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April 24, 2012
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Teck Reports Unaudited First Quarter Results for 2012
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VANCOUVER, BRITISH COLUMBIA--(Marketwire - April 24, 2012) -
All dollar amounts expressed in this news release are in Canadian dollars unless otherwise noted.
Teck Resources Limited (TSX:TCK.A and TCK.B, NYSE:TCK) reported first quarter adjusted profit of $504 million, or $0.86 per share, up 12% from $450 million in 2011.
"Our strong first quarter results demonstrate continued solid operating performance and the successful execution of our ongoing expansion programs, particularly in coal.
Gross profit was similar to the first quarter of 2011, but cash flow from operations was up 14%.
Our near-term copper growth projects are on track and, with the acquisition of SilverBirch, we increased our contingent bitumen resources by 67% to 3.5 billion barrels.
With a strong balance sheet and strong cash flow, we are well positioned to successfully pursue our longer term growth plans," said Don Lindsay, President and CEO.
Highlights and Significant Items
-- We achieved record first quarter revenues and gross profits of $2.5
billion and $918 million, respectively, in the first quarter of 2012.
-- Gross profit before depreciation and amortization of $1.1 billion in the
first quarter was similar to the first quarter of 2011.
-- Cash flow from operations, before working capital changes, was $1.0
billion in the first quarter of 2012, 14% higher than $874 million a
year ago.
-- Profit attributable to shareholders was $218 million and EBITDA was $781
million in the first quarter.
-- Coal production increased to 6.3 million tonnes in the quarter, up 43%
from the first quarter of 2011.
This was the result of the successful
execution of our ongoing expansion program.
In addition, coal production
in the first quarter of 2011 was negatively impacted by unusual weather-
related events and a strike at our Elkview mine.
-- To date we have reached agreements with our coal customers to sell 6.3
million tonnes of coal in the second quarter of 2012 at an average price
of US$202 per tonne.
We expect to conclude additional sales over the
course of the quarter as demand has improved and supplies, particularly
from Australia, have been constrained.
-- In early April, we closed our acquisition of SilverBirch Energy
Corporation ("SilverBirch") for a net cash outlay of $432 million, which
gives us full ownership of the Frontier oil sands project, including the
Equinox property.
As a result, our total contingent resource for all of
our oil sands projects has increased by 67% to 3.5 billion barrels of
bitumen.
-- Our cash balance was $3.8 billion at March 31, 2012, after dividend
payments, capital expenditures, share repurchases and investments
totaling $728 million in the first quarter.
-- In February we refinanced $1 billion of our high yield notes, replacing
it with debt of longer maturities and lower effective interest rates
averaging 4.2%.
This refinancing resulted in a $329 million after-tax
charge to profit in the quarter and will reduce our annual interest
expense by $80 million.
-- Our Quebrada Blanca and Carmen de Andacollo copper operations in Chile
ratified new collective labour agreements during the quarter.
-- On April 23, 2012 we announced that on July 3, 2012 we will pay an
eligible dividend of $0.40 per share on our outstanding Class A common
shares and Class B subordinate voting shares to shareholders of record
at the close of business on June 15, 2012.This managements discussion and analysis is dated as at April 23, 2012, and should be read in conjunction with the unaudited consolidated financial statements of Teck Resources Limited (Teck) and the notes thereto for the three months ended March 31, 2012, and with the audited consolidated financial statements of Teck and the notes thereto for the year ended December 31, 2011.
In this news release, unless the context otherwise dictates, a reference to "the company" or "us," "we" or "our" refers to Teck and its subsidiaries.
Additional information, including our annual information form and managements discussion and analysis for the year ended December 31, 2011, is available on SEDAR at www.sedar.com.
This document contains forward-looking statements.
Please refer to the cautionary language under the heading "CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION" below.
Overview
Our continued focus on expanding coal and copper production is positively affecting our business and financial results.
In coal, investments in new mining equipment, plant upgrades and people have resulted in substantial increases in material moved, increased clean coal production and sales.
Our investments at Carmen de Andacollo and Antamina are expected to continue to generate increased copper production and we continue to advance Quebrada Blanca Phase 2 and Relincho.
We also strengthened our energy business unit by consolidating ownership of our now wholly-owned Frontier project.
Prices for our key products in our metal units strengthened during the first quarter.
Copper prices remain strong, but unit operating costs increased as a result of higher input costs, lower grades and higher stripping ratios at many of our mines.
