Teck Resources Ltd (TECK) 2004 Q3 法說會逐字稿

Welcome to the Teck Cominco Third Quarter 2004 Investor Relations Conference Call. (OPERATOR INSTRUCTIONS). As a reminder this conference call is being recorded on Tuesday, October 26, 2004. I would now like to turn the conference call over to the Director of Financial Long-term Planning and Financial Analysis, Mr. Greg Waller. Please go ahead, sir.

Good morning everyone and thank you all for joining us today at the Teck Cominco's Third Quarter 2004 Investor Conference Call. On the call this morning, are Norm Keevil, Chairman of Teck Cominco; David Thompson, Deputy Chairman and CEO; John Taylor, Senior Vice President and CFO; Howard Chu, our Controller; Doug Horswill, Senior Vice President, Environment and Corporate Affairs; and Mike Lipkewich, Senior Vice President of Mining. This morning David Thompson will review the results for the third quarter of 2004. Following his comments we'll open the lines for questions.

Please note this call is also being webcast and can be accessed at our Website at www.teckcominco.com. A set of slides has been prepared to accompany David's commentary today, and these are also available via the Internet at our Website. It can also be accessed by clicking on the webcast link. Before we start, I'd like to remind everyone that some of the information in this call and the slides, which accompany our commentary and in the press release is forward-looking information. This forward-looking information is subject to risks, uncertainties, and other factors as described in our annual information form under the caption 'Cautionary Statements Concerning Forward-Looking Information.' Please treat this information with caution, as many factors might change, which may cause future events to unfold differently than originally anticipated. Teck Cominco does not assume the obligation to update any forward-looking statement. At this point I'd like to turn the call over to David Thompson, Deputy Chairman and Chief Executive Officer.

Welcome to the Third Quarter Conference Call. I'll start up the presentation on slide 3 and the numbers shown on the bottom left-hand corner of the slide. As you will see on slide 3, our earnings reported for this quarter are $120 million at 62 cents per share against $16 million or 8 cents per share in the third quarter of last year. On slide 4, we also show the results for the third quarter before the provision for the write off of the Sons of Gwalia Investment. There you'll see the net earnings are $172 million for the quarter 89 cents per share and that compares with the second quarter -- previous record earnings of $116 million or 60 cents per share.

Turning on to slide 5, that summarizes the results for the third quarter. This is as we reported fourth consecutive record earnings. We also had a record cash flow of $337 million for the quarter. That 37 percent's greater than our previous record, which is in the second quarter of this year. Net debt was reduced by $203 million and our net debt to debt plus equity has declined from 21 percent at the end of June to 16 percent at the end of September. On slide 6, we show a comparison of market prices. These are not our realized prices, but the market prices on the LME and on the London Gold Fix. Coal; however, is our actual prices that they are actually the prices that we have obtained for coal including our hedging protection.

On the left hand side, we show the prices denominating US dollars and on the right hand side, the denomination in Canadian dollars. On the left hand side, you can see that's not much change. In the comparison between the third quarter and the second quarter and in the conference call I'll be largely comparing the third quarter to the second quarter because of similarity of prices.

On the right hand side; however, denominating Canadian dollars, you will see that zinc price actually went down 10 percent against the second quarter, copper was down 2 percent, gold down 3 percent. The only major product that went up was coal and that was up 4 percent and that's because this quarter -- third quarter was the first time we had the full 2004 coal-year prices in effect. Moving on to the next slide which is slide 7, shows the operating profit, a comparison by mine or refinery. Our operating profits rose from $229 million in the second quarter to $338 million in the third quarter, that's a $109 million increase. One of the reasons for that is that we have obtained positive settlement adjustments in this quarter. That is when we have sold products to our customers, where title is transferred for the end of the quarter and yet the pricing has not yet been finalized. So, in the third quarter, we are up $18 million on the -- in positive settlement adjustments, whereas in the second quarter, we were down $17 million. The $35 million of this difference is due to the fact that prices rose in the third quarter and whereas sequentially declined from the previous quarter in quarter 2.

