VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 23, 2013) - Teck Resources Limited (TSX: TCK.A and TCK.B, NYSE: TCK) reported first quarter adjusted profit of $328 million, or $0.56 per share, compared with $544 million in 2012.
"Im pleased with our performance so far this year," said Don Lindsay, President and CEO.
"Sales of steelmaking coal were up 24% over the first quarter of 2012, a new record for first quarter sales, while sales volumes for copper and zinc were similar to last year despite various operational challenges.
However, with continuing uncertain global economic conditions, prices for all of our major products were down compared to the first quarter of last year resulting in lower profits and cash flows."
Highlights and Significant Items
-- Gross profit before depreciation and amortization was $994 million in
the first quarter compared with $1.2 billion in the first quarter of
2012.
-- Cash flow from operations, before working capital changes, was $776
million in the first quarter of 2013 compared with $1.1 billion a year
ago.
-- Profit attributable to shareholders was $319 million and EBITDA was $902
million in the first quarter.
-- We achieved all-time record first quarter coal sales of 6.6 million
tonnes despite relatively weak market conditions and shipping
constraints due to repairs at Westshore terminals, which continued into
early February.
-- To date we have reached agreements with our coal customers to sell 5.4
million tonnes of coal in the second quarter of 2013 at an average price
of US$154 per tonne and expect total sales in the second quarter,
including spot sales, to be at or above 6.0 million tonnes.
-- Our cash balance was $2.95 billion at March 31, 2013, after dividend
payments, share repurchases, capital expenditures and investments
totaling approximately $1.0 billion in the first quarter.
-- Our cost reduction program has exceeded our initial goals, and to date
our existing operations have begun the implementation of annualized cost
savings and expenditure deferrals of $275 million in 2013.
-- Our finance expense was down 40% from a year ago, primarily as a result
of the full benefit of our debt refinancing transactions undertaken last
year, which reduced our average interest rate to 4.8% from 7.5%.
-- The effect of the new accounting standards for waste removal costs
increased profit attributable to shareholders by $53 million, or $0.09
per share, in the first quarter of 2013 compared with previous
accounting standards.
-- On April 15 we received an Area Based Management Plan Order from the
British Columbia Ministry of the Environment, providing clarity around
watershed protection and mining activities in the Elk Valley.
We
consider this a positive step that will provide a regulatory basis to
deal with effects of mining on water quality in the Elk Valley and will
establish a regulatory context for permitting of future mining activity.This managements discussion and analysis is dated as at April 22, 2013 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, 2013 and with the audited consolidated financial statements of Teck and the notes thereto for the year ended December 31, 2012.
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, 2012, 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
Profitability was down from the same period last year as prices for copper and steelmaking coal have declined.
Coal prices were down 28% from a year ago while copper was down 5% from the same period.
Substantially higher coal sales volumes in the quarter partly offset the weaker prices.
These declines have reduced our revenue by approximately $440 million based on 2013 sales volumes.
In order to counteract the effect of these price declines on our operating margins, beginning in the fourth quarter of 2012, we put in place a program aimed at containing and reducing our production costs at our existing operations.
This program encompasses both sustainable cost reduction programs initiated by management and one-time cost saving actions.
To date, we have identified sustainable annualized savings of approximately $200 million and a further $75 million of one-time savings and deferrals, which has exceeded our initial goals.
The effect of these initiatives is beginning to show in our quarterly results, but the full effect is expected to be realized over the balance of the year.
Our site production costs are down by approximately $100 million compared to our quarterly production costs last year, excluding the effect of labour agreements.
Operating unit costs for coal have fallen significantly from the fourth quarter of 2012, while copper unit costs have reduced slightly despite significantly lower grades and production.
It should also be noted that 2012 comparative figures have been adjusted to reflect a change in International Financial Reporting Standards ("IFRS") regarding stripping costs in the production plans of a surface mine.
Prior to the change, there was no standard in IFRS on this matter and we followed the standard that existed under Canadian GAAP, which limited capitalization of such costs.
The change should improve conformity and comparability between mining companies subject to IFRS and places us on the same footing as our international peers, most of whom previously followed similar capitalization practices as the new standard.
