. Dowling (1) (3) (4) (6)
Director since: 2012
Kenneth W. Pickering (5) (6)
Director since: 2015
Timothy R. Snider (2) (3) (4)
Director since: 2015
Mayank M. Ashar (3) (5) (6)
Director since: 2007
Eiichi Fukuda (6)
Director since: 2016
Notes: (1) Member of the Executive Committee; (2) Member of the Audit Committee; (3) Member of the Compensation Committee; (4) Member of the
Corporate Governance and Nominating Committee; (5) Member of the Safety and Sustainability Committee; (6) Member of the Reserves Committee.
More information on our directors and officers can be found in our most recent Annual Information Form or in our Management Proxy Circular, which are
available on our website at www.teck.com, on the Canadian Securities Administrators website at www.sedar.com (SEDAR), and on the EDGAR section of
the United States Securities and Exchange Commission (SEC) website at www.sec.gov.
Officers
Norman B. Keevil
Chairman of the Board
Warren S. R. Seyffert, Q.C.
Deputy Chairman and Lead Director
Donald R. Lindsay
President and Chief Executive Officer
Dale E. Andres
Senior Vice President, Base Metals
Alex N. Christopher
Senior Vice President, Exploration,
Projects and Technical Services
Andrew J. Golding
Senior Vice President,
Corporate Development
Ronald A. Millos
Senior Vice President, Finance
and Chief Financial Officer
Raymond A. Reipas
Senior Vice President, Energy
Peter C. Rozee
Senior Vice President,
Commercial and Legal Affairs
Robin B. Sheremeta
Senior Vice President, Coal
Marcia M. Smith
Senior Vice President,
Sustainability and External Affairs
Andrew A. Stonkus
Senior Vice President,
Marketing and Sales
Gregory A. Waller
Senior Vice President, Investor
Relations and Strategic Analysis
Timothy C. Watson
Senior Vice President,
Shehzad Bharmal
Vice President, Planning and
Development, Base Metals
Anne J. Chalmers
Vice President, Risk and Security
Larry M. Davey
Vice President, Planning and
Development, Coal
Michael P. Davies
Vice President, Environment
Christopher J. Dechert
Vice President,
Copper Operations, Chile
Karen L. Dunfee
Corporate Secretary
Mark Edwards
Vice President, Community and
Government Relations
Réal Foley
Vice President, Coal Marketing
John F. Gingell
Vice President and Corporate
Controller
M. Colin Joudrie
Vice President, Business Development
Ralph J. Lutes
Vice President, Asia
Douglas J. Powrie
Vice President, Tax
Keith G. Stein
Vice President, Project Development
Lawrence Watkins
Vice President, Health and Safety
Scott R. Wilson
Vice President and Treasurer
Dean C. Winsor
Vice President, Human Resources
Officers listed as at February 23, 2017. More information on our directors and officers can be found in our most recent Annual Information Form or in our
Management Proxy Circular, which are available on our website at www.teck.com, on the Canadian Securities Administrators website at www.sedar.com
(SEDAR), and on the EDGAR section of the United States Securities and Exchange Commission (SEC) website at www.sec.gov.
114 Teck 2016 Annual Report | Every Day
Our Business
Teck is a diversified resource company committed to responsible mining and mineral
development with business units focused on steelmaking coal, copper, zinc and energy.
Headquartered in Vancouver, British Columbia (B.C.), Canada, we own or have interests
in 12 operating mines, one large metallurgical complex, and several major development
projects in Canada, the United States, Chile and Peru. We have expertise across a wide
range of activities related to exploration, development, mining and minerals processing,
including smelting and refining, safety, environmental protection, materials stewardship,
recycling and research.
Our corporate strategy is focused on exploring for, developing, acquiring and operating
world-class, long-life assets in stable jurisdictions that operate through multiple price
cycles. We maximize productivity and efficiency at our existing operations, maintain a
strong balance sheet, and are nimble in recognizing and acting on opportunities. The
pursuit of sustainability guides our approach to business, and we recognize that our success
depends on our ability to establish safe workplaces for our people and collaborative
relationships with communities.
Mineral reserve and resource estimates for our properties are disclosed in our most recent Annual Information Form, which is
available on our website at www.teck.com, on the Canadian Securities Administrators website at www.sedar.com (SEDAR), and on
the EDGAR section of the United States Securities and Exchange Commission (SEC) website at www.sec.gov.