The 3 main areas of improvement are Red Dog. Red Dog is up $49 million for the quarter from $10 million to $59 million, and that's because the shipping season has started in the third quarter of this year to help

and much more product to sell. 46 but then is a gain from Highland Valley. Highland Valley has gone up from 79 to $125 million for this quarter, driven significantly by higher volumes and prices from molybdenum. The third area of improvement is Antamina. Antamina is swinging increasingly into copper. It's improved, there is an improvement there of $28 million for the quarter, up from 31 to $59 million. The only

that declined significantly was Trail, which was down 7 and Hemlo which is down 4. So, overall, a 47 percent increase in all trading profits in the 2 quarters.

The next slide shows the same information in graphic form. This simply shows the percentage that we are obtaining from the major products and these are of course are defined by refinery or mines, for example copper is Highland Valley, Antamina, Louvicourt. So, we did not rate them as copper because that's the primary product even though they have of course by products

but for zinc. Copper moved up from 48 percent in the second quarter to 55 percent in this quarter. So earnings are -- have been largely driven again this quarter by the improvement in the Highland Valley and Antamina.

Slide 9 shows -- it is the start of the showing the individual refineries and mines. Trail is shown in slide 9. Profit is down from $47 million in the second quarter to $40 million in the third quarter although power was the same at $12 million in both quarters. So, the -- this is really because although the volume fell and because the peak of our power supplies in the second quarter, the power price rose in US dollars. Therefore, we came in with the same expected profit. There was a $7 million decline in metal operations, and the main reason for this is that we actually had a $7 million business interruption insurance payment in the second quarter as a result of the explosion of a Kivcet in the first quarter. So, there was $7 million paid in that quarter and those are being

to nearly $3 million in this quarter for business interruption as the final payment on the explosion at Kivcet but the main item of difference is business interruption. Aside from that, we've had slightly lower profits from zinc and fertilizer because we are beyond the fertilizer season now. On the other hand, we had improvements in the profitability from Lead and particularly from India in this quarter to offset so that we were down, if net of those 2 were down $3 million for -- against the position in the second quarter.

Slide 10 shows Cajamarquilla. Cajamarquilla down slightly this quarter despite a similar sales of zinc. That's principally due to lower sales of acid and also from silver because those quantities vary from quarter to quarter. Otherwise, a consistent performance by Cajamarquilla.

Moving on to slide 11 shows Red Dog. Red Dog had an excellent shipping season this year, a good start, high volumes of shipping in July-August and this is one of the reasons why sales in this quarter are higher than quarter 3 of last year, and if the Red Dog is more useful to compare the 2 third quarters together because they reflect the same shipping situation. Our sales, I think, was up from 132,000 to 176,000. Our sales were later up 40,000 to 52,000. That is the earliest shipping season also due to our customers being extremely anxious to get products and pricing early so that we had a significantly higher sales that we would normally expect in the third quarter. In terms of our operating profits, they jumped from 6 million last year to 59 million this year. Of course prices were higher. The prices -- I think in this quarter was 45 cents against 37 cents last year and in the case of lead, it was 43 cents against 23 cents last year. So the primary driver with that improvement in price in the results of Red Dog. Looking ahead, the fourth quarter which is, you see, our strongest quarter for volumes will probably be somewhat similar to the third quarter. So we think that it is difficult to predict because we don't know what the position of our customers will be but if it goes on like this, we would expect those two both be roughly similar in volume this year.

In Slide 12, we show Highland Valley. Highland Valley, our largest single contributor and this is the best quarter ever for the Highland Valley at $125 million against $79 million in 2Q of this year. The -- some of the adjustments fail over here. Some of the adjustments were positive in this quarter by 8 million whereas they were negative 6 million in 2Q. So 14 million of the difference is due to some of the adjustments but the largest single impact is on molybdenum. Molybdenum revenues were 69 million for this quarter against 50 in the second quarter driven by the high volume of molybdenum 3.2 million pounds against 2.5 in the second quarter and a higher price. We averaged $18 US from molybdenum against 15 in the second quarter. Looking ahead, we are predicting a total of production this year of 10 million pounds of moly. We have produced 8.3 million pounds of -- probably we could have even sold simply 7 million. So if we were able to sell our production in the fourth quarter for the whole year and if we gradually sold the whole year's production by the end of the fourth quarter then we would have sales of about 2.4 million pounds for that quarter.

