管理層發言
Ladies and gentlemen, thank you for standing by. Welcome to Teck's Second Quarter 2026 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. This conference call is being recorded on Thursday, 07/23/2026. I would now like to turn the conference over to Emma Chapman, Vice President, Investor Relations. Please go ahead.
Thank you, operator. Good morning, everyone, and thank you for joining us for Teck's second quarter 2026 conference call. Today's call contains forward-looking statements. Actual results may vary due to various risks and uncertainties. Teck does not assume the obligation to update any forward-looking statements. Please refer to Slide 2 for the assumptions underlying our forward-looking statements. We will reference non-GAAP measures throughout this presentation. Explanations and reconciliations are in our MD&A and the latest press release on our website. On today's call, Jonathan H. Price, our CEO, will provide highlights for the second quarter of 2026. Crystal J. Prystai, our CFO, will follow with further details on our operational performance and financials in the quarter. Jonathan will then wrap up with closing remarks and an opportunity for Q&A. And with that, over to you, Jonathan.
Thank you, Emma, and good morning, everyone. We have delivered another quarter of strong operational and financial performance. We generated significantly higher earnings and robust cash flow in the second quarter of 2026 supported by favorable commodity prices, including another record quarterly average copper price. Compared with the same period last year, we generated cash flow from operations of $1.7 billion and tripled adjusted EBITDA to $2.2 billion. We also successfully managed our net cash unit costs despite energy cost headwinds, supported by stronger operational performance and favorable byproduct pricing. As a result, we increased our net cash position by $756 million during the quarter, and $1 billion in the first half of the year. Alongside this strong financial performance, we continue to make good progress against our near-term priorities to create shareholder value. We are advancing our merger of equals with Anglo American, with our focus on securing the remaining regulatory approval. Meanwhile, integration planning is intensified to ensure we are ready to close shortly after approval is received. Operationally, we continue to build momentum across the business. Copper production increased by 25% compared with the second quarter of last year with higher production across all our copper operations coupled with continued strong sales volumes. We are delivering greater operational stability quarter by quarter through our continued focus on safe, reliable, and consistent performance, and there are no changes to our previously disclosed annual guidance. Importantly, this strong performance includes QB, where we achieved our third consecutive quarter of stable operations—an important step towards realizing the full value of this world-class asset. During the quarter, we also continued to advance our tailings management facility work at QB, including the completion of Rock Bench 5. I will return later in the presentation to some of the TMF options currently under evaluation with the potential to further enhance operational continuity. At Highland Valley, we continue to advance the mine life extension project; detailed engineering is 95% complete. Overall, this was another strong quarter that demonstrates disciplined execution across the business, reinforces the quality of our portfolio, and positions us well as we move towards completing our merger with Anglo American. So turning to the merger update on Slide 5. The regulatory approval process in China continues to progress as expected. We remain focused on engagement with the regulator. In parallel, integration planning continues to advance. Our teams are working hard to ensure we are fully prepared to close the transaction following receipt of necessary approvals while also continuing to develop our plans to capture the significant value-creation opportunities available through the combination. Consistent with our original expectations, we continue to anticipate completing the transaction within 12 to 18 months of the September 2025 announcement. Turning to our focus on safe and stable operational performance, beginning with safety on Slide 6. During the second quarter, our high-potential incident frequency rate at Teck-controlled operations remained low at 0.08, broadly in line with our performance last year. Any safety incidents are thoroughly investigated, and corrective actions implemented to strengthen critical risk controls and reduce the likelihood of recurrence. We are also very pleased that the Highland Valley mine life extension project has now achieved 1 million hours worked without a high-potential incident or a lost-time injury, reflecting the strong safety culture across the project team. So turning now to our operational performance on Slide 7. Copper production increased by almost 25% in the second quarter compared with the same period last year. Higher production across each of our operations as shown in the chart on the left. This higher production, together with favorable commodity and byproduct prices, drove a significant reduction in our net cash unit costs, more than offsetting the impact of higher energy prices. As a result, our profitability continued to strengthen, with adjusted EBITDA margins reaching