Our finance costs were also down 40% compared to a year ago.
This was the result of lower effective interest rates resulting from our debt refinancing transactions undertaken last year and the effect of increased interest capitalization.
We continue to advance our internal growth projects, however, ongoing Social and Community Impact Assessment requirements at Quebrada Blanca may further delay the start date for construction.
Profit and Adjusted Profit(i)
Adjusted profit, which excludes the effect of certain transactions described in the table below, was $328 million, or $0.56 per share, in the first quarter of 2013 compared with $544 million, or $0.93 per share, in the same period a year ago.
The lower adjusted profit was primarily due to substantially lower coal prices, despite stronger sales volumes compared with the same period a year ago.
In addition, the year-over-year change in pricing adjustments negatively affected our after-tax profit by $70 million, as significant positive price adjustments were recognized in 2012 as a result of rising metal prices.
Profit attributable to shareholders was $319 million, or $0.55 per share, in the first quarter compared with $258 million or $0.44 per share in the same period last year.
Profit last year was affected by a $329 million after-tax charge related to the refinancing of a portion of our debt.
Three months
ended March 31,
($ in millions) 2013 2012
----------------------------------------------------------------------------
Profit attributable to shareholders as reported $ 319 $ 258
Add (deduct):
Derivative (gains) losses (2) (59)
Financing charges related to debt refinancing
transactions - 329
Other (note 1) 11 16
----------------------
Adjusted profit $ 328 $ 544
----------------------
Adjusted earnings per share $ 0.56 $ 0.93
----------------------
1.
Includes foreign exchange, asset sale gains and losses, and one-time
collective agreement charges.(i) Our financial results are prepared in accordance with International Financial Reporting Standards.
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 and do not have a standardized meaning prescribed by IFRS.
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, as 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.
New Accounting Standards - Effect on Profit
As a result of the new accounting standards for deferred stripping, we capitalized $223 million of stripping costs compared to $66 million that would have been capitalized under our previous policy.
This includes a cash portion of $210 million and a non-cash portion of $13 million.
Figures for 2012 have been restated so that all figures are presented on a comparable basis.
This new standard results in a decrease in our unit cash production costs and an increase in our depreciation and amortization expense.
In addition, the capitalized cash production stripping costs are now disclosed as an investing activity on our cash flow statement.
The effect of the new standard on our first quarter results is set out in the table below.
----------------------------------------------------------------------------
($ in millions) Copper Coal Zinc Total
----------------------------------------------------------------------------
Additional amounts capitalized $ 41 $ 105 $ 11 $ 157
Additional depreciation (5) (45) (1) (51)
Inventory change (1) (13) (2) (16)
----------------------------------------------------------------------------
Effect on gross profit 35 47 8 90
Royalties, taxes and non-controlling
interests (15) (18) (4) (37)
----------------------------------------------------------------------------
Net effect on profit attributable to
shareholders $ 20 $ 29 $ 4 $ 53
----------------------------------------------------------------------------The adoption of new accounting standards for pension accounting has decreased our after-tax profit by $5 million in the quarter.
Business Unit Results
Our business unit results are presented in the tables below.
Three months ended March 31
Gross profit
before
depreciation and
($ in millions) Revenues amortization Gross profit
----------------------------------------------------------------------------
2013 2012 2013 2012 2013 2012
----------------------------------------------------------------------------
Copper $ 684 $ 753 $ 351 $ 378 $ 253 $ 300
Coal 1,060 1,198 516 703 346 598
Zinc 585 595 126 118 102 94
Energy 1 1 1 1 - -
----------------------------------------------------------------------------
Total $ 2,330 $ 2,547 $ 994 $ 1,200 $ 701 $ 992
----------------------------------------------------------------------------Gross profit before depreciation and amortization from our copper business unit decreased by $27 million in the first quarter compared with a year ago primarily as a result of lower copper prices and reduced by-product revenues.
This was partially offset by lower operating costs.
Copper production in the first quarter of 83,000 tonnes was down 19% from the record in the fourth quarter of 2012, but was slightly higher than the same period a year ago.
