Earnings Call Transcript
TECK RESOURCES LTD (TECK)
Earnings Call Transcript - TECK Q4 2023
Operator, Operator
Ladies and gentlemen, thank you for standing by. Welcome to Teck's Fourth Quarter 2023 Earnings Release Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. This conference call is being recorded on Thursday, February 22nd, 2024. I would now like to turn the conference call over to Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analysis. Please go ahead.
Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analysis
Thanks, Ariel. Good morning everyone and thank you for joining us for Teck's fourth quarter 2023 conference call. Please note, today's call contains forward-looking statements. Various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statements. Please refer to Slide 2 of the assumptions underlying our forward-looking statements. In addition, we will reference various non-GAAP measures throughout this call. Explanations and reconciliations regarding these measures can be found in our MD&A in the latest press release on our website. Jonathan Price, our CEO, will begin today's call with highlights from our fourth quarter and full year results. Crystal Prystai, our CFO, will follow with additional commentary on the quarter. Jonathan will then conclude today's session with a brief update on our key priorities and growth strategy, which will be followed by a Q&A session. With that, I will turn the call over to Jonathan.
Jonathan Price, CEO
Thank you, Fraser, and good morning everyone. Starting on Slide 4, we had a strong fourth quarter performance across our business. We advanced the ramp-up of our QB operation, resulting in Teck's highest-ever quarterly copper production. Adjusted EBITDA of $1.7 billion in Q4 and $6.4 million for the year reflects robust prices for steelmaking coal and copper as well as high-end steelmaking coal sale volumes. Over the course of the year, strong profitability allowed us to return a total of $765 million to shareholders by paying $550 million in dividends and completing $250 million in share buybacks, all while continuing to strengthen our balance sheet through the repayment of $294 million of the QB2 project finance facility. In addition, the Board has approved the payment of our quarterly base dividend of $0.125 per share on March 28, and following the receipt of $1.3 billion in proceeds from the closing of the minority sale stake in our steelmaking coal business to Nippon Steel in January, the Board has authorized up to a $500 million share buyback. This extends our track record of strong cash returns to shareholders, with nearly $4 billion returned over the last five years. Turning to our 2023 highlights on Slide 5, 2023 was a transformational year for Teck as we continued to advance each of the four pillars in our creation strategy. In addition to the strong EBITDA we delivered, we reported higher copper production and sales than the previous year, driven by the addition of QB operations. We also produced 23.7 million tonnes of steelmaking coal, above guidance and higher than the previous year. As we progress towards the full sale of the steelmaking coal business, we were pleased to announce the closing of the sale of our minority interest in EBR to Nippon Steel and POSCO on January 3rd. We progressed the ramp-up of our QB operations and advanced the value of our industry-leading copper growth pipeline through joint partnerships with San Nicolás and NewRange Copper Nickel, and the receipt of regulatory approval for Zafranal. As mentioned earlier, we returned significant cash to shareholders in 2023, paying $515 million in dividends as well as completing the $250 million share buyback, acting opportunistically to utilize available free cash flow. Importantly, we have maintained a strong financial position with $7.9 billion of liquidity, including $2.5 billion in cash as of February 21st. We continue to strive for sustainability leadership and make steady progress against our sustainability goals. Our reported high potential incident frequency for the full year 2023 remained low at a rate of 0.14. We've made significant moves in modernizing our governance structure by introducing the sunset clause for the dual-class share structure. We're proud that all Teck-operated base metals operations have been awarded the Copper Mark or Zinc Mark, and we've been named to the S&P Dow Jones Sustainability Index for the 14th consecutive year. Turning to QB on Slide 6, we remain focused on achieving reliable and consistent operations at QB. However, production was lower than planned in the fourth quarter. Routine ramp-up activities continued along with planned maintenance shutdowns through the first quarter and we have had multiple periods of operating at or above design throughput capacity. Throughout 2024, we expect to see progressively stronger production from QB, expecting full-year copper in concentrate production to be between 230,000 and 275,000 tonnes. On the construction side, by the end of 2023, the molybdenum plant was substantially complete and commissioning is currently well underway. All in-water works at the ports have been successfully concluded, materially de-risking our remaining construction. We are on track to finalize the construction of the offshore facilities at the port by the end of the first quarter, and the ramp-up of the moly plant is expected to be completed by the end of the second quarter. As we look ahead, our QB2 project capital guidance of $8.6 billion to $8.8 billion remains in place. Our guidance for QB net cash costs is $1.95 to $2.25 per pound in 2024. QB unit costs are expected to remain elevated this year, particularly in the first half, driven by the cost of alternative logistics, no molybdenum production in the first quarter as the plant is being commissioned, continued ramp-up, and inflationary pressures, including increased Chilean energy costs. We will provide additional unit cost guidance once QB achieves steady-state operational performance. Now, I'll hand it over to Crystal for additional commentary on the quarter.
