Gregory A. Waller - Vice President of Investor Relations & Strategic Analysis Donald R. Lindsay - Chief Executive Officer, President, Non Independent Director and Member of Executive Committee Ronald A. Millos - Chief Financial Officer and Senior Vice President of Finance Robert W. Bell - Chief Commercial Officer of Coal and Vice President Andrew A. Stonkus - Vice President of Base Metals Marketing Roger J. Higgins - Senior Vice President of Copper John F. Gingell - Vice President and Controller Ian C. Kilgour - Senior Vice President of Coal

Curtis Woodworth - Nomura Securities Co. Ltd., Research Division Meredith H. Bandy - BMO Capital Markets Canada Sohail Tharani - Goldman Sachs Group Inc., Research Division Jorge M. Beristain - Deutsche Bank AG, Research Division Oscar Cabrera - BofA Merrill Lynch, Research Division Greg Barnes - TD Securities Equity Research Garrett S. Nelson - BB&T Capital Markets, Research Division David E. Beard - Iberia Capital Partners, Research Division Alec Kodatsky - CIBC World Markets Inc., Research Division Brian MacArthur - UBS Investment Bank, Research Division Kerry Smith - Haywood Securities Inc., Research Division John Hughes - Desjardins Securities Inc., Research Division David Lipschitz - Credit Agricole Securities (USA) Inc., Research Division John Charles Tumazos - John Tumazos Very Independent Research, LLC H. Fraser Phillips - RBC Capital Markets, LLC, Research Division

Welcome to Teck Resources' Second Quarter 2012 Results Conference Call. [Operator Instructions] This conference calls being recorded on July 25, 2012. I would now like to turn the conference call over to Greg Waller, Vice President, Investor Relations and Strategic Analysis. Please go ahead.

Good morning. Thank you, Catherine. Good morning, everyone, and thanks for joining us this morning for Teck's second quarter earnings conference call. Before we start, I'd like to draw your attention to the forward-looking information slides on Pages 2 and 3 of our presentation package. This presentation contains forward-looking information regarding our business. Various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statement. And at this point, I'd like to turn the call over to Don Lindsay.

Thanks, Greg, and good morning, everyone and thank you for joining us. I will start with the review of the results for the quarter, and then turn the presentation over to Ron Millos, our CFO, to address some more in-depth financial topics. And I should say that a number of the other members of the management team are on the call this morning and available to answer your questions. Starting on Slide 5. This quarter, we achieved record copper production of 90,000 tonnes, thanks, in part to the completion of Antamina's expansion which is now up and running at a slightly better than its nameplate capacity. In coal, our sales during the quarter were over 6.7 million tonnes or at an annualized rate of almost 27 million tonnes. We ended the quarter with a cash balance of about the $3.6 billion and we have new 5-year labor agreements that were ratified at our Trail operation in June and our Cardinal River operation in July. Turning to Slide 6. Our second quarter revenues were over $2.5 billion and gross profit before depreciation and amortization was approximately $992 million and profit attributable to shareholders was $268 million. EBITDA was $790 million and adjusted profit, which removes the effect of onetime items and derivatives and exchange gains and losses was $312 million. I'll discuss these items on the next slide. This quarter, the most significant adjustment is related to the onetime labor settlement at Trail, which resulted in a $38 million after tax charge. Other adjusted items were for asset sales, foreign-exchange and derivative gains. Adjusting for these items, profit was $312 million for the quarter or $0.53 per share. Turning to our operating results for the quarter on Slide 8. In our coal business, production was 5.7 million tonnes and sales were…

