All participants, thank you for standing by. Welcome to Teck's first quarter 2022 earnings release conference 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 Wednesday, April 27th, 2022. I would now like to turn the conference call over to Fraser Phillips, Senior Vice President, Investor Relations and Strategic Analysis. Please go ahead.
Thanks very much, Patrick. Good morning, everyone. Thank you for joining us for Teck's first quarter 2022 results conference call. Please note today's call contains forward-looking statements. Various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statements. Please refer to slide two for the assumptions underlying our forward-looking statements. In addition, we will reference various non-GAAP measures throughout this call. Explanations and reconciliations regarding these measures can be found in our MD&A in the latest press release on our website. Don Lindsay, our President and CEO, will begin today's call with first quarter highlights, followed by Jonathan Price, our CFO, who will provide additional color on our financial results. We will conclude today's session with a question and answer period to address any remaining questions. With that, I will turn the call over to Don.
Thank you, Fraser, and good morning, everyone. We are pleased to report an exceptional start to the year and our record-setting financial results in the first quarter in what is going to be a transformational year for all of us here at Teck. Solid operational performance and continued strong commodity prices drove a quarterly record of CAD 3 billion in adjusted EBITDA, which is more than triple the same period last year. We delivered adjusted diluted earnings of CAD 2.96 per share, compared to CAD 0.61 in Q1 of 2021. Importantly, our strong financial performance enabled us to both strengthen our balance sheet and return significant cash to shareholders. We continue to advance our flagship QB2 copper project with overall progress now surpassing 82% completion.
We have to say we're very proud of this achievement, especially in light of the significant impact the Omicron wave had on workforce absenteeism, which exceeded 20% early in the quarter. Our QB2 capital cost guidance remains unchanged, and our teams are focused on systems completion and handover as we expect first copper from Line 1 in Q4 of this year, assuming no further COVID waves or other major disruptions. During the quarter, we made meaningful progress towards our commitment to safety and sustainability leadership. On safety, our high potential injury frequency remained low at 0.14 in the quarter. On climate, as you will have seen, we expanded our climate action strategy, building on our existing commitment to net zero across our operations by 2050.
We included a new short-term goal to achieve net zero Scope 2 GHG emissions by 2025, and we also have an ambition to achieve net zero Scope 3 emissions by 2050. We are pleased to see our continued sustainability efforts being recognized by the industry. During the quarter, we were named to the 2022 Bloomberg Gender-Equality Index in recognition of a high level of disclosure and performance in gender equality. Highland Valley was the first Canadian mine site to be awarded the Copper Mark verification for its responsible mining practices. Turning to slide four, as stated earlier, we delivered CAD 3 billion in adjusted EBITDA in the quarter. Notwithstanding global inflationary pressures, which increased our overall operating cost by 13% compared to last year, our results reflect meaningful contributions from each one of our business units.
Solid operational performance, combined with the strong commodity price environment, enabled us to further strengthen our balance sheet and accelerated our ability to return capital to shareholders. In the first quarter of 2022, we redeemed $150 million of our maturing notes, and we also paid CAD 337 million in dividends to shareholders. Subsequent to quarter end, we completed CAD 100 million of buybacks, and just last night we announced our intention to repurchase a further $500 million in Class B subordinate voting shares. We think this demonstrates both our confidence in the outlook for our business and our commitment to balance growth with shareholder returns. Going forward, we will consider additional buybacks in the context of market conditions at the time.
With the startup of QB2, we are quickly approaching an inflection point where the potential for further increased cash returns to shareholders will be then there, possible. Turning to our operations, starting with our copper business unit on slide six, record quarterly copper prices of CAD 4.53 per pound and higher contributions from byproducts drove EBITDA of CAD 523 million in the first quarter, which is an increase of 25% from last year. At Highland Valley, production was impacted by unplanned maintenance that reduced mill throughput. However, copper sales exceeded production as the logistics chains recovered from the weather-related disruptions at the end of 2021 and inventory was drawn down. Overall unit operating costs were in line with our annual guidance. The increase year-over-year was primarily the result of higher diesel prices and profit-based compensation.
