Teck Resources Ltd (TECK) 2005 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Teck Cominco First Quarter 2005 Investor Relations conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. This conference call is being recorded on Tuesday, April 26, 2005. I would now like to turn the conference call director of financial and analysis and investor relations, Greg Waller. Please go ahead, sir.

Thanks, operator. Good morning, everyone, and thanks for joining us today at the Teck Cominco 2005 First Quarter Investor conference call. On the call this morning are Norman Keevil, chairman of Teck Cominco; David Thompson, deputy chairman and CEO; Don Lindsay, president; John Taylor, senior vice president and CFO; Doug Horzwill, senior vice president, environment corporate affairs; Michael Lipkewich, senior vice president mining; and Roger Brain, senior vice president marketing and refining. Other members of the management team are also present and will be available to respond to questions as needed. This morning, David Thompson will review the results of the operations for the first quarter of 2005, and 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 and 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. The 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. At this point I would like to turn the call over to David Thompson, deputy chairman and chief executive officer.

Thanks, Greg. Good morning, ladies and gentlemen, and welcome to our first quarter conference call. I will go through the slides that we have this morning and then Don and I will be pleased to answer your questions afterwards.

Starting on slide 3 -- the slide numbers are shown on the bottom left-hand corner of the slide -- our first quarter earnings were $205 million, equivalent to earnings per share of $1.01, compared to $96 million in Q1 2004, when we had earnings of 51 cents per share.

On slide 4 we give an overview for the first quarter. Our cash flow was $288 million, which is 106 higher than the first quarter last year. Operating profits of $329 million. Debt repayment of $46 million, that's repayment on the Antamina debt and cash increase by $240 million for the quarter. The main commercial feature of the quarter was the coal rate agreement that we reached through Atlantic Coal with CPR.

Slide 5 shows our quarterly average market prices, and this compares Q1 2005 to Q1 '04. Left-hand side, the major products are denominated in US dollars. These are LME or the London gold -- fixing the price in the case of gold. On the right-hand side we have it denominated in Canadian dollars. As you can see, in Canadian dollars, zinc is up 14 percent, copper is up 12, coal is up 27, and gold is actually down 3 percent for the quarter.

On slide 6 we show the operating profits of the quarter by refinery and mine, and we also show a quarter -- Q1 and Q4 of 2004. Comparing Q1 2005 against Q4 of '04, we were down $63 million. That is really due to the seasonal swing in the Red Dog sale, so Red Dog is off $57 million of that $63 million as a result of the very high volumes that we sold in the fourth quarter against the much lower volumes that we sold in Q1 of this year.

In terms of Q1 versus Q1 '04, we are ahead $150 million. The principal areas of increase in profits are Highland Valley and Antamina. Antamina set a long-time record, and the coal partnership. So those are the three main reasons for increase in operating profit this year -- in this quarter.

Slide 7 shows our contribution to operating profit by product group. As you know, we classify our products by the primary product that the mine produces. So in the case of copper, that's Highland Valley, Antamina, [inaudible], and we obviously ignore the by-products, even though Antamina produces considerable quantities of zinc.

Copper accounted for 66 percent of our operating profits this quarter. Zinc mines and refineries 21, and coal 12 percent. In the first quarter of 2004, copper was 58 percent, zinc was 29 percent, and coal was 8 percent.

Moving on to slide 8, which shows the Trail results of the quarter. Trail's operating profits are $25 million for the quarter against $15 million last year. In terms of power, the actual operating profits come out roughly the same. We have $8 million of earnings for this quarter against 9 twelve months ago. Even -- this is a result of the higher prices that we're getting in US dollars, and that offsets -- that is offset by the lower volumes that we've had this quarter. And that's really just movement of our volumes from one quarter to another. We would expect to have roughly the same, slightly less volumes this year than we did in 2004.

Metal operations increased from 6 million to 17 million. In both of those quarters we had Kivcet off. Last year, of course, we had the Kivcet explosion and Kivcet was off through February and March. This year we had a major scheduled maintenance was brought in in February this year. This is the biggest maintenance we've ever done on the Kivcet, and we have spent 50 million on really changing part of the Kivcet in the boiler, to see if we can't run Kivcet longer without shutdown. Usually, we take an annual shutdown for Kivcet. We have -- as a result of this major alteration, we will run three years without -- until the next shutdown. While the shutdown was expensive, maintenance costs in this quarter were $14 million, which expense the income statement and we [inaudible] $15 million because of the -- after spending on the installation.

