Quebrada Blanca Phase 2: A Catalyst for Copper Supply and Teck Resources' Valuation

The global energy transition is driving unprecedented demand for copper, a critical metal for electric vehicles, renewable energy infrastructure, and grid modernization. Against this backdrop, Teck Resources' Quebrada Blanca Phase 2 (QB2) project stands out as a transformative asset, with its recent ramp-up marking a pivotal shift in copper supply dynamics. This article examines how QB2's environmental approval and subsequent operational milestones position Teck to capitalize on rising demand, while unlocking significant valuation upside for investors.

QB2's Approval: A Decade in the Making

The QB2 project's environmental approval journey began in 2018, when Chile's Regional Environmental Committee of Tarapacá approved its Social and Environmental Impact Assessment (SEIA). The final Environmental Qualification Resolution (RCA) followed shortly after, paving the way for construction. After nearly five years of development, QB2 began operations in October 2023, becoming the largest mining project in Chile in over a decade.

This approval was no small feat. QB2's $4.5–5 billion investment required navigating complex regulatory and environmental hurdles, including securing permits for a 165-km pipeline system, a desalination plant, and a 140,000-tonne-per-day concentrator. The project's use of 100% renewable energy and desalinated seawater—firsts in Chile's Tarapacá region—also demonstrated its commitment to sustainability, a key factor in gaining regulatory and community acceptance.

Strategic Impact on Copper Supply

QB2's operational ramp-up has already reshaped Teck's copper production profile. In 2024, Quebrada Blanca produced 207,800 tonnes of copper, a 50% increase over 2023 levels, with record quarterly output of 60,700 tonnes in Q4 2024. For 2025, production guidance is 230,000–270,000 tonnes, despite a planned January maintenance shutdown. By 2026–2028, annual output is expected to rise further to 270,000–310,000 tonnes, supported by ongoing optimization efforts.

This growth is critical amid a global copper deficit. Analysts estimate a 10–15 million-tonne gap between supply and demand by 2030, driven by EV adoption and renewable energy projects. QB2's capacity to produce 300,000+ tonnes annually by 2027 directly addresses this shortfall, positioning Teck as a linchpin in stabilizing market dynamics.

Valuation Upside for Teck Resources

QB2's scale and cost structure present a compelling case for Teck's valuation re-rating. Key points include:

1. Cost Efficiency: QB2's net cash unit costs are projected to fall to $1.80–$2.15/lb in 2025, down from $2.25–$2.55 in 2024, due to operational stability and higher by-product revenues (e.g., molybdenum). This compares favorably to industry averages, enhancing profit margins.
2. Long-Dated Growth: With a 27-year mine life and only ~18% of reserves utilized, QB2 offers decades of predictable cash flows. The project's potential 15–25% throughput boost via debottlenecking could further amplify output.
3. ESG Leadership: QB2's use of renewable energy and seawater avoids 1.6 million tonnes of annual CO2 emissions, aligning with investor demand for ESG-compliant assets. This reduces regulatory and reputational risks.

Despite these strengths, Teck trades at a 20% discount to its peers based on EV/EBITDA multiples, suggesting undervaluation. As QB2's production stabilizes and ESG benefits gain recognition, a re-rating is likely.

Risks and Considerations

• Water Scarcity: Drought conditions in Carmen de Andacollo could strain operations, though Teck has invested in well expansions.
• Commodity Volatility: Copper prices remain tied to macroeconomic cycles, though long-term demand fundamentals are robust.
• Execution Risks: Any delays in debottlenecking or cost overruns could temper growth expectations.

Investment Recommendation

Buy TECK with a 12–18 month horizon, targeting a price target of CAD 55–60 (vs. current CAD 45). Key catalysts include:
- Production Beat: Outperforming 2025 guidance on lower costs.
- Debt Reduction: QB2's cash flows will deleverage the balance sheet, improving financial flexibility.
- ESG Recognition: Inclusion in sustainability indices could attract new investors.

Conclusion

Quebrada Blanca Phase 2 is a landmark project that transforms Teck Resources into a dominant copper producer. Its environmental approval and subsequent ramp-up have solidified its role in addressing global supply shortages, while its cost and ESG advantages position Teck for sustained outperformance. Investors seeking exposure to the energy transition and undervalued miners should prioritize TECK as a core holding.