Substantially higher production from Highland Valley Copper, as a result of mining higher grade sections of the Valley pit, was offset by lower production from Antamina and Quebrada Blanca as anticipated in each respective mine plan.
Copper prices softened by 5% from a year ago and averaged US$3.60 per pound in the first quarter of 2013.
Total unit cash costs of product sold in the quarter, before by-product credits, was US$2.06 per pound compared with US$2.13 per pound in the first quarter of 2012.
Total cash unit costs after by-product credits was US$1.61 per pound compared with US$1.51 per pound in the first quarter of 2012 as a result of lower molybdenum and silver by-product credits.
Capitalized stripping costs in our copper business unit totaled $60 million (US$0.34 per pound) in the first quarter compared with $37 million (US$0.21 per pound) in the first quarter of 2012.
Gross profit before depreciation and amortization from our coal business unit declined by $187 million in the first quarter compared with the same period a year ago primarily due to lower coal prices, partially offset by higher sales volumes.
Coal sales of 6.6 million tonnes in the first quarter were 24% higher than the same period last year and set a new first quarter sales record.
The average coal price of US$161 per tonne in the first quarter was 28% lower than the same quarter a year ago and reflects the weaker steelmaking coal market conditions.
Sales in the quarter reflected our typical sales distribution.
Record volumes were partly attributable to starting the year with a large number of vessels at anchor due to the Westshore Berth 1 outage, which occurred in early December.
Production of 6.2 million tonnes in the first quarter was largely unchanged from the same period a year ago, as production has been aligned with anticipated customer demand.
The cost of product sold in the first quarter, before transportation and depreciation charges, was $47 per tonne, or $12 per tonne lower than in the same quarter in 2012.
In the current period, $140 million of production costs were capitalized in accordance with the accounting standard for stripping costs compared with $142 million in the same period a year ago.
Transportation costs increased by $2 per tonne in the first quarter to $36 per tonne, primarily due to higher demurrage charges incurred throughout the quarter resulting from the Westshore Berth 1 outage.
Gross profit before depreciation and amortization from our zinc business unit rose slightly from a year ago.
Production volumes at both Trail and Red Dog in the first quarter were similar to the same period a year ago.
Trails contribution to gross profit remained the same as lower sales volumes of refined zinc and lead were offset by increased silver volumes and higher lead prices.
Gross profit improved at Red Dog as a result of slightly lower operating costs compared with a year ago.
This was despite zinc sales volumes decreasing by 11% in the quarter as customers had accelerated purchases in the first quarter of 2012.
Zinc prices in the first quarter remained the same as last year at US$0.92 per pound, while lead prices rose by 9% to US$1.04 per pound in the first quarter of 2013.
Revenues
Revenues from operations were $2.3 billion in the first quarter compared with $2.5 billion a year ago.
Revenues from our copper business unit decreased by $69 million compared with a year ago due to lower copper prices and lower contributions from by-products.
Coal revenues decreased by $138 million compared with the first quarter of 2012 as a result of significantly lower coal prices, despite sales volumes increasing by 1.3 million tonnes.
Revenues from our zinc business unit remained similar to the same period a year ago.
Average Prices and Exchange Rates(i)
Three months ended
March 31,
2013 2012 % Change
----------------------------------------------------------------------------
Copper (LME Cash - US$/pound) 3.60 3.77 -5%
Coal (realized - US$/tonne) 161 223 -28%
Zinc (LME Cash - US$/pound) 0.92 0.92 -
Silver (LME PM fix - US$/ounce) 30 33 -9%
Molybdenum (published price - US$/pound) 11 14 -21%
Lead (LME Cash - US$/pound) 1.04 0.95 +9%
Cdn/U.S.
exchange rate (Bank of Canada) 1.01 1.00 +1%
(i) Except for coal prices, the average commodity prices disclosed above are
based on published benchmark prices and are provided for information only.
Our actual revenues are determined using commodity prices and other terms
and conditions specified in our various sales contracts with our customers.
