Executives: Fraser Phillips – Senior Vice President-Investor Relations and Strategic Analysis Don Lindsay – President and Chief Executive Officer Ron Millos – Chief Financial Officer Dale Andres – Senior Vice President-Base Metals Réal Foley – Vice President-Coal Marketing Tim Watson – Senior Vice President Greg Waller – Senior Vice President-Investor Relations and Strategic

Analysis
Analysts: Chris Terry – Deutsche Bank Matt Murphy – Macquarie Greg Barnes – TD Securities Orest Wowkodaw – Scotiabank Timna Tanners – Bank of America Merrill Lynch Lucas Pipes – FBR & Partners Fawzi Hanano – Berenberg Alex Terentiew – BMO Capital

Markets
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Teck Resources Q2 2017 Earnings Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. This conference call is being recorded on Thursday, July 27, 2017.

I would now like to turn the conference call over to Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analysis. Please go ahead.

Fraser Phillips: Thanks very much, Paul. Good morning, everyone and thank you for joining us for Teck’s second quarter 2017 results conference call. Before I begin, I’d like to draw your attention to the forward-looking information on Slide 2.

This presentation contains forward-looking statements regarding our business. However, various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statement. With that, I’d like to turn the call over to Don Lindsay, our President and CEO.

Don Lindsay: Thanks, Fraser and good morning, everyone.

I’ll begin on Slide 3 with some highlights from our second quarter results and then Ron Millos, our CFO, will provide additional color from a financial perspective. We will conclude with a Q&A session, and Ron, I and additional members of our senior management team will be happy to answer any questions. You may recall that we characterize Q1 is one of the most difficult start to year. We believe that our second quarter results demonstrate that the issues experienced earlier in the year are largely now behind us. We set second quarter records for coal production, records for coal sales, and for zinc production in Antamina.

And with the strong operating results and improving prices, our gross profit before depreciation, amortization was almost $900 million, higher in Q2 and in the same quarter last year. And we are generating significant free cash flow of current prices. At Fort Hills, construction is now more than 92% complete and we are five months away from first oil. We are being careful in our capital allocation and strictly managing our sustaining and development CapEx. For more than a year, we have indicated that debt reduction was deep priority and we have continued to act on them.

With an additional $260 million in notes purchased during the quarter, we have now achieved our target of notes outstanding below $5 million. We’re now at $4.8 billion. That’s down from $7.2 billion. We’ve also increased returns to shareholders, we announced a new dividend policy in April, that doubles our base dividend to $0.20 per share annually, and it considers the potential for a supplemental amount in the fourth quarter each year, at the discretion of the board and depending on our outlook and future capital needs. We also announced today that our next quarterly base dividend of $0.05 per share will be paid on September 29.

In May, we announced an agreement to sale of our two-thirds interest in the Waneta Dam for $1.2 billion cash. In June, we announced the acquisition of Goldcorp’s 21% interest in the San Nicolas copper-zinc project for $50 million, which is one of the five based on those properties in our Satellite Project. We view this as prudent housekeeping, consolidates control and gives us additional flexibility in advancing the project. We continue to consider all options to generate additional value for our shareholders at each of the Satellite Project properties. Finally, we were pleased to be named to the 2017 Best 50 Corporate Citizens in Canada based on 14 differences sustainability metrics.

It is the fifth consecutive year that we’ve been recognized on Corporate Knights on this list. Now looking at the overview of our second quarter financial results on Slide 4. Revenue was up 62% compared with the same quarter last year to $2.8 billion, primarily due to significantly higher steelmaking coal prices and also helped by higher zinc and copper prices. Bottom line profit attributable to shareholders was $577 million. After removing unusual items, adjusted profit attributable to shareholders was also $577 million or $1.00 per share, that’s a significant increase from the $0.01 per share in Q2 last year.

I’ll now run through our quarterly results by business unit, starting with steelmaking coal on Slide 5. Revenues grew by more than $900 million compared with Q2 2016, again principally due to significantly higher prices. Our realized price doubles to an average of $169 per tonne. As I mentioned earlier, we set second quarter records for both sales and production at 6.962 million tonnes and 6.8 million tonnes respectively, and this is achieved even though, we had an extended winter period in the Elk Valley with snow that was seen rate through to the middle of June. We elected to advance some of our annual processing plant maintenance shutdowns into the quarter from later in the year, to draw down onsite inventories and restore operational flexibility.

