Mr. Don Lindsay reports
TECK REPORTS UNAUDITED FOURTH QUARTER RESULTS FOR 2015
Teck Resources Ltd. had annual adjusted profit attributable to shareholders of $188-million, or 33 cents per share, compared with $452-million, or 78 cents per share, in 2014. Fourth quarter adjusted profit attributable to shareholders was $16-million, or three cents per share, compared with $116-million, or 20 cents per share, in the fourth quarter of 2014. Total non-cash aftertax impairment charges for 2015 amounted to $2.7-billion, of which $536-million was taken in the fourth quarter.
"We were pleased with our operating performance in 2015, meeting our guidance, reducing our costs and raising nearly $1-billion through two streaming transactions to strengthen our balance sheet," said Don Lindsay, president and chief executive officer. "However, the commodity cycle continues to provide us with a very challenging environment such that our near-term priorities are to keep all of our operations cash flow positive, meet our commitment to Fort Hills with internal sources of funds, evaluate options to further strengthen our liquidity and maintain a strong financial position by ending the year without drawing on our lines of credit."
Highlights and significant items:
- Annual adjusted profit attributable to shareholders was $188-million, or
33 cents per share. Fourth quarter adjusted profit attributable to
shareholders was $16-million, or three cents per share.
- Gross profit before depreciation and amortization in 2015 was $2.6-billion compared with $2.9-billion in 2014. Gross profit before
depreciation and amortization was $614-million in the fourth quarter
compared with $757-million in the fourth quarter of 2014.
- Cash flow from operations, before working capital changes, was $1.7-billion in 2015 compared with $2.0-billion last year. Cash flow from
operations, before working capital changes, was $428-million in the
fourth quarter of 2015 compared with $491-million a year ago.
- The loss attributable to shareholders was $459-million in the fourth
quarter compared with a profit of $129-million in the fourth quarter of
2014.
- The quarterly loss included impairment charges of $736-million on a pretax basis, including $45-million on the company's steelmaking coal assets, $93-million on copper and $598-million on the Fort Hills oil sand project
resulting in a $536-million aftertax charge. For 2015, total pretax
asset impairment charges were $3.6-billion and $2.7-billion on an aftertax basis.
- Adjusted earnings before interest, taxes, depreciation and amortization for 2015 (not including the non-cash impairment charges)
were $2.0-billion compared with $2.4-billion in 2014.
- The company's liquidity remains strong with a cash balance of $1.8-billion at
Feb. 10 and $3.0-billion (U.S.) available under the company's revolving credit
facility which matures in 2020.
- Construction of the Fort Hills oil sands project is more than 50 per cent
complete and progressing substantially on schedule and on budget. As at
Feb. 10, the company's remaining cash financing to complete the project is $1.2-billion.
- The company received a payment of $789-million ($610-million (U.S.)) for the sale of a
silver stream linked to its share of the Antamina mine.
- Cash unit production costs were reduced at all of the company's operations in 2015
compared with a year ago as a result of the highly focused efforts on
cost reduction program and lower diesel prices.
- The company has reached agreements with the majority of its steelmaking coal
customers for the first quarter of 2016, based on a quarterly benchmark
of $81 (U.S.) per tonne for the highest-quality product, and the company expects total
sales in the first quarter, including spot sales, to be at least 5.5
million tonnes of steelmaking coal.
- The company was recognized as one of the Global 100 Most Sustainable
Corporations for the fourth consecutive year by media and investment
research company Corporate Knights.
- Operating highlights in 2015 included:
- All the company's operating mines, with the exception of Quebrada Blanca and
Pend Oreille, remained cash positive in the fourth quarter and for
2015;
- The company achieved record annual production at Trail for refined zinc and
silver;
- The company achieved record annual mill throughput at Antamina.
-
If the company meets its full year guidance for production, costs and capital
expenditures, assuming current commodity prices and exchange rates, and
no unusual transactions or events, it should complete 2016 with at least
$500-million in cash without any material change in its overall U.S.-dollar debt level.
Overview
The company's financial results in the fourth quarter and for 2015 were significantly affected by the decline in commodity prices. In the case of steelmaking coal, prices are approximately 40 per cent lower in U.S.-dollar terms than those experienced during the financial crisis in 2008/2009. In 2015, annual copper, steelmaking coal and zinc prices declined by 20 per cent, 19 per cent and 11 per cent, respectively, in U.S.-dollar terms, compared with 2014. Concerns regarding a slowdown in the Chinese economy combined with an oversupply of certain commodities, especially steelmaking coal, have caused the price declines and volatility.
Partly offsetting the commodity price declines was a stronger U.S. dollar, which has a significant positive benefit on the company's business, as sales of its products are denominated in U.S. dollars while a significant portion of its expenses are incurred in local currencies, particularly the Canadian dollar. At current commodity prices, each one-cent change in the Canadian-/U.S.-dollar exchange rate has a $34-million effect on earnings before interest, taxes, depreciation and amortization.
To meet the continuing challenge of this price environment, the company has been highly focused on its business operations, and achieving cost reduction and production targets. The cost reduction program has reduced operating costs across the organization. In addition, the company reduced capital spending in the current year and is reducing planned spending in future years. The company achieved cash production unit cost reductions at all its operations in 2015 compared with 2014. All of the company's major operations have remained cash positive after sustaining capital expenditures in 2015 and for the fourth quarter of 2015. Quebrada Blanca, where ground control issues affected production, and Pend Oreille, which started up operations in December, 2014, and was ramping up through 2015, were cash flow negative after sustaining capital.
The oil market has been volatile and in significant decline since mid-2014. During 2015, the decline in oil price had a significant positive effect on operating costs as the company's mining operations use a substantial amount of diesel fuel. The Fort Hills oil sands property, which is currently under construction, has a reserve life of approximately 50 years. The project is expected to produce first oil by the fourth quarter of 2017 and achieve 90 per cent of its planned production capacity within 12 months. Consistent with the company's strategy to develop long-life assets, in order to be exposed to various commodity price cycles, it believes that Fort Hills will benefit from higher oil prices in the longer term.
Profit and adjusted profit
The company incurred a loss attributable to shareholders of $459-million, or 80 cents per share, in the fourth quarter compared with a profit of $129-million, or 23 cents per share, in the same period a year ago.
Adjusted profit attributable to shareholders was $16-million, or three cents per share, in the fourth quarter compared with $116-million, or 20 cents per share, in the same period last year. The decline in adjusted profit is primarily due to substantially lower U.S.-dollar prices for the company's primary products, partly offset by reduced operating costs and the positive effect of a stronger U.S. dollar. Declining metal prices resulted in aftertax negative pricing adjustments of approximately $42-million in each of the fourth quarters of 2015 and 2014. The company also had aftertax profits of $91-million derived from royalty sales and a gain on the formation of project Corridor.