Contract coal prices and coal markets remain weaker than those we experienced in the previous nine months, but are higher than in the same quarter last year.
Unit operating costs at our coal operations also decreased significantly.
Coal production and sales significantly outpaced last year.
We refinanced $1.05 billion of high-yield notes with $1 billion of new notes at an average effective interest rate of 4.2%.
This transaction will reduce our annual interest charge by $80 million and extended the average term of our debt to 15.1 years.
Our strong cash flow, debt capacity and cash position of $3.8 billion, together with access to capital markets, should provide the financial capacity necessary to fund our attractive portfolio of growth projects.
Profit and Adjusted Profit(i)
Adjusted profit, which excludes the effect of certain transactions described in the table below, was $504 million, or $0.86 per share, in the first quarter of 2012 compared with $450 million, or $0.76 per share in the same period a year ago.
The higher adjusted profit was primarily due to a significantly higher contribution from our coal business unit and increased copper sales, partly offset by higher operating costs at our copper operations.
Also contributing to the higher adjusted profit were positive after-tax pricing adjustments of $57 million compared to negative after-tax pricing adjustments of $18 million in the first quarter of 2011, which resulted from rising metal prices, particularly copper in the quarter.
Profit attributable to shareholders in the first quarter was also affected by a $329 million after-tax charge related to the refinancing of a portion of our debt.
This was partly offset by a $55 million after-tax gain related to an increase in the fair value of our option to call certain of our high-yield notes prior to their maturity, which resulted from declining interest rates in the quarter.
Profit attributable to shareholders was $218 million, or $0.37 per share, in the first quarter compared with $461 million or $0.78 per share in the same period last year.
Three months
ended March 31,
($ in millions) 2012 2011
----------------------------------------------------------------------------
Profit attributable to shareholders as reported $ 218 $ 461
Add (deduct):
Derivative (gains) losses (59) 4
Financing items 329 -
Other (note 1) 16 (15)
-----------------
Adjusted profit $ 504 $ 450
-----------------
Adjusted earnings per share $ 0.86 $ 0.76
-----------------
1.
Includes foreign exchange, asset sale gains and one-time collective
agreement charges.(i) Our financial results are prepared in accordance with International Financial Reporting Standards ("IFRS").
This news release refers to adjusted profit, adjusted earnings per share, EBITDA and gross profit before depreciation and amortization, which are not measures recognized under IFRS in Canada and do not have a standardized meaning prescribed by IFRS or GAAP in the United States.
For adjusted profit we adjust profit as reported to remove the effect of certain kinds of transactions in these measures.
EBITDA is profit before net finance expense, income taxes, depreciation and amortization.
Gross profit before depreciation and amortization is gross profit with depreciation and amortization added back.
These measures may differ from those used by, and may not be comparable to such measures as reported by, other issuers.
We disclose these measures, which have been derived from our financial statements and applied on a consistent basis, because we believe they are of assistance in understanding the results of our operations and financial position and are meant to provide further information about our financial results to investors.
Business Unit Results
Our business unit results are presented in the tables below.
Three months ended March 31
Gross profit before
($ in depreciation and
millions) Revenues amortization Gross profit
----------------------------------------------------------------------------
2012 2011 2012 2011 2012 2011
----------------------------------------------------------------------------
Copper $ 753 $ 773 $ 366 $ 469 $ 285 $ 398
Coal 1,198 1,019 645 477 540 356
Zinc 595 574 119 167 93 143
Energy 1 - 1 - - -
----------------------------------------------------------------------------
Total $ 2,547 $ 2,366 $ 1,131 $ 1,113 $ 918 $ 897
----------------------------------------------------------------------------Despite a 14% rise in copper sales volumes as a result of higher production levels and timing of shipments, gross profit before depreciation and amortization from our copper business unit decreased by $103 million in the first quarter compared with a year ago.
This was primarily as a result of lower copper prices and other by-product prices.
Costs also rose in the quarter, reflecting cost pressures for most input categories, additional milling throughput at Carmen de Andacollo, Antamina and Highland Valley, timing of maintenance projects and a one-time labour settlement charge of $16 million at our Chilean operations.
Our average cash unit cost of product sold in the first quarter of 2012 was US$1.60 per pound, excluding one-time labour settlement costs, compared with US$1.40 per pound in the first quarter of 2011.