This resulted in a slightly lower production than we had expected and increased our site costs, which came in at $53 per tonne and transportation costs were also up $2 per tonne. But by advancing those plant maintenance shutdowns, it’s really sets us up for a good run in Q3. Overall, gross profit before depreciation and amortization was up more than $700 million over a last year second quarter. Looking forward for Q3 sales are expected to be at least 7 million tonne. And for the full year, we now expect total production to be 27.0 million to 27.5 million tonnes versus the 27 million to 28 million tonnes, we had guided to you previously.

And this reflects stronger production in the second half of the year, given that our annual meeting shutdowns are largely behind us as I mentioned. Please note that sales could be up to happen the intense higher than production for the full year due to inventory draw downs. And we also now expect site costs to be $49 to $53 per tonne for the full year, and we continue to expect transportation costs to be in the $35 to $37 per tonne range. Looking at the steelmaking coal market on Slide 6. Cyclone Debbie hit Australia in April, generating panic buying again, and resulting in prices exceeding $300 per tonne for the fourth time since 2008.

The extreme price volatility led to a regular purchasing and very few transactions were observed in the five-week period from mid-April to mid-May. Path recovering short-term requirements mainly with resole cargoes originally destine in China and increase supply from North America and Mozambique customers retreated from the market, until spot prices return near to the pre-cyclone levels. As a result, we also experienced weak sales during that five-week period, slightly reducing volumes shifts totally in the quarter. Cyclone Debbie also delayed the quarterly benchmark negotiations and triggered a change in pricing mechanism and the pricing practice. For coal sold under quarterly contracts, pricing mechanism has changed from a negotiated quarterly benchmark to an index-linked pricing mechanism, based on the average of key premium steelmaking coal spot price assessments effective April 1, 2017.

We currently expect our overall realize price relative to the price assessments to be similar to what it has been relative negotiated quarterly benchmark, but further changes could still occur. More recently, we have been seen good demand for our products with first half global CRU steel production increasing 4.5% year-over-year, and China CRU steel production reaching a new monthly record high as 73 million tonnes in June. New supply disruptions are also impacting Australia and U.S. steelmaking coal exports. As a result, spot prices have increased by more than $30 per tonne from the lowest and they're currently trading well above $170 per tonne for the highest quality products, incredible $178 today.

Turning to our base metals businesses, starting with copper on Slide 7. Production and sales declined from Q2 last year driven by lower production at Highland Valley, as a result of the lower ore grades that have been anticipated in the mine plan. At the same time, revenue and gross profit were up and cash costs net of by-product credits were down from Q2 last year. And this is primarily due to higher realize prices and substantially higher zinc sales from Antamina, as a result of record zinc production there. Looking forward copper production is expected to be higher in the second half of the year.

Gradually improving as the year progresses as our grade now starts to improve. There is no change for production or cost guidance for the full year. Our zinc business units are summarized on Slide 8. As remainder Antamina, the zinc-related financial results are reported in our copper business unit. Revenues were up 21% to $660 million reflecting the higher zinc prices.

At Red Dog, zinc sales came in slightly higher than guidance is around 83,000 tonnes, as smelters continue to draw down consignment inventory due to tightness of the concentrate market. However, our zinc and concentrate production was down. We had reported last quarter, as you remember that we have to lower the amount of higher-grade Qanaiyaq ore process due to some metallurgically issues. We expect to be able to include more of this material in ore feed has regain more processing experience with it week-by-week. At Trail, refined zinc production was up primarily due to higher feed rates operating disruptions at some mines, it supply lead concentrate did impact our refine lead and silver production.

Overall, gross profit before depreciation and amortization was up 50% to $196 million. Looking forward, Red Dog concentrates shipping season commenced in July, with the first sailing on July 4. We expect Red Dog sales of contained zinc to be around 145,000 tonnes in Q3 and 165,000 tonnes in Q4 and that would reflect our normal seasonal patterns. There is no change to our production guidance for the following year. Now turning to an update on Fort Hills on Slide 9.

As I mentioned earlier, we are now five months first oil. Construction is now more than 92% complete for the six major project areas have now been turned over to operations and the focus remains on the completion of the utilities area and secondary extraction. Over 90% of operations personnel had been hired. In the second quarter, our share capital expenditure was $201 million. As noted in our release, there is a recent disagreement among the Fort Hills partners regarding ongoing funding for the project.