Forward-Looking Statements
This annual report contains forward-looking statements. Please refer to the “Cautionary Statement on Forward-Looking Information”
on page 49.
All dollar amounts expressed throughout this report are in Canadian dollars unless otherwise noted.
In This Report
Our Business
2016 Highlights
Letter from the Chairman
Letter from the CEO
Responsibility
Management’s Discussion and Analysis
Steelmaking Coal
Copper
1
2
3
5
7
9
12
16
Zinc
Energy
Exploration
Financial Overview
Consolidated Financial Statements
Board of Directors
Officers
Corporate Information
21
25
27
28
51
114
114
115
Corporate Information
2016 Share Prices and Trading Volume
Class B subordinate voting shares–TSX–CAD$/share
Q1
Q2
Q3
Q4
$
$
$
$
Class B subordinate voting shares–NYSE–US$/share
Q1
Q2
Q3
Q4
Class A common shares–TSX–CAD$/share
Q1
Q2
Q3
Q4
$
$
$
$
$
$
$
$
Stock Exchanges
Our Class A common shares and Class B subordinate voting
shares are listed on the Toronto Stock Exchange under the
symbols TECK.A and TECK.B, respectively.
Our Class B subordinate voting shares are also listed on the
New York Stock Exchange under the symbol TECK.
Dividends Declared on Class A and B Shares
Amount per share
$0.05
$0.05
Payment Date
June 30, 2016
December 30, 2016
These dividends are eligible for both the federal and provincial
enhanced dividend tax credits.
Shares Outstanding at December 31, 2016
Class A common shares
Class B subordinate voting shares
9,353,470
567,546,513
Shareholder Relations
Karen L. Dunfee, Corporate Secretary
Annual Meeting
Our annual meeting of shareholders will be held at 11:00 a.m.
on Wednesday, April 26, 2017, in the Waterfront Ballroom,
Fairmont Waterfront Hotel, 900 Canada Place Way, Vancouver,
British Columbia.
Transfer Agents
Inquiries regarding change of address, stock transfer,
registered shareholdings, dividends or lost certificates should
be directed to our Registrar and Transfer Agent:
CST Trust Company
1600 – 1066 West Hastings Street,
Vancouver, British Columbia V6E 3X1
High
11.99
17.09
24.89
35.67
High
9.25
13.20
19.07
26.60
High
14.51
18.05
25.00
36.49
$
$
$
$
$
$
$
$
$
$
$
$
Low
3.65
9.05
16.53
22.38
Low
2.56
6.89
12.62
16.95
Low
5.69
11.90
17.40
22.65
$
$
$
$
$
$
$
$
$
$
$
$
Close
Volume
10.14
16.31
24.59
27.45
386,550,338
414,279,556
278,290,368
226,873,363
1,305,993,625
Close
Volume
7.61
13.17
18.03
20.03
107,412,803
142,055,779
110,330,313
87,626,571
447,425,466
Close
Volume
13.24
18.05
23.59
31.00
206,884
167,709
197,126
523,450
1,095,169
CST Trust Company provides an AnswerLine Service for the
convenience of shareholders:
Toll-free in Canada and the U.S.
+1.800.387.0825
Outside Canada and the U.S.
+1.416.682.3860
Email: inquiries@canstockta.com
American Stock Transfer & Trust Company, LLC
6201 – 15th Avenue,
Brooklyn, New York 11219
+1.800.937.5449 or +1.718.921.8124
Email: info@amstock.com
Website: www.amstock.com
TTY: +1.866.703.9077 or +1.718.921.8386
Auditors
PricewaterhouseCoopers LLP
Chartered Professional Accountants
Suite 700, 250 Howe Street,
Vancouver, British Columbia V6C 3S7
Annual Information Form
We prepare an Annual Information Form (AIF) that is filed
with the securities commissions or similar bodies in all
the provinces of Canada. Copies of our AIF and annual and
quarterly reports are available on request or on our website
at www.teck.com, on the Canadian Securities Administrators
website at www.sedar.com (SEDAR), and on the EDGAR
section of the United States Securities and Exchange
Commission (SEC) website at www.sec.gov.
On the cover: Julia Dick, Utilityperson at Highland Valley Copper Operations.
Corporate Information
115
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Every Day
2016 Annual Report
Teck Resources Limited
Suite 3300, 550 Burrard Street
Vancouver, British Columbia, Canada
V6C 0B3
+1.604.699.4000 Tel
+1.604.699.4750 Fax
www.teck.com
Setting Possibilities in Motion