Copper production in the first quarter rose by 8% to 81,000 tonnes compared with a year ago, reflecting our share of additional production from Antaminas mine expansion program and improvements at Carmen de Andacollo and Quebrada Blanca.
Copper production at Highland Valley was lower than expected as we experienced delays in accessing higher grade ore.
Severe weather conditions at Quebrada Blanca also constrained mining activities in the first quarter.
Gross profit before depreciation and amortization from our coal business unit increased by $168 million in the first quarter as a result of higher coal prices, increased sales volumes and lower unit costs.
Coal production increased by 43% to 6.3 million tonnes in the quarter.
This was partly a result of our expanded production capacity and partly because coal production was negatively impacted by unusual weather-related events and the strike at our Elkview mine in the first quarter of 2011.
Sales volumes were 5.3 million tonnes and reflected weaker market conditions for steelmaking coal.
The average coal price of US$223 per tonne in the first quarter was up 8% over the first quarter of last year despite the weaker market conditions.
Unit cost of product sold in the first quarter, before transportation and depreciation charges, improved to $70 per tonne compared with $76 per tonne a year ago as the fixed costs were spread over a significantly larger production volume.
Gross profit before depreciation and amortization from our zinc business unit decreased by $48 million in the first quarter compared with a year ago primarily due to lower metal prices and higher concentrate purchase costs for silver at Trail, partially offset by higher sales volumes.
As expected, zinc production at Red Dog declined by 10% in the first quarter compared with the same period a year ago because more ore was mined from the lower grade Aqqaluk pit.
Refined zinc production from Trail rose slightly as a result of improved process plant reliability, while refined lead decreased by 7% due to a scheduled lead refinery shutdown in March.
Zinc sales volumes in the first quarter from Red Dog increased by 19% as a result of the timing of shipments, partly due to advancement of deliveries by certain customers and higher consumption of offsite inventories.
Zinc and lead prices decreased 16% and 19%, respectively, in the first quarter of 2012 compared with the same period a year ago.
Revenues
Revenues from operations were $2.5 billion in the first quarter compared with $2.4 billion a year ago.
Revenues from our copper business unit remained similar to a year ago as higher sales volumes were offset by lower copper prices.
Coal revenues increased by $179 million compared with the first quarter of 2011 as a result of higher realized coal prices and a 7% increase in sales volumes.
Revenues from our zinc business unit rose slightly from a year ago as higher sales volumes from Red Dog and Trail were partially offset by lower metal prices.
Average Prices and Exchange Rates(i)
Three months ended
March 31,
2012 2011 % Change
----------------------------------------------------------------------------
Copper (LME Cash - US$/pound) 3.77 4.38 -14%
Coal (realized - US$/tonne) 223 207 +8%
Zinc (LME Cash - US$/pound) 0.92 1.09 -16%
Silver (LME PM fix - US$/ounce) 33 32 +3%
Molybdenum (published price - US$/pound) 14 17 -18%
Lead (LME Cash - US$/pound) 0.95 1.18 -19%
Cdn/U.S.
exchange rate (Bank of Canada) 1.00 0.99 +1%(i) Except for coal prices, the average commodity prices disclosed above are based on published benchmark prices and are provided for information only.
Our actual revenues are determined using commodity prices and other terms and conditions specified in our various sales contracts with our customers.
The molybdenum price is the price published in Platts Metals Week.
BUSINESS UNIT RESULTS
The table below shows our production and sales of our major commodities.
Units
(000s) Production Sales
----------------------------------------------------------------------------
First Quarter First Quarter
------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
Principal products
Copper (note 1)
Contained in concentrate tonnes 63 57 65 56
Cathode tonnes 18 18 18 17
------------------------------------
81 75 83 73
------------------------------------
Coal tonnes 6,265 4,379 5,305 4,950
Zinc
Contained in concentrate tonnes 147 166 135 129
Refined tonnes 74 72 76 73
Other products
Lead
Contained in concentrate tonnes 23 21 - -
Refined tonnes 21 23 22 20
Molybdenum
Contained in concentrate pounds 2,970 1,879 3,110 2,355
----------------------------------------------------------------------------
1.
We include 100% of production and sales from our Highland Valley Copper,
Quebrada Blanca and Carmen de Andacollo mines in our production and sales
volumes, even though we own 97.5%, 76.5% and 90%, respectively, of these
operations, because we fully consolidate their results in our financial
statements.