Moving on to Antamina which is the share on of 5, 13 progress improved there again. Segments adjustments helped a stir in total of 17 million adjustments. In other words, positive 8 versus a negative 9 in the second quarter. But the primary driver is copper. Copper production is -- has increased Antamina and zinc has reduced and this is reflected in the higher sales of copper -- 99,000 tons on a 100 percent basis for the quarter again maybe 1000 in second quarter of this year, a 28 million improvement in Antamina's profit.

Hemlo is shown on Slide 14. Hemlo had a difficult quarter both David Bell and Williams suffer from undercurrent problems. Therefore that we were drawing more from the open pit. As a result, our grade has dropped from 5 grams per ton to 3.8 grams per ton from the second quarter and the third quarter. Production went down from 133,000, 100 percent to 107,000 for 3Q and operating profits reduced from 10 million to 6 million. As a result of the lower production cash costs increased by maybe $68 to $298 US.

The final slide for the operations is Slide 15 which shows the Elk Valley partnership. Operating profits are same, 39 million in second quarter and third quarter even though sales dropped from 6.8 million tons 100 percent to 6 million tons in the third quarter. That is because of the -- our wash plant maintenance shutdowns are held generally in the summer. As a result, production was at 5.7 million tons on a 100 percent basis. We would expect the fourth quarter to be normal so that that would move up to the same 6.8 million level or higher. The prices of course have improved, as I said earlier, by 3 dozen Canadian tons as a result of the -- moving down to the full 2004 pricing

.

Slide 16 shows our cash flow and CapEx. As you -- we have 337 million, which is four times the rate that we were earning -- we were generating in the third quarter of 2003. CapEx is up, it's normally high in the summer to 68 million, driven particularly by Pogo and Cheviot, 20 million on Pogo, 12 million on Cheviot, and the rest is suspending capital led by Red Dog with 11 million, Trail by 7 million and

with 5 million. Looking forward by staying CapEx at around 55 million for the fourth quarter, so we are now indicating a CapEx for this year, though it's just over 200 million, which is slightly higher than we had forecast during the last conference call. This is partly because of the acceleration that we're getting at Cheviot and also the fact that we have -- as you have seen in the report we have now authorized Phase II, spending is now starting on the second phase of Cheviot.

Liquidity is shown in slide 17, our working capital has risen, since Christmas, 31 December by 420 million. This is largely driven by cash reserve from 96 million to 429 million over that period and that debt plus equity has fallen now from 29 percent at the year end to 16 percent at the present time.

The final slide is corporate development, the investments we're making in the Pogo growth project, work is going well there. We've had actually quite a good fall season, temperatures have been quite good, these are fair by

. And as a result of that, we are well underway on planning the mill building, we hope that the mill building will be completed by December and we will be able to install equipment through the winter. This will be very helpful to achieving our projected turn-off which is March 2006.

On the Cheviot coal project, work is proceeding well on stage I, we are hoping to get our first coal, mined and railed out of Cheviot by the end of November. We have announced the Phase II, which is the doubling of the capacity of that. We hope that that will be in full production during the second half of 2005 at a rate of 2.8 million tons in total for the project per annum on an average for coal. We also announced that we are increasing the Fording River by a million tons and that will occur again -- similarly in the second half of 2005 after the wash plant goes down for changes in July of next year. At Highland valley, we are looking as we have reported on the possibility of extending the life of Highland Valley, there is more resources below the existing pit. We have, however, to undertake geo-technical work on that to satisfy ourselves of a healthy pit walls. So, we would like to make a decision in 2006 on that extension. In the meantime, we have voted the mining content to extend throughout next year, increasing the ship as the stripping in order to give us more flexibility to make that decision if it is positive in 2006. And finally, on debenture conversion, we did buy in our convertible debenture as a result of the stock price moving up. That has partially been converted, 7.3 million shares have been converted, total outstanding shares of both A and B are just under -- just over 200 million at this time. That's all I would like to say and now I would welcome questions. Thank you very much.

(OPERATOR INSTRUCTIONS) Alberto Arias, Goldman Sachs & Co.

Good morning gentlemen and congratulations on the very strong results. Given the amount of free cash flows that they are coming towards generating, if you could please elaborate a bit about what are your plans for the use of those free cash flows given that your voluntary flow is strong now?

