Teck Resources Limited (TECKB) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to Teck's 2019 Sustainability Review Investors Conference Call. [Operator Instructions] This conference call is being recorded on Wednesday, June 3, 2020. I would now like to turn the conference over to Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analysis. Please go ahead.

Thank you, Melanie, and good morning, everyone. Thank you for joining us for Teck's 6th annual discussion of our sustainability and performance. I'm joined today by our President and CEO, Don Lindsay, of course; and also by Senior Vice President, Sustainability and External Affairs, Marcia Smith. We also have a number of other members of the Teck team on the line with us today. We are looking forward to discussing Teck's approach to ESG, sustainability and our performance. Before we start, I'd like to draw your attention to the caution regarding forward-looking information on Slide 2 and 3. This presentation contains forward-looking statements regarding our business. However, various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statement. With that, I'd like to turn the meeting over to Don Lindsay.

Thank you, Fraser, and good morning, everyone. We have a lot to cover in this call, so I wanted to start by outlining our response to COVID-19 and our current business priorities. We will provide a brief update on our new sustainability strategy with the ambitious short-term goals to 2025 and long-term goals all the way out to 2040. And then we will transition to a deeper dive on 5 key sustainability topics. We'll begin with an update on health and safety because at Teck, nothing is more important than the health and safety of our employees and contractors. Looking at our recent health and safety performance, we saw an improvement in safety metrics year-over-year, and importantly, we've been able to reduce the rate of high potential incidents by 31%, almost 1/3 over the last 4 years. Despite our progress though in safety, we were saddened to report a fatality at the QB2 project in 2019. And I should say that an in-depth investigation was completed with preventative measures implemented, and we are sharing lessons learned across our company and all across the industry. COVID-19 is clearly the most pressing health and safety issue facing Teck and the world. We have a comprehensive approach to managing the risks and the impacts of the pandemic based around 5 pillars: Prevention, employee support, aid for communities and public health organizations, business continuity and communication. All of our Teck-managed mines continue to operate, and we've implemented comprehensive preventative measures in our operations that are in line with guidance from health authorities, and these include enhanced cleaning and disinfecting protocols, eliminating group meetings and requiring physical distancing, staggering shift start times to support the decision, ensuring adequate supplies of personal protective equipment, including masks, and promoting measures like frequent hand washing. Our people and our unions are working extremely hard to ensure these measures are being diligently implemented. And in fact, at just our steelmaking coal operations, we've conducted over 28,000 assurance checks and achieved an impressive 98% compliance rate. We have maintained wages for employees whose work hours have been reduced because of COVID-19 measures. And we are providing employees and their families with additional support, including access to specialized health resources and mental health support services. Lastly, I want to take a moment to recognize and thank all of our frontline workers. These are men and women who are ensuring our communities are safe and have the services and supplies they need. In addition to our strong focus on our people and on their health and safety, we have also taken steps to ensure the resiliency of our business throughout this period. We are well positioned to weather the effects of this pandemic, supported by our strong financial position. We have around $5.8 billion of liquidity as of April 20. Our $4 billion U.S. revolving credit facility is committed through Q4 of 2024, and it does not have a cash flow based covenant, it does not include a credit rating trigger, and it does not include a general material adverse effect borrowing condition. We have no significant debt maturities prior to 2035. And we have investment-grade credit ratings from all 4 credit rating agencies. And for our QB2 project, we have a prudent funding and financing plan in place, a $2.5 billion U.S. project financing facility and the QB2 party transaction dramatically reduced our funding requirements for the project. And there are no contributions to project capital expected from Teck until mid-2021. Turning to Slide 7. As we work to maintain business continuity and the health and safety of our workforce, we are also working to support communities. We have created a $20 million COVID-19 response fund for communities, which includes procuring and donating essential medical supplies such as 1 million KN95 masks for health care providers, and also supporting local health and social services affected by COVID-19 and contributing to relief efforts. That work builds on our well-established approach to local and global community priorities. For example, our support for health care aligns with our copper and health program. We've established copper and health several years ago to increase the use of antimicrobial copper to reduce the spread of health care-acquired infections. Copper, as many of you know, has unique antimicrobial properties and has proven to continuously kill bacteria that cause infection. When installed on high-touch surfaces, copper will eliminate up to 99.9% of harmful bacteria. As a major copper producer, we believe we can play an important role in educating people about the use of copper to reduce the spread of infections like COVID-19. We are also supporting international relief and regional organizations to protect food security. This aligns with our zinc and health program launched nearly a decade ago, where we are working with the United Nations World Food Program to improve crop yields and strengthen food security. Finally, we