Thanks, Don. I'm on Slide 17 where we summarized our changes in cash for the quarter. Our cash flow from operations was approximately $725 million in the quarter. Capital expenditures and investments were $445 million. And in early April, as Don mentioned, we completed our acquisition of SilverBirch Energy for a net cash outlay of $432 million. After allowing for principal and interest payments on our debt, exchange rate changes and other items, our cash decreased in the quarter, it was about $159 million, and we ended the quarter with about $3.6 billion in cash. Slide 18 shows our final pricing adjustments for the second quarter, which are included in our other operating and income expense on our income statement. Our total pricing adjustments for the quarter were negative due to the following prices during the quarter, resulting in an $84 million loss on a pretax basis. And of course, remember, when analyzing the impact of price adjustments, refining and treatment charges on the Canadian U.S. dollar exchange rate must be included in your calculation. In addition, when analyzing the impact on our net earnings, you need to consider taxes and royalties. And on the next slide, I wanted to spend 1 second or 2 highlighting the relationship between pricing adjustments and the change in commodity prices. The chart on Slide 19 plots total pricing adjustments in millions of dollars on the y-axis versus the change in quarter-end copper and zinc prices on the x-axis. There are other elements that impact the total settlement adjustments like volumes, and lead and silver prices, and refining and treatment charges, but clearly, copper and zinc prices are the most significant factor. And the chart highlights a relatively clear relationship. Of course, the key driver is the quarter-over-quarter change in commodity prices. Moving on to Slide 20. We've updated our forecast capital expenditures for 2012. Overall, sustaining and development capital expenditures are expected to be approximately $2.1 billion, down about $200 million about from our previous guidance and this change is mainly due to the timing of spending on the various projects. The spending on our development projects include $140 million for Quintette, $265 million for Phase II of Quebrada Blanca and $310 million for Highland Valley. As always, the amount and time being actual capital expenditures are dependent upon numerous factors including permitting, availability of equipment and people, economic conditions, et cetera. We also expect to invest approximately $220 million as our share of the cost of Fort Hills Oil Sands project, which is accounted for as an investment on our balance sheet, but we view it internally as capital spending. And with that, I'll turn the call back to Don.

Thank you, Ron. And turning to Slide 22. I would like to update you on the status of the main development projects we have underway. In coal, the feasibility study for the restart of the Quintette coal mine is proceeding with additional work revolving around caribou management plans. We expect the feasibility study next quarter and the permanent approval is now expected during the first half of 2013. The mine could be production in the first of 2014 and potentially be operating at an annualized rate of about 3 to 4 million tonnes by the end of 2014. At the Neptune coal terminal, we are moving forward with plans to further expand the terminal to 12.5 million tonnes throughput capacity. The principal enhancement will include a new stacker reclaimer unit. At Relincho, we continue to move forward with the feasibility study and expect it to be complete by the end of the first quarter of 2013. And in our Energy division at Fort Hills, Suncor continues with the work required to get to project sanction decision expected in 2013. The acquisition of SilverBirch's interests in the Frontier project will now enable us to add value by moving the project to fully permanent status as quickly as possible. So in summary, Teck remains in strong financial shape and is well-positioned in uncertain economic times. Our long-term view remains favorable, particularly, for our key products, of steelmaking, coal and copper. Our copper production is increasing and is still expected to grow over the next 2 quarters. Coal production is also increasing and is moving towards our target level of 28 million tonnes of production at our existing 6 mines, and that's before the restart of Quintette. And lastly, we are continuing to move through the permitting process with Quebrada Blanca Phase II, which is a large, long life, low cost, extendable project in a great jurisdiction. And with that, I would like to turn the call now over to questions.

[Operator Instructions] Our first question is from Curt Woodworth of Nomura.

I was wondering if you could just give a little bit more color on the price differential for the 5 million priced tonnes at $198. I know you mentioned you included some carryover left in that number, but it seems like it's still a little bit larger discount to the benchmark. So I'm just wondering if that includes any lower quality tonnes or potentially some spot business that was done at lower levels?

Okay. I'll turn that over to Bob Bell.

Curt, of course, that average pricing includes all of the pricings, so that would be the quarterly price and also any spot pricing, and it includes carryover. It also includes the mix of products that we see. So we have a slightly more of the lower-priced tonnes this coming quarter than we did the previous quarter. And we have slightly more spot pricing in that quarter, and all that's already worked into the price.

Great, okay. And then in terms of the on-price position, would you expect to be able to realize kind of a similar level at the $198? Or do you have a bigger component of that, that would may be tied to spot that's going to be more reflective of kind of what we've been seeing -- happening in that market last couple of days?