We include 22.5% of production and sales from Antamina,
representing our proportionate equity interest in Antamina.REVENUES AND GROSS PROFIT
QUARTER ENDED MARCH, 31
Our revenue, gross profit before depreciation and gross profit by business unit are summarized in the table below:
Gross profit
before
depreciation
($ in and
millions) Revenues amortization Gross profit
----------------------------------------------------------------------------
2012 2011 2012 2011 2012 2011
----------------------------------------------------------------------------
Copper
Highland $ 220 $ 210 $ 106 $ 116 $ 84 $ 99
Valley
Copper
Antamina 206 218 148 160 142 154
Quebrada 136 143 44 82 19 59
Blanca
Carmen de 155 157 58 93 36 73
Andacollo
Duck Pond 34 45 10 18 4 13
Other 2 - - - - -
----------------------------------------------------------------------------
753 773 366 469 285 398
Coal (note 1) 1,198 1,019 645 477 540 356
Zinc
Trail 495 485 40 77 28 65
Red Dog 153 143 77 86 64 74
Other 2 6 2 4 1 4
Inter-segment (55) (60) - - - -
sales
----------------------------------------------------------------------------
595 574 119 167 93 143
Energy 1 - 1 - - -
----------------------------------------------------------------------------
TOTAL $ 2,547 $ 2,366 $ 1,131 $ 1,113 $ 918 $ 897
----------------------------------------------------------------------------
1.
Our coal business unit represents our interest in six operating mines.
We
wholly own the Fording River, Coal Mountain, Line Creek and Cardinal River
mines, and have a 95% partnership interest in the Elkview mine and an 80%
interest in the Greenhills mine.COPPER
Highland Valley Copper (97.5%)
Operating results at the 100% level are summarized in the following table:
Three months ended
March 31,
2012 2011
----------------------------------------------------------------------------
Tonnes milled (000s) 10,874 9,581
Copper
Grade (%) 0.22 0.26
Recovery (%) 83.9 87.5
Production (000s tonnes) 20.1 21.4
Sales (000s tonnes) 23.1 20.2
Molybdenum
Production (million pounds) 2.2 1.4
Sales (million pounds) 2.3 1.8
Cost of sales ($ millions)
Operating costs $ 106 $ 86
Distribution costs $ 8 $ 8
Depreciation and amortization $ 22 $ 17
Gross profit summary ($ millions)
Before depreciation and amortization $ 106 $ 116
Depreciation and amortization (22) (17)
----------------------------------------------------------------------------
After depreciation and amortization $ 84 $ 99
----------------------------------------------------------------------------
1.
Results do not include a provision for the 2.5% non-controlling interest
in Highland Valley Copper.The decline in Highland Valley Coppers first quarter gross profit before depreciation and amortization was primarily due to lower copper prices, partially offset by a 14% increase in copper sales volumes as a result of timing of shipments.
Copper production of 20,100 tonnes was 6% lower than the same period last year primarily as a result of lower feed grades available during the quarter, partially offset by 13% higher throughput in the mill.
Mine sequencing delayed the return to higher grade mining due to minor geotechnical issues with an access ramp.
Higher grade production from the east wall of the Valley pit is expected to increase for the balance of 2012 as the development of larger mining fronts in this area is now progressing well.
Meanwhile, throughput improvement projects enabled the mill to process additional low grade material from other areas during the quarter.
Molybdenum production of 2.2 million pounds increased by 58% over the corresponding period last year primarily due to higher feed grades.
Operating costs charged to cost of sales increased by $20 million to $106 million primarily due to the effect of higher sales volumes and a greater proportion of costs capitalized in the first quarter of 2011 as part of the mine life extension program.
Increases to milling costs as a result of higher throughput were largely offset by productivity improvement projects in the mine.
Execution of the $475 million mill modernization project is progressing well.
Detailed engineering is advancing and the bulk of the excavation work is finished.
The project is expected to increase throughput by 10% and improve metal recoveries over the life of the mine, with completion expected in the fourth quarter of 2013.
Highland Valley Copper production in 2012 is still expected to be in the range of 105,000 to 110,000 tonnes of copper, with higher production planned in the second half of the year.