During the quarter the company recorded asset impairment charges on its investment in Fort Hills, on the Coal Mountain and Carmen de Andacollo operations. These charges totalled $736-million on a pretax basis and $536-million on an aftertax basis. The writedowns were triggered by lower short-term commodity prices and lower market expectations for some future commodity prices and capital market conditions.
The economic models for determining the amount of impairment charges above use current prices in the initial years and transition to longer-term prices in years three to five. Current long-term assumptions are as follows: steelmaking coal $130 (U.S.) per tonne, copper $3.00 (U.S.) per pound, zinc $1.00 (U.S.) per pound, Western Canadian Select of $60 (U.S.) per barrel and $1.25 Canadian to $1 (U.S.) exchange rate. A 6.2-per-cent-real, 8.3-per-cent-nominal, posttax discount rate was used to discount the company's cash flow projections. Discount rates are based on the weighted average cost of capital for a mining industry peer group.
FINANCIAL OVERVIEW
(In millions, except per share)
Three months ended Dec. 31, Year ended Dec. 31,
2015 2014 2015 2014
Revenues and profit
Revenues $ 2,135 $ 2,256 $ 8,259 $ 8,599
Gross profit before
depreciation and
amortization $ 614 $ 757 $ 2,645 $ 2,879
Gross profit $ 281 $ 416 $ 1,279 $ 1,535
EBITDA $ (269) $ 582 $ (1,633) $ 2,348
Profit (loss) attributable
to shareholders $ (459) $ 129 $ (2,474) $ 362
Cash flow
Cash flow from operations $ 687 $ 743 $ 1,951 $ 2,278
Property, plant and
equipment expenditures $ 532 $ 420 $ 1,581 $ 1,498
Capitalized stripping
costs $ 176 $ 167 $ 663 $ 715
Investments $ 13 $ 12 $ 82 $ 44
Balance sheet
Cash balances $ 1,887 $ 2,029
Total assets $ 34,688 $ 36,839
Debt, including current
portion $ 9,634 $ 8,441
Per-share amounts
Profit (loss) attributable
to shareholders $ (0.80) $ 0.23 $ (4.29) $ 0.63
Dividends declared $ 0.05 $ 0.45 $ 0.20 $ 0.90
Production, sales and prices
Production (000 tonnes,
except steelmaking coal)
Steelmaking coal (millions
tonnes) 6.4 6.8 25.3 26.7
Copper 96 83 358 333
Zinc in concentrate 158 171 658 660
Zinc -- refined 79 73 307 277
Sales (000 tonnes, except
steelmaking coal)
Steelmaking coal (millions
tonnes) 6.5 6.5 26.0 26.2
Copper 105 86 357 338
Zinc in concentrate 238 202 706 657
Zinc -- refined 79 73 308 277
Average prices and exchange
rates
Steelmaking coal (realized
US$/tonne) $ 81 $ 110 $ 93 $ 115
Steelmaking coal (realized
$/tonne) $ 108 $ 123 $ 117 $ 126
Copper (LME cash --
US$/pound) $ 2.22 $ 3.00 $ 2.49 $ 3.11
Zinc (LME cash -- US$/
pound) $ 0.73 $ 1.01 $ 0.87 $ 0.98
Average exchange rate ($
per US$1) $ 1.34 $ 1.14 $ 1.28 $ 1.10
Gross profit margins before
depreciation
Steelmaking coal 28% 28% 30% 28%
Copper 33% 42% 38% 46%
Zinc 26% 32% 29% 29%
Business unit results
Steelmaking coal business unit
Performance
Gross profit before depreciation and amortization from the steelmaking coal business unit decreased by $37-million from a year ago, as the benefits of the cost reduction program and lower diesel prices were more than offset by lower realized steelmaking coal prices.
The average realized steelmaking coal price of $81 (U.S.) per tonne was 26 per cent lower than the fourth quarter of 2014, reflecting oversupplied steelmaking coal market conditions and a decline in spot price assessments. The favourable effect of a stronger U.S. dollar in the fourth quarter partly offset the lower price, which resulted in the Canadian-dollar realized price declining by 12 per cent compared with a year ago.
Fourth quarter production of 6.4 million tonnes was 6 per cent lower than the same period a year ago as the company reduced production volumes to match sales volumes which were equal to the previous year. Even with the lower production volumes, unit production costs at the mines were 6 per cent lower this quarter than a year ago as a result of our continued cost reductions, productivity improvements and lower diesel prices.
Property, plant and equipment expenditures totalled $28-million in the fourth quarter, of which $20-million was spent on sustaining capital. Capitalized stripping costs were $103-million in the fourth quarter compared with $94-million a year ago.
The company continues to implement the water quality management measures contemplated by its Elk Valley water quality plan. The water treatment facility at the company's Line Creek operations continues to move through commissioning and is expected to be fully operational in early 2016.
Markets
Steelmaking coal prices declined further during the quarter. Although Chinese imports have declined substantially compared with 2014, demand in the rest of the world continues to be strong for the company's products. However, given oversupply in the market, the company does not expect a substantial recovery in price until additional supply cuts occur or demand increases.
Steelmaking coal prices for the first quarter of 2016 have been agreed with the majority of quarterly priced customers based on $81 (U.S.) per tonne for the highest-quality products. This is consistent with prices reportedly achieved by competitors. Additional sales priced on a spot basis will reflect market conditions as sales are concluded.
Operations
Cost reduction initiatives continue to produce significant results and remain focused on improvements in equipment and labour productivity, reduced use of contractors, reduced consumable usage, and limiting the use of higher-cost equipment. However, a number of factors have partially offset the strong performance of the cost reduction program. These included the effects of the strengthening U.S. dollar on some inputs and higher electricity costs.
In the fourth quarter of 2015, the company continued to experience the positive effects of lower diesel prices. Combined with reduced usage from a number of cost reduction initiatives and slightly shorter haul distances, diesel costs per tonne produced have decreased by 31 per cent compared with the fourth quarter of 2014.
Cost of sales
Site cost of sales in the fourth quarter of 2015, before transportation, depreciation and inventory writedowns, was $41 per tonne, $7 per tonne or 15 per cent lower than a year ago.
Total cost of sales for the quarter also included an $11-per-tonne charge for the amortization of capitalized stripping costs and $15 per tonne for other depreciation. In U.S.-dollar terms, unit costs have fallen by $11 per tonne from $42 per tonne to $31 per tonne due to reductions in the site costs and the positive effect of the stronger U.S. dollar when translating Canadian costs.
Outlook
Vessel nominations for quarterly contract shipments are determined by customers, and final sales and average prices for the quarter will depend on product mix, market direction for spot priced sales, timely arrival of vessels, as well as the performance of the rail transportation network and port-loading facilities.
Steelmaking coal production in 2016 is expected to be between 25 million and 26 million tonnes. Production in the first half of 2016 is expected to be lower than the second half due to scheduled plant maintenance shutdowns and raw coal release timing. As in prior years, annual volumes produced will be adjusted if necessary to reflect market demand for products. Production in 2017 is expected to remain similar to 2016, assuming current market conditions persist. The company is currently exploring its options to maintain production at similar levels in 2018 and beyond after the closure of Coal Mountain in late 2017.