The molybdenum price is the price published in Platts Metals Week.BUSINESS UNIT RESULTS
The table below shows our production and sales of our major commodities.
Units
(000s) Production Sales
----------------------------------------------------------------------------
First Quarter First Quarter
--------------------------------
2013 2012 2013 2012
----------------------------------------------------------------------------
Principal products
Copper (note 1)
Contained in concentrate tonnes 69 63 71 65
Cathode tonnes 14 18 11 18
--------------------------------
83 81 82 83
--------------------------------
Steelmaking coal tonnes 6,234 6,265 6,578 5,305
Zinc
Contained in concentrate tonnes 147 147 124 135
Refined tonnes 74 74 73 76
Other products
Lead
Contained in concentrate tonnes 23 23 - -
Refined tonnes 21 21 20 22
Molybdenum
Contained in concentrate pounds 2,376 2,970 2,468 3,110
----------------------------------------------------------------------------
1.
We include 100% of production and sales from our Highland Valley Copper,
Quebrada Blanca and Carmen de Andacollo mines in our production and
sales volumes, even though we own 97.5%, 76.5% and 90%, respectively, of
these operations, because we fully consolidate their results in our
financial statements.
We include 22.5% of production and sales from
Antamina, representing our proportionate equity interest in Antamina.REVENUES AND GROSS PROFIT
QUARTER ENDED MARCH, 31
Our revenue, gross profit before depreciation and gross profit by business unit are summarized in the table below:
Gross profit
before
depreciation
and
($ in millions) Revenues amortization Gross profit
----------------------------------------------------------------------------
2013 2012 2013 2012 2013 2012
----------------------------------------------------------------------------
Copper
Highland Valley
Copper $ 251 $ 220 $ 134 $ 110 $ 101 $ 90
Antamina 157 206 110 153 97 147
Quebrada Blanca 82 136 18 47 (5) 22
Carmen de Andacollo 173 155 79 58 56 37
Duck Pond 20 34 10 10 4 4
Other 1 2 - - - -
----------------------------------------------------------------------------
684 753 351 378 253 300
Coal (note 1) 1,060 1,198 516 703 346 598
Zinc
Trail 500 495 41 40 29 28
Red Dog 144 153 83 76 71 64
Other 2 2 2 2 2 2
Inter-segment sales (61) (55) - - - -
----------------------------------------------------------------------------
585 595 126 118 102 94
Energy 1 1 1 1 - -
----------------------------------------------------------------------------
TOTAL $ 2,330 $ 2,547 $ 994 $ 1,200 $ 701 $ 992
----------------------------------------------------------------------------
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,
2013 2012
----------------------------------------------------------------------------
Tonnes milled (000s) 11,264 10,874
Copper
Grade (%) 0.29 0.22
Recovery (%) 86.0 83.9
Production (000s tonnes) 28.5 20.1
Sales (000s tonnes) 31.3 23.1
Molybdenum
Production (million pounds) 1.9 2.2
Sales (million pounds) 1.9 2.1
Cost of sales ($ millions)
Operating costs $ 108 $ 102
Distribution costs $ 9 $ 8
Depreciation and amortization $ 33 $ 20
Gross profit summary ($ millions) (note 1)
Before depreciation and amortization $ 134 $ 110
Depreciation and amortization (33) (20)
----------------------------------------------------------------------------
After depreciation and amortization $ 101 $ 90
----------------------------------------------------------------------------
1.
Results do not include a provision for the 2.5% non-controlling interest
in Highland Valley Copper.Highland Valley Coppers first quarter gross profit before depreciation and amortization rose from a year ago due to a 35% increase in copper sales volumes, partly offset by lower copper prices and molybdenum revenues.
Capitalized deferred stripping costs in the first quarter of 2013 were $27 million compared with $16 million in the first quarter of 2012.
Copper production in the first quarter of 28,500 tonnes was 42% higher than a year ago primarily as a result of significantly higher ore grades in addition to improved mill throughput and recoveries.
As anticipated, copper production has declined significantly from the 37,400 tonnes produced in the fourth quarter of 2012 when production was focused on exceptionally high grade areas in the Valley Pit.