know some of the people who have been impacted the most by COVID-19 are women and other vulnerable groups. And that's why we're working with UN Women and other organizations to support economic empowerment and provide educational opportunities. The extra steps we are taking today to respond to the many social challenges posed by COVID-19 are rooted in years of working to improve the lives and well-being of people in our communities and around the world. Our approach to sustainability is core in success of our business. Strong sustainability practices are an essential part of our strategy for responsibly advancing projects, avoiding disruptions in operations and attracting the best people. We also know that investors are increasingly valuing a company's sustainability performance in managing risk and supporting growth. It is our goal to be the leading diversified mining company when it comes to sustainability and ESG. And I'm proud to say our efforts on sustainability have been recognized by a number of organizations. For example, in 2019, Teck was named to the Dow Jones Sustainability World Index for the 10th consecutive year, and we were the top-ranked mining company on the index. We are also highly ranked on MSCI and sustain the limits in comparison to our peers. And we've been recognized as a strong performer by ISS, Vigeo Eiris, FTSE4Good and the Bloomberg Gender-Equality Index. And we're proud to say that we are also the only mining company on the Global 100 Most Sustainable Corporations list. While we are proud of our performance, we do know that there is still much more work to be done. Our work in sustainability aligns with leading external standards. And through our memberships, for example, with the International Council on Mining and Metals or ICMM, we conduct third-party verification of the sustainability practices at our operations. We also participate in global organizations that drive sustainability leadership. We have been producing GRI sustainability reports over the past 19 years, and we released, for the first time, an index aligned with the Sustainability Accounting Standards Board or SASB's standards this year. On climate change, we are members of the Carbon Pricing Leadership Coalition, and we are currently preparing our 3rd report under the Task Force on Climate-related Financial Disclosures, known as TCFD. In this next section, I want to provide an overview of our approach to business, which is directly linked to our sustainability strategy and performance. On Slide 11, starting with copper, which is a critical metal for enabling the transition to a low-carbon economy. Our copper growth strategy will see us rebalance our portfolio to make copper equal to or greater than our steelmaking coal business. As one of the lowest carbon producers of copper, we're well positioned for the ongoing electrification and associated decarbonization of the economy. We have a stable platform of production with Highland Valley Copper mine in British Columbia, Carmen de Andacollo mine in Chile, and through our joint venture interest in Antamina in Peru. And we have growth opportunities as far as the eye can see in copper, starting with QB2. Our long-life, low-cost Chilean operation is currently in the construction phase, although construction is currently suspended due to COVID-19. Aligned with the transition to a low-carbon economy as part of our commitment to be a net 0 carbon company by 2050, we are working to source 50% of our electricity demands in Chile from clean energy by 2025 and 100% by 2030. Moving now to our steelmaking coal business. We have strong long-term cash flow from our 4 long life high-quality steelmaking coal mines that have more than 30 years of reserves and over 100 years of resources. Our steelmaking coal operations have consistently delivered higher operating margins than many other major steelmaking coal exporters. And as you know, steelmaking coal is a critical component in the production of steel, which is needed for everything from hospitals to clean power. We are amongst the lowest carbon intensity producers for steelmaking coal in the world, positioning us well for the transition to a low-carbon economy. We also have a strong focus on managing water quality at our steelmaking coal operations, which Marcia will speak to in more detail later in the presentation. Turning now to our zinc business unit. Zinc enhances the durability of steel, and it is also an essential micronutrient for human health. Teck has a world-class zinc business with our flagship Red Dog mine, one of the largest high-grade zinc producers in the world. We operate Red Dog under an innovative operating agreement with the landowner, NANA, a Regional Alaska Native Corporation owned by the Iñupiat people of Northwest Alaska. And the operation is firmly located near the bottom of the industry cost curve year after year. And turning to our energy business. We have a 21.3% interest in the Fort Hills oil sands operation, which has amongst the lowest carbon intensity oil production in the oil sands, lower than half all the oil refined in the U.S. today. It features proven technology and has an experienced operator with Suncor. We have been very clear, though, that if we can't see value for Fort Hills reflected in our share price, we will not hesitate to pursue other options to realize the value, including divestment at the appropriate time. Now how does all this fit together? Well, our strategy is very straightforward. We are implementing a copper growth strategy that is financed by the cash flows from our steelmaking coal and zinc businesses. We are focused on rebalancing our portfolio to ultimately make our copper business larger than our steelmaking coal business beginning with building QB2 in Chile, which will double our copper production on a consolidated basis. And then rebalancing our business towards copper does align with the shift to a lower carbon economy, which is a global sustainability priority for all businesses and governments. As we advance this strategy, sustainability will remain at the forefront of everything we do with our ambitious new sustainability goals guiding us along on the path ahead. With that said, I will now hand the call over to Marcia Smith.

