Teck Resources hikes cost of QB2 copper project in Chile again

Teck Resources (TSX: TECK.A | TECK.B; NYSE: TECK) has once again raised its construction cost estimate for the Quebrada Blanca phase 2 (QB2) copper project in Chile by at least US$500 million.

Canada’s largest diversified miner now expects QB2 to cost between US$7.4 billion and US$7.75 billion, up from a July 2022 guidance of US$6.9 billion to US$7 billion, and an earlier estimate of US$4.7 billion.

In a call to discuss third quarter results, Teck cited current foreign exchange assumptions, as well as cost pressures relating to weather and subsurface conditions as the main reasons behind the estimate hike.

The new figure is in line with the US$7.5 billion valuation given in August by Teck’s Japanese partner Sumitomo, which owns 33.33% of Quebrada Blanca.

QB2, Teck’s key growth project, has faced several delays. Initially, it was expected to begin production in 2021. The current timeline points at first copper by December-end, but the company has said the start could be delayed into January 2023 if productivity impacts persist.

The miner sees Quebrada Blanca copper production ramping up over 2023 following commissioning of QB2, with output ranging between 170,000 and 300,000 tonnes per year from 2023 to 2025. 

The fresh estimate compares with a previous forecast of 245,000 to 300,000 tonnes annually. Next year production, the company noted, will be at the lower end of the guidance range.

QB2 is the first step in Teck’s plan to grow its copper footprint and implies extending the aging deposit’s life by 28 years.

The next phase of development of QB will be the Quebrada Blanca and mill expansion (QBME). The QBME feasibility study, including all environmental baseline activities, is expected to be completed in 2023. 

“QBME is expected to be a significant contributor to our near-term copper growth portfolio with first production targeted for 2026,” chief executive officer Jonathan Price, who assumed the top job at Teck earlier this month, told investors. “We’re also continuing to progress our other copper growth projects”, he said.

This project entails an increase in concentrator throughput of about 50% with the addition of one identical, semi autogenous grinding mill. Once finished, it will turn Quebrada Blanca into Chile’s second-largest copper operation, after Escondida. It will also situate it among the world’s top five copper mines. 

Beyond Chile

Teck’s other copper projects include a plan to form a 50:50 joint venture with PolyMet Mining (TSX: POM; NYSE: PLM) to advance copper and nickel projects in Minnesota, U.S. An updated feasibility study and detailed engineering is under way at NorthMet, it said.

Feasibility work at the San Nicolas copper-zinc project in Mexico will be completed in the first quarter of 2024, with first production expected in late 2026, the company noted.

The miner also said it was in the final stage of the permitting process for its 80%-owned Zafranal project, in Peru, as the feasibility study for the project was completed in mid-2019.

Teck Resources has a 60% interest in Teck Quebrada Blanca SA (QBSA), which is the mine’s owner. Japan’s Sumitomo Metal Mining and Sumitomo Corporation have a collective interest of 30% in QBSA, while Chilean state company Enami holds a 10% non-financial interest in the project.

The company said on Wednesday it had agreed to sell its 21.3% stake in the Fort Hills oilsands project in Canada to Suncor Energy (TSX: SU; NYSE: SU) to focus on core operations — copper and steelmaking coal.