Production levels are expected to continue at a similar level for the remainder of 2013 until the Mill Optimization Project is completed in 2014.
Molybdenum production declined by 14% to 1.9 million pounds compared with the same period a year ago due to lower ore grades and recoveries.
Depreciation and amortization expense rose by $13 million in the first quarter of 2013 as the commencement of the amortization of the Valley Pits east wall waste stripping campaign and buttress placement project began in the second quarter of 2012.
The Mill Optimization Project is progressing well with construction over 30% complete.
The project is on schedule for completion by the end of 2013.
Antamina (22.5%)
Operating results at the 100% level are summarized in the following table:
Three months ended
March 31,
2013 2012
----------------------------------------------------------------------------
Tonnes milled (000s)
Copper-only ore 7,065 6,387
Copper-zinc ore 3,265 3,776
--------------------------------------------------------------------------
10,330 10,163
Copper (note 1)
Grade (%) 0.87 1.05
Recovery (%) 83.6 86.6
Production (000s tonnes) 77.3 94.8
Sales (000s tonnes) 74.2 94.3
Zinc (note 1)
Grade (%) 2.37 1.87
Recovery (%) 85.4 79.4
Production (000s tonnes) 67.3 59.3
Sales (000s tonnes) 56.5 47.5
Molybdenum
Production (million pounds) 2.1 3.4
Sales (million pounds) 2.4 4.4
Cost of sales (US$ millions)
Operating costs $ 131 $ 151
Distribution costs $ 19 $ 24
Royalties and other costs (note 2) $ 29 $ 56
Depreciation and amortization $ 56 $ 27
Gross profit summary (our 22.5% share) ($ millions)
Before depreciation and amortization $ 110 $ 153
Depreciation and amortization (13) (6)
----------------------------------------------------------------------------
After depreciation and amortization $ 97 $ 147
----------------------------------------------------------------------------
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 share of Antaminas gross profit before depreciation and amortization in the first quarter was primarily due to substantially lower copper production and sales volumes compared with the first quarter of 2012.
Tonnes milled in the first quarter was similar to a year ago and averaged 115,000 tonnes per day.
However, throughput was approximately 10% lower than the fourth quarter of 2012 due to mechanical problems and unscheduled downtime at the primary crusher experienced during the first quarter.
The mix of mill feed in the first quarter was 68% copper-only ore and 32% copper-zinc ore, similar to a year ago.
Copper production, on a 100% basis, declined by 18% to 77,300 tonnes compared with 94,800 tonnes in the first quarter of 2012 as a result of substantially lower head grades and lower recoveries.
Head grades are expected to return to the same levels as the first quarter of 2012 over the next two quarters.
Zinc production rose to 67,300 tonnes from 59,300 tonnes in the same period a year ago as a result of higher zinc grades and recoveries arising from the nature of the orebody.
Molybdenum production was significantly lower in the first quarter compared with a year ago as a result of lower molybdenum grades.
Operating costs in the first quarter decreased by US$20 million compared with the same period a year ago reflecting the lower copper sales volumes in the quarter.
Depreciation and amortization expense doubled from the same period last year as a result of the commencement of amortization of Antaminas major mine and mill expansion in the second half of 2012.
Capitalized deferred stripping costs were US$79 million (100% basis) in the first quarter of 2013 compared with US$58 million in the first quarter of 2012.
Quebrada Blanca (76.5%)
Operating results at the 100% level are summarized in the following table:
Three months ended
March 31,
2013 2012
----------------------------------------------------------------------------
Tonnes placed (000s)
Heap leach ore 1,688 1,453
Dump leach ore 2,943 5,438
--------------------------------------------------------------------------
4,631 6,891
Grade (TCu%) (note 1)
Heap leach ore 0.93 0.86
Dump leach ore 0.53 0.46
Production (000s tonnes)
Heap leach ore 7.6 10.5
Dump leach ore 5.9 6.4
--------------------------------------------------------------------------
13.5 16.9
Sales (000s tonnes) 10.1 16.4
Cost of sales (US$ million)
Operating costs $ 62 $ 87
Distribution costs $ 1 $ 2
Depreciation and amortization $ 23 $ 25
Gross profit (loss) summary ($ millions) (note 2)
Before depreciation and amortization $ 18 $ 47
Depreciation and amortization (23) (25)
----------------------------------------------------------------------------
After depreciation and amortization $ (5) $ 22
----------------------------------------------------------------------------
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 significantly in the first quarter due to substantially lower sales volumes compared with the first quarter of 2012.