Crystal Prystai, CFO
Thanks, Jonathan. Good morning everyone joining us today on the call. I'm going to start with the key drivers for our financial performance on Slide 8. Adjusted EBITDA in the fourth quarter increased compared to the same period last year, primarily driven by higher steelmaking coal sales volumes, which were partially offset by lower steelmaking coal and zinc prices as well as higher unit costs across our operations, including elevated costs at QB as the production ramp-up continues. We continue to experience inflationary pressures in the cost of key supplies, including mining equipment and tires, labor, and contractors, as well as higher energy costs in Chile and fluctuating diesel prices. These inflationary pressures impacted our unit cost in 2023, and we expect this to continue into 2024. As such, we have reflected inflation in our sustaining capital expenditures and our full-year unit cost guidance ranges for 2024, which are unchanged. Our underlying mining drivers remain relatively stable, and we continue to be highly focused on managing our controllable operating expenditures. Our 2024 annual guidance that we disclosed in January is unchanged across our business. Now, turning to each of our business units in more detail, starting with copper on Slide 9. We achieved record copper production in the fourth quarter, which was 58% higher than last year. This increase was driven by the ramp-up of QB operations, adding 34,300 tonnes of copper in concentrate production, higher production from Highland Valley Copper as a result of increased mill throughput, and higher production from Antamina due to higher grades. The cost of sales was higher year-over-year, primarily due to the inclusion of QB operations in the year, with costs elevated as production ramp-up continued in the fourth quarter. As a result, gross profit before depreciation and amortization decreased compared to the prior year. On the sustainability front, we are pleased to announce that our QB and Carmen de Andacollo operations were awarded the Copper Mark in recognition of their environmentally and socially responsible operating practices, joining Highland Valley, which was awarded the Copper Mark back in March of 2022. Looking ahead, copper production is expected to significantly increase in 2024 to between 465,000 to 540,000 tonnes as we expect increased production at QB and at Highland Valley Copper. Copper net cash unit costs are expected to be higher than 2023, as we incorporate QB costs, which are expected to be elevated in 2024, particularly in the first half of the year as ramp-up continues. We also face ongoing inflationary impacts on the cost of certain key supplies, including mining equipment, tires, labor, and contractors. Moving now to our zinc business on Slide 10. Despite lower year-over-year zinc prices, profitability in our zinc business unit was higher in the fourth quarter compared to a year ago. At Red Dog, zinc production increased by almost 30% and lead production increased by 41% from a year ago, both of which were driven by increased mill throughput and improved grades. We also saw improved results from our Trail operations as it returned to full production rates and benefited from higher contracted zinc premiums. These increases were largely offset by the 18% decrease in realized zinc prices and higher operating costs at our Red Dog operations, primarily due to higher energy costs. Increased operating costs at our Trail operations and at Red Dog were more than offset by substantially lower royalty costs at Red Dog. We were pleased to announce that Red Dog was awarded the Zinc Mark in recognition of its strong environmental and social performance, continuing to demonstrate our sustainability leadership. As we look forward, Red Dog zinc in concentrate sales are expected to be between 70,000 and 85,000 tonnes in the first quarter, reflecting normal seasonality of sales. Total zinc in concentrate production is expected to be between 565,000 and 630,000 tonnes in 2024. Over the next three years, production is expected to decrease due to declining grades at Red Dog. Refined zinc production at Trail is expected to increase in 2024 as a result of improved concentrate availability. The KIVCET boiler replacement will impact our lead circuit in the second quarter of 2024 but is expected to have minimal impact on our zinc circuit. Zinc net cash unit costs in 2024 are expected to be higher than 2023 due to the ongoing inflationary impacts on the costs incurred for certain key supplies, as noted previously. Turning now to steelmaking coal on Slide 11. Gross profit before depreciation and amortization increased to $1.35 billion compared to just over $1 billion a year ago, primarily due to higher sales volumes and partially offset by lower steelmaking coal prices. While our realized prices in the quarter were 3% lower than the strong fourth quarter pricing last year, pricing remains robust and well above historical averages. Overall, plant reliability and performance were strong in the quarter, supported by improved plant availability at all sites and leading to production of 6.4 million