Earnings Call Transcript - TECK Q1 2023

Operator, Operator

Ladies and gentlemen, thank you for standing by. Welcome to Teck's First 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 Wednesday, April 26, 2023. I would now like to turn the conference call over to Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analyst. Please, go ahead.

Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analyst

Thanks, Therese, and good morning, everyone, and thanks for joining us this morning for our quarterly 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 two for 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 and the latest press release on our website. Jonathan Price, our CEO, will begin today's call with some comments on this morning's announcement. Crystal Prystai, our CFO, will follow with our first quarter 2023 results. Then we'll conclude the call with a question-and-answer period. With that, I will turn the call over to you, Jonathan.

Jonathan Price, CEO

Thank you, Fraser, and good morning, everyone. Before we get into the Q1 results, I want to start by speaking to our announcement this morning that we have withdrawn the separation proposal that was to be considered by shareholders at our annual and special meeting today. That proposal was the result of a detailed process undertaken by a special committee of the Board to review all the options and identify the best path forward for our shareholders and company. From the outset, we've been clear that the focus of that work by our Board, our senior management team and myself is maximizing value for our shareholders. And that work firmly identified that separating base metals and steelmaking coal was the best way to achieve that goal. There is no doubt in my mind and the minds of our Board and management team that there is greater value and optionality in having a stand-alone pure-play metals business, separate from the steelmaking coal business, and we are confident from our discussions with shareholders that a substantial majority of shareholders support the strategy of separating Teck Metals and EVR. At the same time, we've also heard very clearly that some shareholders would prefer a more direct approach for that separation. So our plan going forward is to evaluate alternatives for a responsible separation of our businesses, taking into account the feedback we've received. Our goal will be to pursue a simpler and more direct separation, which is the best path to unlock the full value of Teck for shareholders. My job is about responsibly creating value for our shareholders and all stakeholders. We're driving intrinsic value organically through the development of best-in-class projects and executing on our growth strategy. There is real value in being a good actor with good business practices, and the approach to doing business has made Teck a partner of choice, minimizing disruptions to our operations and creating opportunities for our business and our stakeholders. Teck is a fantastic company with a strong future. We have the right assets, the right partners and the right people to capture the opportunities created by the energy transition, which we are well-positioned to realize in the near-term. And we have a number of near-term value creation milestones ahead of us. Those include the ramp-up of our flagship QB2 copper project, demonstrating QB2's ability to operate consistently to plan is a key area of focus for us and a major value inflection point. Importantly, even beyond QB2, we have a portfolio of high-quality cornerstone assets in stable mining jurisdictions as well as a number of copper growth projects in our portfolio. This is a copper growth pipeline that is the envy of the industry and in an advanced state of readiness thanks to years of strategic and deliberate pre-investment. We will be in a position to double copper production in the near-term and double it again by the end of the decade. At the same time, our steelmaking coal business is best-in-class, underpinned by an extensive reserve base with high margins, and it will be positioned to capitalize on the developing global supply gap from existing mine depletion and lack of new projects coming into production. Long-term shareholder value can be created in a variety of ways, and today, we are focused on a three-pronged approach to value creation. Firstly, through a separation of resources to unlock the value of an exceptional high growth base metals business. Secondly, through the development of our portfolio of corporate projects, to create substantial new intrinsic value. Thirdly, and all the while retaining our focus on strong cash returns to our shareholders. Beyond this focused approach, M&A can also play a role in creating value when done at the right price with the right partner at the right time. We have premium businesses. When it comes to M&A, we firmly believe that competition for assets drives value. In M&A, you have to carefully evaluate both risk to value and timing and value. It is important to understand the consideration you would receive and the timing of when you would receive it. All of these factors inform our thinking as to how and when Teck should contemplate a transaction with anyone. Management and the Board take their duties incredibly seriously, but will not engage on something that is a distraction from our mandate to create the greatest value with the greater certainty for our shareholders. I want to emphasize that we have greatly appreciated the engagement that we have had with our shareholders leading up to today and the very strong support shown for the goal of separation to unlock value. We look forward to working to execute on a separation approach that reflects their considered feedback and ensure we maximize the value and opportunity it creates for all of our stakeholders. So thank you. And with that, I will turn it over to Crystal to discuss our Q1 results.