In April, Antamina submitted an application for an amendment to its currently approved environmental impact study to extend the mine life from 2028 to 2036. Looking ahead, we continue to expect strong performance from all of our copper operations in 2022. Our annual guidance is unchanged. However, there continues to be upward pressure on cash unit costs. Moving on to zinc on slide seven, EBITDA in our zinc business increased by 71% compared to Q1 last year to CAD 298 million. The increase was driven by higher concentrate sales volumes and zinc prices which were up 32%, partly offset by substantially higher royalty costs related to profitability at Red Dog. The higher zinc and concentrate sales volumes in Q1 were primarily a result of the late start of the 2021 shipping season and the historic weather-related delays resulting in the deferral of a portion of 2021 sales into Q1 2022.
Unit costs are down as a result of lower smelting processing charges, which more than offset inflationary pressures. At Trail, refined zinc production was impacted by non-recurring operational challenges which are now behind us. Looking ahead, we expect Red Dog zinc and concentrate sales of 50,000-70,000 tons in the second quarter, which reflects normal seasonality, and our annual guidance is unchanged. On slide eight, our steelmaking coal business unit delivered yet another record quarter, generating CAD 2.1 billion in EBITDA, a fivefold increase compared to CAD 415 million last year. Pricing for steelmaking coal increased significantly through the quarter, resulting in record quarterly realized price of $357 per ton. Sales to our customers in China are based on the CFR China price, which was at a discount to FOB Australia during this quarter.
Sales in the quarter were 6 million tons, exceeding production but slightly below guidance, and that was as a result of the CP Rail work stoppage in late March. Production was impacted by processing challenges and curtailments early in the quarter associated with high mine inventories, which were carried over from the various weather disruptions in late 2021. Our rail infrastructure and complementary port capacity upgrade at our Neptune terminal demonstrated its value by mitigating the impact of major weather events. The rapid recovery of the logistics chain and the ability to recover deferred sales allowed us to capture higher margins and sales in a high price environment. Adjusted site cash costs at CAD 77 per ton and transportation costs of CAD 46 per ton in the quarter reflect continued inflationary cost pressures, including substantially higher diesel prices, profit-based compensation, demurrage costs, and fuel surcharges.
These increases were partially offset by lower port costs at Neptune. Looking forward, we expect sales of 6.3 million-6.7 million tons in the second quarter. Given our lower production in Q1, we expect 2022 production to be in the lower half of our guidance range of 24.5 million-25.5 million tons. As a result of the same factors that impacted our first quarter costs, we now expect 2022 adjusted site cash costs between CAD 79 and CAD 83 per ton. Additionally, we increased our capitalized stripping cost guidance by CAD 50 million, which reflects the inflationary mining cost pressures in 2022. It's important to note that the primary cost increases are not related to key mining drivers such as mine productivity and strip ratio, which remain relatively stable.
Notwithstanding recent volatility in steelmaking coal prices, the FOB and CFR benchmarks are currently trading at significantly higher levels compared to our record average realized price in the first quarter, which points to continued strong results in Q2. Turning to slide nine, our energy business delivered CAD 119 million of EBITDA in the first quarter, driven by the significant increase in the price of Western Canadian Select and Fort Hills ramp up to a two-train operation. In addition to its positive contribution to our bottom line, our investment in Fort Hills provides us a natural hedge against increasing WTI and diesel prices. Lower adjusted operating costs per barrel reflect higher production, which is partially offset by higher costs for natural gas and diesel. The increase in the WTI price also impacted cost for diluent, which is required for blending with the bitumen.
Looking forward, a 20-day planned maintenance outage in the second quarter is expected to reduce production to one train during this period. We continue to expect Fort Hills to operate at an average utilization of 90% in 2022. As we have previously stated, adjusted operating costs are expected to continue to decrease throughout the year. However, given increases in the price of natural gas and diesel, we now expect adjusted operating costs for 2022 to be in the range of CAD 28-CAD 32 per barrel. Moving on to QB2 on slide 10, we now have 12,500 workers on site, which is the highest to date, evidencing the recovery from the impacts of Omicron virus early in the quarter when absenteeism exceeded 20% at times with hundreds of workers in isolation.