tonnes in the quarter. Fourth quarter sales volume of 6.1 million tonnes were driven by the strong production rates and supported by logistics performance with the fourth quarter of 2022 impacted by a two-month outage at our Elkview operations and extreme weather conditions. Adjusted site cash cost of sales per tonne of $100 was higher than last year due to lower capitalized stripping at Elkview when compared to the fourth quarter of 2022. We were pleased to announce an agreement with shipping company, Oldendorff Carriers, to use wind propulsion technology intended to reduce CO2 emissions in shipping vessels and reduce Scope 3 emissions in our steelmaking coal supply chain, consistent with our focus on sustainability. As we look at the year ahead, steelmaking coal sales are expected to be between 5.9 million tonnes and 6.3 million tonnes in the first quarter. Production is expected to be between 24 million tonnes and 26 million tonnes in 2024 and to remain at these levels throughout 2025 to 2027. We expect ongoing inflationary cost impacts on certain key supplies to persist into 2024, which will impact adjusted site cash cost of sales per tonne and is reflected in our guidance. Turning to Slide 12 and our capital allocation framework; overall, our priority is to have a disciplined approach to deploying capital guided by our capital allocation framework. We aim to balance our growth with cash returns to shareholders while maintaining a strong balance sheet through the cycle. We expect a meaningful decrease in our capital expenditures in 2024 with a reduction in committed growth capital as outlined on Slide 13. We expect a reduction in total capital expenditures of approximately $1.2 billion in 2024, as we see a significant step-down in QB2 development capital as the project nears completion. We will see a slight increase in sustaining capital as we complete the KIVCET boiler repairs at Trail and reach peak capital spending for the Elkview administration and maintenance complex in our steelmaking coal business. Capitalized stripping costs in 2024 are expected to decrease from the peak in 2023. In 2024, growth capital, excluding QB2, will prioritize copper growth projects, particularly for HVC mine life extension, San Nicolás, and Zafranal. As we have previously disclosed, we do not expect to make a sanction decision on any growth projects in 2024, and we are focused on advancing these near-term projects for possible sanctioning in 2025. Both projects are required to deliver an attractive risk-adjusted return and will compete for capital in line with our capital allocation framework. Turning now to our strong balance sheet and shareholder returns on Slide 14. As Jonathan mentioned earlier, we are in a strong financial position with $7.9 billion in liquidity, including $2.5 billion in cash. We ended the year with a net-debt-to-adjusted EBITDA ratio of 1.1 times, and we remain focused on maintaining our investment-grade credit metrics. Over the last five years, we have completed $2.5 billion in share buybacks and paid dividends totaling $1.4 billion, demonstrating our commitment to balancing growth with returns to shareholders. The Board has approved further cash returns to shareholders this quarter, approving the quarterly base dividend of $0.125 per share, payable on March 28. After receiving cash proceeds of $1.3 billion from the closing of the minority sale of our steelmaking coal business to NSC, the Board has authorized a share buyback of up to $500 million. Our capital allocation framework will inform how the Board will consider the proceeds from the sale of the steelmaking coal business, as outlined on Slide 15. In total, we are expecting to receive $9.6 billion in cash proceeds, which includes 100% of the steelmaking coal cash flows until the transaction closes, expected to be no later than Q3 of this year. As we have already noted, $1.3 billion was received from NSC in early January, with up to $500 million to be returned to shareholders through share buyback. With the remaining proceeds to be received, we will assess opportunities to reduce our gross debt and maintain or improve our credit metrics through the cycle, ensuring that we do that economically. We will also retain additional cash on the balance sheet to fund our near-term copper growth opportunities and generate strong returns. We will pay our cash income tax payments in respect of the 2022 and 2023 fiscal years, which total just over CAD1.2 billion at the end of February of this year, and we will pay transaction-related taxes of approximately $750 million in early 2025. Finally, as we've previously stated, we expect a significant return to shareholders. The Board will determine the amount, form, and timing of these returns, which will be in addition to the $500 million buyback authorized by the Board concerning the NSC proceeds. Overall, significant cash proceeds from this transaction will strengthen our balance sheet and ensure we are well capitalized to unlock the full potential of our base metals business while delivering significant returns to shareholders. I'll now turn the call back over to Jonathan.