Great. Thanks, Don, and good morning, everyone. I'm going to cover a few ESG and sustainability topics, and then we'll open it up for questions. And as Fraser said, obviously, Don and I are here, but a number of our colleagues are on the line with us as well today. So Teck has had a comprehensive sustainability strategy in place for nearly a decade. We updated the strategy first in 2015, and we released the second update a few months ago in early March 2020. In this most recent update, we set ambitious goals in 8 strategic themes from health and safety to biodiversity to climate change. And each team has long-term objectives with short-term milestone goals to guide our progress. Moving to Slide 18. I'm going to start with climate action. We know that we have a responsibility to help tackle the global challenge of climate change. And we do this by working to reduce our emissions at our operations by advocating for policies that support the transition to a low-carbon economy and by responsibly producing materials that are essential to building the technologies and infrastructure needed to reduce emissions globally. The carbon intensity of our operations is already very low within our industry. And as shown in the graph here on the slide, the intensity of our Scope 1 and scope 2 GHG emissions on a copper equivalent basis is amongst the lowest in the industry. Further, the majority of our business is already covered by carbon pricing. So unlike many of our peers, the cost of carbon is always factored into our cost structure. Earlier this year, we set the goal of being carbon neutral across all operations and activity by 2050. And this commitment demonstrates our support for the transition to a low-carbon economy, and worldwide efforts to meet the goal of the Paris Agreement to limit global temperature increase. It also aligns with commitments made by our primary operating jurisdictions of Canada and Chile, who's committed to being carbon neutral by 2050. And underpinning this objective are 3 short term goals. The first is to reduce the carbon intensity of our operations by 33% by 2030. The second, as Don mentioned, is to procure 50% of our electricity demands in Chile from clean energy by 2025 and 100% by 2030. And third is to accelerate the adoption of zero-emission alternatives for transportation by displacing the equivalent of 1,000 Internal Combustion Engine vehicles by 2025. Moving to Slide 20. We have set out a road map for how we will reduce carbon intensity and ultimately achieve our long-term objective of carbon neutrality. It first starts with a solid understanding of our current and our future emission sources, and then we apply a mitigation framework. And so this framework has 4 steps: First, avoiding emissions altogether where possible; second, eliminate emissions through the use of alternatives such as solar instead of coal power; third, minimizing emissions; and fourth using carbon offsets if needed. We know that our 2 most significant emission sources are from power supply and from our mobile equipment fleet such as haul trucks. And so we prioritize those sources in our short-term goals, and are deploying proven, cost-effective technologies to make progress now. So this includes increasing procurement of electricity for operations from clean energy sources. And earlier this year, we announced a major purchase agreement for our QB2 project in Chile that will source renewable energy for approximately half the power required for that operation. We're also replacing Internal Combustion Engine vehicles with 0-emission alternatives with a focus on electric transportation and alternatives for material handling. And as you can see on the slide, as we move forward, we will evaluate and implement options to address other sources of emissions. So for example, we're considering lower emission alternatives for stationary combustion processes, such as in our steelmaking coal dryers, and we're assessing the potential for using emerging technologies such as Carbon Capture and Storage. At each stage, we're looking at what cost-effective technologies are available and proven now that we can begin implementing. And at the same time, we're monitoring early stage technologies as they mature towards commercial viability. I'll talk just for a minute on Slide 21 about an area of active technology development, and that's something called the Cleaner, Safer Vehicles Initiatives that's being advanced through the International Council on Mining and Metals. 27 of the world's leading mining companies, including Teck and mining equipment manufacturers are collaborating to develop a new generation of mining vehicles with a significantly reduced environmental footprint, including lower greenhouse gas emissions, reduced diesel particulate relief and decreased chance of collisions. So I'm on Slide 22, and I'm going to talk for a moment about water stewardship. We have been and we will continue to focus on innovative water management and water treatment solutions to protect water quality. And we continue to focus on transitioning to seawater or low-quality water sources in water-scarce regions. For example, this means using desalinated seawater for our QB2 project, which is located in one of the driest places in the world. One of our key priorities is managing water quality at our steelmaking coal operations in the Elk Valley of British Columbia. And we've discussed this topic before on this call, and I'm pleased to say that we're making good progress. To address the challenge, Teck worked in partnership with governments, Indigenous Peoples and surrounding communities to develop the Elk Valley Water Quality Plan, which was approved by our provincial regulator. We're advancing a range of innovative technologies to achieve the objectives of the plan. And as part of that work, we developed a new form of water treatment called Saturated Rock Fill, which can help achieve water quality objectives more quickly and at a lower cost. As Saturated Rock Fills, or SRFs, filter carbon, use naturally occurring biological processes to remove selenium and nitrate from mine-affected water. The first full-scale SRF is successfully treating up to 10 million liters per day and achieving near complete removal of selenium and nitrate. We're currently building a second phase of this SRF, which will double water treatment capacity to 20 million meters per day. We have 1 tank-based facility operating successfully, and we're currently constructing a second larger facility at our Fording River operations. And moving forward, we're planning for all future water-treatment facilities to be SRFs. We have a major R&D program underway to continue, for example, improving our options for source control. And this includes advancing our work to reduce nitrate as sourced through the use of explosive product liners and we see that picture here on the slide. Moving now to Slide 24. As you can see in this chart, we have a clear path forward for implementing the Elk Valley water quality plan and improving the water quality. As disclosed in our Q4 2019 results press release, we anticipate spending CAD 640 million