Last year the cost of the explosion was $9 million. That was partly offset by insurance proceeds we received from business interruption of $4 million, but the business interruption last year was more serious than this year, where we're back on stream and our volumes were higher for this quarter, particularly for our specialty metal, molybdenum we produced at 10 tons against 8 last year, germanium 9 tons against 7 last year. And our silver production was up just over 5 million against 3.3 million last year. So as a result of these and the better prices, our operating profits were higher, considerably higher than they were in the quarter last year.

Moving onto the next slide, which is slide 9, Red Dog. Red Dog's operating profits of $43 million against $38 million last year. This is just slightly lower sales. Sales down 22,000 tons of zinc from last year, down from 132,000 to 109,000. This is offset , though, by price. Price was 60 cents for this quarter as opposed to 50 cents last year. In terms of our production, our production was higher this quarter, 136,000 tons of zinc against 130,000 last year. So we're on schedule to produce and ship approximately the same quantity as we did in 2004.

Slide 10 shows you Antamina. Antamina, as I said, had a record operating profit of $79 million to our account, against $35 million last year. This is due to obviously higher prices, price of copper. Also, of course, we are now producing moly in some quantity, 3.8 million pounds of moly produced for this quarter on a 100 percent basis, which means that our share is about 870,000 pounds, so about $24 a pound, so this is an important contributor to our earnings at Antamina. Antamina paid back a considerable portion of debt in this quarter. We are now down to a level of debt on Antamina, in total 100 percent is 738 million, of which our last share is 166 million. These are all US numbers. So Antamina has now paid off almost 600 million since it started its operation.

Slide 11 shows HVC. HVC again is the highest profit contributor of our mines, 134 million for the quarter, again, 65 million last year. Again, higher prices, of course, for copper, but particularly for moly. Last year the moly price averaged $8 pound; this year it was $30 pound for Highland moly. Sales were the same, 1.9 million pounds for both quarters. Production was lower at 2 million pounds against 2.7 million pounds last year. We believe that our forecast position is that we should exceed $5.5 million pounds of moly, and obviously we're doing everything we can do generate moly. Recovers moved up again. In the last 12 months they've moved up by about 11 percent, from 54 percent to 65 percent recovery on moly, and that is helping to give us the -- helping us to give us some additional volume.

Slide 12 shows Hemlo. Hemlo's profits fell in this quarter from 8 million to 3 million. This is partly the result of the lower price in Canadian dollars. It's $14 dollars lower for the quarter as against last year. Also, cash costs in Canadian dollars rose $14, that's a 3.7 percent increase. Partly it's due to the inflationary pressure we're experiencing. It's also due to just slight change in our mining methods, which is also increasing costs. The other reason for the reduction in operating profits is the increase in depreciation. Depreciation is up $2 million for this quarter. This is as a result of the capital expenditures we've had in the last two or three years on Hemlo.

Moving on to Elk Valley Coal, that is [inaudible]. Elk Valley Coal had a good quarter with operating profits of 40 million against 15 last year. Production up from 6 million to 6.7 million. Sales were about the same, 5.7 versus 5.6 last year. The price -- these reported prices up $17 Canadian, that's from $64 to $81. Partly that is due to the fact that the price in 2004 was -- the coal year 2004 was $10 US higher than coal year 2003, so that accounts for about $12.50 of that increase. The remainder is that we do take a portion of our westbound sales, which we're selling CIF rather than FOB. We take that -- we now have to take the CIF into our revenue, although we fully recover in our transportation costs. So this is really a pass-through. We pay CIF here and our customer fully reimburses us. That accounts for two or three dollars of this increase. The remainder is due to the fact that [inaudible] US coal customers have the prices there and -- this I think affected about 200,000 ton in this quarter -- have now gone to the 2005 prices, so we're really affecting the other $125 on a couple hundred thousand ton in this quarter. In terms of the new prices we forecasted, at the end of March we had six weeks left to fulfill our 2004 obligations, so we would expect to start to really see the numbers improve in terms of price from about mid-May onwards in this quarter.

