9 months after buying the minority interest, Teck sold 30% of QB2 to Sumitomo.

Terms of the transaction:

• $800M US earn-in contribution
• $400M US matching contribution
• $50M US upon reaching 154ktpd
• Additional contributions for QB3

For this analysis, I'll focus on the first 3 items and also use the below assumptions from slide 27 (reserve case).

https://www.teck.com/media/QB2-Partnership-and-Sanctioning-Conference-Call.pdf

• NPV (8%) with copper at $3.00 US - $2.0B US
• NPV (8%) with copper at $3.15 US - $2.5B US (estimated)
• NPV (8%) with copper at $3.25 US - $2.9B US
• EBITDA (First 10 years): $1B US with copper at $3.00 US
• EBITDA (First 10 years): $1.1B US with copper at $3.25 US
• Capex: $4.74B US

Per slide 12, it was planned that Sumitomo would pay $1.2B US (2018) upfront with another $346M US and $50M US that would be paid later during construction and ramp-up.  Let's assume the $346M US was planned for 2022 and the $50M US was planned for 2025.  We all know that it ended up being more cost and time, but let's focus on what was known at the time.

If we discount the $346M US by 8% for (4) years, this makes it $254M US in 2018 dollars.

If we discount the $50M US by 8% for (7) years, this makes it $29M US in 2018 dollars.

Total of the transaction in 2018 dollars: $1.2B US + $254M US + $29M US = $1.48B US for 30%.

That's $1.48B US total for the 30% interest (valued at $600M US) or 247% of the NAV when using copper at $3.00 US.

That's $1.48B US total for the 30% interest (valued at $750M US) or 197% of the NAV when using copper at $3.15 US.

That's $1.48B US total for the 30% interest (valued at $870M US) or 170% of the NAV when using copper at $3.25 US.

When looking at the EBITDA ratio (first 10 years):

• $1B US x 30% = $300M US per year
• $1.48B US / $300M US per year = 5X the projected EBITDA when using copper at $3.00 US
• $1.1B US x 30% = $330M US per year
• $1.48B US / $330M US per year = 4.5X the projected EBITDA when using copper at $3.25 US

When looking at the capex ratio:

$1.48B US / ($4.74B US x 30%) = 104% for a project that should offer around a 15% IRR after-tax.

Conclusion: 

This transaction was done between 170% and 247% of the NAV (8%), at production decision and came with a partial carried-interest to production.  Sumitomo was still liable for 1/3 of the cost above the initial capex estimate of $4.74B US.

IMO.

MoneyK