to CAD 690 million from 2020 through 2024 on water treatment in the Elk Valley. And this will see a total treatment capacity increase to 120 million liters of water per day. And ultimately, it will ensure that the watershed is protected and that we can continue to sustainably operate our mines in that region. I'm going to shift on Slide 25 now to Tailings Management. And the safe management of tailings, dams and facilities is of critical importance for our company and our industry, especially in light of the tragic incidents at both Brumadinho and Samarco. Teck manages 16 active tailings facilities and 39 facilities that are closed and no longer receiving tailings. We have comprehensive systems and procedures to ensure the safety of our facilities, organized around 6 levels of protection as outlined on the slide. Our tailings facilities are operated and maintained to meet global best practices for safety, including industry-leading protocols established by the Towards Sustainable Mining program or TSM and the Canadian Dam Association. And our facilities also have full emergency comparatives plans in place, which are reviewed with local stakeholders. The most recent annual Dam Safety Inspections for our facilities, which are available on our website, confirm that they are stable and secure and that our monitoring and surveillance practices are robust. And many on the call will also be aware that last year, the Church of England Pension Board and the Swedish Council on Ethics saw additional disclosure on tailings, and you will also find that detail on our website. In 2019, we undertook a special review of Teck's tailings and water retention structures following the Brumadinho incident, and that review was conducted by independent external experts, who provided their report to the safety and sustainability committee of our Board. They confirmed that there are no immediate or emerging threats of catastrophic failures with our tailings and water dams. Nevertheless, we are focused on maintaining our management practices and ensuring that our facilities meet the highest standards for safety. And finally, I will say that planning is underway today at Teck to fully implement the new global tailing standard that is being advanced by the Principles for Responsible Investment, the UN Environment Program and the ICMM, once finalized and released. So moving to our next topic on Slide 26. In today's increasingly complex operating environment, success relies on developing positive long-term relationships with communities. And this begins with acknowledging and respecting the human and indigenous rights of the people that we interact with. In 2019, we had no significant human rights related to community incidents. And last month, we released our updated human rights policy, which emphasizes our commitment to the UN Guiding Principles. Most of our operations and the majority of our development projects are located within or immediately adjacent to Indigenous Peoples territories. And so accordingly, we have formal agreements in place with Indigenous Peoples at all mining operations. We believe that agreements form a framework for relationships, they build a foundation for cooperation, and they support ongoing engagement. Indigenous and community support for our activity is also contingent upon sharing economic benefits. And that's why we're focused on local employment and procurement. In 2019, we spent $225 million on procurement with indigenous businesses, and 72% of our workforce with local, with 36% of our procurement coming from local suppliers. I want to move into Slide 27. I want to spend just a moment talking about inclusion and diversity. And this is an issue that is very much at the top of our minds right now with recent events that have both shocked and saddened us. And it's clear that as a society, we need to do more to combat racism and keep each other safe. And at Teck, we recognize that all employees have a right to work in an environment that supports diversity and is free from discrimination and harassment. And that's why we have a strong inclusion on diversity policy, and we work to actively implement our global harassment policy and our code of ethics. We also recognize that the world is evolving in the light of COVID-19. And while we have a number of family-friendly policies and programs in place, we are working towards an expanded remote work policy to further enhance our workplace flexibility. On gender diversity, we've implemented programs to attract and retain a greater number of women at Teck, and we're seeing progress. In 2019, women comprised 32% of new hires at Teck, about 1/3 of all our new hires. 25% of independent directors on our Board are women, including our Board Chair. And women now make up 20% of our total workforce, up from 14% just 5 years ago. We put in place a range of projects and programs to form our inclusion and diversity across our company. And finally, we ensure that no matter the topic or the concern, employees can raise them in strict confidence at any time through our 24/7 Doing What's Right Hotline. Accountability for sustainability performance is embedded throughout our company. Our compensation program is directly linked to sustainability performance through individual, department and company-wide objectives. At a minimum, performance against sustainability-related objectives affects at least 10% to 20% of an individual annual bonus. And business units also have sustainability metrics built into their bonus structures. As you might expect, executive compensation, including my compensation and Don's and our business unit leaders' compensation, is also closely linked to sustainability, in particular, with the safety and well-being of our people, our relationship with communities where we operate, our use of energy and our carbon intensity and environmental impact. And our sustainability performance is tracked on an annual basis, especially as it relates to our sustainability goals. And it is reported in our management proxy circular and our sustainability report. And for more detail on our sustainability performance, we have a range of ESG resources available for investors. On our website, you can find our annual financial and sustainability reports, our TCFD aligned report and more. All of our sustainability data is available. And as Don mentioned, it's also available within our new SASB index. We also provide links to our CDP and the UN Global Compact reports. And all of these resources are available on our online disclosure portal, which we update throughout the year with new data as it becomes available. And when it comes to sustainability, we are focused on continuing to improve our social and environmental performance as a key element of our business and long-term value creation strategy. And this will mean a safer and more diverse workforce, it will mean less carbon emissions and a reduced environmental footprint, and it will mean even stronger relationships with communities and Indigenous Peoples. And with that, we would be happy to answer your questions, and I'll turn the call back, Melanie, to you.

