Teck said in statement said that its chief operating officer Shehzad Bharmal is retiring, as part of an overhaul of its QB2 operations.CHRIS HELGREN/Reuters
Teck Resources Ltd. TECK-B-T is undertaking an overhaul at its Quebrada Blanca site and cutting ties with its chief operating officer after years of operational problems at the Chilean mine.
Vancouver-based Teck said in a statement it has started a comprehensive review aimed at fixing the problems with phase two of the Quebrada Blanca operation, or QB2, including improving performance at its tailings dam, which is dragging down production.
“Teck is committed to positioning QB operations for long-term, reliable performance,” the company said in the statement. “This includes validating an executable mine plan and optimizing performance across the mine, plant and port.”
Teck put the high-altitude mine in the mountains of northern Chile into production in 2023. The US$8.7-billion project went 85 per cent over budget. The ramp-up hasn’t gone well either, with grade shortfalls, production misses, cuts to guidance and persistent drainage issues at the tailings dam.
Teck said in its statement that COO Shehzad Bharmal, who was primarily responsible for operations at QB2, is retiring. While Mr. Bharmal had spent 33 years at Teck, he had only been in the COO role for about a year. In 2023, Teck parted ways with its previous COO, Harry (Red) Conger, and blamed him for the massive cost overruns in the construction of QB2, The Globe and Mail reported at the time.
The company also said it has hired an unnamed individual with 30 years of strategic and operational experience to support Teck chief executive officer Jonathan Price and the operations team at QB2.
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A company spokesperson subsequently confirmed in an e-mail to The Globe that the special adviser is Daniel Malchuk, a former senior operations executive at BHP Group Ltd., the world’s biggest mining company.
Mr. Malchuk has experience working in Chile, sits on the boards of SSR Mining Corp. and Franco-Nevada Corp., and serves as a senior adviser with Appian Capital Advisory LLP.
Martin Pradier, materials analyst with Veritas Investment Research, said it is unusual that Teck did not name the person hired for the QB2 turnaround in the official press release because companies normally want to inspire confidence by talking up the individual’s track record.
“Usually they want to tell you who it is because typically the guy is really well-known and has a reputation, and people feel better about it,” he said.
Teck framed production from the QB2 copper mine as central to its future as a critical-minerals miner, after it sold its legacy coal business to Glencore PLC and two Asian steelmakers last year.
But Teck has already reduced its 2025 production guidance for QB2 on three separate occasions, most recently in July. The latest cut came after Teck CEO Mr. Price predicted in April that there would be no further reductions to guidance. Meanwhile, the company is planning to update its guidance again after the conclusion of its QB2 review in October, opening up the possibility of yet another revision.
Given the setbacks at QB2 over the past few years, including problems at a newly constructed port, a relining of a new mill and months of unscheduled downtime at the mine, Mr. Pradier said it may soon be time for Mr. Price to step down as CEO.
“At some point, if things are not fixed, that’s what happens, right?”
“People don’t have a lot of patience. They will probably move on to somebody that they feel has a better chance to fix it,” he added.
Teck declined an interview request with Mr. Price.
Despite copper being in a bull market, Teck has underperformed peers such as Hudbay Minerals Inc. over the past year, owing to problems at QB2.
“Over the past few years, the market has lost significant confidence in the company’s ability to execute and meet its own operating guidance,” Scotia Capital analyst Orest Wowkodaw said in a note to clients on Wednesday.
Still, he said the new QB2 initiatives are “a step in the right direction for Teck following a very disappointing Q2.”
QB2’s tailings dam is designed to store and manage waste materials from the mining and milling process, which involves water, sand and fine particles. As part of the tailings process, water is supposed to filter through the sandy mixture to be reused in the production process. To improve drainage at QB2’s tailings dam, Teck is changing the placement of the sand and experimenting with coarser particles to see if water will drain faster.
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 the National Copper Corporation of Chile owns 10 per cent.
Teck’s class B shares rose by 0.7 per cent in trading on the Toronto Stock Exchange on Wednesday to close at $46.59 apiece.