Despite these challenges, steady progress has been made since our last report just two months ago, and QB2 is now over 82% complete, and we expect first copper from line one in Q4 this year, while our capital cost guidance remains unchanged. We're proud of this progress. We're also pleased to report that the QB2 project has been named by Bechtel as their global construction project of the year. We completed a number of key milestones in Q1, including the completion of the power transmission line tower construction. In terms of water supply, the seawater intake and the outlet pipes are now in place on the sea floor in preparation for water extraction pipes, and we have entered the hydrotesting phase for the water supply pipeline.
I'm proud to say that the QB mine fleet has completed their mass earthwork scope for the Tailings Starter Dam construction, which is now over 85% complete, and the mine fleet has transitioned to open pit activities. Our focus going forward is on system completion and handover of key facilities as we drive towards first copper. Looking into Q2, key milestones include energization of the high voltage power transmission system, which is in progress, completion of the mine area infrastructure that is required for pre-stripping, and we will begin turning over key systems at the concentrator to pre-operational testing, including the Line 1 mills. The photo on the right side of the slide shows workers installing the siding on the building which houses the mills.
Slide 11 shows the preparation for launching and placement of the second and final seawater intake pipe on the sea floor, and this pipe is a key component of our water supply system and was successfully deployed during the quarter. On the next slide 12, you can see the placement of one of the last modules for the electrical room at the desalination plant and the reverse osmosis units on the left side of the photo. On slide 13, it shows preparations for the hydrotesting phase of the water supply pipeline, which is a key step in construction and pre-commissioning of the pipeline for supplying water to the project for commissioning and operations. On slide 14, you can see workers mounting the concave inside the primary crusher. The major mechanical components associated with the primary crusher are now all installed.
Next you see the transfer station on the overland conveyor that will transport ore between the crusher and coarse ore stockpile. We will begin shortly the installation of the conveyor belts in this area. Slide 16 illustrates the progress we are making on the assembly of the stockpile dome, which is well advanced and approaching its final height. The approximately 15-story high stacker structure can be seen feeding into the dome. On slide 17, here we have an overall view of the concentrator area from February with the stacker structure and the grinding building in the background and the flotation area in the foreground. The focus in this area is on completion of Line 1 in preparation for first copper. As mentioned earlier, in Q2, we will begin turnover of key systems in this area to pre-operational testing, including the Line 1 mills.
On slide 18, you can see the progress on the cyclone station, which sits above the future tailings impoundment area. The cyclone station will be used to classify the tailings once we are in operation. Finally, on slide 19, you can see the starter dam, where we continue to make excellent progress. As I said, the Teck mine fleet has completed the mass earthworks scope for the starter dam, and it has transitioned back to the mine area. In summary, we continue to be very pleased with the progress we are making, and we are excited to build on our construction successes to date with a focus on delivering to the project's key milestones. I encourage all of you to visit the investor section of our website to watch the latest progress video and view the most recent photo gallery.
With that, I will now pass it over to Jonathan to discuss our financial results.
Thanks, Don. Teck delivered record-setting profitability in the first quarter, largely as a result of continued strength in the prices for all of our principal products as illustrated on slide 21. Copper prices reached an all-time quarterly record average of $4.53 per pound in the first quarter, while zinc prices increased by 36% to an average of $1.70 per pound. Western Canadian Select, the heavy oil benchmark price, increased sharply due to the impact of the Russian war in Ukraine. FOB Australia coal prices reached peak levels in the first quarter, averaging a record high of $395 per tonne for the quarter lagged by one month, and a record high of $487 per tonne for the calendar quarter. CFR China prices traded at an average of $405 per tonne in the quarter.
As you may have noted, we published a press release on April 10th announcing the sales volume, average realized price, and pricing adjustments for our steel-making coal business unit in the first quarter. We intend to continue pre-releasing these data points each quarter going forward, given the lack of visibility and publicly available information. We've outlined the key drivers for our record profitability on slide 22. Adjusted EBITDA of CAD 3 billion in the quarter represents an increase of more than CAD 2 billion compared to last year, predominantly driven by strong commodity prices. Like others in the industry, we continue to face inflationary cost pressures, which increased our Q1 operating costs by 13% compared to last year. Approximately half of this increase relates to diesel costs at our operations and in our transportation costs. The diesel prices increased by 52% compared to the same period last year.