a record 61%, up from 36% in the second quarter of 2025. These results demonstrate how our continued focus on operational performance is translating into higher volumes, lower costs, and improved financial returns. Turning to QB on Slide 8. As we continue to advance tailings management facility development, we have not experienced any TMF-related downtime in the past three quarters, supporting improved asset utilization and operational consistency. As a result, QB produced 55.8 thousand tonnes of copper during the quarter, compared with 52.7 thousand tonnes in the same period last year, with stable throughput and recoveries and all key operating metrics tracking in line with our full-year guidance. During the planned maintenance shutdown in May, we completed several initiatives designed to optimize plant performance and increase throughput. We began to see the benefits of that work towards the end of the quarter, providing a solid foundation for continued operational improvement throughout the remainder of the year. Overall, QB continues to demonstrate improving operational consistency, giving us increasing confidence in the long-term performance and value of this world-class asset. Now looking at the QBTMF on Slide 9. Progress on the TMF remains an important enabler of predictable operating performance at QB, and we made significant progress during the second quarter. We completed Rock Bench 5 during the quarter—an important milestone that supports freeboard management through the remainder of the year. Completion of the cyclone station upgrades and increased cyclone availability improved our sand deposition rates and supported continued progress towards planned TMF performance. As mentioned, there was no TMF-related downtime at the concentrator in the past three quarters, demonstrating the progress we have made in reducing operational constraints. Workers continue to optimize the supporting ancillary infrastructure required to accommodate higher sand deposition rates. Construction of the secondary cyclone station could further improve our sand deposition performance. The latest progress on the QBTMF is reflected in our updated scorecard on Slide 10. As I have already mentioned, we completed Rock Bench 5 as planned. Looking ahead, we expect to complete installation of the secondary sand cyclone system by the end of the year, further strengthening the robustness of the tailings handling system and increasing its ability to manage variability in plant feed. Consistent with our QB action plan, we are progressing our evaluation of the timing and sequencing of the installation of the permanent TMF pipeline infrastructure which will mechanically raise the tailings pipeline, supporting more efficient and optimized TMF performance. As part of this assessment, we are evaluating opportunities to accelerate certain TMF activities, including the potential advancement of material placement currently planned for 2027 by constructing an additional rock bench this year. Proceeding with Rock Bench 6 would allow the permanent pipeline infrastructure to be installed later this year, earlier than planned. This would provide greater operational flexibility during completion of the sand dam, reducing execution risk and supporting continued improvements in operating performance from a stable operating base. If we take the decision to proceed, construction of Rock Bench 6 is expected to commence in late August or early September, and be completed by around year end, with an estimated capital investment of approximately $100 million this year. Overall, we continue to make good progress on the TMF and are focused on opportunities to safely accelerate development and further strengthen the long-term reliability of QB operations. So turning now to the mine life extension at Highland Valley on Slide 11. Construction continues to advance well, with the project achieving an important safety milestone of more than 1 million hours worked without any high-potential incidents or lost-time injuries. During the second quarter, we completed installation of the pilings for the mill upgrades and successfully executed the first integrated shutdown between the operation and the mine life extension project. Detailed engineering is now approximately 95% complete, procurement is nearing completion, and construction activity continues to ramp up across the site including earthworks, pipelines, brownfield works, and supporting infrastructure. We invested $254 million of project capital during the quarter; our capital expenditure guidance remains unchanged at $900 million to $1.2 billion for 2026, and $2.1 to $2.4 billion over the life of the project. Capitalized stripping activity is also expected to increase during the second half of the year as we prepare future mining areas. While higher diesel prices will have some impact, our guidance for capitalized stripping remains unchanged at $450 million to $550 million for the copper business. Mine life extension will extend Highland Valley's mine life to 2046, while supporting average annual copper production of approximately 132 thousand tonnes, reinforcing its position as a cornerstone asset in the copper portfolio. Overall, we are continuing to execute well across our portfolio, with strong operational performance supporting disciplined project delivery, positioning the business well for the future. I will now hand over to Crystal to take you through the financial results in more detail.