Well, those discussions are ongoing so it would be somewhat speculation. But our expectation is, we would settle that pricing at the same level as we settled our other pricing at the quarterly benchmark, so the $225 for the very highest quality coal, and it would come in similarly. But then, obviously, we can't be certain as to the lifting schedule, of what our customers are going to take and also we're also looking into possibilities of more spot sales. So in the end, the mix we base on whatever we finally achieved in that.

Okay. And then just lastly, in terms of the -- in that spot capability, it seems like just with seasonal weakness in terms of steel production and a little bit of underlying, maybe a buyer's strike where spot pricing is done relative to what the benchmarks have been settled back and there's push back on that, are you seeing any push back on kind of contract volumes? And what's the strategy to try to push tonnes into the spot market if the demand doesn't seem to maybe be there right now? Any color on that would be helpful.

Well, I think you're seeing the impact of that already in the number that we've provided, that's what we've already sold and you'll see that's lower than the previous quarter. But when it comes to what we they to do in the spot market, we'll make decisions that we feel are best at the time and obviously that'll be -- that will include what we see as the pricing. I might just add a comment on the first question, which was the spread between benchmark and our average price. I mean we think about it over the course of 1 year or 2 as being about 10%. If you went back last quarter, it was only 3% and the reason primarily was because there was carryover tonnage at a higher price from the previous 2 quarters that was included in that relative to the benchmark in that quarter. And of course, if you go this quarter where the benchmark is higher, $225 then you carryover from last quarter, then that will increase this price. So this is pretty normal and to be expected. I don't really think anyone should be surprised that the discount this time is a little more than 10%, maybe 12% versus last time being just 3%. It's fairly predictable.

Our next question is from Meredith Bandy of BMO Capital Markets.

My question is, Don, you mentioned in your remarks that the 5 million or so that you sold quarter-to-date is not apples-and-apples to the, I think, it was 6.3 last quarter, I'm just wondering if you could give us a little bit more color on that?

Last quarter, when we announced the 6.3, we were basically finished our quarterly contract discussions. This quarter, in what is obviously a market that is turning weaker, we have not finished those discussions, so we can only make partial announcement of what has been settled of the total package of quarterly contracts that we carry. So we expect to settle the rest of that volume and, as Bob just said, our expectation is to settle and that the prices are the same as the other customers' but we have to finish those discussions.

So does that mean that the volumes are contracted and the pricing hasn't been settled? Or what is the -- would it -- I guess, how are the conversations going and how are the conversations different maybe, than they were last quarter?

Meredith, it's Bob. Yes, those quarterly contracts, the volume is contracted, and so it's now a matter of settling price. Naturally with the market turning a bit weaker, some people are taking longer to come to this decision to finally settle.

And so the volume that's settled is greater than the 5 or no?

The volume that we have contracts for is greater than the 5, that's right.

Is it -- can you tell us what the volume is?

We've got -- well, we've got over half a million tonnes left settle, that's already contracted on a quarterly basis. Again, important to point out, in the end, what's actually lifted by our customers will depend on what they finally nominate in vessels. They control the vessels and we'll be out looking for more business on the spot market. So we really can't say today what the final sales will be for the quarter.

Our next question is from Sohail Tharani of Goldman Sachs.

Also, on the zinc shipment, that was a little lighter than what we had thought. Are you seeing any push back in there, because the macro situation, or you think that the demand is still there and you will be able to manage, to ship whatever the guided number is?

I'll turn that over to Andrew Stonkus.

Yes. The zinc concentrate shipments, we had strong first quarter, now it's a reflection of consumption by our customers. In the second quarter, it's reflected a lower start in the inventory, and there's no -- the demand for zinc concentrate is still extremely strong and the market is healthy. The small market is -- on treatment charges are still significantly below the benchmark of which reflects a tight market.

Okay. One more question, Ron. Your projects, the Quebrada Blanca II, Relincho and Fort Hills, in the past, you have mentioned that these will come along so very close to each other, perhaps in 2016, '17, '18, I was wondering if you have any thoughts of delaying any of these at the moment, that the macro situation concerns are and putting some more gaps, so that you're not too far out on all of them and things get turned around and you may not be able to stop any of these or you're too far out at that time?