Excluding transportation costs, the company expects its annual cost of product sold to be in the range of $45 to $49 per tonne ($32 (U.S.) to $35 (U.S.)) based on current production plans. This range is slightly higher than in 2015. Normal variability between higher and lower strip ratio areas exists in the mine plan sequence. In 2016, the company expects to reduce its overall mining costs from 2015 levels, but a higher proportion of these costs is expected to relate to current production and less to capitalized stripping. This results in a reduction in capitalized stripping from $396-million in 2015 to an expected $288-million in 2016 and an increase of $4 per tonne in operating costs.
Transportation costs in 2016 are expected to be approximately $35 to $37 per tonne ($25 (U.S.) to $26 (U.S.)).
Capital spending planned for 2016 also includes $50-million for sustaining capital and $38-million for major enhancement projects focused on extending mine life at a number of the Elk Valley operations.
Copper business unit
Performance
Gross profit before depreciation and amortization from the copper business unit decreased by $71-million in the fourth quarter compared with a year ago. This was primarily due to lower realized copper prices, partially offset by higher sales volumes and lower unit costs driven by the effect of higher production levels and the results of cost reduction initiatives.
Copper production increased to 96,000 tonnes compared with 83,000 tonnes a year ago. Production at Highland Valley copper was 11,700 tonnes higher than a year ago primarily due to higher grades and recoveries, while the company's share of production from Antamina increased by 6,800 tonnes as a result of record mill throughput and higher grades during the quarter. Production was lower at Quebrada Blanca due to ore availability constraints resulting from geotechnical issues adjacent to the SX-EW plant that occurred in June.
Capital expenditures totalled $125-million, including $79-million for sustaining capital and $43-million for new mine development, of which $40-million was for the Quebrada Blanca phase 2 project. Capitalized stripping costs were $50-million in the fourth quarter, lower than the $54-million a year ago.
Markets
LME copper prices averaged $2.22 (U.S.) per pound in the fourth quarter of 2015, down 26 per cent from a year ago. Copper prices remained volatile trading to the lowest levels since 2009.
Total reported exchange stocks fell 41,200 tonnes during the quarter to 500,000 tonnes. Total reported global copper exchange stocks are now estimated to be 7.9 days of global consumption, below the estimated 25-year average of 12 days of global consumption.
Operational issues and low copper prices are affecting current and future mine production plans. Estimates of lost global production in 2015 amounted to over 1.2 million tonnes. Despite a reduction in demand growth in 2015, analysts believe the market recorded only a small surplus. Similar levels of production cuts have already been made for 2016, and while mine production is expected to grow in 2016, analysts now project it will be far less than previously forecast. Market fundamentals over the medium to long term remain positive as low prices, lower grades, and continuing operational difficulties and project delays will continue to constrain production growth and investment.
Operations
Highland Valley copper
Copper production was 41,200 tonnes in the fourth quarter or 40 per cent higher than a year ago, due to higher copper grades and higher recoveries. Mill throughput was lower than a year ago due to harder ore in the current phase of the Valley pit. As the company continued to mine the higher-grade but harder ore in the current phase of the Valley pit, throughput remained similar to previous quarters, but lower than the previous year, as anticipated. Molybdenum production declined to 900,000 pounds from 1.3 million pounds a year ago primarily due to lower grade and recovery.
Operating costs of $128-million decreased by $14-million or 10 per cent compared with the same period a year ago as a result of substantial progress on cost savings programs and lower mill throughput. Unit costs declined significantly compared with a year ago due to higher ore grades and the resulting higher sales. Capitalized stripping costs in the fourth quarter were $30-million compared with $27-million a year ago.
On average, production is expected to be 135,000 tonnes per year until the end of the current mine life in 2026. As anticipated in the mine plan, production at Highland Valley copper will vary significantly over the next few years to due significant fluctuations in ore grades and hardness. The company forecasts copper production in 2016 of between 113,000 and 118,000 tonnes of copper as the current high-grade phase in the Valley pit is completed. Copper production is expected to be higher in the first half of 2016 before declining significantly for the remainder of the year. Copper production is expected to be lower than normal before gradually recovering in 2018 and 2019 as the company mines a lower-grade phase of the mine. Average annual copper production from 2017 to 2019 is expected to be 105,000 tonnes per year, with a low of 90,000 tonnes expected in 2017. Copper production is expected to return to above life-of-mine average levels starting in 2020. Molybdenum production in 2016 is expected to be approximately 5.8 million to 6.2 million pounds contained in concentrate. Annual molybdenum production from 2017 to 2019 is estimated to average 8.5 million pounds.
Antamina
Copper production in the fourth quarter increased by 36 per cent compared with a year ago primarily as a result of higher grades, recovery and mill throughput. The mix of mill feed in the quarter was 69 per cent copper-only ore and 31 per cent copper-zinc ore compared with 66 per cent and 34 per cent, respectively, in the same period a year ago. Zinc production of 58,000 tonnes in the fourth quarter was consistent with the same period a year ago as lower grades were partially offset by higher recovery.
Antamina achieved mill throughput of 14.2 million tonnes for the quarter, an average of 154,200 tonnes per day, 4 per cent higher than the same period last year. Recent debottlenecking projects focused primarily on the crushing and conveying system have enabled throughputs much higher than the 130,000 tonnes per day design capacity of the original expansion project. Throughput rates going forward will be dependent on ore hardness and the mix of ore feeds to the plant, but are expected to continue above original design capacity rates.
Operating costs in the fourth quarter, before changes in inventory, were 7 per cent lower than a year ago primarily due to lower fuel costs, reduced tire costs and reduced usage of contractors.
In the fourth quarter the company entered into a long-term streaming agreement with FN Holdings ULC (FNH), a subsidiary of Franco-Nevada Corp., linked to silver production at the Antamina mine. Compania Minera Antamina SA, in which the company holds a 22.5-per-cent interest, and which owns and operates Antamina, is not a party to the agreement and operations will not be affected. Franco-Nevada made a payment of $789-million ($610-million (U.S.)) and will pay 5 per cent of the spot price at the time of delivery for each ounce of silver delivered under the agreement. The company will deliver silver to Franco-Nevada equivalent to 22.5 per cent of payable silver sold by Compania Minera Antamina using a silver payability factor of 90 per cent. After 86 million ounces of silver have been delivered under the agreement, the stream will be reduced by one-third. The company recorded the payment as deferred consideration and will amortize the amount based on the delivery of the silver.