[Operator Instructions] The first question is from Greg Barnes of TD Securities.

Yes. Marcia, that's Slide 24 on the Elk Valley water treatment plan. I think that's the clearest plan we've seen. Is that all of the water treatment that you require in the Elk Valley mapped out there? And is it -- I assume that the way you've mapped it out, that means that the government is on-site and getting permits for all the Saturated Rock Fill facilities will happen.

Yes. I'll start, Greg, and then I can turn it over to Robin, who's on the call, too. But yes, that does outline our plans for water treatment. And yes, we do have support from government up for proceeding with our strategy on Saturated Rock Fill. I don't know, Robin, if you want to add anything.

I'm not sure what to add, but I agree. I think that was just the chart itself gives a pretty good sense of what the plan is, and it's pretty much locked down now. So as Marcia said, we've got approval to -- I mean we're in the middle of constructing the first -- or the largest expansion of the Saturated Rock Fill at Elkview. So that's doubling the capacity there. So I'm not sure what to add to that.

Just my understanding, Robin, was that the government was studying this and trying to figure out if they were happy with the way that the Saturated Rock Fill performs and stripping out the selenium. But I guess with this plan that is all taken care of. Now they do agree with you that it's the best route going forward.

Yes. I would just say, Greg, as I said in my remarks, I mean the Elkview Saturated Rock Fill is achieving near complete removal of selenium and nitrate. So it is achieving what we set out to do, which is to get water treatment online quicker, and it is obviously more cost-effective for us. So I think all systems are go. And as I said, we've made a lot of progress since we talked about this a year ago sort of on this call.

The following question is from Terence Ortslan of TSO.

Maybe it's a contemporary topic with the COVID and other issues. This -- actually, this question goes back to some of your previous competitors in the industry, doing this anymore for their products. But I do know that copper alloys and copper itself antibacterial antimicrobial properties. The -- I'm actually amazed all through this pandemic how little publicity it has gotten in the public forum. It doesn't matter if it's the news channels or the business channels or the industry journals. Is there anything else that your leadership you can do to either brand it in such a way that it becomes a preferred, high-value, competitive product? And also as well, I was going back to my notes and look at the zinc side, which you illustrated very well about the -- its effect on the fertilizers and also usage for learning abilities, so on and so forth. Is that a branding way or pricing in such a different way that people have to pay to get it? If it's cheap, people think it's not worth it. So how can we take the next step whereby it becomes a recognized product, not only as it is, but from Teck itself?

Terry, thanks very much for your question. It's a really important point for society at large. I'll start with the commerce. So -- and then throw it open to any of my colleagues who want to jump in. We have been pushing it at Teck with our copper health program for a number of years now, and we funded the installation of copper composite material in high-touch surfaces in the intensive care units at Vancouver General Hospital, where they've been testing it and -- and there's a number of aspects that people still need to learn about in terms of what the effect of different cleaning agents are over the course of a year or 2. But so far, it's just had excellent results. So we're now supporting it going into, I think, 4 more hospitals so far. And we've been educating people and pushing the story on a number of fronts. We have seen during COVID-19 numerous media reports. I get a report sent to me by a friend or colleague or somebody almost every day from some media outlet. But you're right, there's still a lot of education going, particularly with government that would fund major investment infrastructure using copper. We did see Toyota, a Canadian automobile manufacturer. When they were reopening, they applied copper to their high-touch surfaces, railings and so on as part of their COVID-19 restart protocols. But really, we'd like to see that everywhere. And also in public transit, health care facilities I mentioned, but restaurants [indiscernible], you name it. For society at large, it would reduce the risk of infection and make it safer for people to carry on with the normal life that we used to have. So those are some thoughts. I think the National Copper Association has a program pushing it, but you're absolutely right that this is an opportune moment to get that story out and have governments really start to back it as a requirement for building infrastructure. But I throw it open to my colleagues. Anybody else have anything you want to add?

It's Marcia. Maybe I would just add, Don and Terry. Terry, as part of our COVID Response Fund, our $20 million fund, we have allocated actually $1 million for copper and health in 2020 and that is designed to do exactly what you just suggested, which is to increase awareness of copper in infection control management. So we are looking at projects, and we'll continue to invest in trying to raise awareness so that people understand both at government levels and as we -- as Don mentioned, as we've been doing through the health care sector in Canada.

And there are other uses that people don't think about, like copper clothing is getting more and more popular. I obtain copper-laced masks for my family and there are several manufacturers of those now that give everything from copper gloves to copper socks and so on. So -- but I guess, like branding it or just getting that message to the public is so important.