Jonathan Price, CEO
Thanks, Crystal. Turning to Slide 17 and our key priorities in 2024. As we mentioned, 2023 was a transformational year for Teck. To ensure we can continue to demonstrate our focus on value creation, we have set up several key priorities for 2024. We were very excited to announce an agreement for the full sale of our steelmaking coal business in November, where Glencore will acquire a 77% controlling interest in EVR and become the operator of the Elk Valley steelmaking coal lines. As we have discussed, we closed the sale of a minority interest in EVR to Nippon Steel and POSCO on January 3rd. The completion of the sale of our steelmaking coal business is one of our key priorities for this year, and regulatory approvals are progressing. The significant cash proceeds from this transaction will strengthen our balance sheet and ensure we are well capitalized to unlock the full potential of our base metals business while balancing significant returns to our shareholders. As I mentioned earlier, we are also driving safe operational performance across our portfolio, and we have embedded known risks into our guidance to ensure we build confidence in our ability to deliver on our market commitments. At QB, we are pushing hard to complete construction of the port and commissioning of the molybdenum plant in the first half of the year and to achieve consistent operating performance at design capacity. At the same time, we are advancing the development projects in our industry-leading pipeline, foundational to our future growth. We will advance that growth in a disciplined way by following our capital allocation framework to ensure that our capital decisions are value maximizing for shareholders. Looking at Slide 18 and our priority to advance our copper growth in a disciplined way. This starts with the completion of construction and the ramp-up of QB and driving performance across all operations, and it continues with foundational technical work around our near-term development projects, completing feasibility studies, advancing engineering work, and progressing project execution planning and permitting. We are adapting our approach to project development to leverage lessons learned. With no project sanction decisions until 2025, we are taking the opportunity to undertake a detailed review of the QB2 project, utilizing third-party expertise so that we can embed relevant learnings into future projects. In the meantime, we are advancing the most important work in the near term to prepare for our potential sanctioning decisions in 2025. This means that all our projects must compete for capital with the rest of the business to ensure that we drive strong financial returns. Importantly, each of our near-term development options are significantly smaller in scope and less complex than QB2. Ultimately, we will follow our disciplined capital allocation framework, focused on generating strong returns for shareholders, balanced with growth and maintaining a robust balance sheet in line with investment-grade credit metrics. Slide 19 summarizes our near-term development options, which include San Nicolás, Zafranal, QB asset expansion, and the mine life extension at Highland Valley. This represents a portfolio of both greenfield and brownfield projects in stable and well-understood jurisdictions. We continue to progress the optimal path to value for each of our assets. Significant work continues to advance each of these projects, focusing on de-risking project delivery. We submitted the environmental permit for the HVC mine life extension to the British Columbia regulator in October 2023 and finalized the Mexican Environmental Impact Assessment for San Nicolás, submitted on January 25th. Just last week, we received the Modification of Environmental Impact Assessment approval of the mine life expansion at Antamina. We're making progress across all our near-term copper growth options and setting Teck up to progress these projects at the right time to generate significant value. Moving to Slide 20, Teck remains committed to sustainability leadership. We continue to progress our sustainability strategy and are proving we can make a positive impact, demonstrated by a number of achievements this past year. We are proud to have received Copper Mark and Zinc Mark for all Teck-operated base metal operations, an industry-leading achievement highlighting our commitment to sustainability and transparency at our operations, verified through third-party assurances. We've received several accolades this year for our sustainability performance, including being named as a Constituent of the Dow Jones Sustainability Index. We have modernized our governance structure through the introduction of the sunset clause for the dual-class share structure. We also remain committed to our long-term goals of net-zero Scope 1 and 2 emissions by 2050, net nature-positive by 2030, and collaborating with our communities and indigenous peoples with a commitment to working to achieve free, prior, and informed consent for our mining activities. Of note, we were one of the first mining companies to commit to supporting a nature-positive future. We have implemented initiatives, including conserving and reclaiming at least three hectares for every one hectare we affect through mining, ensuring we protect and restore our landscapes and ecosystems for the benefit of all. In conclusion on Slide 21, Teck is committed to responsibly creating long-term value for our shareholders and stakeholders. As an industry-leading base metals producer with a strategy centered on copper growth, we are in a unique position to deliver significant value. We have current production from a premium portfolio of long-life, high-quality assets in stable, well-understood jurisdictions, and we are focused on execution, driving excellence in performance across our operations and project delivery to ensure that we consistently deliver against our market commitments. We have major near-term copper growth through the ramp-up of our flagship operation, QB in Chile; at the same time, we seek to unlock the significant value upside potential from our industry-leading copper growth portfolio. Importantly, we will pursue our growth in a disciplined way, following our capital allocation framework, balancing growth with returns to shareholders and maintaining a strong balance sheet through the cycle. Sustainability is core to who we are. Our sustainability leadership position is a competitive advantage. This strategy will ensure we can continue to responsibly generate significant value for shareholders and all stakeholders. With that, thank you, and that concludes our presentation for today. Operator, please open the line for questions.