The company's 22.5-per-cent share of Antamina's 2016 production is expected to be in the range of 90,000 to 95,000 tonnes of copper, 48,000 to 52,000 tonnes of zinc and 1.7 million pounds of molybdenum. The company's share of copper production is expected to remain stable between 90,000 and 100,000 tonnes from 2017 to 2019. Zinc production is expected to increase significantly as the mine enters a phase with high zinc grades and a higher proportion of copper-zinc ore processed, with the company's share of zinc production during 2017 to 2019 expected to average more than 80,000 tonnes per year. Annual molybdenum production is expected to range between two million and 2.5 million pounds between 2017 and 2019.
Quebrada Blanca
Copper production in the fourth quarter decreased by 25 per cent compared with a year ago due to lower grades and ore availability constraints following the ground movement that occurred in June adjacent to the SX-EW plant. The company continues to operate the south side of the SX-EW plant which has sufficient production capacity for the available ore sources over the remainder of the mine life. The north portion of the SX-EW plant is being decommissioned.
Before a $15-million (U.S.) inventory writedown due to lower copper prices, operating costs in the fourth quarter were $50-million (U.S.), the same as a year ago. Capitalized stripping costs in the fourth quarter were $1-million (U.S.) compared with $9-million (U.S.) a year ago.
The company continues to advance the updating of the environmental permits for the existing facilities for the supergene operation. Indigenous people consultation processes by the relevant regulatory agencies are still in progress.
The company expects production of approximately 30,000 to 35,000 tonnes of copper cathode in 2016. Grades are forecast to decline as the supergene deposit is gradually depleted. The operation made significant progress on further cost reduction initiatives in late 2015, with continued focus early in 2016 on minimizing operating costs at current production levels. Mine life options past 2016 are being reviewed in light of current market conditions, and mine life and future production plans will depend on copper prices and further cost reduction efforts.
Carmen de Andacollo
Copper production in the fourth quarter increased by 2 per cent compared with a year ago primarily as a result of higher copper recovery and throughput.
Before a $10-million (U.S.) labour settlement charge, operating costs in the fourth quarter were $72-million (U.S.) compared with $74-million (U.S.) a year ago. Excluding the one-time labour settlement charge, unit costs were lower than a year ago, reflecting cost reduction program and higher volumes. Capitalized stripping costs in the fourth quarter of both periods were minimal.
Consistent with the mine plan, copper grades are expected to gradually decline in 2016 and in future years which the company expects to offset by planned throughput improvements. Carmen de Andacollo's production in 2016 is expected to be in the range of 65,000 to 70,000 tonnes of copper contained in concentrate and 3,000 tonnes of copper cathode, similar to 2015. Copper concentrate production is expected to remain similar for the subsequent three-year period. The company is working to extend cathode production, previously expected to end in 2015, at similar rates through 2020.
Cost of sales
Unit cash costs of product sold in the fourth quarter of 2015 as reported in U.S. dollars, before cash margins for byproducts, decreased primarily due to higher sales volumes, continued cost reduction efforts, and the favourable effects of a stronger U.S. dollar at the Chilean and Highland Valley copper operations. Cash margin for byproducts was significantly lower compared with the same period a year ago. This was due to lower zinc revenues as a result of substantially lower prices and the loss of zinc revenues from the closure of Duck Pond in June, 2015. The removal of silver credits at Antamina following the company's silver streaming agreement resulted in a nine-U.S.-cent-per-pound reduction to byproduct credits in the fourth quarter.
Copper development projects
Quebrada Blanca phase 2
During the fourth quarter of 2015, activities continued to focus on capital optimization and permitting for the Quebrada Blanca phase 2 project. The company decided to move the proposed tailings facility closer to the mine site. The proposed facility is expected to provide sufficient capacity for tailings from ore mined during the first 25 years of the mine life. This decision, and other plant and infrastructure optimizations in the current design, are expected to materially reduce initial capital costs for the project. The company expects to complete a new cost estimate in 2016 as engineering on these design changes progresses. Additional baseline work is required as a result of these changes and the company now anticipates submitting the social and environmental impact assessment (SEIA) for the project to the authorities in mid- to late 2016.
Project Corridor
In November, the company closed the transaction combining Goldcorp's El Morro project with its Relincho project, located approximately 40 kilometres apart in the Huasco province in the Atacama region of Chile, into a single copper-gold-molybdenum project. Teck and Goldcorp contributed their respective project interests to create a 50/50 joint venture. In combination with community consultation, a prefeasibility study is expected to commence in mid-2016 and be completed in approximately 12 to 18 months.
Other copper projects
The prefeasibility study continued to progress at the company's 50-per-cent-owned Zafranal copper-gold project located in southern Peru and is now expected to be complete in the first half of 2016. The company continues to minimize expenditures on all other copper projects. Targeted studies continue at Galore Creek, Schaft Creek, San Nicolas and Mesaba projects as the company further explores ways to enhance the value of these projects.
Outlook
The company expects 2016 copper production to be in the range of 305,000 to 320,000 tonnes, with lower production in the second half of the year as a result of lower grades at Highland Valley copper.
In 2016, the company expects copper unit costs to be in the range of $1.65 (U.S.) to $1.75 (U.S.) per pound before margins from byproducts and $1.50 (U.S.) to $1.60 (U.S.) per pound after byproducts based on current production plans, byproduct prices and exchange rates.
Zinc business unit
Performance
Gross profit before depreciation and amortization from the zinc business unit declined by $35-million in the fourth quarter compared with a year ago. A substantially lower realized zinc price was partly offset by the favourable effect of a stronger U.S. dollar and higher sales volumes, partially due to the timing of Red Dog shipments.
Refined zinc production in the fourth quarter from the Trail operations increased by 8 per cent compared with last year due to improved operating efficiencies in the electrolytic plant and to the improved reliability of the new acid plant, leading to higher throughput in 2015. For 2015, Trail achieved record production of refined zinc and silver. At Red Dog, zinc production was 12 per cent lower than a year ago primarily due to an extended annual mill shutdown.
Capital expenditures include $64-million for sustaining capital, which included $49-million at Trail and $15-million at Red Dog.
Markets
LME zinc prices averaged 73 U.S. cents per pound in the fourth quarter of 2015, a decrease of 28 per cent from the same period a year ago. Zinc prices fell to a low of 67 U.S. cents per pound in the quarter, the lowest level since 2009.
Reported zinc exchange stocks fell 96,750 tonnes during the quarter to end the year at 659,300 tonnes. Total global reported exchange stocks are now estimated at 17 days of global consumption, down from the 25-year average of 23 days.
Demand for refined zinc in key North American markets remained weak again this quarter with customers facing headwinds from significantly increased imports of low priced galvanized steel into North America. Current reductions in monthly imports combined with good underlying demand should help to reduce service centre inventories and improve North American galvanized steel market conditions. Stocks of both zinc metal and concentrates have continued to decline since the start of this year. Zinc metal supply is expected to become constrained in 2016 with the forecast mine closures having now taken place and additional production cuts announced in the third and fourth quarters also taking effect.
