Teck Resources (TSX: Teck.B )

Teck Resources (TSX: Teck.B)

Metals and Mining Team McMaster Investment Council

Company Overview Company Snapshot Revenue Breakdown – LT Favourable Markets • Teck Resources is one of the worlds leading diversified mining companies • The company primarily produces metallurgical/coking (steelmaking coal) zinc and copper, with molybdenum, lead, and silver by-products • Recent production has begun in the Canadian oil sector and significant future developments are underway in the Chilean copper industry • Teck Resources was founded in 1962 and is headquartered in Canada 2019E Revenue ~$13.2B 2023E Revenue ~$14.1B Geography Breakdown – Stable Geopolitics Historical Growth – Strong Sales and Efficiency Company Overview Industry Overview Operations Risks & Catalysts Conclusion Investment Theses Financial Analysis Mine Locations Diversified Buyers Revenue (billions C$) EBITDA(billions C$) 31% CAGR 11% CAGR Diversified miner with not just growing revenue but also EBTIDA operating in very stable jurisdiction McMaster Investment Council

Further Analysis 2 Year Stock Chart Operating Assets Summary 1 9 8 7 6 5 4 3 2 Key Events Falling EV/EBITDA Despite Financial Performance Company Overview Industry Overview Operations Risks & Catalysts Conclusion Investment Theses Financial Analysis 2 1 7 9 8 6 5 3 4 Teck has suffered as other sectors outperformed in 17-18 and we see revaluation opportunities with value-seeking markets McMaster Investment Council

Industry Overview Steelmaking Coal Crude Steel Production - Synchronized Global Growth (Mt) Chinese Coal Production Cuts Price Supports China significantly cutting capacity for coking coal production but growing crude steel and hot metal India targeting 300Mt of steelmaking coal imports by 2030 (130Mt in 2018) 2018 YoY Growth India – 4.9% Global – 5.2% China – 6.6% <5% of noncurrent production growth comes from highly probable projects Zinc Copper Company Overview Industry Overview Operations Risks & Catalysts Conclusion Investment Theses Financial Analysis Chinese Mine Production (Mt) Existing Supply vs Demand (Mt) Existing Supply vs Demand (Mt) Down 27% Demand Gap Demand Gap Major growth in copper demand driven by China, India, electric vehicles, and basic goods in developing countries Probable Projects Insufficient (Mt) Chinese production hampered by inspections, depletions, and policy Chinese zinc stocks are at record lower, will require significant imports Significant development of smelting projects despite lack of mining projects Post 2021 structural global supply deficits take over with need for new projects, just need to get over the next 2 years Future supply inadequate to meet demand, even in probable projects Significant market tightness will kick in within the next two years, and begin getting priced in sooner McMaster Investment Council

Commodity Outlooks Coking Coal (US$/tonne) LME Copper (US$/lb) • Upside • Continued tightness in the zinc concentrate market • No additional restarts from Glencore • Upside • Improved global growth and increasing inflation • Trade disputes resolved near-term • Upside • Recent supply constraints in Australia continue • Global demand increases • Upside • Stronger oil sanction on Iran, OPEC cuts, and other geopolitical conflicts • Higher investor flows • Downside • Oversupplied market coupled with lower economic growth • Australian supply recovers • Downside • Greater than expected downturns in global economic growth • Unexpected US production • Downside • Trade war and slowing global GDP • Chinese zinc production expands more than expected • Downside • US-China tariffs and trade war persist, global GDP slowdown • China metal demand slows LME Zinc (US$/lb) WTI Crude Oil (US$/bbl) Company Overview Industry Overview Operations Risks & Catalysts Conclusion Investment Theses Financial Analysis Teck produces commodities with strong supply-demand dynamics and low expected volatility, prices all above LT averages McMaster Investment Council

