Slow water drainage in the tailings dam at Teck's QB2 mine in Chile has repeatedly dragged down production this year.Marcos Zegers/The Globe and Mail
Teck Resources Ltd. TCK-N has cut its production forecast yet again at its Quebrada Blanca (QB2) copper mine as it continues to struggle with engineering problems at the high-altitude operation in Chile.
Vancouver-based Teck announced the worse-than-anticipated guidance as it tries to persuade its investors to vote for the takeover of the company by Anglo-American PLC NGLOY.
Teck on Wednesday said that it is reducing QB2’s forecast to roughly 180,000 tonnes of copper from about 220,000 tonnes. The company had already cut the forecast in July and January.
QB2 has been a problem for years. The US$8.7-billion project went 85 per cent over budget. After the mine went into production in 2023, the ramp-up didn’t go well either, with ore-grade shortfalls, unscheduled maintenance shutdowns and persistent technical issues with the tailings dam.
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This year, slow water drainage in the dam has repeatedly dragged down production. Teck on Wednesday said it will spend an additional $420-million next year on the dam but constraints on production will persist throughout 2026.
“We’d expect to see that steady-state operation in 2027,” Jonathan Price, Teck’s chief executive, said in a conference call with analysts on Wednesday.
Anglo in September reached a friendly agreement with Teck to buy the company in an all-stock, no premium deal worth about $20-billion.
Jefferies analyst Christopher LaFemina in a note to clients on Wednesday said that owing to the latest setback at QB2, Anglo would have little reason to increase its offer.
“This makes the Anglo-Teck merger more likely to close without Anglo needing to bump,” he said.
Some analysts question whether Teck shareholders will approve the deal in a vote scheduled for Dec. 9 given the lack of a premium being paid by Anglo. The timing is also under scrutiny because the transaction was announced when QB2 troubles were hammering the share price.
“While the industrial logic of an Anglo-Teck combination is sound and the significant expected corporate/operational synergies are compelling, we continue to believe that the proposed transaction under the current terms appears unlikely to succeed,” Orest Wowkodaw, an analyst with Scotia Capital, said in a note to clients on Wednesday.
Obtaining the minimum threshold in Teck’s coming shareholder vote is “likely to prove challenging,” he added.
At least two thirds of votes cast must be in favour for the transaction to proceed.
About a week before the Anglo deal was announced, Teck launched a major overhaul at QB2 and cut ties with its chief operating officer, the second COO to leave the company amid problems at the mine.
Despite years of struggle, some analysts believe the problems at QB2 will get ironed out over time.
“Although the near-term guidance revisions are slightly weaker than we anticipated, our biggest takeaway is that QB2 does not appear to be a structurally broken asset,” Mr. Wowkodaw said.
Anglo chief executive Duncan Wanblad told The Globe and Mail last month that he was confident the company would be able to fix any outstanding technical issues at QB2 in large part because Anglo had overcome similar problems at one of its mines in the past.
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In a statement on Wednesday, Anglo reiterated that contention, saying it had resolved similar issues at its Quellaveco mine in Peru during its ramp-up phase.
Anglo owns 44 per cent of the Collahuasi mine, which is located close to QB2. If Anglo succeeds in its attempt to buy Teck, it plans to combine QB2 and Collahuasi into one giant mining operation.
Teck owns 60 per cent of QB2 and is the operator. Japan’s Sumitomo Metal Mining Co. Ltd. and Sumitomo Corp. hold a 30-per-cent stake and Chile’s National Copper Corporation owns 10 per cent.