Operations
Red Dog
Mill throughput in the fourth quarter was 15 per cent lower than a year ago primarily due an extended annual mill maintenance shutdown, which resulted in zinc production being 12 per cent lower than a year ago. Lead production declined by 22 per cent primarily due to the lower throughput and reduced recoveries, partly offset by higher ore grades.
Zinc and lead sales volumes were 19 per cent and 27 per cent higher, respectively, than in the fourth quarter of 2014 due to timing of annual shipments.
Cost of sales in the current quarter increased by $20-million (U.S.) to $95-million (U.S.), primarily due to higher sales volumes compared with the same period a year ago. Capitalized stripping costs were $17-million (U.S.) in the fourth quarter, the same as a year ago.
Offsite zinc inventory available for sale from Jan. 1, 2016, to the beginning of the 2016 shipping season totals 220,000 tonnes (2015 -- 249,000 tonnes) of contained metal. Zinc sales volumes in the first quarter of 2016 are estimated to be approximately 115,000 tonnes of contained metal. All off-site lead inventories were sold as of the end of 2015.
Red Dog's production in 2016 is expected to be in the range of 545,000 to 570,000 tonnes of zinc and 115,000 to 120,000 tonnes of lead. From 2017 to 2019, Red Dog's production is expected to be in the range of 500,000 to 550,000 tonnes of zinc and 100,000 to 110,000 tonnes of lead. Studies are in progress to increase mill throughput and thus zinc metal production as feed grade continues to decline.
Teck Alaska has filed a complaint in the Superior Court for the State of Alaska seeking to enjoin the enforcement of a new severance tax enacted by the Northwest Arctic Borough, a local municipality, on the grounds that the municipality lacks the authority to tax interstate commerce, that the tax violates Teck Alaska's equal protection and due process rights, and that the imposition of the tax breaches a prior negotiated agreement between Teck Alaska and the municipality. The new tax falls solely on Teck Alaska and, if legal, would increase annual payments to the municipality from approximately $11.5-million under the prior agreement to an estimated $30-million (U.S.) to $40-million (U.S.), depending on zinc prices. While the company is advised that there is a sound legal basis for the complaint, there can be no assurance that Teck Alaska will prevail in the litigation, or that the tax will not be enforceable.
Trail
Zinc production matched the company's quarterly production record and was 8 per cent higher this quarter than in the fourth quarter of 2014. The increased production and record results were due to improved reliability of the new acid plant and better utilization of electrical current applied in the zinc cell house. Lead production was 52 per cent higher than a year ago as 2014 production was affected by the planned 35-day maintenance shutdown of the KIVCET furnace, which occurs once every three to four years.
Annual production records were achieved in 2015 for refined zinc and silver.
Operating costs in the fourth quarter declined to $89-million compared with $103-million a year ago due to cost reduction activities and not having the additional costs that were incurred in the fourth quarter of 2014 related to the KIVCET shutdown.
Capital expenditures in the quarter included $19-million for upgrades to the smelter feed building, $17-million for the water treatment plant and $13-million for various other small projects.
Trail's production in 2016 is expected to be in the range of 290,000 to 300,000 tonnes of refined zinc, 85,000 to 90,000 tonnes of refined lead and 22 million to 25 million ounces of silver.
Pend Oreille
Mill throughput was 1,760 tonnes per day in the fourth quarter, or 88 per cent of design capacity of 2,000 tonnes per day. The shortfall in the quarter was due to restricted mine production as a result of delays in fully implementing pillar recovery mining, but the issue was resolved by the end of the year. The concentrator is performing as anticipated with recoveries continuing to improve as mill feed variability is reduced.
Zinc production in the fourth quarter was 8,600 tonnes and lead production was 2,100 tonnes.
Pend Oreille's production in 2016 is expected to be approximately 40,000 tonnes of zinc.
Outlook
The company expects zinc in concentrate production in 2016, including co-product zinc production from the copper business unit, to be in the range of 630,000 to 665,000 tonnes.
Energy business unit
Fort Hills project
Construction of the Fort Hills oil sands project has passed the midway point and is progressing substantially in accordance with the project schedule. In the fourth quarter, capital expenditures were $302-million compared with a cash spending estimate of $159-million. Capital expenditures in 2015 were $966-million compared with the cash forecast spending estimate, which was $850-million. Capital expenditures in 2015 exceeded plan due to favourable fourth quarter weather conditions which allowed for additional site work and timing of project payments. The company's share of Fort Hills cash expenditures in 2016 is estimated at $960-million.
Since sanction, the project has achieved and continues to track to key milestones. Engineering activity is progressing well and is over 95 per cent complete; construction is progressing per plan and is now over 50 per cent complete. Equipment and material deliveries are continuing, and off-site modular fabrication, site civil works and process facility construction are well under way. Site construction work force is ramping up to peak in mid-2016 through to early 2017. The capital cost and schedule outlook has not changed since the company announced project sanction in October, 2013. First oil is still expected as early as the fourth quarter of 2017, with 90 per cent of the planned production capacity of 180,000 barrels per day expected within 12 months. The company's share of production is expected to be 36,000 bpd (13 million barrels per year) of bitumen.
The company is continuing to review options to sell diluted bitumen into the North American and overseas markets which may include the use of pipelines from Hardisty or rail to access U.S. Gulf Coast refineries and tidewater ports.
Frontier energy project
The Frontier project regulatory application review continues with the provincial and federal regulators. The company received a fifth round of information requests from the regulators in the fourth quarter of 2015. The company plans to respond to the regulators' latest information requests late in the first quarter of 2016. The earliest anticipated first oil date for the Frontier project is 2026, which reflects time required to receive regulatory permits for the project in light of revisions to the project scope. The regulatory review process is expected to continue through 2016, making 2017 the earliest a decision report is expected. Expenditures on Frontier are limited to supporting this process. The company is evaluating the project schedule and development options as part of its continuing capital review and prioritization process in response to market conditions.
Wintering Hills wind power facility
During the fourth quarter, the company's share of the power generation from Wintering Hills was 37 gigawatt-hours, resulting in 24,000 tonnes of carbon dioxide equivalent offsets. The company's share of power generation in 2015 was 136 gwh, resulting in approximately 85,000 tonnes of CO2 equivalent offsets. The company's share of expected power generation in 2016 is 135 gwh, resulting in approximately 85,000 tonnes of CO2 equivalent offsets, although actual generation will depend on weather conditions and other factors.
Other operating cost and expenses
Other operating expenses, net of other income, were $73-million in the fourth quarter compared with $100-million a year ago. This includes negative pricing adjustments of $63-million, including adjustments on copper and zinc of $42-million and $18-million, respectively. The company also made additional environmental provisions of $35-million and incurred restructuring charges of $19-million. Partly offsetting these expense items was $38-million of gains on the disposal of various assets and a $37-million non-cash gain on the formation of project Corridor.
Finance expense was $80-million in the fourth quarter, similar to a year ago. Debt interest expense increased due to the effect of the stronger U.S. dollar, as all the company's debt and related interest expense is U.S. dollar denominated. The company capitalized a total of $56-million in interest in the quarter compared with $46-million a year ago.