Crystal Prystai, CFO

Thanks, Jonathan. Let's start with our financial results for Q1. We're happy with the positive beginning to the year, having achieved strong financial performance driven by favorable commodity prices and steelmaking coal sales volumes. Adjusted EBITDA was $2 billion, and our adjusted profit attributable to shareholders reached $930 million, or $1.78 per share on a diluted basis. We paid dividends of $0.625 per share, which includes a quarterly base dividend of $0.125 and a supplemental dividend of $0.50 per share. Furthermore, in February, the Board approved the purchase of up to $250 million of outstanding Class B shares. Now, during the quarter, we made significant progress on our comparable strategy with the production of the first bulk copper concentrate at QB2. We're only beginning to tap into the immense value from QB, which is a truly world-class mine. We reached several important milestones during the QB2 ramp-up. The desalination plant is operational and supplying water to the concentrator through the pipeline. The primary crusher and conveyors are moving ore to the stockpile. The commissioning of the grinding and flotation systems on Line 1 is ongoing, and the tailings facility is receiving tailings from commissioning activities with the concentrate transport system entering pre-commissioning. We continue to anticipate doubling our consolidated copper production in 2024 as we expect QB2 to hit full production rates by the end of this year. However, delays in the startup of Line 1 and recent foreign exchange impacts have pressured our project capital cost guidance, with total costs for the project potentially increasing to between $8 billion and $8.2 billion. Over 30% of this increase relates to foreign exchange fluctuations that are beyond our control. Regarding our key highlights from the first quarter, we achieved several milestones across our copper growth strategy. Alongside the initial copper production at QB2, we made significant strides toward enhancing value for our other copper projects by successfully closing two key joint venture transactions for New Range and San Nicolas. We also took a major step in rebalancing our portfolio toward low-carbon assets by completing the sale of Quintette and our interest in Fort Hills, marking our exit from the oil business. Additionally, we've returned substantial cash to shareholders through dividends and have received authorization for $250 million in share buybacks, reflecting the distribution of 40% of the proceeds from Fort Hills received in the first quarter. We maintain a robust balance sheet with $8 billion in liquidity, including $2.6 billion in cash. Finally, we continue to strengthen our sustainability credentials, being recognized as one of the Global 100 most sustainable corporations for the fifth consecutive year and named to the Bloomberg Gender Equality Index for the sixth year in a row. Our adjusted EBITDA was $2 billion for the quarter, lower than the same period last year due to reduced prices for our main products. Additionally, lower sales volumes for copper and zinc and inflationary cost pressures impacted our EBITDA compared to Q1 of last year. While inflationary pressures have eased, they still affected our business units as we anticipated when setting our 2023 annual cost guidance, impacting our operating costs by 6% compared to the same period last year. It's important to note that the main drivers for cost increases are not linked to core mining operations like mine productivity and strip ratio, which remain stable. We are focused on managing our controllable operating expenditures, and our unit cost guidance for 2023 remains unchanged across all business units. Now, looking at our business units, starting with copper, prices have stayed high despite a decline in the quarter, reflecting strong market fundamentals. Copper production was lower than the same quarter last year, primarily due to harder ore and lower grades at Highland Valley and Antamina as expected. A five-day suspension of operations at Antamina due to severe weather in late March affected our Q1 production, but our full-year production and unit cost guidance remain unchanged. In terms of zinc, severe weather events disrupted zinc concentrate production at Red Dog and refined zinc production at Trail during the quarter. Trail also dealt with unplanned maintenance and a 22-day shutdown for KIVCET boiler repairs. Both Red Dog and Trail stabilized by the end of the quarter, and we anticipate Red Dog zinc concentrate sales of 45,000 to 55,000 tonnes in the second quarter, in line with our normal sales seasonality. For steelmaking coal, prices stayed well above historical averages even with a decline in the quarter. We achieved sales of 6.2 million tons, which is within our guidance range and higher than the same quarter last year. Our logistics chain performance was affected by weather-related disruptions from the previous quarter, but recovery occurred by the end of Q1. Our transportation costs in Q1 reflected increased rail rates and port costs due to greater utilization of third-party terminals. We expect transportation costs to normalize throughout the rest of the year, and our transportation unit cost guidance for 2023 remains unchanged. Looking ahead, we expect Q2 sales of 6.2 million to 6.6 million tonnes as we finish the remaining deferred sales from Q4 and aim to bring our clean coal inventories back to normal levels. Our financial position is quite strong, with liquidity at $8 billion, which includes $2.6 billion in cash. In the first quarter, we returned $321 million to shareholders through dividends and reduced our debt by $144 million through the redemption of notes upon maturity in February. Our Board also authorized $250 million for share buybacks in February as part of our normal course issuer bid. As we move forward, we will continue to balance our investments in growth with returning capital to shareholders while maintaining a strong balance sheet. Now, I'll turn it back to Jonathan.

