Oil and Gas Resources at December 31, 2013
Reserve Categories and Resources
For oil and gas, reserves are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on analysis of drilling, geological, geophysical and engineering data, the use of established technology, and specified economic conditions, which are generally accepted as being reasonable. Reserves are classified into proved or probable according to the degree of certainty associated with the estimates.
Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.
Each of the proved and probable reserves categories may be divided into developed and undeveloped categories. Undeveloped reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (e.g. when compared to the cost of drilling a well) is required to render them capable of production. Teck does not have any developed reserves at this time.
A contingent resource for oil and gas reporting purposes is different than a mineral resource. Contingent resources for oil and gas reporting purposes are estimated in accordance with the standards set out in the COGE Handbook. As further described below, contingent resources are defined in the COGE Handbook as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. There is no certainty that it will be commercially viable to produce any portion of the resources.
Fort Hills Project
The reserves data presented below summarizes our proved and probable reserves and the net present values of future net revenue for these reserves. The reserves data uses forecast prices and costs prior to provision for interest, general and administrative expenses, the impact of any hedging activities or the liability associated with abandonment and all well, lease, pipeline and facilities reclamation costs. These forecasts and other assumptions are taken from the GLJ evaluation report effective December 31, 2013. Future net revenues have been presented on a before and after tax basis in accordance with NI 51-101.
The future net revenue, development and operating cost, exchange rate, price and other assumptions set out in this “Description of the Business ― Oil and Gas Reserves and Resources―Fort Hills Project” section of this AIF are the estimates or assumptions of GLJ, our independent reserves evaluator. In order to estimate reserves and resources and future net revenues, GLJ makes a number of assumptions, including assumptions regarding inflation rates, currency exchange rates and prices for oil and other products. For planning, project approval, accounting and other purposes our management makes assumptions regarding those same factors and our assumptions generally differ from those of GLJ. Different assumptions would lead to different present value and net revenue figures, and could affect reserve estimates.
GLJ estimates capital and operating costs associated with the Fort Hills project based on general assumptions regarding project costs and comparisons to other projects. These GLJ estimated costs differ from those the Fort Hills partners use for construction planning and decision making for the project, which are based on detailed engineering studies. See “Description of the Business ― Energy―Fort Hills Project” for a further description of the project operator estimates regarding development costs.
All of our reserves are associated with our Fort Hills project. Bitumen is the only product type associated with our reserves.
Reserves are presented on a gross and net basis. Gross in relation to Teck’s interest in reserves means Teck’s working interest share before deduction of royalties. Net in relation to Teck’s interest in reserves means Teck’s working interest share after deduction of royalties.
Summary of Company Interest
Oil and Gas Reserves at December 31, 2013
(forecast prices and costs)
| Reserves Category
|Total Proved Reserves
|Total Proved plus Probably Reserves
*Column does not add due to rounding.
For additional information, please refer to page 50: Annual Information Form (1.5MB PDF)
Proven and Probable Mineral Reserves and Measured, Indicated and Inferred Mineral Resources
have been estimated in accordance with the definitions of these terms adopted by the Canadian
Institute of Mining, Metallurgy and Petroleum (“CIM”) in November 2010 and incorporated in
National Instrument 43-101, “Standards of Disclosure for Mineral Projects” (“NI 43-101”), by
Canadian securities regulatory authorities in June 2011. Estimates of coal reserves and
resources have been prepared and classified using guidance from the Geological Survey of
Canada Paper 88-21. Classification terminology for coal conforms to CIM definitions incorporated
by reference into NI 43-101. Mineral Resources are reported separately from and do not include
that portion of the Mineral Resources that is classified as Mineral Reserves. That portion of
Mineral Resource which is not classified as Mineral Reserve does not have demonstrated
Metallurgical Coal means the various grades of coal that are used to produce coke which is used in the steel making process.
PCI Coal means coal that is pulverized and injected into a blast furnace. Those grades of coal used in the PCI process are generally non-coking. PCI grade coal is used primarily as a heat
source in the steel making process in partial replacement for high quality coking coals which are
typically more expensive.
Thermal Coal means coal that is used primarily for its heating value. Thermal coals tend not to have the carbonization properties possessed by metallurgical coals. Most thermal coal is used to
produce electricity in thermal power plants
The CIM definitions on Mineral Resources and Mineral Reserves provide as follows:
A Mineral Resource is a concentration or occurrence of diamonds, natural solid inorganic material, or natural solid fossilized organic material including base and precious metals, coal, and
industrial minerals in or on the earth’s crust in such form and quantity and of such a grade or
quality that it has reasonable prospects for economic extraction. The location, quantity, grade,
geological characteristics and continuity of a Mineral Resource are known, estimated or
interpreted from specific geological evidence and knowledge.