Thanks, Jonathan. Good morning, everyone. Starting with an overview of our strong financial performance in Q2 2026 on Slide 13. We delivered significantly stronger financial results in the quarter with adjusted EBITDA tripling to $2.2 billion compared to the same period last year. This performance was underpinned by strong copper production across all of our operations, including a third consecutive quarter of stable production at QB together with higher commodity prices, and increased byproduct revenues. In addition, we significantly improved profitability at Trail Operations as we continue to focus on cash generation through value-driven optimization of feed sources and production. As a result, our adjusted EBITDA margin increased to a record 61%. Our strong earnings in the second quarter translated into robust cash generation with $1.7 billion of cash flow from operations, contributing to a $756 million increase in our net cash position over the quarter. We also returned $61 million to shareholders through payment of our regular quarterly base dividend. Looking now at the key drivers of our higher profitability in Q2 2026 on Slide 14. The increase in adjusted EBITDA was primarily driven by significantly higher commodity prices including favorable pricing adjustments and stronger byproduct pricing. Higher copper production and sales volumes and higher volumes of byproducts also made significant contributions. Overall, operating costs were lower year-on-year, more than offsetting higher oil prices while lower smelter processing charges also provided a benefit. These positive factors were partially offset by higher royalties and profit sharing as a result of higher profitability at our operations. Turning to our copper business on Slide 15. Compared with Q2 last year, gross profit before depreciation and amortization (D&A) more than doubled to $1.8 billion with margins substantially higher at 65% compared with 46% a year ago. This stronger performance was driven by record copper prices together with higher production across all operations. Higher copper production reflects higher throughput across our operations as well as higher grades at Highland Valley and Antamina as expected. QB delivered its third consecutive quarter of stable operations with copper production increasing to 55.8 thousand tonnes from 52.7 thousand tonnes in the same period last year. Our copper net cash unit costs improved by 19% reflecting higher copper production and byproduct credits. Looking ahead, guidance for our copper segment remains unchanged and we continue to expect further growth in copper production this year to 455 thousand to 530 thousand tonnes from 454 thousand tonnes last year. Looking at our zinc segment on Slide 16. Compared with the prior year, gross profit before D&A increased by 122% to $353 million with margins significantly higher at 39% compared with 28% previously. This improvement was primarily driven by strong performance at Trail Operations. This reflects materially higher byproduct pricing, and the continued execution of our value-driven optimization of feed sources and production including prioritizing processing of residues in the near term. As a result, gross profit before D&A at Trail increased to $203 million compared with $42 million in the same period last year, despite the planned shutdown of the lead circuit during the quarter. On July 7th, we also announced a strategic investment agreement with the Government of Canada to support strategic metals production at Trail. The initiative has the potential to expand production of germanium and antimony and add new gallium capacity. It also remains subject to certain conditions as well as evaluation under our capital allocation framework. At Red Dog, zinc production in the second quarter reflected lower grades and recoveries, consistent with the mine plan, and zinc sales were within our guidance range at 37 thousand tonnes. Zinc net cash unit costs improved 29% benefiting from lower smelter processing charges and higher byproduct credits. Looking ahead, the Red Dog shipping season commenced on July 12th. As in previous years, the majority of diesel deliveries are expected during the third quarter, alongside zinc concentrate sales of 220 thousand to 270 thousand tonnes reflecting the normal seasonal shipping pattern. Our guidance for the zinc business remains unchanged. We continue to expect zinc in concentrate production of 410 thousand to 460 thousand tonnes and refined zinc production of 190 thousand to 230 thousand tonnes in 2026. Turning now to our net cash unit costs on Slide 17. Despite oil price headwinds during the quarter, we reduced net cash unit costs across both our copper and zinc businesses reflecting strong operational performance, cost discipline, and favorable byproduct pricing. In copper, total cash unit cost declined despite approximately 7¢ US per pound of energy inflation impact, supported by higher production across our operations. Net cash unit costs improved even further from $2.02 US per pound to $1.64 US per pound as stronger byproduct production and pricing—particularly for molybdenum, silver, and zinc—increased byproduct credits. In zinc, total cash unit costs were broadly stable as the impact of lower production volumes has been largely offset by lower smelter processing charges. Red Dog has been largely insulated from higher energy year-to-date, as diesel for the 2026 shipping season had not yet been delivered. Net cash unit cost in zinc also improved significantly from $0.49 US per pound to $0.35 US per pound driven by stronger byproduct prices, including silver, lead, and germanium. These cost improvements, together with the favorable pricing environment, translated into materially stronger margins across both of our business segments. Turning now to our margins on Slide 18. We delivered a significant expansion in margins across both of our business segments during the second quarter, reflecting the benefit of higher commodity prices, together with continued operational improvements and disciplined cost performance. In copper, adjusted EBITDA margin increased to 70% compared with 45% in the second quarter of last year, driven by stronger copper prices, higher production and sales volumes and strong byproduct credits. In zinc, our adjusted EBITDA margin increased to 38% from 25% a year ago, reflecting higher zinc prices, stronger byproduct credits, and the continued optimization of feed sources at Trail Operations. Turning now to our balance sheet on Slide 19. As a result of the strong cash generation from our operations, we continue to strengthen our balance sheet while funding the Highland Valley mine life extension project. In the second quarter of 2026, we generated significant cash flow from operations of $1.7 billion. Net cash increased by $756 million during the quarter to $1.2 billion representing an increase of $1 billion over the first half of this year. Our liquidity strengthened further to $10.3 billion as at June 30, including $6.1 billion of cash. We also continue to reduce debt through our semiannual repayments under the QB project finance facility, positioning us with a strong balance sheet as we move towards completion of the Anglo merger. I will now pass it back to Jonathan for closing remarks.