Jonathan Price, CEO

Thanks, Crystal. Now, on slide 17, I want to close by reiterating that our plan going forward is to evaluate alternatives for a responsible separation of our businesses, taking into account the feedback we've received. Our goal will be to pursue a simpler and more direct separation, which is the best path to unlock the full value of Teck for shareholders. At the same time, we will continue to execute our copper growth strategy. We will advance our copper growth portfolio, which is the envy of our peers, commissioning and ramp-up of QB2 will, of course, be a key focus. We will rebalance our portfolio to copper while reducing the proportion of carbon in our overall business. We will continue to follow our rigorous capital allocation framework, balancing growth and cash returns to shareholders. At the same time, we will maintain our leadership in responsible resource development, drive best practices in sustainability and share in the benefits of mining with our stakeholders. Overall, Teck is very well positioned to drive long-term sustainable shareholder value. So thank you. And operator, please open the line for questions.

Operator, Operator

Certainly. The first question comes from Greg Barnes with TD Securities.

Greg Barnes, Analyst

Jonathan, now that you've been through this process, do you think investors recognize the value in the coal business and were willing to take on our largest share individually of that coal business rather than, obviously with the complicated transition capital structure now something that's cleaner and more direct? After you've got two, I guess independent valuations on that business of around CAD 11 billion. So that's what the market is telling you it's worth. Do you think investors will be willing to accept that valuation directly?

Jonathan Price, CEO

Thanks for the question, Greg. Look, the first thing I would say is it's very clear that the market recognizes the value of the businesses that comprise Teck resources today. One of the benefits through the engagement we've had with investors over the last few months is it has shone a light on the quality of the businesses we have today, but also the quality of the growth projects we have before us. The other thing we've heard clearly from our shareholders through this process is they do see the value in a separation of Elk Valley Resources and Teck Metals as being the most value-creative path in terms of shareholder value. But what we've heard, as you just referenced, is that they would like to see a simpler and more direct separation. That's exactly what we will now go away and study. We'll look at a range of alternatives there with a focus on maximizing shareholder value and work through those details. I think there's no doubt Greg, that through this process, the quality of Teck's steelmaking coal business or Elk Valley Resources has been very well recognized in terms of the quality of the products that we produce in terms of the high margins at which that business operates and the cash flow that's generated. So yes, there is clearly now a far enhanced understanding of the value of that business. We continue to believe that the best path to unlock value is the separation of that business from Teck Metals.

Greg Barnes, Analyst

Great. Thank you, Jonathan. That's it for me.

Operator, Operator

And the next question comes from Orest Wowkodaw with Scotiabank. Please go ahead.

Orest Wowkodaw, Analyst

Hi, good morning. Jonathan, just following up on Greg's questions. In terms of separating the business, can you run through the possible alternatives that you're considering? And would they include potentially a full spin-out of the coal business to shareholders or is another alternative a sale of the business?

Jonathan Price, CEO

Thanks for that question, Orest. Look, I won't run through all of the options available to us today. But suffice to say, we will look very broadly at the full suite of options that would satisfy both the simpler and more direct separation of these businesses. Of course, that work has to be undertaken by the management team and with the Board. That is the focus, as I've said now going forward. When that work is advanced and concluded we will say more about that. I think what's really important to note is that we will continue to work with our shareholders to get their perspectives and understand their feedback as that work progresses.

Orest Wowkodaw, Analyst

Can you provide an expected timeline on how long you think the Board and management will need to review and develop a new separation strategy?

Jonathan Price, CEO

As I said, we look at a range of alternatives, Orest. I won't put a fixed date on that right now in terms of when we will communicate more about that. As you can imagine, this work will be a priority for us, but we need to ensure we take the time to engage with shareholders to understand their perspectives and come back with a proposal that meets those needs and is focused on maximizing shareholder value through unlocking that value with the separation of EVR and Teck Metals.

Orest Wowkodaw, Analyst

Okay. And just one more, if I could. Just given the public separation plan that's been in front of shareholders, have you been approached at all by another party to buy the coal assets? Can you give us any sort of color there? Has there been interest in the market?