Operator, Operator
The first question comes from Orest Wowkodaw of Scotiabank. Please go ahead.
Orest Wowkodaw, Analyst
Hi, good morning. With the quarter now more than half over, Jonathan, I'm wondering if you can give us an update on the first quarter operating performance at QB. Specifically, the mill, the plant, are we starting to see more consistent throughput and recoveries? Can you give us an update?
Jonathan Price, CEO
Yes. Thanks, Orest. As I mentioned, we're working through the ramp-up phase for QB right now. It's in line with our expectations. We expect, of course, to progressively increase our copper production throughout the year to meet that guidance of 230,000 to 275,000 tonnes that we've previously communicated, and we're on track to do that. But I'll hand over to Shehzad Bharmal, our SVP of Base Metals, who is responsible for the operations there, just to give you a little more color.
Shehzad Bharmal, SVP of Base Metals
Thanks, Orest. We have worked through most of the issues that we had mentioned previously regarding the conveyors and pumps, and we are currently operating at close to design throughput rates. We are occasionally limited by some conveyor issues on two conveyors at the front end of the plant near the primary crushers, and we are working through those issues and expect to have those resolved in the next month or so to achieve above design rates. Regarding recovery, in January and February so far, we are close to design rates, just a little below. We continue to work through this as we bring more stability to the front end of the plant. The consistency we have seen over the last month has helped us improve our recoveries, and we continue our efforts to reach design rates.
Orest Wowkodaw, Analyst
Thank you, guys. Just as a follow-up, is the plan to have QB operating at consistent throughput, recoveries, etc., midway through the second quarter? Is that the right way to think about it?
Jonathan Price, CEO
I think this is the ramp-up of the facilities. As I said, we will progressively deliver increased copper production throughout the year. We're pursuing exactly what you suggested, that stability and operating at design throughput rates. But this is a ramp-up process, which will take some time to finalize, but we are confident in the guidance we've provided and expect the delivery of copper to improve through the year.
Operator, Operator
Our next question comes from Liam Fitzpatrick of Deutsche Bank. Please go ahead.
Liam Fitzpatrick, Analyst
Hi there. Liam Fitzpatrick from Deutsche Bank. My first question is on the balance sheet structure post-EVR. Just wondering if you could give us more guidance on the balance sheet you're targeting as we move into 2025. I know you've mentioned the one times EBITDA as a target level, but it seems unlikely you're going to take leverage up that high. So, what are you targeting? A small net debt position? A small net cash position? Any guidance would be helpful.
Jonathan Price, CEO
Yes, I'll hand over to Crystal to discuss that. One thing I would remind you is that, that is the long-term position we are targeting as we receive the proceeds and how we allocate them in subsequent years. But Crystal, if you want to provide more detail.
Crystal Prystai, CFO
Yes, of course. Thank you. I think it's consistent with what we've been articulating about reducing our gross debt levels from where they currently are. I believe there is an opportunity for us to do that. We'll look across our debt stack as we consider that. We want to ensure we approach that in an economical manner. In respect to public notes, we have that make-whole premium, so we want to be deliberate in our decision-making. We are committed to maintaining our investment-grade credit metrics, as Jonathan mentioned, through the cycle with a target of 1.0 times net debt to adjusted EBITDA ratio.