But I can say it was the project 92% complete, large just suggested will get built. We remain comfortable with our guidance regarding $780 million share Fort Hills cost for 2017. We are not obligated to fund more than our 20% share of project cost. And at this point, I should say that we are not in a position to discuss details of the funding issue while the matter is under discussion among the Fort Hills partners. With the expected completion of the utilities component of project in Q3, Suncor plans to initiate froth production in September and froth is the product from the primary extraction plant at Fort Hills, it will be tracked at Suncor’s base plan for further cost processing until the last component of project that is the secondary extraction area is completed.

And this will allow for the majority of the plants to be fully commissioned and operating when the secondary extraction plants starts operation later in the year. The folks have commissioning, then we able to shift to secondary extraction at that time. And with that, I will turn it over to Ron for additional color from the financial perspective.

Ron Millos: Thanks, Don. Slide 10 summarize of our second quarter pricing adjustments.

And overall, we had $3 million in negative adjustments this quarter compared with the $1 million in negative adjustments in second quarter about 2016. The adjustments are small and both these quarters had copper and zinc prices did not change much during the quarter. And these adjustments are included in our income statement under other operating income and expense. The chart on the left represents a simplified relationship between the change in copper and zinc prices and the reported settlement pricing adjustment and continues writes to good estimate each quarter and then the second quarter our pricing adjustments was right on the line as suggested by our model. Moving on to Slide 11, we summarized our changes in cash.

Our cash flow from operations was $1.4 billion in Q2. And please note that this includes $144 million of provisional pricing payments made that by our coal customers on second quarter sales, which will refunded to our customers in third quarter. Now that is clarity on the second quarter coal price. Proceeds from sale of investments and other assets totaled $13 million. We’ve repaid a total of $382 in debt in the quarter Canadian dollar terms, which include the repurchase of the $260 principle amount of outstanding notes that Don mentioned earlier.

We spent $329 million on capital projects, including Fort Hills and capitalized stripping costs were $173 million and we also paid $87 million on interest and finance charges and $58 million dividend. After these and other minor items, we ended the quarter with cash and short-term investments of around $850 million. Our liquidity remains strong at $4.5 billion, including our current cash balance of $930 million and that net of the refunds that we expect provide to customers for the steelmaking coal settlements, and also includes the undrawn $3 billion credit facilities that we have. Moving on to the next slide. Looking at updated on our debt reduction, as Don mentioned earlier, we’ve achieve the target that we’ve set, reducing our outstanding notes at below $5 billion.

We currently have $4.8 billion in public notes outstanding which represents a substantial $2.4 billion reduction from what was outstanding in September 2015. As a result, our debt to debt-plus-equity ratio is now down to 26% and debt, adjusted EBITDA ratio are about 1.2% and that’s well in the investment grade territory. Our net debt to debt-plus-equity ratio is currently 23% without taking into account proceeds from the Waneta transaction and this meaningful progress that we’ve made in reducing the debt net strong free cash flow we’re noted by Moody’s when they upgraded our debt by one notch to be Aa2 with stable outlook last week. And it's important to note that we've deliberately managed our debt profile to ensure that we have very little debt due before 2020-2021, which covers the majority of the QB2 construction period, if that project ultimately goes forward. So going forward, we may continue to reduce debt on an opportunistic basis, depending on our view to the outlook and commodity prices in the near future.

With that, I will pass it back to Don for closing comments.

Don Lindsay: Thanks very much, Ron. So in summary on Slide 13. I’m very excited about the outlook for the second half the year beyond, we’re set up particularly well for Q3. We’ve overcome what was a very difficult start to the year and set second quarter production records for coal and zinc.

We are generating strong free cash flow of current prices and as the world's largest net miner of zinc. We have exposure to the potential upside and what we believe remains in a very tight market. First oil from Fort Hills is now five months away. And we’re in a solid financial position for the future. We have achieved our target for the debt reduction and really importantly, we've eliminated essentially all of our note maturity over to 2020-2021.