Antamina (22.5%)
Operating results at the 100% level are summarized in the following table:
Three months ended
March 31,
2012 2011
----------------------------------------------------------------------------
Tonnes milled (000s)
Copper-only ore 6,387 4,972
Copper-zinc ore 3,776 4,316
----------------------------------------------------------------------------
10,163 9,288
Copper (note 1)
Grade (%) 1.05 0.99
Recovery (%) 86.6 83.5
Production (000s tonnes) 94.8 76.4
Sales (000s tonnes) 94.3 80.3
Zinc (note 1)
Grade (%) 1.9 2.2
Recovery (%) 79.4 84.7
Production (000s tonnes) 59.3 84.8
Sales (000s tonnes) 47.5 90.0
Molybdenum
Production (million pounds) 3.4 2.1
Sales (million pounds) 4.4 2.6
Cost of sales (US$ millions)
Operating costs $ 175 $ 140
Distribution costs $ 24 $ 25
Royalties and other costs (note 2) $ 56 $ 66
Depreciation and amortization $ 29 $ 26
Gross profit summary (our 22.5% share) ($ millions)
Before depreciation and amortization $ 148 $ 160
Depreciation and amortization (6) (6)
----------------------------------------------------------------------------
After depreciation and amortization $ 142 $ 154
----------------------------------------------------------------------------
(1) Copper ore grades and recoveries apply to all of the processed ores.
Zinc ore grades and recoveries apply to copper-zinc ores only.
(2) In addition to royalties paid by Antamina, we also pay a royalty in
connection with the acquisition of our interest in Antamina equivalent to
7.4% of our share of cash flow distributed by the mine.The decrease in our 22.5% share of Antaminas gross profit before depreciation and amortization in the first quarter was primarily due to lower metal prices.
Tonnes milled in the first quarter were 9% higher than a year ago and averaged approximately 112,000 tonnes per day.
In the month of March, the mill achieved a throughput rate of approximately 131,000 tonnes per day.
The mix of mill feed in the first quarter was 63% copper-only ore and 37% copper-zinc ore, compared with 54% and 46%, respectively, in the same period a year ago.
Copper production, on a 100% basis, was 94,800 tonnes compared with 76,400 tonnes in the first quarter of 2011 as a result of the tonnes of copper ore processed, as well as higher head grades and improved recovery.
As anticipated, zinc production decreased significantly to 59,300 tonnes from 84,800 tonnes in the same period a year ago due to a 13% decrease in copper-zinc ore processed in the quarter and lower zinc grades and recoveries arising from the nature of the orebody.
Molybdenum production was significantly higher in the first quarter compared with a year ago as a result of higher throughput of copper-only ores with higher molybdenum grades.
The Antamina expansion project commissioned and operated SAG mill number 2 and ball mill number 4, as well as the expanded flotation circuits for both copper and zinc recovery.
Other elements of the expansion, including additional mining equipment and mine infrastructure, process water supply and tailings dam works are ongoing as scheduled.
Quebrada Blanca (76.5%)
Operating results at the 100% level are summarized in the following table:
Three months ended
March 31,
2012 2011
----------------------------------------------------------------------------
Tonnes placed (000s)
Heap leach ore 1,453 1,438
Dump leach ore 5,438 6,339
----------------------------------------------------------------------------
6,891 7,777
Grade (TCu%) (note 1)
Heap leach ore 0.86 0.80
Dump leach ore 0.46 0.41
Production (000s tonnes)
Heap leach ore 10.5 7.6
Dump leach ore 6.4 8.2
----------------------------------------------------------------------------
16.9 15.8
Sales (000s tonnes) 16.4 14.9
Cost of sales (US$ million)
Operating costs $ 90 $ 59
Distribution costs $ 2 $ 2
Depreciation and amortization $ 25 $ 23
Gross profit summary ($ millions) (note 2)
Before depreciation and amortization $ 44 $ 82
Depreciation and amortization (25) (23)
----------------------------------------------------------------------------
After depreciation and amortization $ 19 $ 59
----------------------------------------------------------------------------
(1) TCu% is the percent assayed total copper grade.
(2) Results do not include a provision for the 23.5% non-controlling
interest in Quebrada Blanca.Quebrada Blancas gross profit before depreciation and amortization declined in the first quarter due to lower copper prices, higher operating costs and a one-time labour settlement charge of US$6 million for the new 46-month labour agreement ratified in the quarter.
For the second consecutive year, heavy rains and severe weather conditions affected mining operations during the first quarter.
Although more rain was experienced this year, the operation was better prepared than last year, and this was reflected in the slightly higher copper production levels.
The severe weather conditions restricted mine material movement and reduced ore placed on the leach pads, consequently lowering copper in the copper solution.