Liam Fitzpatrick, Analyst
Okay. Thank you. One follow-up: regarding potential M&A versus organic opportunities. You clearly have a number of internal options that you think are interesting and you hope to progress in 2025. Is that enough to keep you occupied? Or are you also looking for possible external opportunities?
Jonathan Price, CEO
Yes, Liam. Given what we have in the portfolio already, we're quite preoccupied. We are very focused on the ramp-up stabilization and achieving full production from QB this year. We also have a tranche of projects which should be subject to engineering, economics, and permitting, ready for sanction in 2025, including the HVC life extension, San Nicolás, and Zafranal. We have a lot to work with here, and as we have always said, we aim to balance investments in growth with returns of capital to shareholders, so we'll continue focusing on those areas that are entirely within our control to deliver future growth.
Operator, Operator
Our next question comes from Timna Tanners of Wolfe Research. Please go ahead.
Timna Tanners, Analyst
No, I just didn't hear you. Hey, good morning. How is everyone doing?
Jonathan Price, CEO
Good. Thanks, Timna.
Timna Tanners, Analyst
Can you hear me now?
Operator, Operator
Yes.
Timna Tanners, Analyst
Okay. I'm asking a little more about the expansion projects. I know at one point, you had a permit for further QB opportunities and just want to know the updated thinking there. And regarding Zacatecas, San Nicolás, the leadership in Mexico is looking into banning open-pit mining. How does that affect that project or how are you looking at it?
Jonathan Price, CEO
Yes. Starting with QB and future expansions of that facility, we have an incredible ore body there. It has a very long life and will enable future capacity expansions at QB, allowing it to run as a multigenerational asset. Our immediate priority, as I said, is to get the current plant fully ramped up and operating before we explore the full potential of that facility in terms of further capacity optimization. Medium term, we expect to continue pursuing larger-scale expansions at that operation. With what we have at San Nicolás, Zafranal, and the life extension of HVC, we have a fairly full task card in the immediate term, and we'll focus on that for our major capital deployments, but asset optimization studies for the medium and long term at QB are ongoing. For your second question regarding some of the proposed changes in Mexico that relate to the constitution, I'll hand you over to Tyler Mitchelson, our Senior Vice President, to address that.
Tyler Mitchelson, SVP
Yes, we're closely monitoring and assessing the proposed changes to the constitution. There are more than 20 proposed changes, with the ones surrounding open-pit mining and water consumption being the most critical. We've been working with our fellow industry players and now the chamber of mines in Mexico to truly understand the pathway forward. Given the current timeline of four months to the main general election that closes on April 30, it is premature to determine if these will be approved and their potential impact moving forward. It's essential to consider that some of the largest mines in Mexico currently utilize open-pit mining, so the implications could be significant; however, we are continuing to closely monitor this over the coming months.
Timna Tanners, Analyst
Makes sense. Thank you. I got my two in, so I'll pass it along. Thank you again.
Jonathan Price, CEO
Thanks, Timna.
Operator, Operator
Our next question comes from Dalton Baretto of Canaccord Genuity. Please go ahead.
Dalton Baretto, Analyst
Thank you, good morning, Jonathan and team. On the Glencore call, Gary was asked about synergies between Collahuasi and QB2. He mentioned several work streams that alluded to billions in synergies. I'm curious if you could comment on what these synergies might entail and when we can expect an update on where QBME fits into all of this? Thanks.
Jonathan Price, CEO
Yes, thanks for the question, Dalton. We, along with the other parties involved, are conducting detailed technical evaluations of the potential synergies between QB and Collahuasi. We have not yet quantified those. The synergies could take multiple forms, from infrastructure-related efficiencies to optimization across two very significant ore bodies in the area. It's a complex process that will take some time due to the many counterparties involved, but engagement is ongoing. We are working together to identify opportunities, and we'll provide updates as we get closer to finalizing that technical evaluation. If and when we get closer to agreeing on terms with other parties, we will update you. For now, our primary focus must remain on ramping up QB2 and optimizing the operations we currently have.