So 2017, 2018, 2019, 2020 essentially all the maturity were gone and even in 2021, it's only a little bit over $200 million. We currently have over $4.5 billion in the liquidity. And with that, we will be happy to answer your questions. And please note that some of our management team members may be on the line at different locations, wait back they are on the line in different locations, so there may be a brief pause after you ask your question, as we sort that out who's going to answer it. Back to you, operator.

Operator: Thank you. [Operator Instructions] The first question is from Chris Terry from Deutsche Bank. Please go ahead. Your line is open.

Chris Terry: Good morning, guys.

Well done on solid quarter. Just interested in Red Dog with the Qanaiyaq ore and how that’s going. Did you learn much over the quarter on the recovery side? Or is it more just about managing the blend of it going forward?

Don Lindsay: Thanks Chris. I'll turn that over to Dale Andres on the line.

Dale Andres: Yes.

Thanks Chris. We did scale back in the second quarter after our experience in the first quarter with the amount of Qanaiyaq ore. The average percentage of that ore feet in the first quarter was kind of an 18% to 20% range. We scale that back to 10% or 11% in the second quarter and the process did stabilize, obviously the grades were similar and lower – a little bit lower as a result that. But the ore does get better and less weathered as we progress through the new pit at depths.

And we're starting to trial some blends going forward in the second half, that a little bit higher-grade. So we're encouraged by the progress in the second quarter. But right now, it's still a metallurgically complex ore and well after work way through that in the third and fourth quarter through this year. But quite hopeful and then confident, that we're going to be able to increase that is as we go deeper.

Chris Terry: Okay, thanks.

And then just following-up on the operational side. On the coal, you mentioned some technical issues there. You’ve obviously given stronger guidance for the second half. So is that behind now or still could push into 3Q? Where those two issues are?

Don Lindsay: Yes. I’ll turn that over to Robin Sheremeta.

Robin Sheremeta: Thanks. Yes, we got – it’s not a significant issues, there two different geo technical challenges we have, mostly of the partner weather. So it's pretty much isolated to one mine, those issues can delay some other release of coal and not at that particular mine same. We've got capacity to make up some of the shortfall in other mine site. So on balance not to concerned about the issues we have, but they can from time to time disrupt some of the shorter term release of coal…

Chris Terry: Okay.

Thanks guys.

Don Lindsay: Thanks very much.

Operator: Thank you. The next question is from Matt Murphy from Macquarie. Please go ahead.

Matt Murphy: Good morning. I was wondering, if you could elaborate a little bit on your thoughts on capital allocation now given, since Investor Day in Q1, we have the additional financing from Waneta and we’ve got Michael or Réal or again so pretty good free cash flow outlook and you've achieved your debt targets. So just wondering, how you're thinking about dividend versus go even more conservative on the balance sheet versus your growth options – whether organic for acquisitions, your thoughts there. Thanks.

Don Lindsay: Okay.

Fairly board question. I’ll try to break it down and answer sort of two or three section. So first on Waneta that the deal won't close for some time yet, the earliest it might close would be the end of this year and of course depending on who the ultimate buyers, you recall that what we have the transaction with Fortis, BC Hydro does have a right to first offer and just working through that process now. So depending on who it is, it might has to go into next year before it closes. So that additional capital still we saw in the balance sheet.

I’m not going to spend it, until we see it, or that – you understand just our approach there. Terms of dividends, the November board meeting is when we would look at – whether there is a supplemental dividend, that is the policy to look at once a year and it's a board decision and depends on the outlook for the operations for commodity prices and future capital needs, which time lease sort of third-party question on capital allocation. We’re continuing to move ahead on permitting for QB2, we’re encouraged. But we aren't expecting to have it till first half of next year. Hopefully, earlier part of that first half, but we still have to work through that process and as you know, those timelines have been unpredictable in the past.

And so we don't know if it will be on that schedule or later or in fact even earlier. So I think we're just kind of working through all those issues first, before making any key decisions. I can say that, you mentioned acquisitions, we don’t really see anything out there, that’s good value to be older buy in the public markets. It always depends on what your outlook for commodity prices are, but even if you assume the $3 copper price long-term, it's tough to make the numbers work. And also one of our key criteria, which I've talked above before is mine life to payback.