The lower sales were partially attributable to reduced production levels and a three-week port strike that restricted shipments in the period.
As anticipated in the mine plan, copper production in the first quarter declined by 20% compared with a year ago to 13,500 tonnes.
Production decreased as a result of processing lower amounts of dump-leach ore placed in this and previous quarters.
Operating costs decreased by US$25 million in the first quarter compared with the same period a year ago partly due to the lower power costs and as a result of initiatives undertaken in the fourth quarter of 2012 to reduce costs and workforce at the operation.
Quebrada Blanca had also incurred a one-time labor settlement charge of US$6 million in the first quarter of 2012.
Capitalized stripping costs in the first quarter of 2013 were US$14 million compared with US$7 million in the first quarter of 2012.
Quebrada Blanca incurred an operating loss in the period as high cost inventory produced in prior periods was sold.
Current period unit production costs have declined by approximately 20% and the benefit of these lower costs are expected to be realized when the production is sold in subsequent quarters.
Carmen de Andacollo (90%)
Operating results at the 100% level are summarized in the following table:
Three months ended
March 31,
2013 2012
----------------------------------------------------------------------------
Tonnes milled (000s) 4,197 3,898
Copper
Grade (%) 0.54 0.51
Recovery (%) 87.3 88.1
Production (000s tonnes) 19.7 17.6
Sales (000s tonnes) 21.4 17.5
Gold (note 1)
Production (000s ounces) 17.9 12.9
Sales (000s ounces) 19.2 13.1
Copper cathode
Production (000s tonnes) 0.9 1.6
Sales (000s tonnes) 0.8 2.0
Cost of sales (US$ million)
Operating costs $ 85 $ 90
Distribution costs $ 8 $ 6
Depreciation and amortization $ 23 $ 21
Gross profit summary ($ millions) (note 2)
Before depreciation and amortization $ 79 $ 58
Depreciation and amortization (23) (21)
----------------------------------------------------------------------------
After depreciation and amortization $ 56 $ 37
----------------------------------------------------------------------------
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 increase in Carmen de Andacollos first quarter gross profit before depreciation and amortization was a result of higher sales volumes compared with the same period a year ago.
Total copper production rose by 7% to 20,600 tonnes compared with the first quarter of 2012, primarily as a result of increased mill throughput and higher ore grades.
Operating costs rose with increased production levels and were US$85 million in the first quarter compared with US$80 million last year before US$10 million of one-time labour settlement charges.
Capitalized deferred stripping costs in both periods were minimal.
Duck Pond (100%)
Duck Ponds gross profit before depreciation and amortization was $10 million in the first quarter, the same as the first quarter of 2012.
Copper and zinc production in the first quarter was 3,300 tonnes and 3,500 tonnes, respectively, compared with 3,700 tonnes and 5,200 tonnes, respectively, last year.
Copper and zinc sales in the first quarter were 1,800 tonnes and 4,300 tonnes, respectively, compared with 3,600 tonnes and 4,100 tonnes, respectively, last year.
The development plan for the Boundary Pit was approved in the quarter and it is anticipated that production will transition to mining a combination of both open pit and underground ores towards the end of the second quarter.
Copper Development Projects
Quebrada Blanca Phase 2
During the first quarter detailed design and the procurement of long-lead equipment for the Quebrada Blanca Phase 2 project continued.
The estimated capital cost for the development of the project is US$5.6 billion on a 100% basis (in January 2012 dollars, not including working capital or interest during construction), of which our funding share would be US$4.8 billion.
The project 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.
Quebrada Blanca has entered into purchase arrangements in order to secure the supply of power to the project.