Other non-operating expense of $21-million included foreign exchange losses of $20-million on that portion of the company's debt which is not offset by investments in U.S.-dollar-denominated foreign subsidiaries.
The company's income and resource taxes recovery for the fourth quarter was $222-million, or 32 per cent of pretax loss. This effective tax rate reflects the effect of resource taxes, high taxes in foreign jurisdictions and other non-recurring items. As a result, the tax rate is not comparable with historical and expected tax rates. Due to available tax pools, the company is currently shielded from cash income taxes, but not resource taxes in Canada. The company remains subject to cash taxes in foreign jurisdictions.
Financial position and liquidity
The company's cash position increased from $1.5-billion to $1.9-billion in the quarter. Significant outflows included $302-million on Fort Hills project expenditures and $398-million for the repayment of a $300-million (U.S.) note due in October. Significant inflows included $789-million ($610-million (U.S.)) from the silver streaming agreement with Franco-Nevada related to the Antamina mine. The company's cash flow in the quarter was affected by the seasonality of Red Dog sales and the reduction of inventories.
The company maintains various committed and uncommitted credit facilities for liquidity and for the issuance of letters of credit. All of the company's bank credit facilities are unsecured and any borrowings rank pari passu with its outstanding public notes. None of the company's notes or credit facilities are guaranteed by any of its subsidiaries. The company maintains two primary revolving committed credit facilities. The $3-billion (U.S.) facility matures in July, 2020, and has a letter of credit sublimit of $1-billion (U.S.). Any letters of credit issued under this facility would reduce the amount of the facility that can be drawn for cash. There were no drawings on this facility in 2015 and it remains fully available as at Feb. 10, 2016.
The $1.2-billion (U.S.) facility matures in June, 2017, and can be drawn fully for cash or for letters of credit. As at Feb. 10, 2016, there is $740-million (U.S.) of letters of credit issued on this facility. Both facilities require the company to pay a commitment fee on undrawn amounts and a specified spread above LIBOR on any drawn amounts, which varies with the company's credit rating, but does not further vary if its ratings from both Moody's and S&P are below Ba1 or BB high, respectively. Drawings under both facilities are available for general corporate purposes, however, the company expects to keep any undrawn portion of the $1.2-billion (U.S.) facility available for letter of credit requirements that may be required under certain contractual arrangements with counterparties.
Borrowing under the company's primary committed credit facilities is subject to its compliance with the covenants in the agreement and its ability to make certain representations and warranties at the time of the borrowing request. The company's credit facilities, but not its public notes, include a financial covenant that requires it to maintain its debt to debt-plus-equity ratio below 50 per cent. Borrowing under the credit facilities is not conditioned on the company maintaining any particular credit rating or there being no general developments that could be expected to have a material adverse effect on it.
The company is restricted under its bank and public note covenants from creating liens on certain assets to secure indebtedness unless those liens also secure its credit facilities and notes. The company is restricted from creating liens on major assets. There are a number of exceptions from these negative pledge covenants, including an exception for liens securing debt that does not exceed 10 per cent of consolidated net tangible assets. As at Dec. 31, 2015, the company's consolidated net tangible assets for the purposes of its credit facilities and public notes totalled approximately $32-billion, 10 per cent of which is approximately $3.2-billion.
In addition to its two primary revolving committed credit facilities, the company also maintains uncommitted bilateral credit facilities with various banks and with Export Development Canada for the issuance of letters of credit, primarily to support its future reclamation obligations. At Dec. 31, 2015, these facilities totalled $1.7-billion and outstanding letters of credit issued thereunder were $1.5-billion. The company expects these amounts to increase by approximately $110-million in 2016. These facilities are typically renewed on an annual basis. From time to time, at its election, the company may reduce the fees paid to banks issuing letters of credit by making short-term deposits of excess cash with those banks. The deposits earn a competitive rate of interest and are generally refundable on demand. At Dec. 31, 2015, the company had $529-million (U.S.) of such deposits.
The reclamation obligations are included in other liabilities and provisions on the company's balance sheet. Associated letters of credit would not become a liability unless the letter of credit is drawn by the beneficiary, which drawing would be triggered if the company did not perform its obligations under the relevant contact or permit. In the event of the drawing, the company would be required to reimburse the issuing bank for the amount drawn on the letter of credit. Issued letters of credit do not constitute debt for the purpose of the debt-to-debt-plus-equity covenant in its bank credit agreements.
Since the end of the third quarter, Moody's, Fitch and DBRS revised the company's credit ratings to Ba3, BB+ and BB (high), respectively, in each case with a negative outlook or trend. S&P currently rates the company BB with a negative outlook. On Jan. 21, 2016, Moody's placed certain mining companies, including Teck, on review for downgrade. Based on current market conditions, the company expects further rating actions.
As a consequence of the reduction of its credit ratings to below investment grade, the company was required in the fourth quarter of 2015 to deliver an aggregate of $672-million (U.S.) of letters of credit pursuant to long-term power purchase agreements for the Quebrada Blanca phase 2 project. The letters of credit would be terminated if and when the company regains investment-grade ratings. There are no requirements to deliver further letters of credit related to the Quebrada Blanca project. The company was also required to post $93-million letters of credit under certain pipeline and storage agreements it entered into in connection with the Fort Hills project. These letters of credit will increase as construction of the relevant facilities progresses and could reach approximately $550-million in 2016 and could further increase to approximately $650-million in 2017 at the request of the company's counterparties prior to the relevant in-service date. Following the in-service date, the letter of credit amount would reduce to a maximum amount of approximately $450-million. These Fort Hills related letters of credit would also be terminated if and when the company regains investment-grade ratings.
The ratings actions described above do not affect the company's credit facilities beyond the rate of the commitment fee and cost of borrowing. There are no restrictions on borrowing, or additional covenants, triggered under the company's credit facilities as a result of the downgrades by the rating agencies.
Operating cash flow
Cash flow from operations, before changes in non-cash working capital items, was $428-million in the fourth quarter compared with $491-million a year ago. The reduction was primarily due to substantially lower commodity prices, partly offset by higher sales volumes of copper and zinc and lower income taxes paid due to timing.
Changes in working capital items increased cash by $259-million in the fourth quarter compared with $252-million a year ago. The decrease in working capital in both periods was due to the seasonal drawdown of Red Dog's production inventories and timing of payment of trade payables.
Investing activities
Expenditures on property, plant and equipment were $532-million in the fourth quarter, including $302-million for the Fort Hills oil sands project, $165-million on sustaining capital and $17-million on major enhancement projects. The largest components of sustaining expenditures were $49-million at the Trail operations and $31-million at Highland Valley copper. Major enhancement expenditures included approximately $8-million at the company's steelmaking coal operations.
Capitalized stripping expenditures were $176-million in the fourth quarter compared with $167-million a year ago. The majority of this item represents the advancement of pits for future production at the company's steelmaking coal mines.
