Definitions for Mineral Reserves and Mineral Resources
Mineral Reserves and Mineral Resources: “Proven” and “probable” mineral reserves and “measured”, “indicated” and “inferred” mineral resources are estimated in accordance with the definitions of these terms adopted by the Canadian Institute of Mining, Metallurgy and Petroleum in November, 2010 updated in May 2014 and incorporated in National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”), by Canadian securities regulatory authorities.
Mineral resources are reported separately from, and do not include, that portion of the mineral resources classified as mineral reserves.
Metallurgical coal: means the various grades of coal that are used to produce coke which is used in the steel making process.
PCI coal: means coal that is pulverized and injected into a blast furnace. Those grades of coal used in the PCI process are generally non-coking. PCI grade coal is used primarily as a heat source in the steel making process in partial replacement for high quality coking coals which are typically more expensive.
Thermal coal: means coal that is used primarily for its heating value. Thermal coals tend not to have the carbonization properties possessed by metallurgical coals. Most thermal coal is used to produce electricity in thermal power plants.
The Canadian Institute of Mining, Metallurgy and Petroleum definitions for mineral resources and mineral reserves are as follows:
A “mineral resource” is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling.
An “inferred mineral resource” is that part of a mineral resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An inferred mineral resource has a lower level of confidence than that applying to an indicated mineral resource and must not be converted to a mineral reserve. It is reasonably expected that the majority of inferred mineral resources could be upgraded to indicated mineral resources with continued exploration. An inferred mineral resource is based on limited information and sampling gathered through appropriate sampling techniques from locations such as outcrops, trenches, pits, workings and drillholes. Inferred mineral resources must not be included in the economic analysis, production schedules, or estimated mine life in publicly disclosed prefeasibility or feasibility studies, or in the life of mine plans and cash flow models of developed mines. Inferred mineral resources can only be used in economic studies as provided under NI 43-101.
An “indicated mineral resource” is that part of a mineral resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of modifying factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation. An indicated mineral resource has a lower level of confidence than that applying to a measured mineral resource and may only be converted to a probable mineral reserve. Mineralization may be classified as an indicated mineral resource by the qualified person when the nature, quality, quantity and distribution of data are such as to allow confident interpretation of the geological framework and to reasonably assume the continuity of mineralization. An indicated mineral resource estimate is of sufficient quality to support a prefeasibility study which can serve as the basis for major development decisions.
A “measured mineral resource” is that part of a mineral resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of modifying factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation. A measured mineral resource has a higher level of confidence than that applying to either an indicated mineral resource or an inferred mineral resource. It may be converted to a proven mineral reserve or to a probable mineral reserve. Mineralization or other natural material of economic interest may be classified as a measured mineral resource when the nature, quality, quantity and distribution of data are such that the tonnage and grade or quality of the mineralization can be estimated to within close limits and that variation from the estimate would not significantly affect potential economic viability of the deposit. This category requires a high level of confidence in, and understanding of, the geology and controls of the mineral deposit.
A “mineral reserve” is the economically mineable part of a measured and/or indicated mineral resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at prefeasibility or feasibility level as appropriate that include application of modifying factors. These studies demonstrate that, at the time of reporting, extraction could reasonably be justified.
A “probable mineral reserve” is the economically mineable part of an indicated, and in some circumstances, a measured mineral resource. The confidence in the modifying factors applying to a probable mineral reserve is lower than that applying to a proven mineral reserve.
A “proven mineral reserve” is the economically mineable part of a measured mineral resource. A proven mineral reserve implies a high degree of confidence in the modifying factors.
Methodologies and Assumptions
Mineral reserve and mineral resource estimates are based on various assumptions relating to operating matters, including with respect to production costs, mining and processing recoveries, mining dilution, cut-off values or grades, as well as assumptions relating to long-term commodity prices and, in some cases, exchange rates. Cost estimates are based on feasibility study estimates or operating history.