These items were partly offset by an increase in SX-EW plant capacity.
Operating costs increased by $31 million in the first quarter compared with the same period a year ago as a result of higher fuel costs, the timing of maintenance projects, the effect of higher sales volumes which rose 10%, and the US$6 million labour settlement charge.
Carmen de Andacollo (90%)
Operating results at the 100% level are summarized in the following table:
Three months ended
March 31,
2012 2011
----------------------------------------------------------------------------
Tonnes milled (000s) 3,898 3,723
Copper
Grade (%) 0.51 0.50
Recovery (%) 88.1 86.8
Production (000s tonnes) 17.6 16.3
Sales (000s tonnes) 16.8 14.0
Gold (note 1)
Production (000s ounces) 12.9 13.6
Sales (000s ounces) 13.1 11.8
Copper cathode
Production (000s tonnes) 1.6 2.0
Sales (000s tonnes) 2.0 2.0
Cost of sales (US$ million)
Operating costs $ 91 $ 60
Distribution costs $ 6 $ 6
Depreciation and amortization $ 22 $ 20
Gross profit summary ($ millions) (note 2)
Before depreciation and amortization $ 58 $ 93
Depreciation and amortization (22) (20)
----------------------------------------------------------------------------
After depreciation and amortization $ 36 $ 73
----------------------------------------------------------------------------
(1) Carmen de Andacollo processes 100% of gold mined, but 75% of the gold
produced is for the account of Royal Gold Inc.
(2) Results do not include a provision for the 10% non-controlling interest
in Andacollo.The decrease in Carmen de Andacollos first quarter gross profit before depreciation and amortization was primarily due to lower copper prices, higher operating costs and a one-time labour settlement cost of US$10 million for the new 45-month labour agreement ratified in the quarter.
Copper production increased by 8% in the first quarter compared with a year ago, reflecting higher mill throughput and improved recoveries.
We are pre-commissioning the new 20,000-tonnes-per-day pre-crushing plant to help us achieve the design mill throughput of 55,000 tonnes per day.
We expect to start ramp-up of this plant in May.
Mill modifications and new liners are planned to be in place for the second quarter which will increase SAG motor capacity by an additional 10%.
An upgrade to the capacity of the main ore feed conveyor is in progress and is expected to be in place early in the third quarter.
Operating costs increased by $31 million in the first quarter compared with the same period a year ago due to the effect of higher sales volumes that rose 20%, higher fuel and power costs, increased consumable costs reflecting higher production levels and the US$10 million labour settlement charge.
The expansion study at Carmen de Andacollo has evaluated both additional grinding (SAG mill 2) and additional pre-crushing as ways to increase concentrator throughput.
Project evaluations of these alternatives were essentially the same.
As a result, further circuit configuration and economic evaluation for the expansion will be undertaken based on the performance of the new 20,000-tonnes-per-day pre-crushing plant during the second and third quarters of 2012.
During this period we will continue infill drilling to evaluate the resource potential and our understanding of the ore body and continue our investigation in the sources available for additional water required for the expansion.
We will also continue metallurgical test work to finalize the molybdenum recovery circuit.
Both dust-control and water-use measures will be key to any expansion decision.
Our 2012 production guidance for the operation remains unchanged at between 70,000 to 75,000 tonnes of copper in concentrate and 5,000 tonnes of copper cathode.
Duck Pond (100%)
Duck Ponds gross profit before depreciation and amortization was $10 million in the first quarter compared with $18 million in the same period last year.
The decline was primarily due to lower sales volumes as a result of timing of shipments and lower metal prices.
Copper and zinc production in the first quarter improved to 3,700 tonnes and 5,200 tonnes, respectively, compared with 2,700 tonnes and 4,600 tonnes, respectively, last year.
Copper and zinc sales in the first quarter were 3,600 tonnes and 4,100 tonnes, respectively, compared with 3,900 tonnes and 7,500 tonnes, respectively, last year.
Copper Development Projects
Quebrada Blanca Phase 2
Subsequent to the end of the quarter we completed a feasibility study on our Quebrada Blanca hypogene project.
We own a 76.5% interest in Quebrada Blanca.
The other shareholders are a Chilean private company which owns a 13.5% interest and Empresa Nacional de Minera ("ENAMI"), a state-owned Chilean mining company, which has a 10% non-funding interest.