Thanks, Crystal. I will now wrap up briefly on Slide 21. We are pleased to have delivered another quarter of strong operational and financial performance, reflecting the continued progress we are making across the business. As we look to the second half of the year, our key near-term priorities remain clear: advancing our merger of equals with Anglo American, including securing the remaining regulatory approval and progressing integration planning; continuing to deliver safe, stable, and reliable operating performance across our business; further strengthening the performance of QB through continued operational improvements and progress on the tailings management facility; and advancing the Highland Valley mine life extension project. By remaining focused on these priorities, we believe we are well positioned to complete the merger and create a leading critical minerals company with the financial strength, operational capability, and portfolio quality to deliver long-term value for shareholders. So with that, over to you, operator, for questions, please.
分析師問答
Certainly. To join the question queue, please press * then 1 on your touch-tone phone. We ask that you please limit yourself to one question and one follow-up. You are using a speakerphone, please ensure you lift the handset before pressing any keys. If you wish to remove yourself from the question queue, you may press * then 2. The first question comes from Orest Wowkodaw with Scotiabank. Please go ahead.
Hi, good morning. It is really great to see the operational turnaround, especially QB. And before my question, I just wanted to also put a big thank you to Emma for all her help in IR and best wishes on her next opportunity. What specifically I'm curious about is if advancing Rock Bench 6 and advancing some of the infrastructure could positively impact throughput rates versus plan for 2027 and 2028?
Thanks, Orest, and thank you as well for that comment on Emma. I will talk a little bit about that later. The short answer to your question is no, Orest. We do not expect any direct impact to throughput rates as a result of the planned actions. As mentioned, we see this as an acceleration and essentially a de-risking that allows us to further underwrite the ongoing operational continuity that we have worked hard to achieve over the last three quarters.
Okay. And second question, just in terms of the regulatory approval specifically from China, can you give us an update on where things are at? Whether you have received any requests for potential offtakes or asset sales or anything like that? Or is it just really business as usual—what might the Chinese be asking for in terms of the process?
Yeah. I would say that the process with SAMR, which is the market regulator in China, is unfolding in the normal course. We continue to respond to information requests, aligned with the typical process here. We are moving ahead and still expect completion to be within the originally announced 12 to 18 months from the date of announcement. Beyond that, there is nothing more to say in that we have not received any request for remedies arising from the approval process. So, business as usual for the time being.
Okay. Thank you. And just finally, how quickly do you expect the transaction to close post the Chinese approval?
Very quickly. We would be talking a matter of a couple of weeks, no more than that.
The next question comes from Dalton Baretto with Canaccord Genuity. Please go ahead.
Thanks, operator. Good morning, Jonathan and team. On the assumption that you do get the SAMR approvals in short order and you close fairly quickly, can you give us an update on where you are at in terms of the integration planning? What things have been settled and are ready, and what are you still working on? Any thinking around the pro forma portfolio?
Thanks for those questions, Dalton. An enormous amount of work is going on integration planning between ourselves and Anglo American right now. Of course, we have to continue to operate entirely as independent companies until such time as the merger closes. We run our own businesses; there is no crossover of decisions in relation to operations or current activities. In the meantime, of course, we have to ensure that we can seamlessly integrate these two companies to do two things: one, to maintain operational continuity and two, to ensure we can operate efficiently and effectively. On the other hand, we have a lot of value to capture here through the combination of these businesses. So we are planning for both of those things. On the one hand, we have to plan the way forward around business processes and systems and organizational structures. Of course, the appointment of leadership and other teams throughout the new organization will be key to standing that new business up. On the other hand, we are working hard to build out the synergy capture plans at a much higher level of fidelity to ensure that as soon as the merger closes, teams in the new Anglo-Teck organization can get after capturing that value. An enormous amount of work is going on, and we would expect that work to continue with a high level of intensity all the way through to completion of the transaction.