An Inferred Mineral Resource is that part of a Mineral Resource for which quantity and grade or
quality can be estimated on the basis of geological evidence and limited sampling and reasonably
assumed, but not verified, geological and grade continuity. The estimate is based on limited
information and sampling gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes.
An Indicated Mineral Resource is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape and physical characteristics can be estimated with a level of confidence
sufficient to allow the appropriate application of technical and economic parameters, to support
mine planning and evaluation of the economic viability of the deposit. The estimate is based on
detailed and reliable exploration and testing information gathered through appropriate techniques
from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely
enough for geological and grade continuity to be reasonably assumed.
A Measured Mineral Resource is that part of a Mineral Resource for which quantity, grade or
quality, densities, shape, and physical characteristics are so well established that they can be
estimated with confidence sufficient to allow the appropriate application of technical and
economic parameters, to support production planning and evaluation of the economic viability of
the deposit. The estimate is based on detailed and reliable exploration, sampling and testing
information gathered through appropriate techniques from locations such as outcrops, trenches,
pits, workings and drill holes that are spaced closely enough to confirm both geological and grade
A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral
Resource demonstrated by at least a preliminary feasibility study. This study must include
adequate information on mining, processing, metallurgical, economic and other relevant factors
that demonstrate, at the time of reporting, that economic extraction can be justified. A mineral
reserve includes diluting materials and allowances for losses that may occur when the material is
A Probable Mineral Reserve is the economically mineable part of an Indicated and, in some
circumstances, a Measured Mineral Resource demonstrated by at least a preliminary feasibility
study. This study must include adequate information on mining, processing, metallurgical,
economic, and other relevant factors that demonstrate, at the time of reporting, that economic
extraction can be justified.
A Proven Mineral Reserve is the economically mineable part of a Measured Mineral Resource
demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate
information on mining, processing, metallurgical, economic, and other relevant factors that
demonstrate, at the time of reporting, that economic extraction is justified.
Methodologies and Assumptions
Mineral reserve and resource estimates are based on various assumptions relating to operating
matters, including with respect to production costs, mining and processing recoveries, mining
dilution, cut-off values or grades, as well as assumptions relating to long-term commodity prices
and, in some cases, exchange rates. Cost estimates are based on feasibility study estimates or
Methodologies used in reserve and resource estimates vary from property to property depending
on the style of mineralization, geology and other factors. Geostatistical methods, appropriate to
the style of mineralization, have been used in the estimation of reserves at Teck’s material base
Assumed metal prices vary from property to property for a number of reasons. Teck has interests
in a number of joint ventures for which assumed metal prices are a joint venture decision. In
certain cases, assumed metal prices are historical assumptions made at the time of the relevant
reserve and resource estimates. For operations with short remaining lives, assumed metal prices
may reflect shorter-term commodity price forecasts.
Comments on Individual Operations
Highland Valley Copper
In 2013, an increase of 350.2 million tonnes in resources was attributable to higher assumed
metal prices. Pit shells used to constrain reserves were prepared on the basis of various
assumed prices averaging US$2.06/lb copper. Within these pit shells, internal cut-offs for reserve
reporting were based on US$2.80/lb copper, US$13.70/lb molybdenum and a C$1.10 per
US$1.00 exchange rate.
Current reserves are expected to support a mine life to 2027.
Two general ore types occur at Antamina. These are copper ores from which copper and molybdenum concentrates are produced and copper-zinc ores from which copper and zinc concentrates are recovered. Reserves and resources have been calculated using metal prices of: US$2.41/lb copper, US$0.88/lb zinc, US$12.46/lb molybdenum, and US$18.54/oz silver.
Mine production in 2013 removed 49.2 million tonnes from reserve and 3.3 million tonnes from resources. After other changes have been considered the end of year 2013 reserves at Antamina have decreased by 50.5 million tonnes. The end of year 2013 resources at Antamina have increased by 156 million tonnes primarily due to new drilling and an update to the resource model.
The mine life is expected to continue until 2027
Mine production depleted 16.6 million tonnes of the heap and dump leach reserve during 2013. End-of-year 2013 supergene reserves assume a US$3.30/lb copper price, 77.2% heap leach soluble copper recovery, 57.5% dump leach soluble copper recovery and are based on a dump leach soluble copper operating cut-off of 0.15%, and a heap leach operating cut-off of 0.35% soluble copper between 2014 and 2017 and 0.32% soluble copper for 2018 and 2019.
Supergene reserves at the end of 2013 have decreased by 25.7 million tonnes primarily due to production but also due to life of mine plan changes and an updated resource model. Supergene reserves are expected to sustain dump and heap leach operations until 2020. Hypogene reserves and resources at the end of 2013 only increased very minimally as a result of changes to the life of mine plan for the supergene operation.