Dalton Baretto, Analyst
Great. Thank you. If I can ask one more about the Glencore transaction in the coal business. Can you update us on where you are in the regulatory approvals process and if you've encountered anything that raises concerns?
Jonathan Price, CEO
Our process is continuing. We expect that we will receive the required approvals, including both the Investment Canada approvals and the antitrust approvals. Nothing we have seen gives us cause for concern, Dalton; these processes simply take time. We are working through that regulatory process and still anticipate this will close no later than the third quarter of this year.
Operator, Operator
Our next question comes from Carlos De Alba of Morgan Stanley. Please go ahead.
Carlos de Alba, Analyst
Thank you very much. Good morning everyone. I would like to follow up on the prior question. Could you provide more specific details on the approvals you have already received and the ones that are still pending for closing the coal transaction?
Jonathan Price, CEO
One of the key approvals is the Investment Canada Act approval, which remains outstanding concerning various antitrust approvals across multiple jurisdictions. Some of those approvals have been received, while others are still pending. As stated earlier, things are progressing in the normal course, and we remain confident that this close will happen no later than the third quarter.
Carlos de Alba, Analyst
All right. Regarding QB2 cost trends, I understand you're going to provide further guidance once the production stabilizes at a steady state. However, how do you currently view the trend of costs moving forth once you achieve steady state? Should we assume you only expect to reach the lower end of the three-year cost guidance by the end of the three-year production guidance period? Or could you achieve a lower, more sustainable cost earlier than the third year of that period?
Jonathan Price, CEO
There are a few factors under our control that should lead to improvements in the unit cost profile at QB. These include getting our own port operational to transition away from temporary logistics arrangements to a permanent solution, ramping up the molybdenum plant to full production for the byproduct credits, and scaling the main circuit to full production so we realize that full dilution effect on costs. These factors signal that we expect to see improvements in costs even as we move through this year. In the second half of the year, we would anticipate lower costs as compared to the first half. However, there are also factors outside our control, like the inflationary environment which could impact labor costs, as well as elevated energy costs in Chile. We have therefore outlined our guidance for 2024 based on the current ramp-up phase we are experiencing, which reflects those factors. As we progress, we expect a clearer view for future costs once operations stabilize.
Operator, Operator
Our next question comes from Lawson Winder of Bank of America Securities. Please go ahead.
Lawson Winder, Analyst
Great. Thank you very much, operator, and thank you for the update today, Jonathan and team. I'd like to ask about Antamina and also hopefully follow up on QB2. But regarding Antamina, given that Teck is just one partner among several in the JV, what is the risk that Teck has to make an allocation decision there prior to 2025? What is driving the timeline for an expansion or extension decision at Antamina?
Jonathan Price, CEO
I'll hand that over to Shehzad.
Shehzad Bharmal, SVP of Base Metals
As you might have read, we did not receive the MEIA approval for the mine life extension from 2020 to 2036. This is specific to expanding waste facilities and tailings facilities in their current locations. Between now and 2036, that mine life extension has other permits in place, along with capital to be spent over the next eight years or so. Post-2036, all parties are evaluating the prospects, and we are looking into permitting strategies for that expansion. However, it will take a few years before we achieve definitive project definitions. Our focused goal right now is to ensure that we are able to extend the mine life from 2028 to 2036, which we were pleased to achieve.
Lawson Winder, Analyst
Okay. Yes, that's great. Thank you for the clarity. Now regarding QB2, you noted a significant increase in the copper resources at QB2. How does that shape your perspective on the next potential expansion? Does it imply that it could be much larger than the prior QBME mill expansion concept of a 50% increase?
Jonathan Price, CEO
Not necessarily, Lawson. While the resource was always substantial, it is now even larger. This doesn't change our short-term considerations regarding how we would expand it. Our objective will be to keep the next expansion capital-efficient, maximizing unutilized capacities in our desalination and pipeline systems. What it does mean, however, is that we have significantly greater options in the long run, which is a good position to be in, but it will not directly shift our short-term thinking; our focus remains on capital intensity and return potential.
Operator, Operator
Our next question comes from Lucas Pipes of B. Riley Securities. Please go ahead.