I'll move on now to slide 14. That shows our cash flow and CapEx. Cash flow at 288 million for the -- for working capital change for the three months. Cap expenditures of 62 million. They were divided between sustaining Trail as a result of that maintenance shutdown, had 16 million of capital expenditures for the quarter, Elk Valley had 9. Those were the two highest on the sustaining side. And on the development side, Pogo was at 11 million, and Cheviot and Fording River were about 7 million for the quarter. So those are our largest cap expenditures. [Inaudible] with our forecast is unchanged for capital expenditure of 280 million for the year.

Slide 15 shows working capital is up in the 12 months by 683 million to 1.4 billion. Cash is up to 1.15 billion, which is almost a billion dollars increase in the 12 months, so that is really cash that's just driving the working capital change. Debt is down to 623 million, so it's dropped just over 400 million in the 12 months. So the swing is -- of cash and debt is about 1.4 billion to the 12 months. But in fact, of that 1.4 billion, a billion has come in the last six months. So really we're seeing a -- the fastest changes really occurred in the last six months.

Our final slide shows copper development. The coal rail rate agreement was a very important agreement that we reached this quarter after a disagreement which had lasted at least a year and a half. The situation there is that our --we have now got our rail rates fixed for coal years 2005 and 2006, and the rates for 2007 and 2008, which are partially tied to coal prices, even at the ceiling we'll be below those of 2005 and 2006.

In terms of tonnage, which is obviously vitally important to us, the agreement confirms our existing plans. In other words, [inaudible] for the Fording River expansion, Elk V expansion and so forth. It also provides us progressively up to -- over the next three years to increase tonnages by an additional 2 million, if we so choose at a slightly higher cost than the base rate. Personally, this is essential for us to get the certainty on our pricing now, so we know what our consultation costs are going to be, and therefore we can plan more effectively than we could before.

In terms of our development projects, Pogo is still on schedule for the startup in the first quarter 2006, and the Elk Valley expected plans. We still hope to have Chevoit and Fording River on fully in -- expect to be on fully in the third quarter. There have been some delay in receiving equipment at Chevoit and they're running about two months behind on that. But most of that equipment is now onsite, so we now believe that we can really hit our stride there and hit our target for the year, even though we're slightly late at the present time.

That's all I have to say and I'll be happy to answer questions.

Are you ready to begin the questions?

Yes, we are.

Okay. (OPERATOR INSTRUCTIONS) Alberto Arias, Goldman Sachs. Please go ahead with your question.

Yes, good morning, David. Congratulations on the results. If you could please update us in terms of whether the plans that Teck Cominco will have in terms of the use of cash. Is the Company considering any potential increase in dividends, share buy-back. The question is, how is that capital going to be deployed?

Well, the -- as you know, the dividend was doubled last November, but this is clearly an area that we will be considering going forward, but there have been no decisions other than that doubling of the dividends. We've made that decision at the present time.

Okay. And a followup question. If you could, please, give us an update with the zinc markets and coke and coal markets.

Well, the zinc market -- zinc market starting in Europe, Western Europe, is again a steady flat year, not much change there except for the seasonal upswing that you get at this time of the year. In Eastern Europe, it could be the [inaudible] are showing some strength in all metals, so there is some growth there, but they are small markets. In the United States, we had a strong sales quota and that's -- our sales book is still strong through April, but there does seem to be some [inaudible] stocking going on in the steel industry, so we're seeing -- we'd say that the market in the States is at a high plateau at the moment and not showing the strength that we saw this time last year.

In Asia, however, the markets probably have gotten stronger. We're getting frequent inquiries from Asia to ship metal from Trail to Asia. This, I think, is due to the fact that the Chinese have now become a significant importer of zinc rather than exporter. Their numbers show that net imports of zinc metal of 47,000 tons for the first three months. That's in addition, of course, to their concentrate. They purchased 100,000 tons of zinc in concentrate for that three months. As a result of that, the position in Asia is quite tight. You have good demands in Southeast Asia, in Japan, in Korea, Taiwan, and, of course, in China, and a result of that swing you're seeing a pretty steady decline in inventories both in Dubai and in Singapore. Singapore is down now to 48,000 tons. Two years ago it was 230,000 tons. We're seeing a real takeoff on the LME concentrated right at this moment in Asia.

The coke and coal market, again, it's very strong. There's not very much spot material available, so it's difficult to discern whether the prices are higher than the contracted prices, although there does seem to be some indication that prices actually -- certainly in the first weeks -- early period of this year were higher than contract. So it's a tight market still and most customers are looking for additional coal, not so much immediately, because they're probably -- their inventories are okay, but they're still looking for extra coal in the next two or three years.