Our present plan is to continue our capital expenditure levels which will be slightly higher next year than they're this year, we're now forecasting about 225 million of capital expenditure for next year so that it is well within the existing free cash flow. We continue to look for new investment opportunities, and if we were able to find them, obviously that would be one use of the free cash flow. Alternatively we feel that this as a very strong cyclical cycle, and therefore we should be really strengthening the balance sheet up for further situations in the next year or two in other words we can't just look at an indefinite continuation of high prices, but we should prepare ourselves for any downturn that might come in 2 or 3 year's time. In terms of excess cash flow, if we really find ourselves into an excess cash flow situation, and I think that what would happen, consider how to reduce that cash flow, in terms of return to shareholders, but that decision is yet to be made.

In terms of the investment opportunities, you would be considering, are you mainly focusing on internal growth opportunities with some of your exploration projects or would you consider any sort of acquisitions or M&A activity?

Well, our existing mode is ready to do

expansions, so that they have as you have seen from these numbers, it's a bulk that you are really paying off, and that continues to, whether it's a share bid or floating

, and so forth. That's where we are putting our money immediately. At the same time, we are constantly looking for new opportunities, but then tell me on our exploration but also externally with that extensive network with the junior companies who have fund financing, I think, this year 16 juniors, however, we have backing right to say as you find something, and of course, we are also looking at other possible acquisitions too, but unless they meet our criteria, we won't rush in.

Final question on Highland Valley. In your press release you talked about voluminous volumes coming down significantly, I think, it's 50 percent next year. What about the following years, should we expect that on the year 2006 and beyond, are we going to see similar levels of 2005?

2004 was a particularly high year, I think, that's

year that we've had as far as I could remember. In terms of looking forward, we would see numbers more similar to 2005 going forward than 2004.

Terence Ortslan, TSO & Associates.

Could you just review the Highland Valley situation, I think in the previous conversations we had, you talked about pushing Volvo back and probably get there in an year, now you are talking expansion at that. Am I correct?

I think, I will turn that over that Mike.

We are actually looking at pushing the East Wall back, significantly and also dropping the bottom of the pit, and by doing that we should be able add some vis around 182 to 200 million tons probably around a 190 million ton range.

And the

are about similar point for us.

They are very similar to historic rates.

And it's increased stripping, Mike, how much we talking about here.

Increased stripping this next year is pretty modest. We are only going to up to a strip ratio a bit of 0.25, but what it does do is positions us in 2006 before a smooth transition into the yolk and into an expansion if we make that decision.

And then how long would it take to prepare the pits for the expansion, and it's going to be the pit logs of 2008, if I remember it correctly.

We would step up striping ratio sharply in 2007 and 2008, so that would be a fairly smooth transition into the expansion.

Mike, what is the stripping that it is on those 3 years?

Stripping ratio will deliver the 1, it will be in that 1.3 to 1.5 for 2 years.

David, coming back to the operations, could you remind me if there any labor contracts coming up this year and 2005?

Yes, we have trails contract comes up in May 2005. We didn't have a star of labor contract in the Elk Valley, starting with Coal Mountain in December this year. Then I think there are 3 or 4 contracts which will come up between December this year and March 2006. So, they come up between over about a 50-month period.

But those are all on the coal side?

On the coal side. I am trying to think of how it [Multiple Speakers].

David, that contract is under negotiations right now, it may continue negotiations into the New Year.

Okay. Did I miss anything or is that --?

I think that's all with the contract for now.

Could you review the market conditions, David, to where you guys see it? I guess, are you in

because I'm not so sure but I don't think -- and let's specifically just get your feedback on that?

Yes, I was at LMEV. On the zinc markets generally they're good. In terms of the United States, North America, it has been pretty steady -- it has been strong and pretty steady right the way through the summer and it's the fall. So, we haven't seen any drop off at all in demand in that area. Europe is still very much the same it has been as far as we can gather during the year, some spotty strength but overall a fairly flat market even though the steel industry itself is doing quite well. In terms of Asia, it's generally strong, very strong in Japan. Korea has had some weakness domestically this summer in it's residential/non-residential construction; on the other hand its exports are high. So overall demand I think is good, export is good; similarly for Southeast Asia. And then China as far as we can see has continued strong, the half of been the destocking that we saw in copper, in zinc, in fact the Chinese numbers are coming in. The September numbers indicate a net import of metal of several thousand tons. So, they exported 17,000 tons per purchase 24,000 tons, and there are reports of actually demand in Southern China needing zinc beds. So overall still a good market.