The study estimates a capital cost for the development of the project of US$5.6 billion (in January 2012 dollars, not including working capital or interest during construction), of which our funding share would be US$4.8 billion.
The study contemplates the construction of a 135,000 tonne per day concentrator and related facilities connected to a new port facility by 165 kilometre concentrate and desalinated water pipelines.
The total mineral reserve and mineral resource estimates for the hypogene project, as at April 19, 2012, are set out in the tables below.
Mineral resources are reported separately from and do not include that portion of mineral resources that are classified as mineral reserves.
Mill - Mineral Reserve(i) within design reserve pit
Tonnes (000s) Copper Grade (%Cu) Molybdenum Grade (%Mo)
---------------------------------------------------------------------------
Probable 1,436,333 0.50 0.018
---------------------------------------------------------------------------
Mill - Mineral Resource(i) within design reserve pit
Tonnes (000s) Copper Grade (%Cu) Molybdenum Grade (%Mo)
---------------------------------------------------------------------------
Inferred 325,375 0.43 0.018
---------------------------------------------------------------------------
Mill - Mineral Resource(i) outside design reserve pit
Tonnes (000s) Copper Grade (%Cu) Molybdenum Grade (%Mo)
---------------------------------------------------------------------------
Indicated 744,176 0.42 0.014
Inferred 1,481,085 0.40 0.016
---------------------------------------------------------------------------
(i) The mineral reserve and mineral resource estimates assume US$2.50 per
pound of copper, US$12.50 per pound of molybdenum and a net smelter return
cut-off of US$9.08 per tonne.Approximately 19,000 meters of additional drilling has been completed since the data cut-off date for the feasibility mine plan.
We currently expect the results of that drilling, when incorporated, will support the reclassification of additional tonnage from the inferred mineral resource to the measured and indicated mineral resource categories.
The mine plan developed for the feasibility study is expected to supply mill feed that includes 1.436 billion tonnes of probable mineral reserves.
In addition, there is approximately 325 million tonnes of material currently classified as inferred mineral resource scheduled within the design reserve pit.
The inferred mineral resource has not been drilled to a level that would support mineral reserve classification due in part to access restrictions related to the existing supergene operation and minor geotechnical issues.
The mine plan contemplates a mine life, including mineral reserves, inferred mineral resources, previously reported leach (supergene) resources and associated low-grade material, within the design reserve pit, of 39 years.
Marginal material outside the mineral reserve and mineral resource statement is stockpiled in the early years of the mine plan and fed to the mill in later years.
The significant mineral resource outside the mine plan pit provides the potential for expansion in future years and the mine facilities have been designed with this in mind.
Estimated key project operating parameters, taking into account the inferred resources included in the design reserve pit (the development case) and excluding the inferred resources (the base case) are summarized in the following table:
Development Case (measured, indicated and inferred resource)
----------------------------------------------------------------------------
Years 1-5 Years 1-10 Life of Mine
----------------------------------------------------------------------------
Strip ratio (tonnes waste:tonnes ore) 0.10:1 0.22:1 0.48:1
Tonnes milled (tonnes per day) 135,000 135,000 135,000
Copper grade (%Cu) 0.62% 0.58% 0.48%
Molybdenum grade (%Mo) 0.020% 0.021% 0.018%
Contained copper production (tonnes per 250,000 240,000 200,000
annum)
Contained molybdenum production (tonnes 6,000 6,000 5,000
per annum)
C1 cash costs (US$)(i) 1.07 1.12 1.35
----------------------------------------------------------------------------
(i) C1 cash costs are presented after by-product credit assuming US$12.50
per pound of molybdenum.
Base Case (measured and indicated resource)
----------------------------------------------------------------------------
Years 1-5 Years 1-10 Life of Mine
----------------------------------------------------------------------------
Strip ratio (tonnes waste:tonnes ore) 0.26:1 0.41:1 0.82:1
Tonnes milled (tonnes per day) 135,000 135,000 135,000
Copper grade (%Cu) 0.61% 0.58% 0.49%
Molybdenum grade (%Mo) 0.020% 0.020% 0.018%
Contained copper production (tonnes per 240,000 240,000 200,000
annum)
Contained molybdenum production (tonnes 6,000 6,000 5,000
per annum)
C1 cash costs (US$)(i) 1.08 1.15 1.38
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(i) C1 cash costs are presented after by-product credit assuming US$12.50
per pound of molybdenum.The hypogene project includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves.