And when you look at that ratio most of what out there trading publicly that would be in a size that we could manage doesn’t really measure up on that key ratio. So we don’t see much going on there. In terms of our project portfolio, we're very pleased how our portfolio looks relative to competitors in that we have actually four projects between Quebrada Blanca 2, NuevaUnión, Zafranal, San Nicolas that depending on the how thing is proceed with regular, it sounds but all four are actually things that you could see built within a – with everything went perfectly with in a five-year time frame. And I’ll think there are many companies in that position. Our highest priority is QB2.

As we talked to it before and we’re deploying lot of energy towards that, but we don’t know exactly, when it will be permanent. So clear line of answer, I hope, test on the various parts your question. But capital allocation is clearly – it’s the more significant factor that board looks set and it will continue to look at a quite interesting.

Matt Murphy: I appreciate the color, thanks.

Operator: Thank you.

The next question is from Greg Barnes from TD Securities. Please go ahead.

Greg Barnes: Thank you. Don or Réal, I speak on the phone. Given the volatility in the coal price, where do you feel the equilibrium price is? I’m not talking about, you said, the price long-term and things like that.

Just what you think equilibrium price for the market actually is?

Don Lindsay: Well, Réal is sitting right beside me. So I'll let him start, depending what he says, I may have something else.

Réal Foley: Thanks Greg, that’s a good question. One that’s where we’re being asked quite often and quite frankly, it’s bit tough to come up with specific price range. What I can say is, this year or in the last couple months specially, we’ve seen a lot of volatility again but prices corrected maybe too much too quickly, when they went through around the 140 level.

Because if we look at the demand and supply side, I mean it's a bit of a story of both demand and supply, that the price is where it is today. So on the demand side, coal to steel production is up about 4.5% in the world and growth rates are very similar in China and outside of China. And China itself is importing the record levels. And if you look at seaborne year-to-date June at 21.5 million tones, that’s 4 million tonnes year-over-year higher. And in other market areas, are also doing really well in terms of demand.

On the supply side, Australia may year-to-date exports are down by 12 million tonnes and that’s mainly due to Cyclone Debbie. But at that same time, U.S. and Mozambique exports are up 6 million tonnes and 2.5 million tonnes respectively for June year-to-date. But with that being said, Australia is recovering quicker than expected. And we’re still seeing some supply disruptions in some areas, whether it’s Australia or U.S.

there is supply issues, demand continues to be strong, oil price stay at the level that it is right now. Assessments are now sitting in the high $170’s just under $180 actually. I'm personally actually a little bit surprised by the level that they have gone to. I would have thought, it would have been maybe a little bit lower than that, I thought $140 was probably a little bit too low, but kind of somewhere I guess the below the $170 level is what we’re expecting to see. Don?

Don Lindsay: Yes.

Maybe the way I would trace is that don’t dispute anything that’s in the past I have said that the range of $140 to $160 seems to make some sense, because it translates from the – announces policy that Chinese government, the NBRC has on what they want to do with thermal coal. And just goes back to principal behind that, if you want to have profitable coal business in China, one of the big issues there is just the share amount of debt that the coal industry carries is actually measured in percentage points of GDP and I saw one aspect, that was raise 8% and they want the companies to able to services those loans and maintain employment so on. So they're managing thermal coal price the range that we now set translates to mine coal price at $140 to $160. That doesn't mean that it can slight down below the $140 to $125 or something, likewise it does mean it can't go above $160 which is currently is. But that seems to be the range that they want to manage to.

We don’t see these really low prices that some of the analysts there are calling for down to $100 or below, just because of the cost curve and what we witnessed last time, where the shutdown started to take place was significantly above that. And so that's the range that we come to end $140 to $160 and at those levels, and even with the increase in Canadian dollar that translate into a very healthy price for us in very strong cash flows. So that’s view from here.

Greg Barnes: That’s great. Thanks very much.

Operator: Thank you. The next question is from Orest Wowkodaw from Scotiabank. Please go ahead.

Orest Wowkodaw: Hi, good morning. Question can for a bit color on Fort Hills.

Specifically, your CapEx estimate for this year went up by $140 million from your release last quarter. Is that – should we interpret that as a capital cost inflation? Or is that just an advancement of plan spending for 2018?

Don Lindsay: I’ll turn that over to Tim Watson, he may have in additional comments.

Tim Watson: Yes. Thank you very much. I think, the number you have increase from the $640 to the $780 is a couple things.