Jonathan Price, CEO

So look, I won't speculate in any detail on that, Orest, as you would expect. But again, suffice to say that the process we've been through over the last two months, which, of course, has been a very public one shows a significant interest in both businesses, EVR and Teck Metals. It's very clear that the value of those businesses is well recognized. It really has shown a spotlight on the quality of the business that we have here as well as the growth options that we have ahead of us.

Orest Wowkodaw, Analyst

Thank you, Jonathan.

Operator, Operator

The next question comes from Emily Chieng - Goldman Sachs. Please go ahead.

Emily Chieng, Analyst

Thanks, Jonathan and Crystal. My question is around a follow-up on the separation that has been proposed. I guess, is there a sense of urgency in getting a separation done this year, or could you wait until QB2 becomes more flow generative and you've got further deleveraging at the corporate level before you could approach that next restructuring process?

Jonathan Price, CEO

Yes. Thanks for that question, Emily. As we look through the alternatives here that we will have for a simple direct separation. Of course, one of the things we will consider is timing as part of that proposal in terms of what would be optimal to maximize shareholder value. Again, as I mentioned with respect to Orest's questions, I won't give any more details now on exactly what that timing would look like. But to your point, we will consider timing as a key factor here in terms of how to maximize value for our shareholders.

Emily Chieng, Analyst

Great. And then a follow-up on QB2 actually. I was curious about the update around the jetty construction and when we should expect to see that come online and therefore, when we would expect logistical costs to start ticking down for that asset? Thank you.

Jonathan Price, CEO

Yes. Thanks, Emily. On that point, I'll hand over to Red Conger, our Chief Operating Officer, to make some comments.

Red Conger, COO

Yes. Thanks, Emily. The jetty itself is the longest critical path to be completed later this year. Our logistics team has come up with a really creative way to sell our concentrate up until that construction is completed. So we will be able to ship and sell concentrate starting later this quarter for the remainder of the year until the jetty is completed.

Emily Chieng, Analyst

Great. Thank you.

Operator, Operator

The next question comes from Carlos Alba with Morgan Stanley. Please, go ahead.

Carlos Alba, Analyst

Yes. Thank you. Good morning, everyone. The question I had is on QB2 CapEx increase. I just wanted to go back and check what are the FX assumptions that are underneath the original CapEx, I thought it was CLP775 per dollar. We have been above that level and my understanding was that a weaker peso would favor the company. So, yes, if you could provide maybe a little bit more color around that, that would be great.

Jonathan Price, CEO

Thanks for the question, Carlos. I'll hand you over to Crystal for that one.

Crystal Prystai, CFO

Hi, Carlos. Thanks for your question. Regarding the 775 you mentioned, that was based on an old foreign exchange assumption. When we updated our guidance in the third quarter, we considered a range of $900 million to $975 million, and the new CapEx estimate is between $800 million and $850 million. Therefore, you're actually seeing a strengthening of the peso, which is the reason for the increase in CapEx.

Carlos Alba, Analyst

That's very clear. And just a follow-up, any color on the timing of the remaining disbursement?

Crystal Prystai, CFO

Yes, it will be spent over the remainder of the year and likely extend a bit into the following year. The updated capital expenditure guidance is between $800 million and $1 billion. You can anticipate that this amount will be used throughout the year, with some likely carrying over into 2024 as we finalize everything.

Carlos Alba, Analyst

Thank you very much. Got it. Thank you.

Operator, Operator

The next question comes from Brian Macarthur with Raymond James. Please, go ahead.

Brian Macarthur, Analyst

Good morning. As you consider potential options for coal moving forward, it's clear that shareholder opinion is crucial, but you also have partners to consider. Do you foresee any challenges with your partners as you pursue this path? You've mentioned that shareholders prefer a clean split. Do your partners feel the same way, or can you provide any insights on that?

Jonathan Price, CEO

Yes. Thanks for the question, Brian. Look, we have a very good relationship with both POSCO and NSC and of course, we worked with them for many years and including recently through the recent proposal that we put to shareholders. We'll continue to engage with them and have been doing so. Of course, we expect them to remain very supportive of the business. We'd like to have them remain involved going forward. Those conversations, of course, will evolve as we work our way through the range of alternatives for the separation of steelmaking coal from base metals.

Brian Macarthur, Analyst

Great. Thanks very much.

Operator, Operator

The next question comes from Shane Nagle with National Bank Financial. Please, go ahead.