Inferred mineral resources are subject to greater uncertainty than measured or indicated resources and, notwithstanding our current expectations, it cannot be assumed that they will be successfully upgraded to measured and indicated status through further drilling.
Nonetheless, based on the nature of the mineralization, we believe that the feasibility mine plan, including inferred mineral resources, represents the most likely initial development scenario for the Quebrada Blanca hypogene deposit.
As part of the ongoing project work plan for 2012, the social environmental impact assessment for the project is expected to be submitted to the Chilean regulatory authorities during the second quarter of 2012.
Discussions are ongoing with various potential suppliers for power to the project.
We are also in discussions with the other shareholders of Quebrada Blanca concerning financing options for the hypogene project, which may include limited recourse project financing and, possibly, bringing in a new funding partner.
A decision to proceed with development will depend on the outcome of these discussions.
The scientific and technical information regarding the hypogene project was approved by Paul C.
Bankes, P.
Geo, and Michael J.
Allan, P.
Eng, who are employees of Teck.
Mr.
Bankes is a qualified person, as defined under National Instrument 43-101, and approved the geology, mineral resource and global mineral reserve estimates.
Mr.
Allan is a qualified person, as defined under National Instrument 43-101, and approved the mine plans, metallurgy and the financial models on which the mineral reserves were based.
Relincho
The feasibility study is progressing on schedule and is expected to be complete by the end of the first quarter of 2013.
Exploration and geotechnical drilling are ongoing and a new resource and reserve estimate is expected at the completion of the feasibility study.
In accordance with the prefeasibility design, production would average 180,000 tonnes per year of copper and 6,000 tonnes per year of molybdenum over the 22 year mine life, with higher production in the first five years.
Galore Creek (50%)
The Galore Creek project team is currently executing a $25 million work program for 2012 which was previously approved by the partners.
The 2012 work program is primarily focused on infill and geotechnical drilling to support the advanced engineering work that was completed in the fourth quarter of 2011.
The program will include approximately 25,000 metres of drilling anticipated to start in the second quarter.
COAL
Teck Coal Partnership (100%)
Operating results at the 100% level are summarized in the following table:
Three months ended
March 31,
2012 2011
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Production (000s tonnes) 6,265 4,379
Sales (000s tonnes) 5,305 4,950
Average sale price
US$/tonne $ 223 $ 207
C$/tonne $ 226 $ 206
Operating expenses (C$/tonne)
Cost of product sold $ 70 $ 76
Transportation $ 34 $ 34
Depreciation and amortization $ 20 $ 24
Gross profit summary ($ millions)
Before depreciation and amortization $ 645 $ 477
Depreciation and amortization (105) (121)
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After depreciation and amortization $ 540 $ 356
----------------------------------------------------------------------------Gross profit before depreciation and amortization in the first quarter increased by $168 million over last year due primarily to higher selling prices, increased sales volumes, and lower unit cost of product sold.
Production for the first quarter increased by 43% compared with the same quarter of 2011.
This significant increase is due partly to our expanded production capacity and partly to unusual weather-related events and the strike at our Elkview mine in the first quarter of 2011.
We continue to execute our growth strategy, with approximately $65 million of investments in expansion capital made during the quarter, including investments in the Quintette re-opening project, expansion of the maintenance shop at the Fording River mine to accommodate new larger capacity haul trucks, and the expansion of the processing plant at the Elkview mine, which has now been commissioned.
The volume of material moved in the first quarter exceeded our previous best first quarter by more than 15%.
Unless we are required to restrict production because of customer demand, we expect to produce 24.5 to 25.5 million tonnes in 2012.
The average coal price of US$223 per tonne in the first quarter was up 8% over last year.
Quarterly contract prices for the first quarter of 2011 were finalized in late 2010 before the severe flooding in Australia caused significant supply disruptions in the seaborne steelmaking coal market, which resulted in a spike in prices in early 2011.
Market conditions subsequently turned downward in the latter part of 2011 as supply gradually returned to normal and uncertainty over the global economic conditions grew.
We have agreed on prices with the vast majority of our quarterly contract customers for the second quarter of 2012 based on pricing of approximately US$206 per tonne for our highest quality product.
As of the date of this release, we have sold approximately 6.3 million tonnes of coal for delivery in the second quarter at an average price of US$202 per tonne, which is roughly balanced with our expected production for the quarter.
Vessel nominations for quarterly contract tonnage are determined by our customers
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