Okay. Thank you.

Terence Ortslan from TSO and Associates. Go ahead with your question, please.

Thanks. Good morning. Just looking at the taxes, I guess every quarter you're going to be asked this question progressively. You made a tax rate for the year and if you can continue to breakdown your estimated current and non-current taxes, please.

I'll ask John to answer that.

The tax rate for the balance of the year we would expect to be similar to what we're showing in this quarter, and the current tax breakdown we would also expect to be similar to what we had this quarter. I think this quarter we had 70 in current taxes, and so we would expect that to continue as a ratio.

David, I hear you say that the next Kivcet shutdown is going to be two years from now?

Well, we hope that's the case. That's what we're planning to do.

Okay, okay. That's good. Any comments on the lead market itself? It's been the aborted orphan and that did very well the last many quarters and you shouldn't be complaining.

Well, we don't complain about anything at these prices. The lead market is -- the lead market is pretty strong because there's been a diversion in part away from the United States, so that's really given us strength inside the US, so [inaudible] run has been selling offshore. That means concentrate, that means there's less lead available, so the premiums have been generally very good. But the lead market -- the lead market is increasingly moving to China. Not only are the big lead producers, but they're increasingly lead -- big battery producers, too, so you're seeing some switching of where the products are actually being made. So I think at the moment, the trend is strongly to move towards Asia, particularly China for lead production.

I think in your statements you seem to be a bit more hesitant about the second half 2005 outlook for zinc markets than second quarter.

I think there is some nervousness, I think because of the [inaudible] of GM on board and people are a little bit hesitant. On the other hand, nonresidential construction is still doing very well. And these are actually bigger markets in the States than automobiles. So we believe that we're still in a strong market and Asia is particularly strong. We also haven't really seen the full impact, I think, on some of the shutdowns that have occurred or have been announced. For example, the Umicor shutdown of 130,000 tons in Europe will take place in the second half of the year, so that's still running normally at the moment. When you see those coming up, I think you'll see further declines in European LME stocks rather than being concentrated at the moment as it is in Asia.

Fair enough. Just coming back to you in a followup question with respect to the ongoing cash flow, which showed evidence last year of the way it's going to shape up this year and it's great progress, no question about it. And given the past trends of Teck Cominco that's the right time of purchasing zincs, and obviously the asset values are quite extensive right now, unless there's little value added that you might bring to the table. Is Teck Cominco possibly -- first of all, do you agree that the statement that [inaudible] zinc assets or Teck Cominco assets are on the expensive side, number one. Number two is, are you considering opening up a new front, such as an energy front, for instance, whereby price may so rally compared to what zinc as a result offset [inaudible] at this point in time may be beneficial to Teck Cominco shareholders? Thanks.

I think we look at possible investment opportunities really throughout the cycle, whether it's high or low, so we're really looking all the time, and if somebody brings something in we'll certainly look at it. I don't think we would have a particular opinion that because evaluations appear high we would do nothing. That's not the way we've done things in the past. So we'll go on actively looking.

In terms of what products come in, we really look at, of course, the [inaudible] mining and refining, and if we can apply that, we'll do so. So we wouldn't keep ourselves confined to a single narrow mining product range.

Specifically, there have been issues of cost [inaudible]. Is there a possibility of Teck Cominco to enter into the business, into the sector. Is that something you would [inaudible]?

Well, it would depend on the deal that we're being offered. We wouldn't rule anything out, but it would just depend on what -- what we could bring to the table and what to expect the returns are likely to be on our investment.

Thanks a lot. Thanks, David. And also good luck to Mr. Lindsay.

Thank you.

Haytham Hodaly from Salman Partners. Go ahead, please.

Good morning, David. A couple of quick questions. I guess the first one would be with regards to your molybdenum sales at Antamina. Just curious, why did you get significant discounts to the average spot? I think you realized $24 versus 31, whereas at HBC you were at 31.

The reason for that is really that we have some copper in the moly at Antamina. It's difficult to remove it all, so that we are actually under a form of penalty at Antamina at the present time. As you know, the moly circuit at Antamina is also the business. We're not producing any business, but we do have -- we're not set up at Antamina in the same way that we set up in HBC, which at ACG, as you know, a long time supplier of moly in [inaudible], but it's quality is very high over a period of time. Antamina is really rushing to get it to the market.

Okay, fair enough. What's the typical sustaining capital of Trail before this big shutdown?