Shane Nagle, Analyst

Just to confirm on the QB2 with the capital cost increase. Now that the concentrate is up and running, is any other further delays or cost creep going to be classified under operator to this point, or can you provide any color on maybe where things are at with commissioning the second line and how you may anticipate those costs going forward?

Jonathan Price, CEO

Thanks Shane. That's a good question for Crystal.

Crystal Prystai, CFO

I will likely pass the line to Red for the ramp-up update, but I'll address the first part of your question. We need to keep focusing on costs, distinguishing between operating and capital costs. Our project capital guidance is based on what we've previously disclosed, and the operating costs will depend on the ramp-up progress and how we allocate those costs to the inventory sold. We haven't offered guidance on that yet. Now, I'll turn it over to Red for an update on the ramp-up timing.

Red Conger, COO

Yes. Shane, so where we're at right now, we've just completed the run on all notes. It now requires retorque or to be ready to run long-term. That is to point to entail a full project shutdown here to do that work and various other maintenance things that we've identified running Line 1. So when that comes up in a week or so, Line 1 is ready to run both ball mills are commissioned and running will be going into cleaner flotation, essentially moving that construction workforce off of Line 1 substantially and on the Line 2 and be working diligently completing Line 2 through the remainder of this quarter.

Shane Nagle, Analyst

Okay, great. Thanks. And then just one more maybe just on the separation, the both for the dual-class sunset. I just want to confirm that that's going to be disclosed a little bit later as well.

Jonathan Price, CEO

Yes. That vote will proceed, and then we'll be cited at today's annual general and special meeting.

Shane Nagle, Analyst

Okay, great. Thank you.

Jonathan Price, CEO

Thanks Shane.

Operator, Operator

The next question comes from Lawson Winder with Bank of America Securities. Please go ahead.

Lawson Winder, Analyst

Thank you operator. Good morning Jonathan and Crystal. I just wanted to follow-up on some comments you made in your prepared remarks, Jonathan, on value coming from a competitive process. And clearly, you indicated that you prefer that process to come after a spin. But I guess I would just ask you the question like, is why couldn't that process create the most value prior to a coal separation, like potentially, there's a buyer that could actually address the whole separation more effectively?

Jonathan Price, CEO

Thanks for the question, Lawson. I mean, I think we've always been clear here that there will be more options to create value post the separation than pre. This has been a function of competition. As we see the situation today, of course, we have had one proposal that we consider to be forward with material execution risks for shareholders. That doesn't represent a competitive environment and therefore doesn't represent an opportunity to create the most value for our shareholders. As I said, we continue to believe there will be more options to enhance value post separation. That's why we continue to look through the range of alternatives to conduct a separation in a simpler and more direct fashion.

Lawson Winder, Analyst

Okay. Thanks for that. Maybe I'll just sort of follow-up on that and get one sort of a different way, which is, is it the case then that there was only one proposal that on the table prior to the coal spend?

Jonathan Price, CEO

As you've seen in our communications, there is one proposal that we have received, evaluated, and rejected due to the flaws contained in that proposal. As we have discussed previously, we expect there to be significantly more interest in the businesses on a stand-alone basis than as a component today. That is one of the reasons we continue to believe that separation is the right path forward here. More importantly, we think there is value to be created through the separation as we can unlock the full potential of Teck Metals, in particular, with respect to the pipeline of copper growth projects that this business contains.

Lawson Winder, Analyst

Fantastic. That's super helpful. And if I could just ask one simple, sort of, like accounting question. What is the CLP assumption on OpEx for the QB2 guidance for long-term? Thanks very much.

Crystal Prystai, CFO

Lawson, we'll have to follow-up with you separately on that one. I don't have that one at my fingertips.

Lawson Winder, Analyst

Okay. Thank you.

Jonathan Price, CEO

Thanks Lawson.

Operator, Operator

The next question comes from Lucas Pipes of B. Riley Securities. Please go ahead.

Lucas Pipes, Analyst

Thank you very much, operator, and good morning everyone. Jonathan, my first question is also on the separation. I'm sure that before you went down the path with the TCS and EVR as you have proposed, you carefully evaluated like a clean spin where you would separate the coal business without cash flow, royalty, preferred equity structures, etc. What were the reasons you choose not to do that at that time? Would really appreciate your perspective on that.