Maybe in parallel, as you are working through that, can you comment on where you guys are at either as Teck or potentially with Anglo American on the Collahuasi–QB2 type opportunity specifically from an ownership perspective?
Yeah. So we remain very focused on that, given the significant value opportunity that presents. As we have said before, we continue to believe that it offers the shareholders of both QB and Collahuasi the fastest growth route to copper growth with the lowest risk and lowest capital intensity, and therefore delivers the highest returns of any opportunity available to either operation and their shareholders. One of the first steps there is advancing a formal study to ensure that we validate and underwrite the investment thesis and begin to shape exactly what that project will look like from an execution perspective. We have engaged with shareholders of both operations and with local governments, and we remain very optimistic that we will arrive at a mutually beneficial agreement for all parties because there is so much value to be shared. I will not comment more on the nature of those commercial interactions at this point because they remain confidential. But we remain very focused, as Anglo American, on pursuing that synergy capture opportunity.
Is that study being conducted collectively, or will different shareholders have people look at this?
Ultimately, that will have to be a shared piece of work across both sites. We are working with Anglo American on developing that, so we have the coverage, of course, as we do today across both QB and Collahuasi. Ultimately, what that looks like is going to be something for all shareholders to be part of. For the time being, that is something we are progressing at pace.
The next question comes from Anita Soni with CIBC World Markets. Please go ahead.
Thanks for taking my questions. And again, similar to Orest, congratulations on your move and best wishes on your next endeavor. And thanks for all your help over the last couple of years. I just wanted to ask firstly on this Rock Bench 6: what would you need to see to be able to make that go-ahead decision to accelerate the Rock Bench 6 construction?
I think, Anita, as ever, when we make a decision to invest capital, we need to ensure that it is the right thing to do in terms of the uplift that it will give to the value of the operation. I think we have a pretty strong conviction that this is the direction that we will go because of that acceleration and de-risking I mentioned. But we have our usual investment committee processes to work through and the technical assessment of Dale and his team. I would say there is a high likelihood that is the direction that we will follow.
The idea is that you now build out the rock bench so you would have a wide enough crest field to put the infrastructure in earlier, and then that would help with the sand deposition and accelerate that?
Yeah, that is exactly right. An additional Rock Bench 6 will significantly widen the crest that will enable the installation of the permanent infrastructure on that crest and then the efficiency of the deposition of tailings upstream and sand downstream will be significantly enhanced and more efficient than the practices we are deploying today.
Would there be any kind of cost savings from that? More of the sand deposition being taken up automatically rather than physically placing it with trucks?
Yes, there will be some soft cost savings. I do not think they will be dramatically material in the context of the overall operation at QB, but we will gain efficiencies from progressing to this next phase of steady-state operation.
And I just have one quick question on the Antamina zinc pipeline: is there any update on where that stands? I read in your release that it was shut down during the quarter. Is there any idea when it would restart?
It is now fixed, and it is back in operation.
The next question comes from Craig Hutchinson with TD. Please go ahead.
Hi, guys. Good morning. I just want to ask a follow-up question on the throughput at 115 thousand to 132 thousand tonnes. Is the goal now in the second half of the year to really push the mill up to its design rate, or are you still being a bit cautious on that? Maybe as a follow-up, is there anything on the tailings management facility or the mill itself that would prevent you from operating at design?
Dale, do you want to provide a bit of color on that, please?
Sure. Thanks for the question. I think the focus for us in recent quarters has been stability. That focus has allowed us to achieve stable metallurgical recovery as well as improved molybdenum plant performance. Our focus now is to build upon that stability and start optimizing and improving plant performance. This work is unconstrained by the TMF. So our priority is to achieve demonstrated, repeatable results through improvement over the next few quarters.
And is the improvement in recovery part due to the stability of the operation, or are you also starting to see improvements in terms of geology—less oxide, less clay-type ores?
As the mine continues to develop, we do expect to see improved recoveries as a result of ore type. At the same time, now that we have stable operations, it is far easier to identify incremental improvements and to implement operating discipline to achieve stability and repeatability. It's really a combination of both as we move forward.