Methodologies used in reserve and resource estimates vary from property to property depending on the style of mineralization, geology and other factors. Geostatistical methods, appropriate to the style of mineralization, have been used in the estimation of reserves at Teck’s material base metal properties.
Assumed metal prices vary from property to property for a number of reasons. Teck has interests in a number of joint ventures for which assumed metal prices are a joint venture decision. In certain cases, assumed metal prices are historical assumptions made at the time of the relevant reserve and resource estimates. For operations with short remaining lives, assumed metal prices may reflect shorter-term commodity price forecasts.
Comments on Individual Operations
Highland Valley Copper
Reserve and resource estimates were prepared assuming long-term metal prices of US$3.00/lb copper, US$9.40/lb molybdenum, US$20.00/oz silver and US$1,300/oz gold and an exchange rate of CAD$1.25 per US$1.00. Reserves and resources are reported at a 0.10% copper equivalent cut-off and a 1.8 molybdenum factor. This copper equivalent cut-off equals a net smelter return of US$5.19 per tonne.
There was a net decrease of 51 million tonnes of Proven and Probable reserves in 2019 mostly as a result of normal mining activity. Resources significantly increased by 347 million tonnes when compared to 2018, primarily because of lower operating costs and higher assumed USD to CAD exchange rate. The resource estimate at Highland Valley is extremely sensitive to changes in these assumptions.
Antamina
Open pit reserve estimates were prepared assuming long-term metal prices of US$3.084/lb copper, US$1.08/lb zinc, US$8.7/lb molybdenum and US$17.39/oz. silver. Open pit and underground resource estimates were prepared assuming long-term metal prices of US$3.30/lb copper, US$1.23/lb zinc, US$10.0/lb molybdenum and US$19.95/oz silver.
Cut-off grades at Antamina are based on the net value before taxes that the relevant material is expected to generate per hour of concentrator operation at assumed prices, and varies by year in an effort to maximize the net present value of the pit.
The total, open pit and underground resources reported in 2019 are 564 million tonnes of Measured and Indicated and close to 1.3 billion tonnes of Inferred. These figures are similar to those reported in 2018.
Quebrada Blanca
Supergene reserves have been fully depleted in 2018 and only mineral resources are being reported. The Quebrada Blanca (hypogene) reserve and resource estimates were prepared assuming a long-term copper price of US$3.00/lb and a long-term molybdenum price of US$9.40/lb.
The hypogene mineral reserves remain at 1.4 billion tonnes and are limited by the current tailings storage capacity. Ongoing infill and resource delineation drilling continues to improve confidence in resource categories and increasing the resource basis. An additional 28,200 metres of drilling with assays results was incorporated in the current model that reports a 14% increase in resources from 2018, totaling 1.89 billion tonnes of measured and indicated resources and another 3.49 billion tonnes of inferred resources.
Carmen de Andacollo
Our Carmen de Andacollo Operations include a heap leach copper operation and a copper-gold hypogene concentrator. The year-end 2019 reserves and resources are supported by updated resource models that incorporate over 3,000 metres of new drilling and improved economic assumptions related to operational costs and higher long-term gold prices compared to 2018.
Hypogene reserve estimates assume long-term metal prices of US$3.00/lb copper and US$1,300/oz gold. Mineral reserves show a very small reduction from 2018 due to depletion from normal mining activities offset by improved costs and changes in mine design. Hypogene resources show a second-year increase of 75 million tonnes in comparison to 2018, due mostly to favourable operating costs, additional drilling and improved process recoveries.
NuevaUnión
Teck has a 50% interest in NuevaUnión. As of the end of 2019, a feasibility study on the NuevaUnión project was nearing completion. Reserves and resources for two deposits, Relincho and La Fortuna have been updated based on the results of this study. Reserves at Relincho and La Fortuna deposits consider a bulk open-pit mining operation that will be developed in three production phases that will alternate mining operations between the two deposits.