Further, increases in the cost of a number of our key supplies, including mining equipment, fuel, tires, and explosives, are being driven by price increases in underlying commodities such as steel, crude oil, and natural gas. While our underlying key mining drivers remain relatively stable, key input costs and profit-based compensation continue to put upward pressure on our unit costs and capitalized stripping guidance in 2022. Now we generated cash flow from operations of CAD 2.3 billion in the first quarter, compared to CAD 585 million in the same period last year. This is largely a reflection of a positive impact of substantially higher commodity prices, most significantly, steelmaking coal. Debt proceeds from the QB2 project financing facility were CAD 260 million in the quarter. The U.S. $2.5 billion facility was fully drawn in April.
In the first quarter, our capital investments totaled CAD 867 million, including CAD 654 million for QB2, and CAD 186 million in sustaining capital. In addition, we incurred CAD 233 million for capitalized stripping, primarily related to the advancement of pits for future production at our steelmaking coal operations. This was higher than a year ago as a number of development mining areas transitioned from sustaining pre-production capital to early stages of operations. As Don Lindsay outlined earlier, solid operating performance and strong commodity prices enabled us to pay down debt and return meaningful cash to shareholders in the quarter. In January, we repaid CAD 236 million in debt, including $150 million of our maturing 4.75% term notes.
In the quarter, we paid out CAD 337 million in dividends, consisting of our quarterly base dividend of CAD 0.125 per share, and a supplemental dividend of CAD 0.50 per share. In addition, we paid out another CAD 100 million through the purchase of 2 million Class B shares under our normal course issuer bid, 1.8 million shares or CAD 90 million of which was completed in the first quarter. As shown here on slide 24, our balance sheet remains strong, with a net debt to adjusted EBITDA ratio of 0.6 x, investment-grade credit ratings, and no significant debt maturities due prior to 2030. As of April 26, we had CAD 8 billion of liquidity. Importantly, our record profitability and strong balance sheet has enabled us to deliver meaningful cash returns to shareholders.
As Don noted earlier, in accordance with our capital allocation framework, we announced our intention to repurchase a further $500 million in Class B subordinate voting shares. This demonstrates both our confidence in the outlook for our business and our commitment to balance growth with shareholder returns. Going forward, we will consider additional buybacks in the context of market conditions at the time. Supplemental distributions will continue to be considered annually by the board in February when they have the final results for the full year. Slide 26 outlines our guidance for capital investments. With the completion of QB2, 2022 will be the high-water mark in our capital spend profile. As previously noted, we expect a significant decrease in capital investments into 2023, to a total of approximately CAD 3 billion.
With first production from QB2 in the fourth quarter of this year, and the operation then ramping up to full capacity, we are approaching a major cash flow inflection point where we shift from a period of significant capital investment to a period of significant cash generation. I will now pass it back to Don for closing remarks.
Thank you, Jonathan. In closing, I have to say we are very pleased with how Teck is positioned to drive long-term shareholder value. Our first quarter results gave us an exceptional start to 2022, and as I said, this is a transformational year for Teck as we rebalance our portfolio towards copper. As we bring on QB2 and advance our overall copper growth strategy, we will rebalance and reduce the proportion of carbon in our overall business. As we've done to date, we'll continue to further strengthen our existing high-quality assets through our RACE Technology Transformation program and our sustainability strategy. Strong commodity prices over the last few months have accelerated our ability to return capital to shareholders. Looking ahead, we have the ability to generate even greater cash flows and returns.
With that, I'll turn the call over to the operator to open it up for questions.
Thank you. You may press star one at this time if you have a question. The first question is from Orest Wowkodaw from Scotiabank. Please go ahead.
Hi, good morning. Don, obviously cost inflation is impacting the mining industry across the board. I'm not surprised to see your higher cost guidance in coal, but I am a little surprised that you're maintaining cost guidance in copper and zinc, even when you look at it before by-product credits. Can you maybe give us a bit of color on how you're managing that and whether that's related to perhaps some hedging done for fuel or something that's keeping costs at a lower level?
Mm-hmm
for some period of time?
Okay. I'm gonna turn that question over to Shehzad, but I'll just make a comment that one of the contributing factors, not just in copper, but across the business, is the success of our RACE21 program, and we'll be issuing a release summarizing some of the key accomplishments there in the next short while. Shehzad, over to you.