It's associated with the some sort of ongoing pressure in terms of the field labor productive issues, which we continue to see and also there is a concerted effort to try to get as much of the construction completed within calendar year 2017 to ensure that we have minimal construction required to complete in 2018.

Don Lindsay: Yes. I guess the part that I would add that last point is really important, because, if you ended up – having a project delayed for first oil into 2018. Every month is very significant fixed costs that you'd be caring and that would really drive the project costs higher. So it really all efforts are – get things done for first oil on December.

I should say that Suncor really to spoke person there is – the operator, the earlier you had a conference call and I can say earlier today on the Suncor call, the Steve Williams said the situation will not have any impact on the overall capital cost or the time in Fort Hills project. So they're obviously quite positive on the project as are we.

Orest Wowkodaw: Okay. And just as follow-up you mentioned earlier in your opening remarks that your position is that you don't need to fund more than a 20% proportionate share of Fort Hills. Does that imply that you have been asked to fund more than 20%?

Don Lindsay: No.

I should say again, as I said in the in the opening comments. We are in a position to really discuss the details of the funding issue, all those matters under discussion and really we’ve to leave it with that.

Orest Wowkodaw: Okay. Thank you.

Operator: Thank you.

The next question is from Timna Tanners from Bank of America Merrill Lynch. Please go ahead.

Timna Tanners: Hi. Good morning, gentlemen.

Don Lindsay: Good morning.

Timna Tanners: I just want to revisit the topic earlier at capital allocation, I might have obviously the improved commodity price outlook very good debt reduction and so one other revenues that are income it should be expecting over the next six-plus month. Have you been at all tempted to consider additional growth projects? Or can you give us beyond what you've talked about? Or you sticking to kind of the ones that you've talked about, if you could just elaborate on any possible areas of interest beyond what you checking on discuss in the past given the improved result?

Don Lindsay: Yes. So the short answer is latter. We haven’t been tempted by anything easier. It’s true then the normal course, we identify opportunities and we have opportunities shown to us frequently by other companies and banks and so on.

We do as a matter normal course, if I wait all of those things and Andrew building in this part are busy all the time and Andrew is – anything and you are looking at all these things. But really, really nothing as sort of made through our screen that would tempt us at the moment, no matter how much cash we have, if coal prices that were still $300, I don’t think we seen anything that it would make a difference. So we continue to work way on QB2. We continue to partner with Suncor to get Fort Hills done. And we’re keep looking all these things and always measuring – our current in-house opportunities against things, but particularly because, like in QB2 space, we control the schedule.

We own 76.5% of it. So we’re something better then we could differ QB2 and go on to that. But right now, nothing on the screen.

Timna Tanners: Okay, that’s helpful. Can you elaborate also on the situation in Highland Valley and the potential perspective.

Just give us a more of an update?

Don Lindsay: Yes. I will turn it over to Dale Andres.

Dale Andres: We’re still – there was a straight Fort Hills, by the union earlier this month. We're still in active discussions and negotiations and because of that, I really don’t want to comment any further as could probably understand.

Timna Tanners: Okay.

Fair enough, thanks again.

Operator: Thank you. The next question is from Lucas Pipes from FBR & Partners. Please go ahead.

Lucas Pipes: Yes.

Thank you very much and good morning everybody. So Réal, Don typically you realized about the 92% of the benchmark and now with the quarterly benchmark system effectively being replaced an index. How would you recommend remodel will be ASPI, I assume it still on 8% discount. But there's been some volatility in the market, I wanted to make sure that recapture all those operations correctly. Thank you.

Don Lindsay: Réal?

Réal Foley: So thanks Lucas. So at this point, we're expecting that our realized prices will be within our historical range. The only difference will be instead of comparing to the quarterly benchmark well compared to the key premium hard coking coal price assessments. And just to add a bit of color on the mechanism, the majority of our quarterly price contracts sales are based on the actual quarter lacked by one month. So what that means is that for Q2 for instance, the prices based on the average of March 1 to May 31 period and other important point is those – that the relationships with the customers have not change and contracted volumes for quarterly price spends have not change even.

So we still have similar visibility on those volumes. The only that’s changes is the pricing mechanism. And as we've guided before, we have around 40% of our book that is price on a quarterly basis.

Lucas Pipes: Got it.