Relincho mineral reserves and mineral resources are reported using an average net smelter return cut-off of US$11/tonne and US$6.72/tonne, respectively. It assumes metal prices of US$ 3.00/lb copper and US$ 10.0/lb molybdenum.
La Fortuna mineral reserves and open pit mineral resources are reported using an average net smelter return cut-off of US$9.14.0/tonne and US$9.12.0/tonne, respectively. It assumes metal prices of US$ 3.00/lb copper and US$ 1,200/oz gold. Mineral resources outside of the mineral reserve pit are defined using a conceptual underground mining envelope. This approach assumes the same recoveries, metal prices, processing and general & administration costs as used for the open pits but with mining costs and dilution assumptions that are more appropriate to bulk underground mining.
Red Dog
Teck reports reserves and resources for Red Dog divided into two reporting groups based on the spatial proximity and the land ownership associated with the deposits in and around Red Dog. The names assigned to these groups are “Mine” and “District”.
In the “Mine” group, Teck is currently operating two deposits accessible by open pit mining: Aqqaluk, and Qanaiyaq. The Aqqaluk deposit, with first ore milled in August 2010, has had its operations extended to 2032. Mining of the Qanaiyaq deposit started with first ore milled in January 2017 and is planned to have a life span through 2028. The Red Dog Mine area also contains the undeveloped Paalaaq deposit, which is currently only defined to a resource level of confidence.
All reserves and resources were estimated using long-term metal prices: US$1.10/lb for zinc, US$0.90/lb for lead and US$20.00/oz for silver. Red Dog Mine reserve tonnage is down 5.1 million tonnes from 2018, due primarily to normal depletion from mining operations. Higher operating costs are primarily responsible for the reduction of 3.4 million tonnes of Red Dog Mine resources.
The “District” group consists entirely of Inferred resources from the Anarraaq deposit which lies approximately 11 km northwest of the current Red Dog operations. Inferred resources for this deposit are unchanged, at 19.4 million tonnes, from 2018.
Pend Oreille
The operation is in care and maintenance and a decision was made to convert the remaining mineral reserves back in to resources. The resource models were updated in 2019 with short-term in-fill drilling.
The resources for Pend Oreille are estimated using a 4.0 % zinc+lead cut-off. Recovery is expected at 89.5% for zinc and 60% for lead. Commodity prices assumptions were US$1.10/lb zinc and US$0.90/lb for lead.
San Nicolás
The 2019 reported resource estimates are unchanged from 2018. The estimates assume different net smelter return cut-offs for different geometallurgical domains from US$9.20/tonne to US$12.00/tonne based on an estimate of the marginal cost of production for the relevant ore. Net smelter return calculations include metal price assumptions as US$3.00/lb copper, US$1.10/lb zinc, US$1,250/oz gold and US$20/oz silver and scaled costs from previous studies.
Galore Creek
Teck has a 50% interest in Galore Creek. Following the change in ownership of the Galore Creek partnership, new drilling, and a re-interpretation of existing geological information was completed during 2019. A resource update is scheduled to be completed in support of ongoing technical studies. The year-end 2019 statement reports unchanged resource figures from 2018 and are estimated based on commodity prices of US$3.00/lb copper, US$1,200/oz gold and US$20/oz silver and a US$8.84/tonne net smelter return cut-off.
Schaft Creek
Schaft Creek resources are based on a 2018 Resource Model Update. Open pit mineral resources are reported at a net smelter return cut-off of US$4.31/tonne and constrained by a conceptual open pit shape. The resource estimate categorizes 10% of the mineral resources as Measured, 70% as Indicated and 20% as Inferred.
Mesaba
Year-end 2019 statement reports unchanged figures from 2018 cycle when mineral resources were reported for the first time. The estimates are based at a cut-off of 0.2% copper, equivalent to a net smelter return cut-off of US$5.24/tonne, and consider the estimates of copper, nickel, silver, cobalt, gold, platinum and palladium.