I think it was a sustaining level going forward. I think it's going to probably come down to about 25 to 30 million a year. Historically, it's run higher. It's run 40 to 50 million a year, but we were in a pretty big catch-up mode. Really for the last I'd say six or seven years we've been on a catch-up mode, so hopefully we've caught up.

Now, this additional shutdown that you did, what exactly did you do that will allow you to continue to operate for three years without any significant --

Well, we've -- I don't -- [Inaudible] will you answer that question?

We replaced a couple of the two bundles inside the system and we operated a lot of the rest of it, so these hot shutdowns may have to cool the furnace off completely, go inside to do all this work. We did a lot of work -- the most work we've ever done since we put the furnace in in '97, so we think we'll get at least three years now because of all the work we've done and the money we've spent on the upgrades before we have to go back in.

Okay. Okay. A couple more questions. You indicated that at the gold [inaudible], you indicated that the currencies had an effect of increasing your cash costs, then you talked about changing the money methods. Can you give us an outlook, given current currencies, what we should expect in terms of cash cost maybe for the remainder this year at David Bell and Williams, and then how you see that changing in the next year assuming the currency stays exactly where it is?

Well, as you know, the Hemlo mines are very mature mines. They're in a lot of years of production, and the more material that you move out of a deposit, the more difficult it becomes to hold ground conditions safe for workers to be deployed. So from time to time you have to change your mining method because of ground conditions. And at Hemlo, we are predominantly what we call bottom-up mining. You start at the bottom and you mine upwards and you're working underneath supported rock. In some of the stokes, because they've got such high stresses, it is safer for us to work underneath backfill, and so we've gone top-down mining. And this is a much more expensive mining method. And so I would think that the costs that we see right now are probably indicative of what they will be in the future.

Okay, just one last question. If you had to forecast your total depreciation for the year, is it simple enough at this point in time as saying current depreciation times four, or are we expecting some big changes here going forward?

No, I think it will be roughly the same, so we expect 280 million for the year.

Okay, perfect. Thank you, David.

Steve Bonnyman from CIBC World Markets. Please go ahead with your question.

Good morning, gentleman. Thank you. Question on Antamina. In terms of one tonnage is going forward. And secondly, how long do you think you'll be staying in the high copper ore and will the moly grades be fairly consistent? Can we look out over the next couple of years and expect to see similar kind of production levels as to what we saw in this quarter?

I think that the present mining plan is to really stay in this mode for at least the next couple of years. It will gradually go up in terms of zinc, so zinc would come back in 2008, in terms of tonnages, but right now we will try and stay in this as long as we can, given where the markets are.

And, David, are the moly grates consistent as we move through these tonnages over the next couple of years?

We're looking at moly production actually this year of something north of 10 million. We think next year should be very similar.

And similar for next year. Okay. And a second unrelated question, if I may. Power prices are healthy in the Pacific Northwest and look like they're getting better. Have you contracted out any of your power sales over the rest of the year at this point?

Yes, we have contracted out some right at the moment. I think we've got --

About a third.

Yes, about a third is out at -- what kind of -- what's that price? Yes, we have contracted out some for this year, about a third. We were at 215 gigawatt at $55.

At 55. Is that loaded towards any particular quarter?

There is a base load on it I think for nine months, and it will be particularly in this second quarter, where we have quite high -- we traditionally have high sales.

Thanks. And last question, could you review what major labor contracts you might be facing in the next 18 to 24 months?

Yes, we have labor contacts at -- Coal Mountain is already -- the contract is already up in Elk Valley, so that's under negotiation at the moment. That's followed by Line Creek at the end of May, followed by Fording -- sorry -- followed by Elk View in October, and Fording River in next April 2006. And the main one in our division is Trail, which is up at the end of ---

I'm sorry, Trail is up at the end of --

-- May 2005.

-- May '05. Thank you very much.

David Charles from GMP Security. Go ahead with your question, please.

Yes. Just a quick question. You noted in your report that you think concentrate available for sale out of Red Dog. Was that 65,000 tons at the end of the quarter against 115,000 tons the same period last year? I'm just wondering where does that 65,000 tons fit in the normal scheme of things? Are you trying to suggest to us that you're down from an over supply position last year or a large inventory build last year, or are you at a low level relative to history?