Don Lindsay: Réal, can I just that ask you to comment on that I know that the folks on the phone are models and they're looking out past sort of the next quarter.

As we get into next year and we start mining at Coal Mountain and that production is made up with together safe. How do you see that discount to the average price has been to evolving then.

Réal Foley: So we have capacity at the other mines to replace the production from Coal Mountain. Coal Mountain produces mainly lower grade material. Production from our other mines where we’re in the process of looking at what that product will lease – additional products, and so it’s a little bit early to say exactly what in fact that might have on a realized price for next year Don.

But we were looking at that very carefully, very closely between now and the end of 2017.

Don Lindsay: Okay. So we'll be back to you with further details on that in the next quarter or so. The main point being that the lower quality coal will deplete and we’ll stop buying that. We do acquire quality coal at the other sites.

But they’re all there are other factors that affects the pricing of that those products.

Lucas Pipes: That's an interesting point. Maybe to just feel – I mean one layer on it. So if you look at your product and you do a lot of blending and mixing and such. But if you were to look at your discount versus to benchmark excluding Coal Mountain today or over the past year, what would that discount has been 5% or 4% or where would you put that?

Don Lindsay: That's a very good question, Lucas.

I would be guessing at an answer right now. I mean the realization should be higher, but again, we need to compete work looking at which products are going to replace, the Coal Mountain product.

Lucas Pipes: Okay. Well, but that's something valuable to keep in mind. And maybe one last question, still on coal sales and marketing.

I think it was a headline or report out over the past three months that refer to you speaking to the Indian market more actively. Is that something that you’re targeting that you have maybe looking for further inroads and opportunities and how could that impact that your longer-term outlook on the market? Thank you.

Don Lindsay: Yes. There were several headlines related to a visit, when we have the Minister of Steel from India and Senior Executives from sale the International Steel Producer visit our sites, earlier this month I guess, so it was. And it seemed to get into the – but not from us.

But we have an ongoing dialogue there, our sales to India have increased quite a bit over the last three years. Clearly the Government of India has big plans for steel production with a target of up to $300 million tonnes of annual steel production, which of course would require a large amount of steel making coal to be imported. Given that they don't have much themselves currently. So we’re optimistic about that. It course does have increased transportation costs from here but clearly the customers want to diversify their sources and they value to the reliability that we can provide.

So we’ve had significant interest there and then I'll turn it back to Réal in terms our outlook for what percentage our coal sales make could India this year, going forward.

Réal Foley: So thanks Don. We started selling coal to India back in 2011. And we’ve been increasing sales annually into that market to the points where it now represents somewhere around 10% of our book or so. That the fact like Don said, that the India is the largest growth market for seaborne, steelmaking coal is market that we have a lot of interest in and we’ve invested time and efforts to continue developing both with the privately owned steel mills and government own steel mills.

Lucas Pipes: Okay. Good luck with all of that. Good job, thank you.

Don Lindsay: Thanks Lucas.

Réal Foley: Thank you.

Operator: Thank you. The next question is from Fawzi Hanano from Berenberg. Please go ahead.

Fawzi Hanano: Hi, good morning. I have a couple questions.

Firstly on CapEx, just looking at your sustaining capital, it's tracking well behind annual guidance of $530 million. Just wanted to know, if you're expecting to recruit, so not into second half on how on aggregate that placing along with increasing CapEx for Fort Hills as well as development of above the rig towards your $2.2 billion in a short CapEx guidance. And my second question would be Ron, regarding cash taxes now looking at cash tax pay down close to $200 million which was highest in quite a while and also very close it's a P&L tax provision. Why wasn't it reduced more by the available tax – tax accruals I think previous periods?

Don Lindsay: Okay. Ron, over to you.

Ron Millos: Okay. I'll take on the cash taxes first. So the cash tax, it very difficult to pick a number because the payments made reflect the instalment that we have to make for 2017, they will also include settlement of additional payments that might be required for orders from the various tax regulators and they will also include the final tax payments, as we follow our tax returns for the various countries for 2016. So the number have been actually go all over the place, but varied in the cash tax numbers will be any refunds we might get from overpayment and particularly in South America. The instalments can be based on revenue or prior year earnings.