And leads?

Lead is quite strong. It is tight because I think you have a very low inventories on the LME. The United States is very strong; premiums are up significantly in the US. Europe is strong. There is some patchiness in Asia, I think. But overall still a good market.

Let me ask the last question. Just back to -- actually just before that, so on a total evidence, China being a net import, are you verifying it, there are no statistical issues with the books and everything else on zinc?

Well, yes, one is always a bit nervous. I think the export/import numbers are regardless part of the most reliable of the numbers. Still I think that's a pretty good indication of how things are in terms of -- it's difficult to sort of define exactly what consumption is in China, but if you can think -- if you can see them buying metal as they have consistently through the summer, Kazakhstan of course is their major supplier, but they've now come and they were actually buying from Western refineries. That indicates a pretty strong market I think internally.

Okay. Last question, Norm, are you there? There seems to also the seasonal shortage in the business. Could you talk about maybe where are you on the CEO shortlists or looking into possibility of getting into a shortlist?

We are -- two more things we have to do but we do have a shortlist, it may get expanded to a slightly longer shortlist, but we are getting very close.

May be expanded, I missed that Norman, I am sorry.

Maybe expanded, we have a couple of more introduced that are untapped, but we do have quite an interesting short list right now. I am very confident that we will end up doing the right things for all of us.

David Charles, GMP.

Good morning everybody. Maybe just a quick question. Looking at your power sales out of trail, I was just wondering what is the capacity of sales that you have there I mean in terms of kilowatt hours, like this year and maybe looking forward into next year?

Our surplus for over the year is about 900 gigawatt. So we have about 2600 gigawatt. So, we use 1700 ourselves and have got 900 available. And it moves around from one quarter to another quite significantly because we can move and in fact we did move power into that sector -- into the third quarter.

And looking forward, is that pretty much the capacity going forward as well?

We got one more generated to a change and we will start that next year.

And that would bring your capacity up to?

930, something like that. 930.

Haytham Hodaly, Salman Partners.

Just a couple of quick questions, some other questions have been answered. David, I was hoping if you just give us a little bit of guidance as to what your full year contained metal and con for zinc. Is that right Doug, your forecast?

Well, we would have to get about 550,000 tons contained till 2004.

And then I guess with regard to your Antamina copper outlook and zinc outlook, same thing metal containing costs?

The production profile at Antamina is still swinging towards copper, so we think that production maybe -- it was 92,000 in the quarter, maybe over 100,000 of copper for the fourth quarter. In terms of zinc, it will probably still fall from the present level. So if that was 45,000 tons in the quarter, 165,000 tons per year-to-date, that will probably go down. It's difficult to say, quite would have go down to maybe 30-35,000, something like that. So we are in a very low zinc period right now at the moment.

Going back to Red Dog for a second here, what is that per year, roughly your cash cuts, you've got to be well below 30 cents at this point with the credit, is that credit?

Yes. On a credit level if you buy products of lead, yes, you're well below, that's true. We tend to cope with one or

, but if you go byproducts, yes, you'll get that new number.

Greg Barnes, Canaccord Capital.

I've just 2 questions. First of all, on Highland Valley. Can you give us some idea of ballpark number on CapEx for the mine wise extension if it happens?

I think that it's a bit early, because we really haven't finalized it at all at this time. So it's a bit early to say what it would be. So I prefer not to answer that question.

Okay, second one then. Oil prices, do you have a feel or can you give us a ballpark on how that is impacting costs driven down to the bottom line, what you are feeling with beyond $50 oil in 2005?

Yes, it has an impact. I think John can answer this question.

We've done some preliminary numbers and very roughly it looks like for a dollar increase in oil per barrel. It looks like it's affecting us by around $2 million CAD before tax. But we're going to -- actually in our budgeting process this year where we're going to try and make fine tune that number because that's a bit rough.