We're at a low level relative to our history. So the last year's number is a normal number. This year because of the shortage of zinc, just about everybody has taken all the zinc and physically used it. So of the 65,000 tons we have left, that is principally Trail. Trail, I think has got 52,000 of that, and the rest is just one more -- one or two customers left and they'll take them this quarter without doubt. So we're going to be out and therefore this quarter -- last quarter -- last year we did 97,000 tons of Q2. This year we'll probably do 55,000 tons, something like that. It will be down because of that very high sale in the fourth quarter of last year.

So what you're saying is that your -- if I understand it correctly, then your zinc sales as we head into Q2 will be probably down a little bit again from this quarter.

Yes, that's right. It will be down.

Okay, then. Thank you very much.

They always are down in the second quarter, but this is -- the number, our second quarter they say will probably be about 55,000 against 97,000 in the second quarter last year.

But if I understand you correctly as well, earlier in the call you mentioned that you still believe that your production out of Red Dog will be pretty much at last year's levels, so you would expect sales to pick up in the second half?

Oh, yes. Well, if this market stays as strong as this [inaudible], I think there -- it will, because we're seeing really incredibly low prices now in the common market. There are folks in China buying at 50 for treatment charge, so if it's this strong, we will get a very, very strong Q3 and Q4 for sales.

Okay, then, thank you very much, David.

Lawrence Smith from TD Newcrest. Please go ahead with your question.

Good morning. Quick question on your realized copper price in the quarter versus what the market price was. There is quite a discrepancy, about 6 cents a pound, and I wonder -- I guess I'm surprised. I would have thought that the hedge position you got might have had a negative impact on your realized pricing. Could you just sort of run me through what the -- what caused the 6-cent variance?

I think -- adjusting the realized price [inaudible] $1.54 against LME of $1.48. That's some settlement adjustments coming in. We didn't take our hedges off in that price, I don't think. That was taken as a -- in other income. In other words, we took it off there. So I don't think, if I'm right, that that's in [inaudible] number.

So the collars didn't in effect realize copper price.

No, because we --

Put it under other income?

Yes, for accounting, we referred to our income. So we have negative 11 in there, and we -- because that collar was not allowed for hedging, we have to take it fully to market. So you get the unusual position that you're taking it at full market loss, so if the common price goes down, we'll be writing it back in again [inaudible] quarters.

On the hedge position, what's the thinking behind that? Is that kind of a reflection of your use of the copper market in the second half of the year, or --

That was a hedge we put in place. As you know, [inaudible] fear a weakening of the copper price in the second half of the year [inaudible] so it's going to go in the first half of this year. So when you're hedging a full market, yours get trampled, you know, you get run over. So I think that's the case with us, too.

Blame it on the new guy.

Blame it on the old guy. I did it.

Thank you very much.

Okay, Cary Smith from Haywood Securities. Please go ahead with your question.

Thanks, operator. Good morning, everyone. David, you didn't talk at all when you sort of ran through zinc demand globally about India. Are you seeing India pick up at all in terms of demand, or is it really not that much of a factor?

Well, I think -- yes, India is picking up. It's a rapidly growing market, but it's growing from a very small base. So I think consumption in India, I think, is 350, 350,000 tons a year, so it's growing quite quickly. In terms of India, it's self-sufficient, because it does have some -- it has an excellent mine -- Rampur is probably one of the best mines in the world, and it -- I think you'll find that India will stay self-sufficient. So, yes, we think it will grow very quickly, but it's well supplied.

Okay. And did I hear you say correctly that PCRC is on a spot basis on the zinc market or $50 currently?

Well, we've heard a report of 50. I mean, there have been 80, 70, and then I saw one in the trade press this week of 50. These are not certain, but they're indicative of where the press thinks they are.

Right. Right. And just one other question. You talk about strong demand for coal and customers looking for coal. Any thoughts that you might reopen Quintet?

Well, if we open Quintet -- Quintet, I think the customer doesn't like that name, but -- we'll put Babcock on [inaudible]. Our present view at the moment is, we're trying to do everything we can on a low income retro capital cost, so that's what we've really done in the Elk Valley. That's the easiest place to put [inaudible] production. We still have wash plant capacity in the Elk Valley. We haven't used it all up yet. So that's our first preference. If this market really stays strong, then there's no reason why we shouldn't seriously consider the Northeast, but we're not there yet at this moment.

Okay. But when you say you have wash plant capacity in the Southeast, presumably you're probably rail bound, are you?