We had planned to file the updated social environmental impact assessment ("SEIA") for the Quebrada Blanca Phase 2 project by the end of the second quarter of 2013.
During the quarter we have identified issues linked to permitting for existing facilities which need to be reviewed in connection with the resubmission of the SEIA.
We are in discussions with regulators concerning these matters and are working towards resolution.
While the timing for resubmission will depend in part on the outcome of these discussions, our current expectation is that the SEIA will not be resubmitted before the fourth quarter of 2013.
We are reviewing our engineering and procurement activities on the project in light of this extended timetable for resubmission of the SEIA.
Discussions continue with the other shareholders of Quebrada Blanca concerning financing options for the project, which may include limited recourse project financing and, possibly, bringing in a new funding partner.
Relincho
The feasibility study for Relincho is progressing and it is expected to be complete at the end of the fourth quarter of 2013.
Permitting delays have affected the progress of third-party port and power supply facilities that we expected to use for Relincho, which delayed the completion of the feasibility study.
Exploration and geotechnical drilling are ongoing and a new resource and reserve estimate is expected at the completion of the feasibility study.
Based on the prefeasibility design, production would average 180,000 tonnes per year of copper and 6,000 tonnes per year of molybdenum over a 22-year mine life, with higher production in the first five years.
Galore Creek (50%)
The 2013 budget and work plan for Galore Creek was approved which includes regular care and maintenance activities, continuation of baseline environmental work and a 10,000 metre drill program focused on resource expansion.
COAL
Teck Coal Partnership (100%)
Operating results at the 100% level are summarized in the following table:
Three months ended
March 31,
2013 2012
----------------------------------------------------------------------------
Production (000s tonnes) 6,234 6,265
Sales (000s tonnes) 6,578 5,305
Average sale price
US$/tonne $ 161 $ 223
C$/tonne $ 162 $ 226
Operating expenses (C$/tonne)
Cost of product sold $ 47 $ 59
Transportation $ 36 $ 34
Depreciation and amortization $ 26 $ 20
Gross profit summary ($ millions)
Before depreciation and amortization $ 516 $ 703
Depreciation and amortization (170) (105)
----------------------------------------------------------------------------
After depreciation and amortization $ 346 $ 598
----------------------------------------------------------------------------Gross profit before depreciation and amortization in the first quarter declined compared with last year due to lower coal prices, partially offset by higher sales volumes.
Production in the first quarter was largely unchanged from a year ago.
The mines effectively managed inventories and produced coal at a pace which aligned production rates with anticipated demand.
Coal sales of 6.6 million tonnes in the first quarter were 24% higher than the same period last year and set a new first quarter sales record.
The average coal price of US$161 per tonne in the first quarter was 28% lower than the same period a year ago and reflects weaker steelmaking coal market conditions.
Sales in the quarter reflected our typical sales distribution.
Record volumes were partly attributable to starting the year with a large number of vessels at anchor due to the Westshore Berth 1 outage, which occurred in early December.
During the period Neptune Bulk Terminals set a new a record for tonnes loaded in a quarter and Westshore Terminals performed well after completing repairs to Berth 1 in early February.
Coal prices have been agreed with the majority of the quarterly contract customers for the second quarter of 2013 based on pricing of US$172 per tonne for the highest quality products, which is consistent with prices reportedly achieved by our competitors.
As of the date of this release, contracted sales are approximately 5.4 million tonnes of coal for delivery in the second quarter at an average price of US$154 per tonne.
The preference of a number of customers appears to be shifting to pricing coal on a basis shorter than quarterly.
To allow for such purchases, some customers are reducing the proportion of quarterly priced tonnes in their procurement plan and requesting suppliers to price a portion of the volume on a spot basis.
This change in pricing cycle for some of our sales means pricing will be settled closer to the time of shipment rather than at the start of the quarter.
This change has significantly affected the contract sales figures reported above.
We are continuing contract discussions with our customers and are anticipating selling additional tonnage on the spot market, including to customers who have traditionally purchased the majority of their coal requirements on a quarterly pricing basis.
Accordingly we currently expect sales for the second quarter to be at or above 6.0 million tonnes.