Jonathan Price, CEO

Yeah. Thanks, Lucas. I mean, I think as we've communicated over the past couple of months since announcing the proposed separation, we were trying to balance a number of competing factors here, which included the resilience of the valuation of the coal business and ensuring that was reflected and protected, looking for mechanisms to fund the very exciting pipeline of copper growth projects that we have in the base metals business, undertaking a separation in a responsible way and, of course, all the time with a focus on maximizing our value creation for our shareholders. When we looked at that proposal, we believe that the separation as we proposed back on the 21st of February provided an optimal balance of those competing factors to unlock that value long-term. Now clearly, in the engagement we've had with our shareholders and in listening to our shareholders, they have been strongly supportive of the path forward to separate EVR from Teck Metals, but they have told us that they would like to see a simpler and more direct structure to achieve that. So we take that feedback on board, and we will work that through to come forward with alternative proposals in due course.

Lucas Pipes, Analyst

That's very helpful. Thank you. And then turning to operations for a moment. You mentioned in the release that the workforce in the Elk Valley is still a priority. And I wondered if you could touch a little bit on the staffing levels today and what has been an impediment to reach full staffing levels to date? Thank you very much for your perspective.

Jonathan Price, CEO

Thanks, Lucas. I'll hand you over to Robin Sheremeta, the SVP of our Coal business.

Robin Sheremeta, SVP of Coal business

Yeah, thanks. We've been actually on a pretty good track to bring our operating workforce back up to the full complement. So we've got enough operators, enough staff. I think the area that we're probably the most exposed right now is on the heavy-duty mechanics, so a very specific trade area, and we're working hard on that and making some progress. But that's probably the biggest risk we have rate loans. It's just simply the heavy-duty mechanics side to production in the future. So we supplement that with contractors, so we have some options, but that's really our biggest risk right now.

Lucas Pipes, Analyst

Thank you very much for all the color and again, continued best of luck.

Jonathan Price, CEO

Thanks, Lucas. Much appreciated.

Operator, Operator

And the next question comes from Alex Terentiew with Stifel. Please, go ahead.

Alex Terentiew, Analyst

Hi, everyone. I wanted to revisit the separation question. Now that you have completed this process, what are your objectives for separation? I know that maximizing shareholder value is important, but what do you and the key shareholders believe would be the best alternative moving forward? Additionally, with the separation and the original Environmental Stewardship Trust plan off the table, where do the payments of up to $2 billion over the coming years and the Nippon investment currently stand?

Jonathan Price, CEO

Thank you, Alex, for your questions. Regarding your first point about our objectives, the main focus is on maximizing shareholder value. We are considering a variety of factors and reassessing the balance to ensure that any separation is managed in a straightforward and efficient manner. Additionally, we will always prioritize a responsible approach that considers all stakeholders involved in our business. This will remain a key focus as we evaluate a range of alternatives that align with these criteria. Concerning the Nippon investment and the creation of the Environmental Stewardship Trust, these were specific elements of the proposal we presented on February 21. As we review a simpler and more direct approach to the separation, we will take these factors into account and decide what is most suitable for any future separation.

Alex Terentiew, Analyst

Okay. I'm going to ask this question to see if I can get an answer. You mentioned at the beginning that a substantial majority of the shareholders were in favor of a separation. Are you able to share any details about what the vote looked like? I understand that it won't be completed now, but I'm curious if you can give us an indication of what the shareholders were saying before today.

Jonathan Price, CEO

Look, so we didn't proceed with the vote, so we won't have final numbers on a voting result. Our tracking showed that we weren't going to achieve the 66 and two-thirds percent threshold that we needed for approval in this instance. Of course, I won't comment on the voting positions of individual shareholders through this process. However, overwhelmingly, the feedback that we've received is a separation of EVR and Teck Metals was favored as a mechanism to create value for shareholders, hence, why we've elected to go back and figure out the best way to do that, through a lens of doing this in a simpler and more direct way.

Timna Tanners, Analyst

Yes, hey thank you and good morning. Wanted to ask regarding the discussion of new mining laws in Mexico, the implications for San Nicolás as you go through your copper growth portfolio. The last version I saw had it first in line, so would love to hear the implications or your thoughts on any factor there?

Jonathan Price, CEO

Thanks Timna. I'm going to pass you over to Tyler Mitchelson, SVP of Copper Growth.