Okay. Thank you. And just a question on the Trail deal we announced a few weeks back: is the plan to double germanium production through improved recoveries at Red Dog, or more by sourcing additional feed? How much of the uplift would come from existing operations versus new feed or tolling arrangements?
Thanks for the question. The initiative at Trail is more about increasing processing capacity over time so we can handle more feed. The majority of our feed today comes from Red Dog, and that has been supplemented by certain residues and other sources to complement that. We continue to look at a wide range of potential sources. Our commercial group, working with corporate development, has been active sourcing a wide range of feeds to support that going forward. Fundamentally, the additional volume is not a recovery game; it is expanding processing capacity, and that is what the investment would be directed towards. To give examples of our approach, we recently divested the Apex germanium mine to Blue Moon Metals and secured an offtake agreement for zinc concentrate from Blue Moon and marketing rights for that product produced from Apex. We also made an equity investment to rebuild zinc, lead, and silver capacity in the Idaho Silver Valley, where production is growing. We engaged in a recent divestment of the Sun–Smucker project to Valhalla Metals, securing priority purchase rights and an offtake of concentrates produced from those properties. We are working on a number of other opportunities. Based on the announcement, this is an exciting area with lots of promise. We intend to continue our strategy of optimizing for value at Trail; both residues and feed sources are an important component to create optionality.
Thanks, guys.
The next question comes from Liam Fitzpatrick with Deutsche Bank. Please go ahead.
Hi, Jonathan and team. Two quick ones. First, any recent updates on indexation in Canada that you can share? Second, on Trail—I know Q2 was impacted by maintenance, but profitability has remained strong. Should we expect similar or better profitability in the second half, or anything else to highlight on that asset?
To the point on indexation, there was some movement yesterday when S&P released a proposal to the market for comment on the potential for foreign issuers to have indexation in Canada, which is the matter we have been focused on. The proposal is encouraging in that it talks about materiality being an important part of the Canadian investment landscape, and it does not require Canada to be the highest level of economic component of a business for an issuer to achieve indexation. We are encouraged by what we have seen. Also, S&P is proposing to apply some flexibility and discretion around how these decisions are made and when they are made. The consultation process is open for comment until August 21st, and we expect to learn more thereafter. The signals are quite positive, and we will continue to watch that carefully.
Hi, Liam. Similar to what we said in the first quarter, as we think about Trail, we are very focused on optimization and profitability. Profitability going forward depends on both commodity prices and the feed profile. We continue to focus on maximizing profitability over volumes. A couple of things to note for the second half of the year: we expect refined zinc production to increase in the third quarter as we continue to optimize feed sources and balance processing residues. We also have planned shutdowns required in both zinc and lead in the fourth quarter. Those items should moderate expectations for the second half of the year.
Okay, that is great. Thank you.
The next question comes from Myles Allsop with UBS. Please go ahead.
Thanks. One thing that surprised me a little bit is that you didn't point to the upper end of guidance. How are you thinking about production for this year—are you being super prudent given history? Is there a realistic scenario where you could be at the midpoint of guidance rather than the top end?
We are very focused on operational consistency and stability throughout the year—that is a primary focus. Highland Valley is very H1-weighted; in H2 we will have downtime in the mills for tie-ins to the mine life extension project and we also expect a reduction in grade from a feed perspective in the second half. We are also expecting lower production at Antamina in the second half. We will work hard to generate the best production outcomes across all sites, but we do think the guidance ranges are valid and appropriate and reflect the full-year outcomes we are anticipating.
Going back to QB, now that we are getting three steady quarters and the tailings have been de-risked to a large degree, should we be thinking about bringing forward debottlenecking and optimization opportunities to increase throughput by, say, 15–20%?
Certainly, the work in achieving stable operation is highlighting areas that will allow us to think about optimization and future debottlenecking. That work is in progress—building upon operational information to determine what's next. Our focus now is to drive incremental improvements within the current operation and to identify the most cost-effective ways to improve the operation as we move forward.
What is the best timeframe to start debottlenecking? Could that be over the next two years, or further out?
That is part of the work we are doing—to understand what work is needed and how fast we can do it, recognizing other work we are doing on the broader QB picture. Some items can be done in the short term and some will take longer. You can see from our disclosures today that we still have work to do to push key operating parameters toward design levels. That provides a higher base and a strong foundation on which to execute debottlenecking projects.
Thanks.