Zafranal
No changes to the resource and reserve statements in 2019. Figures reported at the end-of-year 2018 were supported by a feasibility study prepared for Compañia Minera Zafranal S.A.C.
Resource and reserves estimates at Zafranal were prepared using price assumptions of US$3.00/lb copper and US$1,200/oz gold. Mining and processing costs, as with other important input parameters, were updated from the prefeasibility study. The total contained metal used in the reserves table are based on variable metallurgical recoveries of up to 89.5% for copper and up to 56% for gold. Open pit mineral reserves are reported using a variable net smelter return cut-off of US$6.10 to $6.35/tonne averaging US$6.11/tonne.
Fording River
The reserve economics assume a long-term selling price at the Port of Vancouver of US$140/tonne for metallurgical coal at an exchange rate of CAD$1.25 per US$1.00.
Elkview
Teck has a 95% interest in the Elkview mine. The reserve economics assume a long-term selling price at the Port of Vancouver of US$140/tonne for metallurgical coal at an exchange rate of CAD$1.25 per US$1.00.
Greenhills
Teck is an 80% partner in the Greenhills Joint Venture. The reserve economics assume a long term selling price at the Port of Vancouver of US$140/tonne for metallurgical coal at an exchange rate of CAD$1.25 per US$1.00.
Line Creek
The reserve economics assume a long term selling price at the Port of Vancouver of US$140/tonne for metallurgical coal and US$75/tonne for oxide coal at an exchange rate of CAD$1.25 per US$1.00.
Cardinal River
Mine operations at Cardinal River Operations will cease in 2020 and remaining reserves will be converted back to resources. The current reserves estimates are based on a long term selling price at the Port of Vancouver of US$140/tonne for metallurgical coal and at an exchange rate of CAD$1.25 per US$1.00.
Quintette (Mt Babcock)
The reserve economics assume a long-term selling price of US$140/tonne for metallurgical coal and US$75 for oxide coal at an exchange rate of CAD$1.25 per US$1.00.
Risks and Uncertainties
Mineral reserves and mineral resources are estimates of the size and grade of the deposits based on the assumptions and parameters currently available. These assumptions and parameters are subject to a number of risks and uncertainties, including, but not limited to, future changes in metals prices and/or production costs, differences in size, grade, continuity, geometry or location of mineralization from that predicted by geological modeling, recovery rates being less than those expected and changes in project parameters due to changes in production plans. Except as expressly described elsewhere in this Annual Information Form, there are no known environmental, permitting, legal, title, taxation, sociopolitical, marketing or other issues that are currently expected to materially affect the mineral reserves or resources. Certain operations will require further permits over the course of their operating lives in order to continue operating. Where management expects such permits to be issued in the ordinary course, material that may only be mined after such permits are issued is included in Proven and Probable reserves. Specific current permitting issues are described in the narrative concerning the relevant operation under the headings “Description of the Business” and “Health and Safety and Environmental Protection” and “Risk Factors — We face risks associated with the issuance and renewal of permits.”
Qualified Persons
Estimates of mineral reserves and resources for our base metal properties have been prepared under the general supervision of Rodrigo Marinho, P.Geo., who is an employee of Teck Resources Limited and the Qualified Person for the purposes of NI 43-101 for our base metal properties (other than Antamina). Mineral reserve and resource estimates for Antamina have been prepared under the supervision of Fernando Angeles P.Eng. and Lucio Canchis, who is an SME Registered Member, and who are both employees of Compañía Minera Antamina S.A. Messrs. Canchis and Angeles are the Qualified Persons for the purposes of NI 43-101 in respect of Antamina. Reserve and resource estimates for coal properties were prepared under the general supervision of Don Mills P.Geo. and Robin Gold P.Eng., employees of Teck Coal Limited, who are the Qualified Persons for coal properties for the purposes of NI 43–101.