Well, with the CP agreement, that does give us another couple million tons above what we're actually planning on at the moment. It doesn't come in immediately, but it comes in over the three-year period.

Okay. And, John, what would your '06 taxes be like in terms of current taxes and actual tax rate?

In '06, if everything continues the way it is, the current tax ratio would go up. But I don't have -- I don't have really a number to give you, but it would increase.

Okay, and would I go up like 20 percent or can you even hazard a guess?

Well, I wouldn't like to guess, because it wouldn't be right, so.

Okay, okay. That's fine. Thanks.

Kenneth Clemens (ph) from Wexford Capital. Please go ahead with your question.

Good morning, David. A couple of questions. If you look out at the year, everything else being equal, what will the moly profits be as a percent of operating income, and what was that number for the first quarter?

I wish I knew what the money prize was going to be.

Everything else being equal, David.

Everything else is not equal. I can't really give you that with that clarity. I think what we can tell you is how much moly we sold [inaudible]. We'll get back to you, Kenneth.

Okay. And then secondly, back in around March 1, either the 1st, 2nd, or 3rd, Mr. Lindsay made a statement to the press about strong interest in expanding the copper -- your copper exposure particularly in the Americas. Can you expand on that? And is that still a high priority? And I've got a further question depending on how you answer it.

I think at the time of the reports you were reading, they linked the two separate questions that were asked at another investor conference, and the answers at that time were, if we were looking at different commodities, which one would we concentrate on. My answer was starting with copper, which really related to the fact that we have extremely good reserve positions in zinc and in metallurgical coal. On the copper side, our business is very strong in terms of producing operating profits, but we would like it to be longer life, even longer than the extension, which we are pretty confident is likely going to be announced next year. So to the extent that we could strengthen our copper business in terms of reserves over time, that would be something that we would look at. Though I would emphasize what David said earlier, that we're always looking at different opportunities throughout the cycle and certainly not just copper.

The second part on the Americas was an entirely different question at that conference. It is true that our history has been that our operations are primarily being in Canada and the United States, Peru and previously Chile, so we had some strength and some comfort there, but I also said at that time that we would continue to look at various opportunities that come in, and we are doing that even as we speak, so nothing has really changed from what was said at that time.

With that, though, could you -- would you comment, would you exclude looking at Africa in the copper arena, or what kind of color can you give me that on?

I don't think we would exclude it. We're always going to keep track of it, because it's part of the overall global copper business, and obviously there are some reserves, resources and operations there that are a very great interest to a lot of the players. But I do not see us becoming very active there in the near future. There is certainly a lot of other opportunities that we would pursue first.

Do you think that in three to five years you'll basically be out of the gold business?

No, I do not. The question, I assume, is probably related to the maturity of our Hemlo assets, as Mike described earlier, but I think the gold business is very important to us, notwithstanding that we're a diversified metals company. Gold to me and to a number of people around here is probably one of the most exciting businesses in terms of value creation that you can find, and in terms of exploration, it's everywhere. When you're in circulation in the gold business, it's amazing what else you find sometimes, and so we will always be in the gold business in some form or another. At different times you would participate in different ways, and so we'll review that, but I think there's a strong commitment to gold here.

Okay.

But, Kenneth, to answer your question on the moly in the first quarter, moly sales in total was $94 million, that's Canadian dollars, and that's 10 percent of our total sales.

Ten percent of the total sales. Thank you both gentleman.

Thank you.

(OPERATOR INSTRUCTIONS) Ian Howitt from National Bank Financial. Go ahead with your question.

Good morning. Just one on Antamina. They produce 60,000 tons or so in the -- 64,000 of zinc in the first three quarters, and they were supposed to 180, 190 for the year. Is 180, 190,000 tons still valid?

I think it is. We did produce higher than we expected in that first quarter of zinc, but the forecast for the year is still about the same as last year. It's about 190,000.

Another question -- I have a question on Highland Valley, which seemed to have more revenue than the previous quarter, but substantially lower earnings. It seems like the operating costs were up like 100 percent. Can we get clarity on that?

I think it's really due to the fact that we sold a lot more copper than we did in the previous quarter.

Yes, your copper volumes were up 51 percent, but the cost, if you back out, seems like to be up $40 million, and the volumes alone on the previous quarter would only add about $20 million, and the depreciation didn't change at all. Is there some sort of funny adjustment that went on at HPC?