Thanks, Don. You know, Orest, I'll start with the zinc business unit. Our higher production is part of the reason compared to last year as to, you know, that helps in maintaining the cost guidance and also the sensitivity to diesel, which has gone up significantly, is a lot less in copper and zinc than it would be in coal. Of course, as Don mentioned, we've done a fair bit of work on RACE21, both Highland Valley and Red Dog have been very active on the RACE21 side, which has helped, you know, on cost management.
As you know, you mentioned before by-product credits and after by-product credits, in copper, zinc credits at Antamina have been very helpful after by-product credits. The same thing in the zinc business unit with lower TCs have also helped from last year.
Thanks, Shehzad. Are there any hedges or collars that are helping kind of contain costs for a certain period of time, or is this your updated guidance reflecting full market cost?
This is Jonathan here. Orest. No, the guidance reflects, you know, the prices you see in the market. We haven't hedged any of our key input costs.
Okay, thank you. Just quickly, if I may, on the capital return program, I'm pleasantly surprised by the new $500 million buyback. Is this something now that the board plans to look at on a quarterly basis?
I'll draw your attention to our release in February where we said that the board would be reviewing it regularly. We deliberately didn't use the word quarterly, 'cause regularly could be shorter than quarterly or could be longer, but I think this does demonstrate that that's exactly what we're doing.
Excellent. Thanks, Don.
Thank you. The next question is from Lawson Winder from Bank of America Securities. Please go ahead.
Hello, and good morning. Thank you for the update today.
Good morning.
Could I ask about the copper project pipeline and whether or not your sort of order of preferences has shifted at all, particularly with some of the smaller projects, such as Zafranal, San Nicolás, and Schaft Creek, and then finally, with San Nicolás and Zafranal, would Teck be comfortable building those two projects alone should you guys not find a partner? Thanks very much.
Okay. The way we look at it is we have three projects that are in mining terms near term, meaning that they could all be in production by 2026, and those are QB2, the QB2 mill expansion, Zafranal and San Nicolás. In each of those cases, we have the teams working away advancing the projects. In Zafranal's case, you know, the hearing in Lima, Peru took place at the end of March, was very successful, very impressive. I managed to get there myself and see it in action. We got very positive feedback from SENACE, the regulator at that time. On San Nicolás, a lot of work going on there.
I should say on both of those projects, we still have a preference to have a partner. Of course, we have a partner on Zafranal. It's 80% our interest, and 20% with MMC. But we are in discussions with different parties on San Nicolás as well and at some point we'll put the pin in, but what's important to us is getting the right partner. It's really like an interview process more so than a valuation process. You know, I think all the parties involved are excited about the project, and at some point we'll put the pin in, but we do wanna stay on that schedule to have it in production by 2026. Those are the three near-term. Galore Creek would then be what we would think of as medium-term.
It's a 50/50 joint venture with Newmont. We're working together updating the studies on that. Of course, it has a lot of gold in it, so it's got the real advantage of grade, so someday I'm sure that's gonna be a great mine. The other two are longer dated, Mesaba and Schaft Creek. Even with Mesaba, you know, we're looking at different partner and development options there as well. I expect different announcements throughout the year. Can't tell you exactly when, but certainly there's a lot of activity in the copper growth for sure.
We're also, I should say, in the market hiring people and building the team internally, so that, you know, if we ended up choosing to do it on our own, we'll have the capability to do so. We really like what we've done with QB2 and our partnership with Sumitomo Metal Mining and Sumitomo Corp. I think the market really liked it too. It de-risked the project both financially and from a market's point of view, and great customers, great partners. We think that's a pretty good model. While we're at this stage, I think it's still worth pursuing. Sorry, sir, a bit of a long answer, but there's a lot in there. We're pretty busy.
Thank you for that insight. On your updated goal to achieve net zero Scope 2, I'm curious, are there any potential like substantial CapEx investments that might be required on behalf of Teck in order to achieve that? What are sort of like the main points that have to get achieved to ultimately reach that?
Yeah. I'm gonna turn this over to Shehzad actually, but the short answer is no on the big capital. It's really all about clean power. Shehzad over to you.