During the quarter the company completed the sale of a silver stream linked to its share of the Antamina mine and received proceeds of $789-million ($610-million (U.S.)).
Financing activities
Financing activities in the fourth quarter included the repayment of $398-million ($300-million (U.S.)) of notes that matured on Oct. 1, 2015, and debt interest payments of $40-million (2014 -- $34-million). The company also paid its semi-annual dividend that totalled $29-million in the fourth quarter.
Outlook
The company continues to experience challenging markets for its products. Prices for most of the company's products have declined and lower prices may persist for some time. Commodity markets have historically been volatile, prices can change rapidly and customers can alter shipment plans. This can have a substantial effect on the company's business. Reduced steelmaking coal imports by China, partially offset by production curtailments, are continuing to maintain pressure on pricing. The company is also significantly affected by foreign exchange rates. In the last 12 months, the U.S. dollar strengthened by approximately 20 per cent against the Canadian dollar, which has had a positive effect on the profitability of Canadian operations and translation of profits from foreign operations. It will, to a lesser extent, put upward pressure on the portion of operating costs and capital spending that is denominated in U.S. dollars.
In October, 2013, the company approved an estimated $2.9-billion (the company's share) of expenditures to complete the development of the Fort Hills oil sands project, of which approximately $1.2-billion remains to be spent as at Feb. 10, 2016. The company has access to cash and credit lines which are expected to be sufficient to meet capital commitments and working capital needs over this period. The company is taking further steps to manage its capital spending profile, and it continuously monitors all aspects of cost reduction program, capital spending and key markets as conditions evolve.
Commodity prices and 2016 production
Commodity prices are a key driver of the company's profit. On the supply side, the depleting nature of ore reserves, difficulties in finding new orebodies, the permitting processes, the availability of skilled resources to develop projects, as well as infrastructure constraints, political risk and significant cost inflation may continue to have a moderating effect on the growth in future production for the industry as a whole. The company believes that over the longer term the industrialization of emerging market economies will continue to be a major positive factor in the future demand for commodities. Therefore, the company believes that the long-term price environment for the products that it produces and sells remains favourable.
The decline in estimated foreign exchange sensitivity from previous estimates is primarily due to the effect of lower commodity prices, which are all denominated in U.S. dollars.
Foreign exchange translation gains and losses on U.S.-dollar-denominated debt arising from exchange rate fluctuations may have some effect on the company's 2016 profit although most its U.S.-dollar debt is expected to be designated as a hedge against investments in U.S.-dollar-denominated foreign operations.
While the extent of the oversupply of steelmaking coal was reduced during 2015 due to acceleration in the implementation of production curtailments, the company believes that steelmaking coal prices continue to trade at unsustainably low long-term levels, which are currently approximately 20 per cent below 2015 averages. Copper and zinc prices to date in 2016 are both trading approximately 18 per cent below 2015 average prices. The fluctuations in the Canadian-/U.S.-dollar exchange rate can have a significant effect on the company's profit and financial position. The Canadian dollar, to date in 2016, has averaged approximately $1.40 against the U.S. dollar compared with $1.28 on average for 2015.
The company's steelmaking coal production in 2016 is expected to be in the range of 25 million to 26 million tonnes compared with 25.3 million tonnes produced in 2015. The company's actual production will depend primarily on customer demand for deliveries of steelmaking coal. Depending on market conditions and the sales outlook, the company may adjust its production plans.
The company's copper production for 2016 is expected to decrease and be in the range of 305,000 to 320,000 tonnes compared with 358,000 tonnes produced in 2015. Highland Valley copper is expected to decrease production by approximately 35,000 tonnes as a result of mining lower ore grades. Production from Quebrada Blanca is expected to decrease by approximately 6,500 tonnes as grades are declining with the depletion of the orebody. Production from Antamina rises slightly in 2016. Duck Pond was permanently closed at the end of June, 2015.
The company's zinc in concentrate production in 2016 is expected to be in the range of 630,000 to 665,000 tonnes compared with 657,500 tonnes produced in 2015. Red Dog's production is expected to decrease by approximately 10,000 tonnes primarily due to lower ore grades. With a full year of operations in 2016, Pend Oreille is expected to produce 40,000 tonnes of zinc. Duck Pond was permanently closed at the end of June, 2015. The company's share of Antamina's zinc production is expected to be 50,000 tonnes, similar to 2015 levels. Refined zinc production in 2016 from the company's Trail operations is expected to be in the range of 290,000 to 300,000 tonnes compared with a record 307,000 tonnes produced in 2015.
Capital expenditures
The company's forecast approved capital expenditures for 2016, before capitalized stripping costs, are approximately $1.4-billion.
New mine development includes $80-million for permitting activities for Quebrada Blanca phase 2, $960-million for Fort Hills and $40-million for permitting activities on the Frontier oil sands project. The amount and timing of actual capital expenditures are also dependent upon being able to secure permits, equipment, supplies, materials and labour on a timely basis, and at expected costs to enable the projects to be completed as currently anticipated. The company may change capital spending plans in 2016, depending on commodity markets, its financial position, results of feasibility studies and other factors.
Foreign exchange, debt revaluation and interest expense
The sales of the company's products are denominated in U.S. dollars, while a significant portion of its expenses are incurred in local currencies, particularly the Canadian dollar and the Chilean peso. Foreign exchange fluctuations can have a significant effect on operating margins, unless such fluctuations are offset by related changes to commodity prices.
The company's U.S.-dollar-denominated debt is subject to revaluation based on changes in the Canadian-/U.S.-dollar exchange rate. As at Dec. 31, 2015, $5.5-billion of the company's U.S.-dollar-denominated debt is designated as a hedge against its foreign operations that have a U.S.-dollar functional currency. As a result, any foreign exchange gains or losses arising on that amount of the company's U.S.-dollar debt are recorded in other comprehensive income. The remaining portion of foreign exchange gains or losses on the company's U.S.-dollar-denominated debt, less U.S.-dollar working capital balances, is charged to profit. As at Dec. 31, 2015, the company was exposed to foreign exchange gains or losses on approximately $375-million (U.S.) on its balance sheet.
Financial instruments and derivatives
The company holds a number of financial instruments and derivatives which are recorded on its balance sheet at fair value with gains and losses in each period included in other comprehensive income and profit for the period as appropriate. The most significant of these instruments are marketable securities, foreign exchange forward sales contracts, metal-related forward contracts, and settlements receivable and payable. Some of the company's gains and losses on metal-related financial instruments are affected by smelter price participation, and are taken into account in determining royalties and other expenses. All are subject to varying rates of taxation depending on their nature and jurisdiction.
Production statistics for each of the company's operations are presented in the table. Operating results are on a 100-per-cent basis.