Production and Development Operations – Growth and Optimization Quebrada Blanca Phase 2 EBITDA First 5Y US$1.1-1.4B AISC First 5Y (Net-Byproducts) US$1.38/lb Production First 5Y CuEq 316kt NPV After-Tax @ 8% US$2.4-4.2B QB2 Prime Enhancement Frontier – Regulatory Phase QB3 Expansion Lease 421 – Future Growth Opportunity Improving economics of QB2 with limited capital outlay Teck 100%: 3.2 billion barrels Expansion of operations to realize full potential of QB2 Teck 50%: high grades & recovery, low fines Concentrator throughput, autonomous haulage, ore sorting, optimization Vast deposit increase, double throughput, a top copper operation in the world Fort Hills – Premier Asset Other Notable Projects Company Overview Industry Overview Operations Risks & Catalysts Conclusion Investment Theses Financial Analysis Antamina Highland Valley P&P Reserves 573Mbbl Life > 45 Years 38,000 bbl/d @ 21% Very Low Decline Rate Cash Cost Target < $20/b Mine life extension studies in progress Advancing mine life extension Pre-Feasibility Study (targeting minimum of 15 years) A Zinc Up 50% Completion of new D3 Ball Mill set for 2019, should improve recovery rates Capturing value from Shovel-Based Ore Sorting, Autonomous Hauling, and Blast Movement Monitoring Trail Operations Elkview Valley Water Strategy Port Upgrades 20,000m2/d AWTF Operating $310M #1 Acid Plant #2 Acid Plant Capital $22 20,000m2/d SFR Operating $50M Potential Pend Oreille life extension Capital $10 Key financial and operational momentum building that could spur revaluation in the near-term McMaster Investment Council

Exploration Projects Copper Zafranal (80%) San Nicholas (100%) Project Satellite Mesaba (100%) Galore Creek (50%) • Significant Cu-Ni (Au-Ag-Cu) deposit (w/ Maiden Resource statement) • Evaluating partnership opportunities Schaft Creek (75%) • Large Cu-Mo-Au-Ag deposit • Received multi-Year Area Based permit to carry out field studies Zinc Copper-Gold Joint Venture Company Overview Industry Overview Operations Risks & Catalysts Conclusion Investment Theses Financial Analysis NuevaUnion (50%) Teena (100%) Aktigiruq (100%) Value Realization Value Realization Combination of Teck’s Relincho and Goldcorp’s El Morro projects Brownfield Discovery Greenfield Discovery • 2001: Initial drill hole • 2017: Exploration target announced • Next 18 Months: advancing delineation • 2013: Discovery • 2016: Consolidated 100% ownership • Next 18 Months: advancing delineation One of the largest undeveloped copper-gold-molybdenum projects the Americas Phased Development Approach Relincho (104ktpd) La Fortuna (116 ktpd) Relincho (208 ktpd) Details Details • Inferred • 58 Mt • Zn: 11.1% • PB: 1.5% • Most significant Zn-Pb discovery in Australia since 1990 • Exploration Target • 80-150 Mt • Zn + Pb: 16-18% • Operating history, only 12km away from Red Dog mine site Concentration in high quality and stable copper assets should be ascribed significant value McMaster Investment Council

Investment Thesis I – Internal and External Defensibility Capital Structure Management – Target 30% D/E Coking Coal Not Thermal Electricity Generation (Tkwh) Investment Grade Ratings Price Forecasts (US$/t) Significant Debt Reductions Moody’s January 16, 2019 Down 43% Renewables Fitch February 21, 2019 Natural Gas Further upgrade potential ??? Teck vs Peers Share Dilution Flexible Maturity Profile (US$M) Coal Nuclear Thermal coal prices are forecast to deteriorate over the next 10 years as demand wanes. Persistent low natural gas prices and increased renewable energy technologies will continue to erode reliance on thermal coal. Past and Present Security Right Commodities at Right Time Company Overview Industry Overview Operations Risks & Catalysts Conclusion Investment Theses Financial Analysis Teck Resources During 2012 – 2016 Downturn Steelmaking Coal Well Positioned for Future “Green” Economy Secular demand growth in India and SE Asia $300/t No Equity Issued $250/t GHG Emission Intensity (kgCO2e/tonne) $200/t China capacity reductions, controls, and checks $150/t Invested in Production Growth at Fort Hills $100t Forward curve > US$165/t through 2021 Coal 10 200 Copper $50/t Jul 18 Jan 17 Jan 18 Jul 16 Jan 19 Jul 17 Copper Zinc No Core Assets Sold Mine production to peak in 2022 and structural deficit to emerge Structural deficit to ease in 2020 and remerge in 2022, record low inventories 100 5 33% Debt Reduction and Maturities Managed Teck is in the bottom quartile of miners 000’ Tonnes Only ~ 5% Mt Contained Maintained Liquidity (Currently ~$7B) 0 0 Over the past few years Teck has taken prophylactic measures to weather any economic or political headwinds McMaster Investment Council