Carmen de Andacollo
The Carmen de Andacollo operation includes a heap leach copper operation and a copper-gold hypogene concentrator. Supergene mineral reserve and resource estimates prepared in 2013 assume a 64% leach recovery for soluble copper, US$3.30/lb copper price and a soluble copper operating cut-off of 0.14%. Supergene reserves are expected to sustain leaching and SXEW operations until the second quarter of 2014, assuming the current mine production schedule.
The hypogene reserves are estimated using variable mill recovery values for copper and an average fixed mill recovery of 61.3% for gold. Long-term prices of US$2.80/lb copper and US$1,100/oz gold were assumed, estimated above a 0.20% copper cut-off. Current hypogene reserves are expected to sustain concentrator operations until 2037.
In 2013, the leach operation processed 1.8 million tonnes from reserve and another 18.0 million tonnes of hypogene material were depleted. After considering other changes the end of year 2013 proven and probable hypogene reserves decreased by 16.4 million tonnes. Hypogene resources increased 20.1 million tonnes primarily due to higher metal prices.
The underground operation at Duck Pond depleted 677,000 tonnes of reserves and 48,000 tonnes of resources during 2013. Due to the short life of mine, short-range metal prices have been applied for reserves (US$3.10/lb copper, US$0.95/lb zinc, US$1,220/oz gold and US$20.90/oz silver) and an exchange rate of C$1.05 per US$1.00 were used. On the basis of these assumptions, the underground reserve is estimated at 533,000 tonnes and the open-pit (Boundary Deposit) reserves at 385,000 tonnes. Virtually all of the open-pit resources have been converted to reserves; thus the 751,000 tonnes of measured and indicated resources reported at the end of 2013 are from the underground deposit.
Mine production at Red Dog during 2013 removed 3.8 million tonnes of reserves from the Aqqaluk pits. A further 2.0 million tonnes was removed from reserves primarily due to higher assumed operating costs. Resources have increased by 3.1 million tonnes in 2013, primarily due to changes in mine design and updates to the resource model. Mineral reserves and resource estimates assume US$1.00/lb zinc and US$0.90/lb lead.
Reserves at Pend Oreille have increased by 1.74 million tonnes to a total of 3.66 million tonnes in 2013 primarily due to updates to the resource models and due to the transfer of some resources to reserves. The year-end reserves are sufficient to support operations at Pend Oreille for 5 years after re-commencement. Reserve and resource cut-off has been estimated at 3.51% zinc based on Teck’s mid-year 2013 short-term metal prices of US$1.00/lb zinc, and US$1.00/lb lead, and take into account by-product and transportation synergies with our Trail Operations. Resources at Pend Oreille have also increased by 177,000 tonnes to a total of 2.87 million tonnes primarily due to updates to the resource model.
Reserves at Relincho have increased by 134.6 million tonnes in 2013 primarily due to higher assumed metal prices and resource model updates, offset by higher assumed operating costs. Reserves have been reported within designed life of mine pits created during the feasibility study assuming US$2.80/lb copper and US$13.70/lb molybdenum prices with mining cost of US$0.954/tonne, a processing cost of US$9.13/tonne milled, and assumed metallurgical recoveries of 88.8% for copper and 47.2% for molybdenum.
Resources at Relincho have decreased by 385.2 million tonnes primarily due to higher operating cost assumptions, offset by higher metal prices, updates to the resource model and mine design changes.
2013 reserve and resource estimates for the Galore Creek project are supported by a 2011 prefeasibility study. Reported mineral reserves and resource estimates assume US$2.50/lb copper, US$1,050/oz gold and US$16.85/oz silver. There have been no changes to the resources for Galore Creek in 2013 in comparison to the figures presented at year end 2012.
The 2013 resource estimate for San Nicolás assumes US$2.75/lb copper, US$1.00/lb zinc, US$1,275/oz gold and US$22.50/oz silver. The estimate is based on the same geological data and block model used for the previous resource estimate published in 2001. There have been no changes to the resources for San Nicolás in 2013 in comparison to the figures presented at year end 2012.
Total reserves have increased from year end 2012 by 18.70 million clean tonnes of coal. Reserve depletion from mine production was 8.70 million tonnes of clean coal. The majority of the change was due to a significant design update of the Eagle pit resulting in an increase of 29.4 million tonnes of clean coal. Geological model updates resulting from extensive drilling added 17.0 million tonnes of raw coal to measured and indicated resources. The reserve estimate assumes a long-term selling price at the Port of Vancouver of US$170/tonne for metallurgical coal at an exchange rate of C$1.10 per US $1.00.