Is that taking it from say $35 oil at 40 or 45, like kind of increment move?

Yes, it's per dollar increment.

Kerry Smith, Haywood Securities.

David, perhaps I could just come back to Greg's question on the CapEx for the Highland Valley expansion? I presume that would just be a mining fleet or would you need a full mining fleet to carry that out in another 5 years?

The reasons why we've never justified this in the past is we had too much capital in the estimates. So we are really trying to see how we can cut the capital down to the minimum in order to make the numbers work.

All right. But I presume the capital is just on the mining side, is it in positive

?

Yes, it's really just for the mines and of course got to move the conveyance system too, that whole inbuilt conveyor have to be moved.

Okay. Mike, you've mentioned the strip ratio in '08,'09. What would the life of mine strip ratio be for that pushback roughly?

Very close to one.

So, you'd have a couple of high -- of years where it will be pretty high and then after that it would drop off.

That's correct.

And, David with Sons of Gwalia going into voluntary receivership, do you know or have you been invited to bid on the tantalum assets, I'm just curious what your thoughts are there and what the process might be for those assets to positively come to market?

Once when we understand that the administrator has appointed 2 step for the investment banks, one to handle gold and one to handle tantalum. So, they will be handled separately and we're waiting to see what develops now.

And you don't know what the timing would be for --

They have on us -- we're in contact -- supposedly know they haven't called for, they haven't really opened it up yet.

And, you did give a CapEx number for '05 is 225 million. Could you just kind of break down the major components of that CapEx next year in terms of the areas where it would be spent?

That was a ballpark estimate because we haven't got a -- we haven't as approved our company expansion budgets yet. So, we haven't found the actual details of budget, but the large numbers are going to be a pogo about a 100 million and then the next largest is going to be the out dally, probably 40 million there for the major CapEx expenditures going underway and then the rest typical sustaining capital is around 70 to 80 million.

And how much for the Cheviot expansion in Phase II?

Cheviot expansion is 70 million went above, with share

at 28 million. So, I mean, including Phase I and Phase II in the 40.

So, you've concluded that in. Just one last question if I may David. You have to, you are going to be finalizing your all your core contracts in the fourth quarter here. What would your expectation be for a contract price in '05 just kind of a range of --- pricing?

Well, we'd just reason the literature like you are, because the negotiation haven't truly started. As in the range that the commentators are giving are anything from about 75 to 105 so it's a pretty broad range. The numbers are steadily moving up from where the commentators are.

So, I take it you'd be unhappy if you settle that 80 bucks a ton next year then. Is that fair?

We want -- we don't want to be the low one for the second year. Weren't it?

David Miller, Maxima Investment Management.

I was just wondering if you can give us a little more exploration update in particularly in Morelos Norte, your Mexican gold property and I think on October 4 you made an announcement about 100 percent Zafranal copper property in Peru as to when we might we get some further resource updates and next person updates on those projects and any other one's coming through the pipeline that seem to be moving along?

Yes, on Morelos. We are in the final stages of providing a new estimate for the resource at Morelos. So, I think we're now in discussion with our partner, I think we've changed down the number this week. So, I would think in the next couple of weeks there will be a press release out on that. On Zafranal, we put that press release out really because of their convertible was out and the lawyers decided that anything that we had we should put out. That was a bit early, it's an interesting set of hollows if it is just a line we're going to do a quite a bit more it needs quite lot more drilling around that to really get a feel for what's actually there. That will take a few months, the drilling is actually due to start imminently but it will be a few months something before able to come back with more in that potential discovery. I think those are the two major ones at the present time.

Lawrence Smith, TD Newcrest.

Two questions. One following up on the question about sensitivity to oil prices, with Red Dog, I'm curious are we seeing the flow through yet of higher oil prices yet or was that fuel bought as beginning of the shipping season and therefore it's kind of like last year's price and then truly unrelated question, during the Fording call, they talked about Fording becoming taxable potentially in 2007, could you just give us some insight into what's flow through to tax to make or would

.

We are already affected by this summer's high prices for oil, so we bought our oil over the period, I think June to September. I haven't seen actual average for that yet.

We are looking at about $400,000 monthly increase in total as a consequence of the current price.