So that the numbers can swing quite widely depending on what the requirements are in those countries. So it’s hard to give a number on exactly what the cash taxes will be. The other thing is we do have to pay the mining taxes in Canada, they are not sheltered by the tax pools those in terms the big swing the numbers. On the CapEx. The CapEx is generally is somewhat backend loaded in all of our years – most of our operations particularly in the Northern Hemisphere, you've got the winter weather conditions, so it can be difficult to have to spend a lot of money in newly part of the year.

But there will be catch up in the latter half of the year.

Fawzi Hanano: Okay. Thank you.

Operator: Thank you. The next question is from Alex Terentiew from BMO Capital Markets.

Please go ahead.

Alex Terentiew: Hi, guys. I just got one follow-up question here for Réal on the timing of core sales understand over the past year. So when we've had some of these spikes you noted how sales volumes have gone down and volumes are paid down when the prices have come back down. Is there a price below which you're seeing that buying interest stop I mean would over the past couple weeks we've had coal prices go backup from $150 or so back to you $170, $180 and sorry, are you seeing a constant level of buying interest and just that – there is the timing of sales has a big impact obviously, on your price that you realized relative to the new index-linked thinks to pricing mechanism?

Réal Foley: Thanks, Alex.

At the current pricing levels and the fact that the coal steel production has increase 4.5% year-to-date in demand is good in the market. And we’re seeing regular purchasing at this time. The regular purchasing that we describe happened when the price spike very quickly following Cyclone Debbie and then as soon as customers are covered their short-term requirements that were very few transactions in a period of about five weeks, until price is return to somewhere near to the pre-cyclone levels. But at the levels, where prices are right now, we're seeing demand from most market areas. On the timing of sales, so overall in our book, we have a variety of pricing arrangements, some are index-linked directly, actually a larger portion now are index-linked and some others also are negotiated on a fixed price bases.

So when we negotiate a fixed price of course, it’s the fixed prize at the time of negotiations and we end up negotiating somewhere between 30 and 45 days before that coal load on vessels, because we need to allow time for the vessels to arrive. So you're quite right in that the timing of the sales impacts specially those fixed pricings.

Alex Terentiew: Okay, great. Thank you.

Operator: Thank you.

There are no further questions registered at this time. I would now like to turn the meeting back to Mr. Phillips.

Fraser Phillips: Don, I turn it over to you for any closing remarks.

Don Lindsay: Thank you.

Thank you all for joining us this morning. I think it was a really solid quarter, I’m particularly pleased that we were able to advance the maintenance into the second quarter, set to step for a really good Q3 and Q4, second half of the year should be very solid as well and we're starting with a pretty solid prices in each of full copper and zinc and a very, very tight zinc market. So I'm feeling really good about the position of companies and were the balance sheet is and with essentially no debt onto 2017, 2018, 2019 and 2020, it’s a pretty good position. So we look forward to speaking to you in October. Well, as you want to say that today is Greg Waller’s last quarterly call.

And Greg of course, he has been with us for 33 years and as you all know, he is retiring at the end of September. I just want to see a special thank you on behalf of all of my colleagues and on behalf of all you on the phone to Greg Waller for terrific job done over many years, I don't know how many quarter call you done Greg, I am sure it’s over 50 or 60.

Greg Waller: 50 or 60.

Don Lindsay: Greg of course has been one of the best in the business for many, many years and in fact in the last year or so has own two key awards the Belle Mulligan Award for Leadership in Investor Relations, to recognize individuals who shown singular leadership in one or more aspects of the practice of Investor Relations. And this year, he also won CIRI Fellowship, which is the highest honor for Investor Relations specials in Canada.

I think it recognizes just the dedication and innovation and creative thinking that Greg put to this really crucial function for any public company and certainly be very crucial for Teck. I just want to say a special thank you to you Greg. You are absolutely a terrific friends to all of us, a terrific colleague, and just a true class guy. Thank you very much, Greg for many years, your dedicated service.

Greg Waller: Thanks so much Don.

And it has been a great 33 years and in particular the last 12 years of this management team is very real pleasure and thanks to some of those who have retired over the last few years, who hopefully might be listening today. And I’ve honestly I thank you to those who that, I had the pleasure working with during this management team. Thanks so much for those kind words.

Don Lindsay: Thank you, Greg. And thank you all on the phone.

We'll look forward to speaking to you on October.

Operator: Thank you. The conference is now ended. Please disconnect your lines at this time. And we thank you for your participation.