Okay, good question. What seems to be happening, and not just within Teck, but within the mining industry globally, is that you don't have to decide to defer projects because the permitting process will do it for you. The QB II situation, while we haven't formally changed the schedule at all, we are watching what happens with the SEIA quite closely, and clearly, there's been a delay of some sort, we don't know whether it's a short one or a medium one or long one yet. We've got a lot of people really focused on it. So at this stage, there isn't enough information to make a decision. It's being delayed by the permitting process on its own, though, it might -- we just don't know how long it is. In Relincho, that's a different case. The full feasibility study is scheduled to be finished by the end of 2013. So theoretically that's a year behind QB2. But we won't make a decision on what the final schedule of Relincho is until we know what's happening with QB2. We want it to be ready to go in case anything happens that defers QB2. But if QB2 is still on schedule at that stage, then the odds are that we would put a bit more of a gap between Relincho and QB2, just from an execution point of view and the people associated with the project, because one of the things that we like is that we have the same owner's team, a lot of the same key people who built the concentrator at Andacollo are now working on the concentrator at QB2 and then would work on the one at Relincho. You do things 3 times in a row, generally you get pretty good at it. So we want to make sure that we can apply the learning from each construction effort to the next one. So that's how we will schedule that. And in terms of Fort Hills, Suncor is the operator there, and they're going through their work right now and, in due course, they'll announce where they come to, but we anticipate the project sanction will be sometime next year and then, when all that detail is released, we'll see what final schedule is at this time.

Our next question is from Jorge Beristain of Deutsche Bank.

I guess, my first question is for Ron. Just on the purchases that you did of securities in the mining industry last quarter, I believe, would there be an expected kind of mark down of any kind of mark-to-market that you would have to make on that investment in the future, given what the broader markets have done?

We mark our investments to market every quarter.

Okay. Is that reflected anywhere in your P&L this quarter?

It goes in to other comprehensive income, but it doesn't go to the P&L until we actually realized any gains or losses.

Okay. So if and when those securities are sold, then you would actually book it through the P&L, as a realized cost?

Correct. Yes.

Okay. And my second question is, I guess, for Don. Just in the context of -- you've had the delay that you're saying now, about a 6 months on Quintette, and you said it's too early to comment on Quebrada Blanca, but could you give us a ballpark at least on QB? Do you think this is an issue of the delay measured in quarters or months, by re-jigging the issues to address the vegetation and the water issues?

So I'll make an overview comment then turn it over to Roger Higgins. One of the things that we're finding, and not just in Chile but in various jurisdictions, is that governments are updating their regulations and requirements. And often the civil servants or regulators and so on who are working on it are applying them for the first time and they're going up a learning curve as well. And given that factor, it is very hard to predict, and therefore, answer your question with anything that's very certain. So I just want to put that context out there and I'll turn it over to Roger for more specifics.

Good morning, Jorge. The Quebrada Blanca Phase II SEIA was drawn based on comments from the regulator and they were looking for some additional information or not completely happy with some of what they were seeing, principally around hydrology -- groundwater hydrology and vegetation and some level of engineering detail. How long it will take us to address those is really part of our ongoing discussions with the regulators. We are in contact with them regularly, we have been all the way through. They have made it quite clear that they like the project, they want to see the project proceed, they're very keen to help us through the process, but this business of stopping and reexamining some of the information from their point of view has become part of the regular process of projects in Chile, and as Don said, elsewhere. But how long it takes really is something that we will have work out with them as a -- in consultation with them as we progressively go through the comments that they've had. So that is difficult to assess it. We are in a very constructive set of discussions with the state about those issues.

If I could just have one more follow-up for Don. Don, has your mind changed at all in the past 6 months given the fairly weak performance we've seen year-to-date, again, in mining equities? And this is compounding what the weakness that we saw already in 2011, to the point where, it looks on my math that it is far cheaper to buy going concern companies than to build the project from scratch and then when you compound it with these time delays through the permitting process, it seems to me that the greenfield CapEx and brownfield CapEx has continued to kind of wither on the vine due to time delays but, at the same time, the going concern companies are getting cheaper and cheaper by the day. So in your mind, is the pendulum kind of swinging in terms of favoring more of an M&A strategy, to sort of bolt on immediately accretive growth? Or are you still happy to stick with your portfolio of long-term projects?