The next question comes from Lawson Winder with Bank of America. Please go ahead.
This is Adam Smierowski on for Lawson. I had a follow-up question on the recovery initiative at QB2. Would you be able to describe some of the work that is being done there and what level of copper recovery we should expect for the remainder of 2026 and into 2027?
We are not going to re-guide copper recoveries beyond the parameters we've set for this year. Dale, can you give some color on the initiatives being pursued to improve recoveries?
A lot of the work builds upon the comprehensive operational review done last year. One key element was accelerated drilling to get more information about the ore body, which helps our operational plans and helps develop playbooks for different ore types. We are optimizing that information and feeding it into process control setups to be more efficient. We are also installing additional sensors and controls to allow fine-tuning of the operation, building upon stable operation to improve control and repeatability. We are continuing to improve and optimize reagent addition. All of this builds confidence in repeatability and our ability to build upon stability as we continue to improve throughput rates.
Thanks. One more question on costs: Q1 and Q2 net cash costs have been well below guidance and byproduct prices are above guidance. Are you set up to beat guidance on cash costs? Can you communicate sensitivity of unit costs to byproduct prices and to diesel deliveries for the shipping season?
Hope you are having a good day. We are pleased with cost performance year-to-date. There remains volatility in byproduct pricing and energy costs. While our guidance contains more conservative assumptions established late last year, we remain confident in the ranges. If byproduct pricing persists, expect to be below the midpoint on copper and similarly on the zinc side. From a sensitivity perspective, for every $10 change per barrel of WTI, it's about 1¢ on our zinc C1s and about 3¢ on copper. On byproduct sensitivities such as silver, I do not have the per-unit movements off the top of my head; we can circle back with more detail offline and provide that in an EBITDA context if helpful.
Okay. We will come back to you offline.
The next question comes from Brian with Raymond James. Please go ahead.
Good morning and thank you for taking my question. I want to follow up on the germanium and gallium initiative at Trail. As Red Dog currently sits, it runs out over a number of years. Does the new area have the same amount of germanium, or if it does not, how do you reconcile potentially losing one of the major sources for germanium at Trail on a longer-term basis if it doesn't grade the same? I realize this is competitive information, so I'll accept whatever you are willing to discuss.
Thanks for that question, Brian. I'll pass to Ian, our Chief Commercial Officer, who can comment on Red Dog and other feed sources and the broader commercial strategy for Trail.
Thanks, Brian. Decisions on Red Dog mine life extension and its advancement are independent of the Trail initiatives and will be subject to normal capital allocation and portfolio decisions. Feed sources for Trail come from a variety of places including Red Dog. We are advancing the Red Dog MLE project, which is rich in germanium. We have also entered into a number of transactions to secure offtake agreements with other zinc and germanium miners. For example, we divested the Apex germanium mine to Blue Moon Metals and secured an offtake agreement for zinc concentrate from Blue Moon and marketing rights for Apex production. We made an equity investment to rebuild capacity in the Idaho Silver Valley and divested the Sun–Smucker project to Valhalla Metals, securing priority purchase rights and offtake for concentrates produced there. We are working on additional opportunities. Residues and alternative feed sources are important in creating optionality and maximizing value at Trail.
That is very helpful. One more quick question: when I look at some of the other sources, such as Kapushi in Africa or material from outside North America, would you consider those, or are you focusing on Western sources?
We have lots of offers and will be careful about how we engage with each of them. Some of them are interesting both as residues and raw feed. We will evaluate them carefully in line with our value optimization and any government or strategic considerations.
Thank you very much. That is helpful.
Thank you. We are out of time for further questions. I will now hand the call back over to Jonathan H. Price for closing remarks.
Okay. Thank you, operator. Before we sign off and in response to some of the kind comments earlier in the call, I did want to note that this is Emma Chapman's last quarterly conference call with Teck. I would like to thank Emma for her incredible contributions and the strong relationships she's built across both the sell side and buy side during an intensely active period. She's done an amazing job on behalf of Teck, and we wish her all the very best in her next chapter. Edwin Shadeo has stepped in as Acting Vice President, Investor Relations and Treasurer. Many of you will already know Edwin from his previous roles with the company since 2005—he has been in treasury, corporate development and previously in investor relations. Please do reach out to Edwin and other members of our IR team on anything you want to follow up on. Thanks again to all of you for joining us today, and enjoy the rest of your day. Thank you.
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