Lucas Pipes, Analyst
Thank you very much, operator. Good morning everyone. My first question is on Slide 13 of the deck, which outlines CapEx trends over the past couple of years and moving into 2024. I noticed that the sustaining capital and capitalized stripping in 2023 and 2024 show a step-up from the average of 2020 to 2022. Can you clarify what's driving these changes? Is it a catch-up from the pandemic, a cyclical effect, any unique projects elevating costs temporarily, or is it chiefly inflation? I'd appreciate any insights.
Jonathan Price, CEO
Yes. Thanks, Lucas. I will pass that to Crystal.
Crystal Prystai, CFO
Thanks, Lucas. The primary driver here would be inflation. Indeed, we have observed a considerable increase in underlying costs that influence our sustaining capital and operating costs from 2020 to now. That would be a significant factor. In capitalized stripping, in our coal business, we were advancing into new mining areas in 2023, elevating those costs in 2022 and 2023, which we expect to normalize in our guidance for 2024. Additionally, there are several larger projects influencing those figures, including the Elkview administration and maintenance complex, which began in 2023 and see peak investment in 2024. Lastly, it’s important to note that QB sustaining capital is now included in our figures. All of these elements contribute to the elevated capital expenses. If you need more granular detail, we can arrange to discuss that after the call.
Lucas Pipes, Analyst
That would be helpful. On Slide 24, you provide a projection of copper production through 2027. I noted a plateau in 2025 with subsequent declines mainly attributed to Highland Valley. With the ongoing expenditures at Highland Valley, do you foresee a potential to sustain production beyond 2025, or should we assume that guidance remains firm through 2027?
Jonathan Price, CEO
I'd say not within that period, Lucas. The production plan aligns with the capital we are investing at that site. For the life extension at HVC, productions will not see a significant uptick due to those ongoing expenses. I would not expect any material changes to the guidance we’ve already provided.
Operator, Operator
Our next question comes from Bill Peterson of JPMorgan. Please go ahead.
Bill Peterson, Analyst
Hi, good morning everyone, and thanks for the questions. You've emphasized the returns framework for future growth projects, learning from QB2, but how should we evaluate the demand and pricing environment necessary for larger growth projects, particularly in the context of an increasingly tightening supply?
Jonathan Price, CEO
We certainly see a tightening supply environment. The outlook for copper pricing is looking constructive as we see the concentrate shortage affecting TC/RCs and the potential to flow through into refined metal, thereby influencing headline copper prices. Each project will have specific economics depending on the capital, operational costs, and production volumes from the mines. They will all have to compete for capital, with a focus on returns guiding our decisions. Still, we remain optimistic about copper pricing in the medium, if not short-term, based on current market dynamics.
Bill Peterson, Analyst
Thanks for that. Regarding coal, may only be relevant for a few more quarters, but can you share your thoughts on the outlook for that segment and the latest developments on supply and demand globally?
Ian Anderson, Chief Commercial Officer
Thank you very much for your question, Bill. Starting with global steel consumption and production throughout the year, we maintained at about 1.85 billion tonnes, which was higher than last year's figures. However, we noticed that production declined at the end of the year, largely due to a significant drop in Chinese output. We can't fully predict these numbers just yet. That said, we saw a rise in crude steel production in India by about 11.8%, which offset small declines in regions like the EU, Japan, and South Korea. Observing the past year, high-quality steel and coal prices exceeded $295 per tonne. By the year's end, this climbed to approximately $315, influenced by limited supply mainly from Australia and rising demand from both India and China. A few key miners, including peers in Australia, reduced their production guidance for 2024. Meanwhile, China's domestic production continues to dive deeper, and Russian coal, while filling some gaps, is generally lower quality. Therefore, the lack of substantial investment in high-quality coking coal supply suggests a promising opportunity for price increases moving forward.
Operator, Operator
I will now hand the call back over to Jonathan Price for any closing remarks.
Jonathan Price, CEO
Thanks, operator and thanks to everyone for joining us today. As we talked about, we're very excited about the prospects here for 2024 and beyond. We are looking forward to the completion of the transaction with Glencore, and we will provide updates on how we intend to allocate the proceeds, including shareholder returns. We remain focused on the ramp-up and stability of QB while progressing and de-risking the future pipeline of projects we have. Please reach out to Fraser and the IR team if you have more detailed questions. Thank you all very much, and have a good day.
Operator, Operator
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.