So my first comment is, that's an excellent question and very well phrased. And it goes to the heart of the discussions that we have here all the time. We are looking at capital allocation as one of, if not the single most important thing that we do. And there's no question that from a market value's point of view, the landscape is tilted towards buy versus build. Having said that, and we have teams that do a lot of work on this, we've reviewed all sorts of opportunities, including ones I'm sure you're watching that are getting cheaper, and they may well get cheaper from here, by the way. And the issue that you have to remember is that the assets themselves haven't changed. They may be valued in the market more cheaply but they're still the same assets. In many cases, those assets have something associated with them that make them not very interesting to us. It could be that they are short life, it could be that they have significant environmental and sustainability issues. It could be that their geopolitical risk is bad and getting worse from a resource nationalism point of view, or from a health and safety and violence point of view. So and those who are trading in the market don't have to deal with those issues, they can buy and sell and get out if things go seriously wrong, but we have to live them for a long, long time. And so as we go to build the company, we are very, very conscious of all these other, more qualitative factors in trying to build a good strong company. We always start with the resource base and are there any significant risks to it? Is it long life? Is it going to catch several cycles during which we can get our capital back and earn a decent return? We look at labor laws. You know what? I could go on and on, on list of questions. And then finally, even though the market price, the current bid, might be quite cheap in quite a number of these companies, they're really controlled, in terms of trying to buy them out, by 5 or 6 shareholders who own perhaps 30%, and they won't sell for the normal takeover premium of 30%, they all want 60%, 70%, 80%. So that in fact, the valuation that you can take it out for hasn't really in particular for hasn't really dropped quite as much as it might appear. So I can assure you that I personally and our Chairman and others on the team here, are looking at that issue all the time. It is intriguing as this market unfolds but, at the moment, we haven't changed our plans.

Our next question is from Oscar Cabrera of Bank of America Merrill Lynch.

Just wanted to focus on your copper business. And if I may just start with the current operations. Don, during your remarks, you said that the price or the costs, the unit costs were declining. I'm assuming that you're talking about per ore milled. You're cost on a per pound basis have increased. And I just wanted to make sure I understand where the increase are coming from. But you know, in our numbers, we have first quarter or, sorry, second quarter 2011, $1.30 more or less, and then increased last quarter to $1.60, this quarter $1.74.

Okay, we'll turn that over to Roger.

Obviously, unit costs. When we're talking unit costs on a per pound basis are heavily dependent on the production rates through the plants. But also , if you remember, clearly dependent on byproduct credits in the C1 truck unit cost and that has made quite a bit of difference in this quarter. As was mentioned earlier, production at Antamina's increased significantly, for example, in terms of copper, but stayed stable or slightly less than stable in terms of zinc. So the impact of byproduct credit adjustments on overall unit costs is, at Antamina was reasonably significant in the last couple of quarters and that's influencing how that weights into our total costs on a [indiscernible] basis as well. As we're going forward with increased milling rates being realized in Highland Valley, with Antamina having gone through the quarter really was its final ramp up quarter we'd think in getting to its nameplate, both in the mine and the mill. And with additional production coming out of Andacollo, [ph] as we ramp up crushing plant there in the next quarter. We can see the volumes going up, at essentially very similar total costs, so that will bring -- help to bring unit costs back down around, in the next few quarters. But there are a number of factors which influenced that unit cost and it's partly throughput but also partly byproduct credit.

Moving on to the development projects on specifically in Quebrada Blanca, could you provide further details on the -- what is the government asking with respect to hydrology? A lot of -- there's a number of projects that have been using saltwater, all as I can surmise is that the questions are coming either on the tailings or would the water use under -- for the construction of the project and so if that's the case, is there a risk that the CapEx could increase significantly because of what the government is looking for?