Investment Thesis II – Project Pipeline Average Deposit Sizes but World Leading Grades Copper Growth Potential Peer Rankings (000’ tonnes) Production Profile ~790 Zafranal San Nic Teck Potential #6 (680) Teck Current #15 (274) Nueva U Contained Zn+PB (Mt) QB2 ~313 Coal Profit Maximization EBITDA Potential Company Overview Industry Overview Operations Risks & Catalysts Conclusion Investment Theses Financial Analysis Result Multiple Normalization Quebrada Blanca 2 Action Taken Energy Business EBITDA potential of ~US$635 million at 60% ownership assuming LT copper price of US$3.00/lb $53M in FCF $14M – Intersite Coal Hauling (Elkview) Current Teck EV/EBITDA Multiple 3.8x EBITDA potential at full production of ~C$500 million at US$75/bbl WTI and US$15/bbl WTI-WCS differential $59M in FCF $7M – Contract Mining (Line Creek) Historical Teck EV/EBITDA Multiple 5.8x - 6.7x Future realized EBITDA likely much higher due to LT copper prices, reserve development, and QB3 expansion Resource upside at Frontier and Lease 421 $17M in FCF $1M – PIP Engagement (Greenhills) Current Peer EV/EBITDA Multiple 6.5x - 7.5x $7M in FCF Historical energy EV/EBTIDA of 8x-10x 63kt – Hauling to Fording (Greenhills) Teck’s TTM EBITDA ~$10.00/share Total of $135 Million in Additional Free Cash Flow Generated EBITDA Potential ~$1.50/share EBITDA Potential ~$1.00/share Teck Resources’ reputation as a coal producer is obscuring upcoming base metal opportunities, LT value to be unlocked McMaster Investment Council

Comparables Analysis Public Comparable Analysis Teck EV/EBITDA vs Pure-Play Copper & Coal Peers Leading Operating FCF Yield Company Overview Industry Overview Operations Risks & Catalysts Conclusion Investment Theses Financial Analysis Teck trades well below copper, and even coal peers, despite a diversified base with copper expansion. 4x Peer group includes: Freeport-McMoRan, Hudbay Minerals, Glencore, Lundin Mining, First Quantum Minerals, Barrick Gold, Goldcorp, Anglo American, Vale SA, BHP Billiton, Rio Tinto, and Southern Copper Teck should trade at a higher multiple given diversified production base, leading Operating FCF Yield, and EBITDA Margins McMaster Investment Council

NAV Model Company Overview Industry Overview Operations Risks & Catalysts Conclusion Investment Theses Financial Analysis Given the NAV model base case assumptions Teck Resources is trading at a ~38% discount to its intrinsic value McMaster Investment Council

Risks & Catalysts Risks Catalysts Company Overview Industry Overview Operations Risks & Catalysts Conclusion Investment Theses Financial Analysis Diversification Recent Transaction Analysis Copper Growth Strategy No single country (buyer) accounts for > 20% of Teck’s revenue QB2 Expansion Expansion into copper and energy Current Projected Mines and projects located in Canada, USA, Chile, and Peru Catalysts well outweigh risks, majority of risks are non-systematic, and Teck is well diversified to mitigate McMaster Investment Council

Conclusion Investment Summary – Compelling Value Financial Analysis Target Price Current Price ($29.2) Avg Target ($38.4) NAV | 6% Strong Execution Premier operating assets, proven track record, and profitability enhancement at all operations NAV | 8% Solid Financial Position Significant liquidity and strong cashflow with a stable dividend and history of buybacks NAV | 10% Disciplined Capital Allocation Long-term balanced approach of cash returns to share- holders, capital spending, balance sheet management EBITDA | 4.5x Robust Project Pipeline Long-term stability, mid-term production growth, and short-term catalyst opportunities EBITDA | 5.5x Higher Multiple Justification Despite Teck’s diversified production base and financial footing it is trading ~3x below peers Blended NAV & EBITDA Share Structure and Holders Street Target Prices Company Overview Industry Overview Operations Risks & Catalysts Conclusion Investment Theses Financial Analysis Class A Shares ~7.8M Class B Shares ~563.5M Temagami Mining Company Institutions General Public SSM Resources (Sumitomo) Sovereign Wealth Other Other Total Total Considering all factors presented Teck Resources is a buy with a PT of $37.5 based on our blended NAV-EBITDA multiple McMaster Investment Council