PRODUCTION STATISTICS
Three months ended Dec. 31, Year ended Dec. 31,
2015 2014 2015 2014
Steelmaking coal
Waste production (million
BCM) 64.3 68.8 260.4 274.0
Steelmaking coal production
(million tonnes) 6.4 6.8 25.3 26.7
Steelmaking coal strip ratio
(waste BCM/steelmaking coal
tonnes) 9.7:1 9.8:1 9.9:1 9.9:1
Sales (million tonnes) 6.5 6.5 26.0 26.2
Highland Valley copper
Tonnes mined (000) 30,125 32,235 116,231 124,217
Tonnes milled (000) 12,698 13,720 47,257 49,932
Copper
Grade (%) 0.37 0.25 0.37 0.29
Recovery (%) 87.5 84.8 87.9 84.9
Production (000 tonnes) 41.2 29.5 151.4 121.5
Sales (000 tonnes) 43.9 31.0 150.4 124.6
Molybdenum
Production (million pounds) 0.9 1.3 3.4 5.2
Sales (million pounds) 0.7 1.1 3.7 4.9
Antamina
Tonnes mined (000) 52,130 43,793 215,653 194,102
Tonnes milled (000)
Copper-only ore 9,765 9,019 37,163 35,107
Copper-zinc ore 4,419 4,576 19,033 15,343
14,184 13,595 56,196 50,450
Copper
Grade (%) 0.92 0.74 0.83 0.83
Recovery (%) 88.1 82.0 83.4 82.8
Production (000 tonnes) 114.3 83.9 390.6 344.9
Sales (000 tonnes) 131.9 91.0 388.0 346.6
Zinc
Grade (%) 1.37 1.50 1.52 1.66
Recovery (%) 82.0 79.0 81.4 82.6
Production (000 tonnes) 58.0 57.5 235.0 211.0
Sales (000 tonnes) 72.0 75.8 241.8 208.3
Molybdenum
Production (million pounds) 1.5 0.5 4.4 3.1
Sales (million pounds) 0.9 0.6 4.0 4.1
Quebrada Blanca
Tonnes mined (000) 5,588 8,635 22,923 34,520
Tonnes placed (000)
Heap leach ore 1,536 1,657 5,962 6,026
Dump leach ore 790 1,063 3,262 6,584
2,326 2,720 9,224 12,610
Grade (SCu%)
Heap leach ore 0.48 0.65 0.60 0.68
Dump leach ore 0.18 0.27 0.26 0.25
Production (000 tonnes)
Heap leach ore 5.7 6.8 23.2 30.3
Dump leach ore 3.6 5.6 15.9 17.7
9.3 12.4 39.1 48.0
Sales (000 tonnes) 9.7 12.3 40.0 48.9
Carmen de Andacollo
Tonnes mined (000) 7,644 7,746 28,362 29,962
Tonnes milled (000) 4,520 4,453 17,309 17,676
Copper
Grade (%) 0.45 0.45 0.45 0.44
Recovery (%) 89.8 88.9 88.6 87.0
Production (000 tonnes) 18.2 17.8 68.3 67.5
Sales (000 tonnes) 20.4 18.1 66.9 69.4
Gold
Production (000 ounces) - 12.3 22.1 47.5
Sales (000 ounces) - 11.0 19.7 42.8
Copper cathode
Production (000 tonnes) 1.3 1.1 4.7 4.3
Sales (000 tonnes) 1.4 1.3 4.7 4.4
Duck Pond
Tonnes mined (000) - 81 176 666
Tonnes milled (000) - 173 310 658
Copper
Production (000 tonnes) - 3.2 6.1 14.2
Sales (000 tonnes) - 3.7 8.1 13.1
Zinc
Production (000 tonnes) - 2.9 7.0 16.2
Sales (000 tonnes) - 5.8 7.8 15.9
Trail
Concentrate treated (000
tonnes)
Zinc 141 140 553 515
Lead 42 23 144 133
Metal production
Zinc (000 tonnes) 78.8 73.1 307.0 277.4
Lead (000 tonnes) 23.8 15.6 83.5 82.1
Silver (million ounces) 6.8 4.3 23.5 21.0
Gold (000 ounces) 14.6 10.5 56.0 50.7
Metal sales
Zinc (000 tonnes) 79.5 72.7 308.0 276.9
Lead (000 tonnes) 24.0 17.7 82.5 77.9
Silver (million ounces) 7.0 4.2 23.5 20.6
Gold (000 ounces) 13.6 9.3 56.1 49.7
Red Dog
Tonnes mined (000) 3,434 3,854 12,496 12,930
Tonnes milled (000) 933 1,098 4,026 4,300
Zinc
Grade (%) 17.2 16.7 16.7 16.6
Recovery (%) 84.7 84.6 84.2 83.3
Production (000 tonnes) 136.2 155.1 567.0 596.0
Sales (000 tonnes) 213.0 179.0 613.3 594.1
Lead
Grade (%) 4.7 4.3 4.8 4.4
Recovery (%) 66.3 78.9 60.7 65.3
Production (000 tonnes) 29.2 37.3 117.6 122.5
Sales (000 tonnes) 62.1 49.0 120.0 112.8
Pend Oreille
Tonnes mined (000) 186 - 619 -
Tonnes milled (000) 161 - 593 -
Zinc
Grade (%) 6.0 - 6.0 -
Recovery (%) 87.8 - 85.7 -
Production (000 tonnes) 8.6 - 30.7 -
Sales (000 tonnes) 8.6 - 30.7 -
Lead
Grade (%) 1.9 - 1.5 -
Recovery (%) 71.9 - 72.3 -
Production (000 tonnes) 2.1 - 6.6 -
Sales (000 tonnes) 2.1 - 6.6 -
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In millions, except per share)
Three months ended Dec. 31, Year ended Dec. 31,
2015 2014 2015 2014
Revenues $ 2,135 $ 2,256 $ 8,259 $ 8,599
Cost of sales (1,854) (1,840) (6,980) (7,064)
Gross profit 281 416 1,279 1,535
Other operating (expenses)
General and administration (30) (36) (108) (119)
Exploration (21) (20) (76) (60)
Research and development (11) (6) (47) (29)
Asset impairments (736) - (3,631) (12)
Other operating income
(expense) (73) (100) (335) (267)
Profit (loss) from
operations (590) 254 (2,918) 1,048
Finance income 1 1 5 4
Finance expense (80) (81) (316) (304)
Non-operating income
(expense) (21) (6) (89) (21)
Share of losses of
associates and joint
ventures (1) (1) (2) (3)
Profit (loss) before tax (691) 167 (3,320) 724
Recovery of (provision for)
income taxes 222 (32) 836 (342)
Profit (loss) for the period (469) 135 (2,484) 382
Profit (loss) attributable
to
Shareholders of the
company (459) 129 (2,474) 362
Non-controlling interests (10) 6 (10) 20
Profit (loss) for the period (469) 135 (2,484) 382
Earnings (loss) per share
Basic (0.80) 0.23 (4.29) 0.63
Diluted (0.80) 0.23 (4.29) 0.63
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