Well, I mean, there are 2 ways of branding; one is the copper itself. One is the Teck itself. Actually, this conversation goes back with INCO, I must tell you this years ago when Caterpillar came with their boots and toys and everything else, INCO has an opportunity to get into the INCO stainless steel sink. INCO this, INCO that. And they looked into that. But why can't it be Teck? Why can't it be -- why it should be anybody else and you get -- add multiple on your copper price or whatever it is because you go to Home Depot today, buy a copper alloy tube for your kitchen, you're paying $10 a pound. Why it has to be like $200,000 a pound, giving it away?

Okay. We're going to look into that. That's an interesting idea. I remember the INCO stainless steel sink.

The following question is from Oscar Cabrera of CIBC.

And just following on same question, theme that Terry raised. Don, the coal industry and the oil industry are getting a pretty rotten up with investors in terms of the environment. And so -- and you have touched on this a couple times. It would be good to hear what you have planned to differentiate the type of coal that you produce versus the thermal coal, which I think the -- most of the comments with regards to the environment come from?

Right. Well, it's a good question, and there's no doubt that it's an education issue that we have been working on. The first point I want to make is for both our production in the oil sands and our production steelmaking coal, we are at the very low end in terms of carbon emissions per ton of production or barrel of production. And I think it's important that as the world moves to energy transition, which we strongly believe in that while there's still going to be a need for oil, you'd want to have barrels of oil that have the lowest carbon emissions associated with them. Those are the barrels that should be producing and the highest to emission barrels should be the ones that are shut down. In terms of steelmaking coal, I mean steelmaking coal is crucial for a low-carbon future for the world. And it's a story that we have been working hard from probably September of last year, September, October, November, Fraser and I saw literally hundreds of institutions that have extended rate through till January, making sure people understood the difference between steelmaking coal and thermal coal. And I can say now that probably 98% or 99% of investors do understand the difference, that they just worry that someone else doesn't understand the difference. And the fact is pretty much everybody does understand the difference. We still have to keep pushing that story probably in every investor meeting that we do have, and also with the media at large and the population at large. But if you want a low-carbon future on this planet, you can't do it without steel, for everything from hospitals to -- for our health care, for rapid transit for lower footprint, for windmills and solar and so on. So I think collectively, we'll keep having to do our bit to make sure people understand that.

Great. And then if I may, there's been an increase or spike in cases of COVID-19 in South America. I was wondering if you could provide an update of what's happening in QB2 and the getting people back to the construction side, et cetera.

Okay. We are making some progress there, but I'm going to turn that over to either Dale or Alex, I see Dale on the line. Maybe, Dale, over to you.

Yes. Thanks, Don. Currently, we remain suspended for construction. We do have a care and maintenance staff, and we do have a small number of critical activities that are progressing on site, and we're spending a lot of our time focused on what it would take to do a full restart in construction. We're obviously monitoring the situation for COVID in the country and in particular, in the Tarapacá region, including medical capacity. A lot of our workers come from across the country. And so it's not just a work of that site, but it's the transportation of workers that we're concerned about as well. So for now, construction remains suspended, some critical activities carrying on. And we're continuing, especially at this time while Chile is still peaking for COVID cases, watching the country very carefully and the region.

Following question is from Carlos De Alba of Morgan and Stanley (sic) [ Morgan Stanley ].

So Marcia, on referring to see the Slide 22, can you elaborate a little bit more as to what are the water-scarce regions that you have identified? Is it mostly Peru and Chile? Any more color would be appreciated.

Yes. We're really referring to Chile, where we have our QB2 project and Carmen de Andacollo. So we have operations in Chile that we manage. And so that is largely what we're referring to in terms of our goals. But of course, if we -- if we brought projects on in other water-scarce regions like Peru and other places, we would apply these rules to them as well.

The following question is from Derek Ip of BMO Global Asset.

And I hope everyone at Teck resources is keeping well during the pandemic. Very excited to read your new sustainability… [Technical Difficulty]

Well. Melanie, it looks like maybe we have Derek cutting out.

Yes. [Operator Instructions]

Sorry, yes. So very excited to read your new sustainability report and the presentation as well as you have made some new and important strategic priorities covering water, carbon and tailings as well. And we do particularly welcome the carbon neutral commitment on climate change, which I think copper's Scope 1 and 2. I'm quite curious about your views on Scope 3 emissions? And whether you have done any accounting on that, as I can see on Slide 18 that currently, it is kind of hidden from chart when you compare with the peers. If there is any planning on working on that -- on the Scope 3 emissions, we will be very keen to hear more of the detail.

Marcia, I missed part of that question. It was breaking up a bit. Did you get it?