Appendices

Management Overview McMaster Investment Council

Global Asset Map McMaster Investment Council

Reserves and Resources Copper, Zinc and Metallurgical Coal Oil and Gas Observations Net Gross Copper Strong reserves with substantial growth options Teck’s working interest share after deduction of royalties Working Interest Share Before Royalties Zinc Premier resources with strong reserves Well established reserves with capital efficient value Coal Teck Ownership: 20.89% Encouraging undeveloped resources with strong growth potential Energy McMaster Investment Council

Production Guidance Production Guidance Operations Change in Annualized Profit/EBITDA Unit Cost McMaster Investment Council

Milestones Recent Future McMaster Investment Council

Project Pipeline Breakdown McMaster Investment Council

Quebrada Blanca Analysis Project Highlights Return Rebalanced portfolio sees Cu contribution similar to coal` • Vast, long life deposit in favourable jurisdiction • Very low strip ratio and all-in-sustaining costs (AISC) • Enhancement (QB2 prime) and expansive potential (QB3) • Competitive capital intensity • High grade, clean concentrates, with mineralization open in multiple directions • Minimized geopolitical risk with community agreements In place and strong local relationships in Chilean government through ENAMI On a consolidated basis Cu production is doubled On attributable basis Cu production increases by 60% Vast deposit could support throughput capacity of over 400 ktpd, similar to some of the largest copper operations globally QB3 and other copper development projects could further increase copper exposure and diversification Copper Growth Strategy Strong Financial Position 290kt2 Transaction with Sumitomo and US$2.5 billion project financing reduce Teck’s equity capital contributions to US$693 million . Based on long term prices, increased Cu production could reduce steelmaking coal to below 50% of EBITDA over time Teck will fund its share of required equity through cash on hand and Free Cash Flow  Current liquidity of C$7 billion McMaster Investment Council

Innovation Focus Blast Movement Monitoring (BMM) Smart Shovels • Value Potential • Increased grade to mill • Potential to add significant free cash flow at HVC • Reduced energy use and tailings; improved sustainability performance • Maturity • Currently being piloted by Teck • Milestones • First launched in 2017 • First ever use of ore sorting technology on a shovel • Assessing Red Dog deployment in 2018 • Opportunity to replicate and scale up across operations • Value Potential • Reduced processing costs • Improved productivity: at Red Dog alone, BMM savings an estimated $6.5 million annually • Enhanced environmental performance; reduced energy and emissions to air • Maturity • Currently being implemented by Teck • Milestones • First launched at Red Dog Operations • Currently being implemented at Red Dog, Highland Valley Copper and Carmen de Andacollo Operations Real Time Analysis High Low Ore Grade Mill Waste Pile Sustainability Sustainability Productivity Productivity Sustainability Productivity Artificial Intelligence Autonomous Haul Trucks Sustainability Productivity • Value Potential • Improved safety • Highland Valley Copper (HVC): >$20M annual savings • Teck-wide: >$100M annual savings potential • Potential to steepen pit walls and narrow road widths; reduce environmental impact • Maturity • Proven technology; well understood • Milestones • Partnering with Caterpillar • Site assessment 2017 • Six-truck deployment at HVC by end of 2018 • First autonomous fleet at a deep pit mine • Value Potential • Machine learning analyzes data streams from each haul truck to predict maintenance issues before they happen • Reduce unplanned maintenance, reduce overall maintenance costs, extend equipment life • Potential $1.2 million annual savings at just one site • Maturity • Successfully developed at Teck coal site • Partnership with Google and Pythian to develop analytic algorithm • Milestones • Successfully implemented in production • Wider deployment underway at coal sites in 2018 Productivity Sustainability Safety Sustainability Productivity McMaster Investment Council