Tyler Mitchelson, SVP of Copper Growth

Good morning. Thank you. Look, we continue to review the proposed legislation. Right now, it's gone through the lower house, and there have been a number of changes from the original proposal. Right now, based on our preliminary estimates, it's not going to have a material impact on the development of San Nicolás, but we continue to work through the details to understand what the implications could be.

Timna Tanners, Analyst

So, sorry, did I understand not expecting it to change your pipeline or your timing, but maybe the returns might be different or I'm sorry if I understand your answer.

Tyler Mitchelson, SVP of Copper Growth

No. Right now, we don't anticipate it changing any of the timing or the impacts of the returns. There are no financial implications to the proposed changes in the legislation. We believe the fact that we've got a concession already there won't be any implications going forward.

Timna Tanners, Analyst

Got it. Thank you. Just want to ask kind of a simple high-level question. On the coal split, but clearly, unfortunate timing with regard to what the coal price was doing while you were in negotiations or pitching the split. How much do you think that was a factor? And what coal price do you think investors are looking at relative to where it's been historically? Thank you.

Jonathan Price, CEO

Timna based on the feedback we've received, I don't think the coal price has any impact on those discussions. The focus, as I've said, has been around supporting a separation, but a desire to see that done in a simpler and more direct manner. Coal prices, as we know, will move up and down, and it hasn't been part of the conversation that we've had here over weeks and months.

Dalton Baretto, Analyst

Thanks. Good morning Jonathan. I want to start again by asking about the separation. This range of alternatives that you're going to work through, is this a subset of the range you've already looked at, or did something fall through the cracks that you're going to start evaluating right now?

Jonathan Price, CEO

Look, we looked extensively around the best mechanism to optimize the portfolio and to create value for shareholders, and that was work done with the Board over the last two to three years. There were a number of options evaluated there. We will relook at those options again to see if they meet the criteria of doing this in a simpler and more direct manner. We'll also though to see if there are other opportunities that weren't considered previously, perhaps in light of a change in market conditions or whatever that might be. But the key driver, Dalton, behind this evaluation and the work that we will do is the feedback that we've received here from our shareholders. We look forward to continuing to engage with our shareholders; we'll continue to listen to their feedback and we will incorporate that into the work that we have ahead of us.

Dalton Baretto, Analyst

Okay. Thanks. And then maybe just following up on a previous question there and kind of in the same vein here. How important now is managing Teck Metals balance sheet and capital allocation framework as you work through this range of criteria?

Jonathan Price, CEO

Look, I mean I think it's always important, of course, the balance sheet to underpin a growth portfolio. It's always important to make sure we can continue to return cash to shareholders on an ongoing basis to reward them for their ownership in the company. So those things will remain a priority for us here as we look to build out and realize substantial intrinsic value from the pipeline of projects that we have in the portfolio.

Dalton Baretto, Analyst

Thank you. And maybe just one last one for me. On the assumption that you come up with a structure that passes the vote. Can you maybe speak to the appetite of the Board and the Class A's to look at bids immediately post separation versus waiting for a period until your growth pipeline progresses?

Jonathan Price, CEO

Yeah. I'm not going to speculate on that, Dalton. Our focus is to find a way to work through a separate here that will maximize value for all shareholders. As I've mentioned before, the priority with Teck Metals is the development of that unrivaled suite of copper projects that we have with QB2 ramping up to full capacity this year, doubling our copper output and then a range of projects, including the QB mill expansion, San Nicolás, Zafranal, hot on the heels of that to allow for investment in high-return growth projects. So that's the focus here. Dalton, and I can't speculate on what may or may not happen beyond that.

Dalton Baretto, Analyst

Thanks, Jonathan. That’s all from me.

Jonathan Price, CEO

Thanks, Dalton. Much appreciated.

Operator, Operator

I will now hand the call back over to Mr. Price for closing remarks.

Jonathan Price, CEO

Thank you very much. I'm just going to make a few brief closing comments here. This process we've undertaken over recent months has really shown a bright light on the tremendous value of Teck, both for our shareholders and other stakeholders. It's shown a light on world-class operations, an industry-leading copper growth pipeline and our focus on responsible and ethical ESG performance, all of which contribute to an incredible value proposition and a bright future ahead. I will just close then by reiterating that our plan forward is to evaluate alternatives for a responsible separation of the business, taking into account the extensive feedback that we've received from our investors and feedback that we're very appreciative of. Our goal will be to do this in a simpler and more direct way, which we believe is the best path to unlock full value for Teck shareholders. Thank you very much.

Operator, Operator

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.