Thanks. In Chile, Scope 2 purchase agreements, remember a couple of years ago we converted two contracts that we had to renewable, and we have one contract left right now at 122 MW with the provider, and we are in the process of looking at options and working on development of new renewable projects to be able to convert that coal-fired contract over to renewable.
I wanna get it done faster than 2025, so I'm putting a lot of pressure on Shehzad.
Will do.
All right, that's excellent. Thank you very much.
Thank you. The next question is from Carlos de Alba from Morgan Stanley. Please go ahead.
Yeah, good morning, everyone. Thank you very much. On QB2, you know, congratulations on the continued progress. I noticed that you expect line one to start producing in the fourth quarter, but yet on the copper outlook or the copper production guidance, you're not including any volumes there. Could you elaborate a little bit more why that is the case and give us a range as to how much volumes, maybe just minimum and that is the reason you are not including in your guidance, but any color on that regard will be great. As well as, I noticed that there was no comment related to QB2 COVID capital cost.
I just wonder if the guidance remains between $900 million and $1 billion for that. If I may, on the coal side, could you comment on the Chinese market and your expectations for shipments into that market in Q2 or for the remainder of 2022? Thank you.
Okay. Carlos, I think we got four questions there. I'm gonna take the one on guidance. I'm gonna turn to Jonathan on the copper production guidance. I'm then gonna ask Red to talk about QB2 since you've raised it, and he's on the line and can give you some insight on how things are going there. Last, it'd be Réal Foley on the China and coal side. On guidance, we've been quite clear there's no change to guidance on either the definitive estimate capital cost that we had put out before or on the COVID cost, so no change there at all on production forecast.
Yeah, on the production guidance, we haven't guided the volumes at this point in time. As you highlight, we will do so, of course, for 2023 in due course. For the time being, we'll you know we continue to just follow the progress of the project and we'll provide updates throughout the remainder of the year.
Okay. Red's on the line. Red, since QB2 is on the table, maybe turn it over to you to share your thoughts.
Yeah, thanks for the question, Carlos. Just in general, we're really excited about where we're at right now. Our team has come through this Omicron wave extremely well. We're very proud of how they've managed the health and safety of our employees. They, you know, weathered through these really high absentee rates that we had earlier in the year. Large hundreds of people in quarantine, as many as 800 at one point. You know, we've got a really clear path now to first copper in the fourth quarter. So all of that is really positive for us. Momentum's building, and we're having a very good month right now in April.
When you talk about volumes of production during particularly the first couple of months of ramp up, let me just give you some color on what that looks like on the ground. You know, you start this equipment and start putting load in it, rock in it. Then the first thing you do is you turn it off and you re-torque bolts and check tolerances and clearances and those kinds of things. You turn it on, and you put more rock in it. One of the next things that you do is adjust the chutes that you know all have to be kind of custom fit and formed as you get the larger volumes of material going in there.
It's this really herky-jerky up, down, up, down shakeout process that you go through. We're, you know, very comfortable with where we're headed in the fourth quarter and just are not, you know, gonna make guesses about how that up, down, up, down goes in the first couple of months, getting this thing really tightened up and fine-tuned and ready to run for decades.
Thanks, Red. That
All right. Thanks very much.
Réal Foley for the coal then.
Yeah. Thanks for the question, Carlos. On coal sales to China for 2022, we're expecting they'll be between 25% and 30%. Keep in mind that we always reserve tons for spot sales, and we'll be placing these tons in markets where we achieve the best returns.
All right. Excellent. Thank you very much, everyone. Good luck.
Thank you.
Thank you. The next question is from Lucas Pipes from B. Riley Securities. Please go ahead.
Hey. Good morning, gentlemen, and congrats on all the progress. Don, I have a higher level question. QB2 kind of home stretch there, much lower CapEx next year. You're generating an incredible amount of free cash flow in the coal business here in Q2 and possibly longer given the global backdrop. I’m reminded of the book Never Rest on Your Ores. What are you going to do next year, the years to come? You have a really strong hand of cards here. What are your priorities?
