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Message from the CEO - 2016 Sustainability Report

There is no question that 2016 was a year of extremes for our company and our industry. The year began in the midst of one of the deepest and longest downturns in our industry’s history, and then moved into a period of unprecedented price increases, particularly in steelmaking coal. These significant price swings demonstrate the kind of volatility that is becoming the “new normal” in the industry, with commodity cycles that have the potential to be both faster and larger in scale.

This volatile market environment challenges us to stay focused on controlling costs and maintaining productivity while at the same time continuing to uphold our commitment to responsible resource development. The theme of our 2016 Sustainability Report — Every Day — is meant to reflect how our core values guide the decisions we make every day, as individual employees and as a company, to meet the challenges of a changing world. By doing so, we know we will remain strong as a company, regardless of market cycles, and will continue to meet the expectations of our stakeholders and society.

Our External Environment

We produce materials that are essential to a modern, sustainable society and that help improve the quality of life for people around the world. To do this responsibly, we focus on understanding and meeting the expectations of Indigenous Peoples, communities and other stakeholders while also taking into account the broader economic, social and environmental context in which we operate.

The volatility of commodity markets shaped the economic context in which we operated in 2016. This volatility affected jobs, wages, procurement and community investment across the entire mining industry and, in turn, affected the societal pressure on these factors. More broadly, we saw citizens around the world call for greater transparency on corporate revenues, taxes paid and investments made. In Canada, the Extractive Sector Transparency Measures Act will increase transparency around payments to governments as companies, including ours, disclose their 2016 data in 2017.

In terms of social context, across all industries, there is an increased focus on diversity within Boards, senior management teams and general employee populations. The movement towards reconciliation with Indigenous Peoples continued, notably in Canada with the Truth and Reconciliation Commission advancing its recommendations. Whether by engaging employees, Indigenous Peoples, communities or other stakeholders, maintaining strong relationships remained a critical component of operating as a responsible company in 2016.

One of the most significant environmental trends in 2016 was the continued global focus on climate action. Following the adoption of the Paris Agreement in 2015, the Government of Canada, where the majority of our operations are located, announced a national Pan-Canadian Framework, which includes a national carbon pricing benchmark. All provinces will be given until 2018 to implement a carbon pricing policy, starting with a minimum price of $10 per tonne in 2018, increasing by $10 per year to $50 per tonne by 2022. All of our Canadian operations have been covered under existing carbon pricing in B.C. and Alberta for a number of years. We believe that broad-based pricing of carbon is one of the most effective ways to incentivize real reductions in greenhouse gas (GHG) emissions by ensuring that all emitters contribute to the solution.

Economic, Social and Environmental Performance Highlights

The tenet that has guided us through the downturn of the past few years has been “controlling the controllable”, ensuring safety, remaining focused on sustainability, driving down costs, controlling capital spending and maintaining strong production.

Our operations continued to perform well in 2016, with 11 of our 13 operations increasing production while decreasing costs. Our gross profit before depreciation and amortization in 2016 was $3.8 billion, compared with $2.6 billion in 2015, with the increase due mainly to higher commodity prices in the latter half of the year. Our financial position and liquidity remained strong. At December 31, 2016, we had $1.4 billion of cash and US$3.0 billion of unused lines of credit, providing us with $5.4 billion of liquidity. Looking ahead, we will continue to focus on our production and cost targets, improving operating excellence and considering opportunities to reduce debt. Teck’s 2016 Annual Report describes our financial performance in more detail. 

We are close to adding a fourth major commodity to our business, with construction of the Fort Hills oil sands project now surpassing 83% completion and on schedule to produce first oil in late 2017. We recognize that there are concerns over the potential environmental effects of developing oil sands projects. That’s why we are researching methods to improve extraction and processing to enhance the sustainability of our projects. One such advancement is the Paraffinic Froth Treatment (PFT) process being utilized at Fort Hills. PFT improves bitumen quality, making the diluted bitumen produced about equivalent to the average GHG intensity per barrel of the oil consumed in the United States on a wells to wheels basis. We are proud to be one of the founding members of Canada’s Oil Sands Innovation Alliance (COSIA) and are encouraged by the progress of the industry towards improving environmental performance, reducing water consumption, improving tailings management, and increasing land reclamation and revegetation.