Vessel nominations for quarterly contract tonnage are determined by customers and final sales and average prices for the quarter will depend on timely arrival of vessels and the performance of our coal-loading facilities.
The cost of product sold in the first quarter, before transportation and depreciation charges, was $47 per tonne compared with $59 per tonne (restated for deferred stripping), 20% lower than in the same period a year ago.
In the current period, $140 million dollars of cash production costs were capitalized on the balance sheet in accordance with the requirements of the deferred stripping accounting standard compared to $142 million in the restated period a year ago.
Under the new accounting standards for stripping costs, we expect our 2013 annual cost of product sold to be in the range of $51 to $58 per tonne, based on our current production plans.
Cost reduction efforts at the mines, which accompanied the reduction in production levels beginning in mid-August 2012, have been successful and are ongoing.
Cash production costs in the first quarter were nearly $12 per tonne lower than a year ago.
This decrease resulted from reductions in the consumption of repair parts and minimizing the use of maintenance contractors, contract miners and consultants.
In addition, costs were positively impacted by reductions in overtime, a hiring freeze, shutdowns of higher cost equipment and shutdowns on statutory holidays.
Transportation costs in the first quarter were $36 per tonne, $2 per tonne or 6% higher compared with the same quarter a year ago.
This increase was primarily due to higher demurrage charges incurred throughout the quarter, resulting from the large number of vessels at anchor at the west coast ports associated with the Westshore Berth 1 outage.
We continue to expect our 2013 transportation costs to be approximately $36 to $40 per tonne.
Depreciation and amortization increased by $6 per tonne to $26 per tonne primarily due to the significant increase in capital assets to be depreciated under the new deferred stripping accounting standard, which are depreciated on a units of production basis.
Also contributing to the increase were investments in capital equipment made over the course of 2012, which are now commissioned and operating at our sites.
We expect depreciation and amortization expense to be in the range of $26 to $30 per tonne in 2013 as we continue to defer and amortize overburden removal costs.
The Quintette re-start project continues to progress on the basis of the study, which estimated a capital cost of approximately $860 million, of which $188 million has been spent to date.
The Mines Act Permit Amendment ("MAPA") application process is proceeding and we continue to expect to receive the permit approval in the second quarter with first coal production expected in the first half of 2014.
Early works activities, procurement of long-lead equipment and engineering, are progressing to support the project timeline.
During the first quarter, a five-year labour agreement was ratified with the union.
By the fourth quarter of 2014, Quintette is expected to be producing at an annualized rate of three million tonnes.
Neptune Bulk Terminals, in which we have a 46% ownership interest, is expanding its annual coal throughput capacity from 9 million tonnes to 12.5 million tonnes by the end of the second quarter of 2013 with the addition of a second stacker reclaimer.
Completion of the feasibility study for the next expansion phase, which will further increase capacity from 12.5 million tonnes to 18.5 million tonnes, was completed in the fourth quarter of 2012.
The proposed upgrades will include a second railcar dumper and associated conveying system, a new rail track within the existing rail loop, the replacement of a ship loader and foundation reinforcement of the loading berth.
Selenium Management
On April 15, the Government of British Columbia issued an Area Based Management Plan Order ("Order"), which calls for development of an Elk Valley Water Quality Plan to address the impact of selenium and other substances released by mining activities throughout the watershed, associated economic and social costs and benefits and establish concentration targets and time-frames required to stabilize and reduce levels of these substances.
The Order establishes a long-term selenium concentration target for Lake Koocanusa, which is currently being met, and which we expect can continue to be achieved using water treatment technologies described in our draft Valley-wide Selenium Management Action Plan submitted to regulators in January 2013.
Development of the area-based plan in accordance with the Order and the associated public consultation is expected to take up to 15 months.
Permitting activities on Line Creek Phase 2 and other projects are expected to continue in the interim, and alternative mine plans are being developed to mitigate any potential impacts of permitting delays.
Subject to changes arising out of the process established under the Order, we expect total capital spending of approximately $600 million over the next five years on the installation of water treatment and diversion facilities.
Our total sustaining c