I'd like to buy the whole company back myself, but you know, we think we're in great position. We think the company's in really strong shape. We have great optionality to continue to grow the copper business. You know, there's seven different projects, three of which we're
As I've just mentioned, reasonably near term, and they can be developed on a capital light basis, right? That's our objective. That's one of the reasons why we wanna partner and so on. If we keep going down that path, that's gonna put us in a very good position to continue to return capital to shareholders, and whether it's by buybacks or dividends, it gets decided at the time. That's a pretty clean strategy, easy for people to understand, great cash flows from our steelmaking coal business, our energy business now, and the zinc business and that cash going into the copper growth, which reflects what's going on in the world. We've got a very, you know, serious global commitment to decarbonization, which means electrification, which means copper.
We're basically reflecting what's going on in the world. I think we keep executing. As you can tell from listening to Red Conger and his color in the project, that the project's in very good hands. The whole team's pulling together here, and so we think these next few years are gonna be very exciting.
Thank you very much for that outlook. My second question is higher level on the coal side. I'd say the one area where I hear the greatest concerns from investors is announcements in China regards to increased coal production. Do you have expectations for their success in alleviating some of the coal pressures and what this could mean for global coking coal prices in the quarters to come?
Yeah, I'll turn that over to Réal, but I'd make sort of this big picture observation. Throughout the years, there have been different announcements and events in different markets, China included. It's one thing to make announcements, it's another thing to see what actually happens. If you track the steelmaking coal production in China over the last 10 years, it's pretty stable. Réal, over to you.
Yeah. Thanks, Lucas. Yes, China increased overall coal production during the quarter, but when you look at it just for coking coal, the increase is very small. Local consultants in China are expecting that the increase in production this year could be maybe up to 4 million tons. That would bring it up to about 494 million tons, compared to 490 last year. Now, I say up to 4 million 'cause there's a number of challenges with safety inspections that are continuing. There's also the 20th Party Congress that will take place in October, November this year. Those increased safety inspections at the coal mines are expected to go on from now right through to the 20th Party Congress.
There is going to be pressure actually to maintain even production at the level that it's at right now.
Very, very helpful. Really appreciate all the color and continued best of luck.
Thank you.
Thank you. The next question is from Brian MacArthur from Raymond James. Please go ahead.
Good morning. Can I just follow up on slide 26? You talk about the CAD 2 billion decrease in capital next year, which is obviously very positive, but then you go on to say, you know, sustaining capital, capitalized strips all coming back down. If I just eyeball that's maybe, I don't know, 500 of that. The other CAD 1.5 billion decrease, some of that's QB2 obviously, but are there other growth projects built in there? Where I'm going with it a little bit is obviously the QB2 cash is different than the corporate cash, just given your relative percentage ownership. I'm just trying to figure out, I actually would've thought it might have gone down a little bit more, on a corporate basis.
I'm just trying to figure out what else is in there, if you can give us any color.
Thanks. Thanks for the question there. We will see a reduction in sustaining capital year over year into 2023. We've guided this year to 1.4 sustaining. We think a longer term sustainable level is closer to CAD 1 billion, including QB2, but we're not gonna get all the way there by 2023. You'll see some step down in sustaining capital. We'll also see a step down in capitalized stripping, as you mentioned. With respect to QB2, it's important to note here that all of these numbers are on a 100% basis for QB2 because we consolidate that.
If you look at our guidance in terms of to-go capital, and you look at the guidance for 2022, you'll see there's a reasonable amount of capital carried over into the first half of next year, and that could be CAD 600 million-CAD 700 million. That as well explains why you don't see, you know, sort of a cliff in the QB2 capital year-over-year. Then finally, I'd say, you know, if you look at our guidance for this year, we've guided to CAD 300 million in other growth across the business, and that goes to, you know, a bunch of studies that we're doing across many of our base metals assets, and we expect that to continue as well.
You know, as Don mentioned, we have this pipeline of projects ahead of us. We're readying a number of those for you know, near term, development decisions and therefore, the studies and sort of pre-execution work continues to ramp up. You know, there's a lot of growth activity still in the portfolio in 2023, both QB2 and future options, which explains why the number perhaps isn't falling as much as you might assume.
Thank you very much. Yeah, that's very helpful.
I was gonna say, if you want a further breakdown on that, just contact Fraser, and he can help with the numbers.
Great, cause that's very helpful. That's exactly what I was trying to get at. Can I just ask, QB working capital, does that get counted in that CAD 700 million as well carry over?