No aspect of our performance is more important to Teck than the health and safety of our people. In 2016, we reduced Total Recordable Injury Frequency by approximately 13% compared with 2015, and had zero fatalities. Lost-Time Injury Frequency fell by 11% and High-Potential Incidents by 12%. We continue to be vigilant in pursuing our vision of everyone going home safe and healthy every day. This past year, we rolled out the fourth phase of our Courageous Safety Leadership program, and we continue our focus on reducing High-Potential Incidents.

In 2016, we continued to work towards strengthening diversity across our company. We believe that a range of backgrounds and perspectives allows for more informed decision-making and, ultimately, a stronger company. As part of our commitment to supporting an inclusive and diverse workplace that recognizes and values difference, we established a formal Inclusion and Diversity Policy in 2016. Guided by this policy, we are implementing initiatives and training programs to further enhance inclusion and diversity at Teck, including working towards increasing the number of women and Indigenous Peoples in our workforce to better reflect the communities in which we operate.

To strengthen our relationships with Indigenous Peoples near our operations and projects in 2016, we signed an Impact Management and Benefits Agreement with the Ktunaxa Nation Council that will create numerous long-term benefits for the Ktunaxa people and increase certainty around future sustainable mining development in the region. Spanning approximately 40 years and all five of our steelmaking coal operations in the Elk Valley region of British Columbia, it is one of the most comprehensive agreements of its kind in place in Canada. We were also engaged in agreement negotiations related to our Frontier project with Indigenous Peoples in the Athabasca region of northeastern Alberta in 2016, and to date have signed agreements with Fort Chipewyan Métis Local 125, Fort McKay First Nation and Fort McKay Métis. We are proud to have reached these groundbreaking arrangements with Métis people.

We enhanced our environmental performance and management practices in 2016. For example, we reduced GHG emissions by 17,000 tonnes, adding to our 217,000 tonnes of reductions in GHG emissions since 2011. We are working towards understanding and monitoring our releases to air more broadly and their associated impacts on people, communities and the environment, with a company-wide emissions inventory well underway. Our Elk Valley Water Quality Plan implementation also continues, which guides our approach to managing selenium, nitrate, sulphate and cadmium, as well as calcite formations in the watersheds near our steelmaking coal operations in the Elk Valley region of British Columbia. In 2016, we completed commissioning of a water treatment facility at our Line Creek Operations as part of the Plan.

In 2016, our progress in sustainability was recognized by a number of prominent international ranking institutes. We were named to the Dow Jones Sustainability World Index (DJSI) for the seventh consecutive year and ranked as one of the Best 50 Corporate Citizens in Canada by media and investment research firm Corporate Knights.

Our Sustainability Strategy, Governance and Partnerships

At Teck, sustainability is one of our values and a part of our overall approach to business. Sustainability is embedded at every level of our organization, from front-line employees to senior management to our Board of Directors, because we know being welcomed in the areas where we operate demands responsible social, economic and environmental performance in everything we do.

Our approach to responsible resource development is guided by our sustainability strategy, which sets out short- and long-term goals in six focus areas: Community, Water, Our People, Biodiversity, Energy and Climate Change, and Air. Following the successful completion in 2015 of our first set of short-term goals in our Sustainability Strategy, we are now pursuing our next set of short-term goals that will guide our progress through to 2020 and, ultimately, to achieving our long-term 2030 goals.

We take into consideration external standards and best practices in our governance of sustainability. Through our membership and involvement with external organizations, we are able to contribute to, and engage with, others on the development of best practice in sustainability performance and global sustainability trends. This includes the United Nations Global Compact, the International Council on Mining and Metals Sustainable Development Framework, the Mining Association of Canada's Towards Sustainable Mining initiative and the United Nations Sustainable Development Goals (SDGs). Throughout this report, we have included case studies and examples of how our activities align with the SDGs.

Our Outlook

As we operate within the “new normal” of volatile commodity markets to produce the materials essential to society, we will continue to be guided every day by our core values, including safety, sustainability and excellence. In 2017, we will focus on working towards our 2020 goals, managing emerging risks and embracing opportunities created by developing issues — such as the transition to a low-carbon economy — and supporting sustainable development on the world stage through the SDGs and other frameworks.

Donald R. Lindsay
President and Chief Executive Officer
Vancouver, B.C., Canada
April XX, 2017

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Teck is a diversified resource company committed to responsible mining and mineral development with business units focused on copper, zinc, steelmaking coal and energy.