Project Satellite Details MESABA (100%) Major undeveloped Cu-Ni-PGE (Au-Ag-Co) Deposit SAN NICHOLAS (100%) Unlocking Value from a high grade copper-zinc Teck greenfield discovery ZAFRANAL (80%) Advancing an attractive copper-gold asset in Peru • Preparing a maiden resource • #3 in contained nickel in undeveloped global nickel sulphide deposits • Copper equivalent grade of 0.70% • One of the world’s most significant undeveloped VMS deposits • Expected C1 cash costs in the 1st quartile • Competitive capital intensity • Co-Product Zn and Au & Ag credits • Well-established mining district in Mexico • Community engagement plan well underway • Prefeasibility Study and Socio-Economic Baseline Studies initiated in Q4 2018 • 19 year life of mine with further upside potential within the deposit footprint and in the district • Attractive front-end grade profile • Mid range forecast LOM C1 cash costs • Competitive capital intensity • Strong support from Peruvian regulators including MINEM and SENACE • Engaged with full spectrum of communities GALORE CREEK (50%) New partner on high grade copper-gold-silver deposit in NW BC • Potential to become one of the highest quality, lowest cost copper producers in Canada • Copper equivalent grade of 0.61% McMaster Investment Council

Precedent Transactions January 2012 • Teck to acquire SilverBirch Energy by way of a plan of arrangement under CBCA • Teck will contribute to the new SilverWillow CAD $25 million in working capital and its 50% interest in several oil sands leases that are currently jointly owned with SilverBirch August 2015 • Goldcorp and Teck Combine El Morro and Relincho Projects in Chile • Teck and Goldcorp will contribute their respective project interests into a 50/50 joint venture, with the interim name “Project Corridor” • Allows Teck to consolidate infrastructure to reduce costs, reduce the environmental footprint and provide greater returns over either standalone project. November 2016 • Teck acquires all issued and outstanding shares of AQM copper for approximately $25M CAD • Provides Teck with more indirect interest in the Zafranal copper-gold project May 2017 • Fortis purchases Teck’s two-thirds interest in the Waneta Dam and related transmission assets in British Columbia, Canada, for $1.2 billion cash. • Strengthens Teck’s balance sheet and provides significant new capital for reinvestment June 2017 • Teck announces redemption of US $214M principal amount of notes • Issued notice of redemption to redeem, on June 7 2017, all of the approximately $84M million principal amount of its 3% notes due in 2019 June 2017 • Teck purchases 21% interest in Goldcorp’s San Nicolás Copper-Zinc Project • Purchased for $50M, Teck will now own 100% of the project April 2018 • Teck acquires additional 13.5% interest Compañia Minera Teck Quebrada Blanca SA, bringing total interest to 90% • High quality copper development project in Northern Chile with low risk and expected long-life. Will substantially increase Teck’s copper production • One of the world’s largest undeveloped copper resources, mine life of 28 years December 2018 • Teck acquires 12.5M shares for 13.8% of Sun Metals for $3.5M • Mineral exploration company with project in British Columbia • Purchased for investment purchases, may increase/decrease investment depending on market conditions December 2018 • Teck sells 30% interest in QBSA to Sumitomo Metal Mining for $1.2B • Reduces Teck’s estimated remaining share of equity contributions • Delays Teck’s expected cash contribution to 2020 McMaster Investment Council

Coal Business Elk Valley Map Production Breakdown (Mt) Water Strategy Innovation CAPEX Projected to Fall Use and Enhancement of Biological Process Present in Backfill Pits Limited major enhancement capital required to increase existing mine capacity and offset Coal Mountain closure ~$13/t ~$6/t McMaster Investment Council

NAV Model – Coal (1) McMaster Investment Council

NAV Model – Highland Valley McMaster Investment Council

NAV Model – Carmen de Andacollo McMaster Investment Council

NAV Model – Antamina McMaster Investment Council

NAV Model – Antamina (2) McMaster Investment Council

NAV Model – Red Dog McMaster Investment Council

Fort Hills Valuation and EBITDA Target Price McMaster Investment Council

Exploration Valuation – In Situ McMaster Investment Council

Teck Resources (TSX: Teck.B )