Yes. It was breaking up for me, too. I think I got it, which was, Derek, I think you're asking if we have any specific Scope 3 emissions goals. And while we don't have any specific goals at this point around Scope 3, it's obviously something that we're paying a lot of attention to, and we're looking at, as I mentioned in our comments, we are looking at and following technologies like Carbon Capture and Storage and trying to understand those as well. We are seeing, of course, steel mills are looking very closely at their emissions. And so that's something important that we're following. Maybe I'll turn it over to Chris Adachi, who is on the line with us as well, for more color. But I would say, in terms of a specific goal at this point, we don't have a specific Scope 3 goal, but obviously, this is an area that we're watching very closely, and we'll see, at some point, if there is a role that we can play in thinking about Scope 3 emissions. I don't know, Chris, if you want to add anything.

Just one minor note I'd add, which is we have been disclosing our Scope 3 emissions for the most material Scope 3 emissions in our sustainability report. So that information has been in a number of reports for a few years. But yes, I think I'd repeat just what you said, Marcia, which is we are monitoring this. We are looking at what the steel sector and other sectors are doing, and keeping an eye on where those opportunities are going to emerge.

The following question is from Michael Proulx of Sustainalytics.

Chris, I wanted to, one, make a quick correction. You mentioned in the opening slides that you were tied for 2nd in the Sustainalytics ratings. And I would say, I'm looking at the April ESG risk rating report, we've done updated the controversies and you're #1 in diversified metals. So congratulations there. My question follows on from Derek, so a little bit more. Looking at the ResponsibleSteel initiative and also the -- I'm sure you're aware, the TPI paper on Scope 3 and carbon pricing for diversified metals. And I'm curious as to how you are contributing to those discussions at RSI on the double counting for coal and iron ore, though I know you're not in the iron ore. And then how that also translates into the -- and I see you're already going to the copper equivalent for carbon on diversified metals. So how you might be navigating and contributing to those discussions as far as establishing the standards go.

Yes. So thanks. I'm going to -- I'll start and then, Michael, and then maybe Chris can jump in as well and also maybe Katie Fedosenko, who's on the line with us. So we are just actually in the process of joining ResponsibleSteel. We've been talking to them since very, very early days and have spent quite a bit of time early on talking about the standards. And in particular, standards like TSM and how those might be integrated. So that's a conversation. I'm trying to think how long it's been going on, maybe 2 years, maybe it's not that long, I can't quite remember. But we have been talking to them for a long time, and we are now, as I say, in the process of more formally joining them. And so that we can continue to work with them and others now that that's really getting some traction. And, yes, maybe I'll just turn that -- maybe I'll turn it over to Chris and Katie, if they have any more color to add on sort of how we're thinking about some of these issues.

Yes. Thanks, Marcia. It's Chris. And Michael, thanks for the question. Yes, I mean we're tracking both -- and I know exactly what you're referencing; you're talking about the double counting. We've joined some of the conversations with the TPI to see how they're going to do their accounting. It's something we'll continue to monitor and engage in and make sure that we're providing some contributions that they make some reasonable decisions in the end of their methodologies. But I think it's still a process that they're working through.

Great. Okay. I just thought you guys are kind of straddling the line there, one on the prescribed metal side, but also then on the certification and their sourcing on the raw materials for the steel side. And I know they're looking and talking with them, right, and they're having the discussions on and they have a double counting. So that's all I was just concerned. I'm sure you guys are on top of it, but just wanted to see how you're thinking about it.

Okay. Thanks, Michael. Yes. I think, as Chris said, this is definitely an evolving area that we're involved in.

The following question is from Anne-Marie Gagnon of BC Investment Management.

Initially, my question related to the Scope 3 emissions reduction targets that was tackled already, but I will follow-up with just to say, I think that it's been great for you to update your long-term GHG emission reduction target to 2030, providing investors and stakeholders with more visibility towards the milestone to meet your net-zero aspiration by 2050. And the plan to carbon neutrality also provides much more nuances and visibility into how you're going to -- to meet those objectives. But I think, in next step, any considerations to come up with even more of a milestone target to 2040 on the emissions reduction front?

Maybe I'll start on that one and then Chris, you could jump in as well. We are just in the process not only of working with our business teams. In fact, Dale and Robin, who lead our base metals and steelmaking coal units, and the team, we spent quite a session, I think, just last week, talking about our implementation plans and how those will unfold at the site level. So I think -- I don't think we have a plan necessarily today to develop more milestone goals. We've got the ones set in front of us right now. But 2050 is a long time away. And I think the world is changing pretty rapidly. We have consistently been updating our sustainability strategy sort of over 4 to 5-year increments. So I fully expect that as this unfolds, we will be making those kinds of updates as we head towards 2030, 2040, 2050. I don't know, Chris, if you want to weigh in there.

Nothing really major to add. The only thing I'd say is as you said, we do update the strategy every 5 years. So at those times, we try to set both short and long-term goals. And I think the 2030, as you mentioned, Anne-Marie, show that bridging. I think that 2030 goal was set to align with sort of Paris trajectory type action. And so I think that's going to be -- continue to be our focus the same way that, that's why we set the carbon neutral goal to stay along that pathway.