No. No, the working capital's not in there.
Okay. Great. Thank you very much. That's very helpful.
Most welcome.
Thank you. The next question is from Jackie Przybylowski from BMO Capital Markets. Please go ahead.
Thanks very much. I just wanna follow up on the question Orest asked earlier in the call on the share buyback. You know, it's, I guess there's a lot of moving parts. I just wanna make sure I'm clear. Can you maybe talk a little bit about, you know, how quickly you expect to complete this new $500 million in share buyback? Can you just maybe remind us if you finished the CAD 100 million that you announced in February and also the 40 million share NCIB that was approved in November as to where you're at in all of those programs, if you don't mind? Thanks.
Yeah, sure. The November announcement is the annual amount announcement of the renewal of the NCIB. You pick a total possible number. I know there is a regulated maximum. We put 40 million shares there, which is a big number. That doesn't guarantee that you're gonna do all 40 million shares, but it gives you then the room to start. Then of course you have to authorize a dollar amount that the board gives myself and Jonathan an amount to work with. When we were doing the special dividend and increasing the base dividend, we just, you know, started with a small amount to get the NCIB going. We completed that amount a while back. We just reloaded last night.
As we had said in February, the board will be reviewing it regularly, and so $500 million gives us something to work with. I couldn't tell you how long it's gonna take to execute. That really depends on market conditions and so on. The board will review it again. If it reviews it again, our next board meeting's actually at the end of May, then there's, you know, there's different board meetings scheduled. Generally, we would review it at a scheduled board meeting, but if Jonathan and I feel that we wanna reload sooner, we can call a quick call or something. It will be reviewed regularly, and that's basically our position.
That sort of matches, you know, as we continue to generate all this cash, we don't know what the commodity prices are going to be next quarter or the quarter after. We've seen a lot of volatility, as you know. While the prices are, you know, reasonably high where they are now, we're generating all this cash, we probably wanna review that buyback very regularly. If the prices happen to fall off, then maybe it'd be slower after that. I think that's about all we can tell you.
Sorry, John, this is probably a really dumb question, but the normal annual authorization of 40 million shares in the fall, I mean, that possibly, you know, would kind of get gobbled up by that Q1 100 million announcement and this new announcement. Would you need to go back and add to that blanket NCIB approval if you wanted to do another buyback at some point later this year?
The NCIB is a normal course issuer bid. I'd encourage you to go and read the rules on that. We are buying back stock under that authorization. If we get to the maximum allowed by the regulators under that, we would then have to actually do a tender offer, something more formal. Right now I'm pretty under that 40 million shares, and I suspect that'll be enough for now.
Jackie, just for context, you know, we bought back CAD 100 million through to April, and that was 2 million shares, and the NCIB is 40, so there's plenty of headroom under that right now, even accounting for the $500 million that was authorized yesterday.
Okay. Thanks, Jonathan. That's helpful. Maybe I could just ask about the QB mill expansion. I know you mentioned in the release that you've got a pre-feasibility that you're working on. I mean, that sort of means different things at different companies sometimes. Can you maybe talk a little bit about what level of detail you're expecting to include in that pre-feasibility study?
I'll turn that one over to Red Conger, please, unless Jonathan, you wanna jump in. Red, over to you.
Good morning, Jackie. We're really excited about this development. We've checked roughly 12 key calculations for fatal flaws. One example would be, can the tailings dam that we currently have constructed accommodate the rate of rise that we would incur from increasing the capacity by 50%? We've gone through those kinds of things, got positive engineering results on all of those. That's what's really triggered us to be bullish about this particular approach. We're actually working on combining the elements of a feasibility study into the work that we're doing right now to fast-track this thing. We're trying to get all of that in place to do permitting, et cetera, here at the end of the year.
That's what I was hoping I would hear. Thank you very much. Thanks. Thanks Red, and John, and Jonathan.
Thank you.
Thank you. This concludes today's question and answer session. I would like to turn the meeting back over to Mr. Lindsay.
Okay. Well, thanks all for attending today. We're very excited about the position we're in, very pleased with the results in Q1. Q2's looking even better, and so we look forward to discussing that with you at the next call in July. Thanks very much.
Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation.