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Teck Resources Limited Management Discusses Q2 2012 Results - Earnings Call Transcript

Stocks in this article: TCK

In Quintette, newly issued draft guidelines pertaining to caribou management have extended the permitting process. This in turn has impacted the feasibility study and the timeline for the reopening of the Quintette mine. The feasibility is now expected to be complete in Q3 of 2012. So this quarter, with the first coal expected in 2014. Also, subsequent to quarter end, we ratified a new 5-year labor agreement at Cardinal River and the next labor agreement in coal expires in May 2014 at our Line Creek operation.

And finally, quarter-to-date, we have reached agreements with the portion of our coal customers to sell 5 million tonnes at an average price of USD 199 per tonne, and this includes carryover tonnage. I think it's important to keep in mind that we were further along in negotiations this time last quarter and so the quarter-over-quarter comparison to the 6.3 million tonnes we have sold, at this time in the last quarter, is not directly comparable. I'll just repeat that, that the 5 million tonnes we have in the press release so far this quarter is not an apples-to-apples comparison to the 6.3 million tonnes that we have sold at this time in the last quarter.

Slide 10 highlights the progress we are making towards our 28 million tonne production target at our existing 6 mines. This chart shows coal production in the red line in millions of tonnes and total material movement in the blue bars as millions of bank cubic meters, or bcms, on a rolling 4 quarter basis. And as you can see, total material movement continues to move ahead at a steady rate between coal production is somewhat more volatile being impacted by various issues, such as strikes and transportation disruptions. A 28 million tonne annual production rate requires that we move 310 million bcms of total material in the 11:1 strip ratio. And as you can see from the chart, we were operating very close to this level during the second quarter. Due to the strike, we ran out of storage capacity and although we had to curtail coal production and we continued with waste movement and accelerated some maintenance work in order to benefit future production once the rail strike ended. We continue to be very pleased with the progress made on our expansion plans in coal.

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