The actual operating cost, the cash operating costs were very similar. The copper production was lower in the first quarter than it was in the fourth quarter. When I go through the numbers on the actual operating costs, I work it out at about a 15 percent increase. But that's -- and that is consistent with the fact that we've been producing less in the first quarter. Cash costs are about the same, so, I don't -- perhaps we could look at this off-line, because I am not sure I follow your questions.

We haven't have a major increase in costs in Highland Valley.

No.

The revenues are high because copper is much higher [inaudible].

Okay, thank you.

Greg Barnes from Canaccord Capital. Go ahead, please.

Yes, thank you. David, given what zinc prices are and the outlook that everyone seems to have that the fundamentals look good, have you got any update on Lennard Shelf and what you're planning to do there?

Well, it's the rainy season that is just finishing now, so we haven't done much in the last few months. We intend to have a new program starting as soon as -- quite shortly, and we'll be exploring the rest of this year. So we won't -- I don't think we'll have a real position on that until early in 2006.

But has your thinking evolved in terms of restarting the operation?

Well, we're not in a hurry to restart, because there is too much zinc in the metal industry at the moment. We want to get the metal inventory [inaudible], and starting out concentrate is not the right way to get the inventories down. With the [inaudible] short life, it will be -- when we put her in, we really want to see a very strong balanced market, and we're not there.

When do you think we'll be there?

Hopefully, [inaudible] concentrate we'll be there fairly quickly.

Okay, thank you.

Okay. Fraser Phillips from RBC Capital Markets. Go ahead, please.

Thanks. David, I'd be interested in your thoughts, or Roger's, I guess, when I look at the degree of drawn out -- early drawn out of inventories, I guess from Red Dog and the state of the concentrate market and you alluded to in terms of spot TCs, is there a point at which there is simply further shutdowns and smelting capacity required because there is no material available? You seem to suggest that now maybe there's a possibility of some additional costs coming to market in relief of that situation.

I don't see much relief in the immediate con market. I mean, we'll have the seasonal relief of Red Dog when we start up in July. But in terms of refining, I think you will see an increasing number of refiners having to take maintenance shutdowns, short holidays, and so forth, because they're going to run out. We know of a number of refiners who just don't have any con left. So they're going to have to take it; they can't run on nothing. And that's why we see this market balancing back out again, because the supply of metal will be restricted this year.

Fraser Phillips Okay. Thank you.

Okay. Terence Ortslan from TSO & Associates. Go ahead with your question.

Just one question I have overlooked. On [inaudible] Roosevelt, the appeals -- you went back to the appeals court, I assume, and you got permission to appeal; am I correct?

Yes, that's correct.

And the basis of the district court decision to dismiss and versus your appeal, what are the issues whereby you feel strongly about it, obviously. Is it legal or is fundamental.

Well, the basis of the appeal and the basis of the motion to dismiss in the first place was on the grounds that [inaudible] of the statute in the United States -- the superfund statute was not intended to nor does apply across the board and therefore it was an extra territorial application to issue an order against Teck Cominco Metals, Ltd. That's a fundamental position in the first place. That's the position that will be argued at appeal by ourselves with amicus from a number of different parties.

So [inaudible] territorial [inaudible], that's what it is.

That's correct. I mean, that's the legal position. I mean, from our point of view, we've indicated an intention to deal with the issues from a perspective first of studying and then taking the action necessary to deal with anything there. And we're hopeful that the Canada/US negotiations will bear fruit and a process will be put in place that we can follow. But in the meantime, we do have the legal issues to sort out.

Okay. And you are also studying the various effects not being taken in [inaudible] by UPA; am I correct?

No, actually, Terry. I think the issue on our offer has moved to the Canadian government's interaction with the US government, and we're behind the Canadian position and they certainly know that with respect to executing our offer. All they need to put in place is the process that will allow us to do it. So that's where that issue has moved. It's national government to national government, and to try and develop a cooperative mechanism that will allow this to be sorted out. And that would kind of reflect a 100-year history in dealing with cross-border environmental issues.

And they being both governments.

Both governments, yes.

Thanks.

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Well, thank you very much, ladies and gentlemen. This is my last conference call, so I'd like to thank you all of you on the buy side and the sell side for the consideration, friendliness and help you've given us in the last 25 years. Thanks very much, indeed, and I'll say goodbye. Thank you. Goodbye.

This concludes Teck Cominco First Quarter 2005 Investor Relations conference call. Thank you.