The following question is from Terence Ortslan of TSO.

Actually, just a quick follow-up. A few years ago, I asked the same question. I just want to wonder -- I'm just wondering if the progress is such a way that we can talk about it again. The oil sustainability accolades, recognition, that's great. And that's for the legacy and the existing issues and looking for the future. However, could you say that today, because of all those efforts that Teck put on the table, has it impacted the timelines to get your permits faster than anybody else? Are you a partner of choice? Governments look at Teck saying that's a great company because all those efforts they do, that means your financing is at a lower cost, your cost of capital is impacted. Is it a yardstick or metrics that are you using saying that this is where we achieved, and we've got to do more? Or we have enough to be done?

Thanks, Terry. I think it's an excellent question, and I'll start and maybe Marcia or others could follow. We do get a very good reception, and we have a strong dialogue with governments all over where we operate. And it's a high priority that we maintain that rate from my office throughout the different members of management, Chair of Board, every now and then and so on. You have to start with relationships and good quality dialogue, whether it be with the communities, Indigenous People, governments and shareholders for cost of capital. So we've put a strong emphasis on that. But it is difficult to measure whether if we weren't ranked as highly or we hadn't adopted the leading practices, whether our cost of capital would be higher, whether it be share price or interest rates on debt, that sort of thing. But I think it's more about access to capital markets and ability to get a permit at all. There have been many projects around the world that did not go ahead because they never did get the permit, they never did get community acceptance, and they didn't have a good quality dialogue with the government, and we have some of those right here in British Columbia, in fact. So probably, the measure of success is being able to continue to operate and to sometimes get a growth project permitted, whereas if you didn't reach the highest standards of practices and sustainability, we probably would just not be able to continue. But Marcia or any others on the team, any other comments on that or any evidence that shows that it does make a difference?

Yes. Maybe I would just sort of add to that, Don. I mean I think we see -- I think we see the impact of our sustainability practices in a couple of ways. One certainly is in recruitment. We consistently hear that people -- so from -- whether we're recruiting at the Senior VP level to the front lines, we consistently hear that people want to join our company because of our sustainability practices. So I think that's a positive and it helps us on that front. When it comes to permits, just to sort of add what Don said, I think a big part of it is building trust with regulators, building trust with indigenous communities. And I would say that in our operating areas, we do have strong levels of trust. I mean certainly here in British Columbia, all of you have been following our water quality plans, and Greg mentioned them earlier, there is a very complex file. And we have a high level of engagement with the British Columbia Government on it, with the Ktunaxa Nation on it, with our communities on it. And we've been able to work through that. So far, so good. I mean we are continuing to operate and to solve some pretty complex problems together. And so I think it is hard to put -- to kind of nail that in a very specific way. But if you, as Don said, if you look at companies that aren't able to proceed, I think that's maybe the easiest way to measure. And then maybe just the last thing I would say is a lot of what we're talking about here, our approach to tailings management, our approach to climate change, to inclusion and diversity, these are becoming for regulators, certainly in the Canadian and Chilean context, these are becoming table stakes. Like if you cannot live up to a certain bar, I think the reality is you will not get permits going forward. So yes. I don't know if that really fully answers your question, but it is an area that is absolutely, I would say, evolving, and evolving significantly over the last few years. If you think 6 years ago, on this very first call that Don and I did, we sat at the end of our presentation and looked at each other across the table because we didn't have a single question from anybody about our sustainability performance. And today, we're spending tons and tons of time. We're getting lots of questions. And so I think that the focus on ESG performance is just growing and increasing. And I think ultimately, this is going to translate into advantage for those companies that can demonstrate they're operating at the highest levels.

You cover a lot of companies, most of my colleagues on this call and the industry. I think Teck has a story to tell. And the question is, you're the leverage to our benefit for all those issues, and I'm sure you are. And don't let it go away because the industry becoming, as you said, Marcia and Don, becoming very selective, the other side, the governments, the competitors, they want to deal with the credibility issue. And you have it. I think I'll use that leverage as many as I can.

Thank you very much. I don't know, Fraser, if there's any other questions or Melanie, whether we've got more on the line?

No, I don't think, at this point, we do have any more questions on the line. So I think, Marcia, we could hand it over to Don for closing remarks.

Okay. Well, thank you, Fraser. Thank you, Marcia. And thank you all for joining us today. We appreciate the questions. We appreciate your input. And if you have any questions that you think about afterwards, please don't hesitate to contact us. And if you have any suggestions as some good ones here today, we'd love to hear those as well. We look forward to doing this again next year, and we remain absolutely committed to maintaining the rankings that we've been having, and to continue to raise the bar on all things sustainability. As I close many meetings at Teck, I'll just say this, it's sort of my mantra, but I repeat it often enough. I hope it all comes true. Please to all of you, stay healthy, keep the faith, this too shall pass and all will be well. Thanks very much. This meeting is adjourned.

The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.