Teck hits pause on growth to fix Chile copper mine

Teck Resources (TSX: TECK.A, TECK.B)(NYSE: TECK), Canada’s largest diversified miner, has deferred major expansion projects while it works to fix output problems at its flagship Quebrada Blanca (QB) copper mine in Chile.

A major overhaul of the mine high in the Andes came in $4 billion over budget and years behind schedule. In July, chief executive officer Jonathan Price was forced to cut production guidance. The main issue now is tailings storage.

The decision is part of a comprehensive operational review that was launched in August and is set to conclude in October, with a focus on improving performance. This review includes a detailed action plan for QB.

The Vancouver-based miner said the bulk of the work will focus on its tailings facility, where slow sand drainage has delayed development and constrained production since the mine’s recent expansion. Teck plans to raise the dam wall mechanically, add new rock benches to increase crest height, and accelerate drainage improvements.

BMO Capital Markets analysts said on Wednesday they see Teck’s operations review as a “necessary step” that “involves some pain including personnel change and perhaps further changes to future guidance”.

“We do not think this will be especially surprising to the Street, but uncertainty should remain until October,” managing director of equity research, metals & mining, Matthew Murphy, wrote. “We expect this process to ultimately drive greater confidence in the outlook and bolster the near-term free cash flow outlook by deferring further new project sanctioning.”

The company also announced management changes, including the retirement of Chief Operating Officer Shehzad Bharmal and the appointment of an unnamed industry veteran as advisor to senior leadership.

Affected projects

While large-scale project approvals are now on hold until QB achieves steady-state operations and meets ramp-up targets, BMO’s Murphy expects certain developments already sanctioned, such as the $2.4 billion Highland Valley expansion, to proceed unaffected.

San Nicolás in Mexico, in partnership with Agnico Eagle (TSX, NYSE: AEM), and Zafranal in Peru remain unsanctioned, and it is unclear how much near-term spending will be pared back or how their development timelines might shift, Murphy wrote.

Output impact

QB is central to Teck’s pivot toward energy transition metals after shedding its coal business. The mine underpins its target of producing 800,000 tonnes of copper annually by 2030.

Teck now expects QB to produce 210,000–230,000 tonnes in 2025, down from earlier projections of 230,000 to 270,000 tonnes. The company had guided copper production at 490,000 to 565,000 tonnes overall this year, but it later trimmed it to 470,000 and 525,000 tonnes. It now warns revised numbers will come with third-quarter results.

Last year, just over 200,000 tonnes of copper was produced last year at the mine, in which Teck has a 60% stake. Japan’s Sumitomo Corp. owns 30% of QB, and Chile’s state-owned Codelco, 10%.

Teck is also studying potential synergies with the nearby Collahuasi mine, jointly owned by Anglo American (LON: AAL) and Glencore (LON: GLEN).