And Mike is saying that he thinks it about 5 million for the year in the terms of the cost last year. One thing we have done is that we have actually cut our requirements because of power efficiencies, we got 1.2 million gallons of fuel left this shipping season. We get to take about -- just over 18 million gallons and we can ship 17 million in this year. So, we have got slight reduction there but we will feel the full effect of this oil price. The tax shield that Fording talks about is, that is the Fording level and so it's not available to us. So, we essentially get taxable income distributed over the partnership to us. So we are taxable now. It will reduce the -- potentially reduce the distributions you get on the units you hold. It would have an effect on it.

Steve Bonnyman, CIBC World Markets.

Good morning gentlemen. Could you speak to the production levels at Antamina sort of 2005 and beyond. I mean obviously as we are swinging over into the higher copper ores to what extent are we going to see that copper production increase and zinc decline and how long will that sustain?

Well the budget is not yet complete and that still has to approved by the partners. So we really can't comment on the actual detail for 2005. But what we can say I think is that this low period is being or this relatively low period was -- plan to continue into 2005. 2005 is not expected to be a high zinc year, it's a continuation. It might not be quite a of extreme as it is right now but it will not be that high.

And is the sediment completely out of the pit at this point, you have clear access to what ever parts of the ore body

allows you?

Sediment mining was completed in May.

David I've got one more question I guess, just on coal pricing again. You indicated obviously you don't want be at the low end of negotiations for a second year in a row. With regards to what you're seeing from the steel mills are they still looking for producers to lock into longer-term contracts?

Yes, I think there is a feeling in the market that individual steel companies are worried about their medium term or longer term supply position because don't know quite how this market is going to break. So yes, there is more desire to go longer not necessarily on price but on volume.

David what would your desire be in terms of, you know, are you looking for a long-term contract or do you think -- obliviously it depends on the prices etcetera, but what would be optimally -- what would you like to see optimally, I guess is what I'm trying to say?

Well I think of course we'd like long term price protected contracts as we once had in the North East but I'm not sure this market is going to give them to us. So in this market I think we will go for longer, longer volume because if you split it by volume in this Industry, then you got one of the two variables that have always been negotiated off the table. So then your just talking price. Historically in coke and coal you had a problem of how do you move your volume and how do you settle the price, and you could get what is sold very easily.

Sorry David, just to clarify, so you are talking larger volume over the coming year or --?

Well more steady, in other words you lock your volumes in. I think this is good for the fuel company because they actually know they are going to get the coal. And secondly it's good for the producer because he knows he doesn't have to argue the volume year, that's already settled.

So these are contracts basically negotiated prices year but locked in larger volumes?

I think that's the trend.

John Hughes,

David just to follow up to the LME week. Just wondering in terms of discussions on Zinc TC side what kind of numbers we might expect for '05 given that the -- I guess the mating season for the mine and the smelters, you know, started to take place at least at that point in time.

Well, I think it is too early to comment on levels, as to what they might go to. But, I think both sides this year, believes the treatment charges have to go down. Last year, this was quite prolonged, because European's believed they should go up, until they actually went down. Therefore, this year, I think nobody thinks, they are going to go up. Everybody thinks they are going to go down. It's just the question of how far. The concentrate market is extremely tight now.

On the gold side and I am sorry if I missed it, but with regards to Hemlo and the undercurrent problems there and the lower grade, what's happening through the course of the fourth quarter? What are your expectations on grade and production there?

Well, our production this year will probably be some where as around 480,000 ounces for 2004.

And direct cost associated with that?

Probably very close overall to what we have published for the 3 months.

All right. And on Pogo with construction well underway, is there a potential for any type of reserve or resource update?

No, because we are not doing any drilling and won't be until we develop access underground with the production crews.

And one last one. Just in terms of -- is Teck contemplating any sales of any asset sales, particularly on the base metal side?

I don't know if I can really answer that question right clearly. Major, I mean, our major mines at Red Dog or what are you referring to?

Well, that's more specifically Cajamarquilla.

I think if we would do it, I think the first time we were to double the market is when we have done it.

Okay, it does not look like we have any further questions.

Thank you operator, if there are no more questions we will sign off. Thanks very much ladies and gentlemen for joining us this morning and we will look forward to talking to you next quarter.