Teck has a 95% interest in the Elkview mine. Reserves depletion from mine production was 5.2 million tonnes of clean coal. Total reserves have decreased from year end 2012 by 25.50 million clean tonnes of coal. Revisions of geotechnical parameters, resulting from external review, reduced reserves by 2.4 million clean tonnes. A 17.4 million tonne reduction in clean coal in reserves from geology was mainly comprised of a 4.2 million reduction in clean coal due to the geological reinterpretation and a 14.1 million tonne clean coal reduction due to reduction in modeled yield. The reserve estimate assumes a long-term selling price at the Port of Vancouver of US$170/tonne for metallurgical coal at an exchange rate of C$1.10 per US $1.00.
Teck owns 80% of the Greenhills joint venture. Normal mine depletion accounted for a 5.0 million tonne reduction in clean coal reserves. An expansion to Cougar South Phase 6 pit resulted in the addition of 6.4 million tonnes of clean coal to proven reserves. A one-time addition of stockpiles of 1.0 million tonnes of clean coal increased proven reserves. The reserve estimate assumes a long-term selling price at the Port of Vancouver of US$170/tonne for metallurgical coal at an exchange rate of C$1.10 per US$1.00.
Reserve reductions were primarily attributed to mine production (3.4 million tonnes of clean coal), which was offset by increases attributable to mine design, geology and positive reconciliations. Measured and indicated resources increased by 29.5 million tonnes of raw coal, and inferred resources increased by 43.9 million tonnes of raw coal as a result of 2012 and 2013 exploration drilling campaigns. The reserve estimate assumes a long-term selling price at the Port of Vancouver of US$170/tonne for metallurgical coal at an exchange rate of C$1.10 per US$1.00.
The Coal Mountain Operation is a relatively low strip ratio open-pit operation that primarily mines PCI coal from a highly folded and faulted deposit. Mine production removed 2.6 million tonnes of clean coal from reserves. The reserve estimate assumes a long term selling price of US$120/tonne for PCI coal at an exchange rate of C$1.10 per US$1.00.
Mine production decreased reserves by 1.7 million tonnes of clean coal. Changes were made to the pit designs to remove uneconomic resources, leading to an additional reduction of 2.3 million tonnes of clean coal. The reserve estimate assumes a long term selling price at the Port of Vancouver of US$170/tonne for metallurgical coal at an exchange rate of C$1.10 per US$1.00.
Quintette (Mt Babcock)
Changes to the reserve between 2012 and 2013 reflect updated geotechnical mine design changes which reduced reserves by 1.1 million tonnes of clean coal and inclusion of oxide coal which increases reserves by 1.1 million tonnes of clean coal. The resource estimates assume a long-term selling price of US$170/tonne for metallurgical coal with discounts to the premium product benchmark price to reflect the specific quality attributes of products, and an exchange rate of C$1.10 per US$1.00.
Other Coal Properties
Other properties include Mt. Duke (92.6% interest) south of Tumbler Ridge B.C., Elco (75% interest) at the north end of the Elk Valley and the Marten Wheeler property south of Elkview. The resource estimates for these other coal properties assumed a long-term selling price of US$170/tonne for metallurgical coal, US$120/tonne for clean PCI, US$95/tonne for clean thermal coal and an exchange rate of C$1.10 per US$1.00.
Risks and Uncertainties
Mineral Reserves and Mineral Resources are estimates of the size and grade of the deposits based on the assumptions and parameters currently available. These assumptions and parameters are subject to a number of risks and uncertainties, including, but not limited to, future changes in metals prices and/or production costs, differences in size, grade, continuity, geometry or location of mineralization from that predicted by geological modeling, recovery rates being less than those expected and changes in project parameters due to changes in production plans. There are no known environmental, permitting, legal, title, taxation, sociopolitical, marketing or other issues that are currently expected to materially affect the mineral reserves or resources. Certain operations will require further permits over the course of their operating lives in order to continue operating. Where management expects such permits to be issued in the ordinary course, material that may only be mined after such permits are issued is included in proven and probable reserves. Specific current permitting issues are described in the narrative concerning the relevant operation under the heading “Description of the Business”, “Safety and Environmental Protection” and under the headings “Risk Factors — We face risks associated
with the issuance and renewal of environmental permits”.
Estimates of mineral reserves and resources for our material base metal properties have been
prepared under the general supervision of Rodrigo Marinho, P.Geo., who is an employee of Teck
Resources Limited. Mineral reserve and resource estimates for Antamina have been prepared
under the supervision of Marco Maulen, MAusIMM (CP), who is an employee of Compañía
Minera Antamina S.A. Messrs. Marinho and Maulen are the Qualified Persons for the purposes
of National Instrument 43-101. Reserve and resource estimates for coal properties were
prepared under the general supervision of Don Mills P.Geol. and Eric Jensen P.Eng. employees
of Teck Coal Limited, who are the Qualified Persons for the purposes of National Instrument 43–
Source: 2013 Annual Information Form (1.5MB PDF)