I'll answer you again on that one. Oscar, the current operations at Quebrada Blanca use underground water from a salar close to the operations and in fact, it's the same salar from which Collahuasi takes quite a larger proportion, not all but quite a lot of it's water. For Quebrada Blanca Phase II, we are planning -- we already have in the capital cost, the cost of a desalination plant and pumping of seawater from the ocean. So by the time Quebrada Blanca Phase II is fully commissioned and operating, we will actually stop using underground water in the vicinity of the mine, completely. That's the plan and that's what we have in our feasibility study. However, in the meantime, we are continuing to use the salar for existing operations and we will have a small additional increase in -- just for construction water, it's a small number but it is a small increase on a salar which is already pumped by bypass [ph] cells and our neighbors. So it's principally that issue and the modeling of that underground water supply, which has been raised by the authorities.

E Okay, that's helpful. And then lastly on -- turning over to coal, can you just remind us what your targets or objectives are in terms of contracted volumes versus spot? Based on the comments earlier on, if it's 5.5 tonnes a quarter, on contracted volumes, 22, you're looking to produce about between 24.5 and 25.5? Is that -- could we be using those metrics as something to -- for the year or are you targeting a different percentages?

Oscar, it's Bob. Now the guidance for the year we gave is actually on production, not on sales. So there -- and we actually have quite a bit of room at our ports now to stockpile more coal if we have a disconnect between production and sales for the quarter. Historically, we had been around 10% for spot. We're quite a bit higher than that now, as we blew it forward with additional efforts into China. We don't have a specific target, we're really working to make sure that we get the best price for the sales that we're going to make to meet our production objectives and we're really migrated what we used to call spot, we now have contractual obligations on the tonnage and then we negotiate the price. So it's not really the same as spot was in the past. So but this quarter, we'll -- we don't have a specific target for spot, we will work to sell the production, as long as we're satisfied with the pricing.

All right. Can you just remind me you one more thing, Bob, while I have you, in terms of the inventory, what are the stockpiling capability at port and at the mines, please?

We generally try to keep about a million tonnes at the port, but we can actually go much closer to 2 million tonnes at the ports, and it depends on which ports we're using at the time, but at the moment, we are actively using Westshore terminals, Neptune terminals and Ridley terminals for the West Coast. At the mine sites, we can exceed 1.5 million tonnes, and we're below that now and it's actually declining but that's the sort of capability we have.

I'd like to make a couple of comments for context on that last question. If you go back the last, say, 3 quarters, we had 2 weak quarters, the Q4 of 2011 and Q1 of 2012 when we produced more than we sold but we're able to manage the inventory such that we didn't have to cut production, then this quarter just finished, we sold 1 million tonnes more than we produced and worked it down. So we have got reasonable flexibility in the system as we go forward. Looking at the next quarter where, obviously, things have turned weaker recently, we do have room for inventories. So that allows us produce more consistently. Oscar, the other question I want to go back to your very first question, not just for yourself, but for the benefit of probably others on the call as well, and that was the comment on unit costs going down when cost per pound has gone up. So unit cost is a cost of a tonne that we process through the mill and that's what's under our control, and that has gone down and so we're quite pleased with the operations on that side. But we can't control the grade or how much content of both copper, the core commodity, or the byproducts. And so if the amount of by product in the tonne of ore and the price we're receiving for that byproduct both go down, then the net cost per pound of copper is going to go up even though we managed to process it through the mill for a lower cost. So hopefully that simplifies it.

Our next question is from Greg Barnes of TD Securities.

Donald, Bob, I guess, some questions or maybe you can provide some color around this spot price that some of the press are reporting around $190 a tonne, as down sharply over the last several days. Can you give us a feel for what's going on or is that a real price?

That's a good question. Well, Greg, we do see a lot of spot prices reported in the trade press, and we don't comment on our specific transactions, we won't do that. But it's hard to know whether a given spot price that's reported is accurate based on the times where we've seen that they don't agree with what we see. But to the extent it that reflects weakening market then, obviously, that's consistent with what we've been reading and what we've experienced.

And what about -- in your view, what is marginal cost of production in hard premium quality coking coal at the moment?

That's one way you'd have a variety of data points and so I'll just quote a recent one. I had lunch with the chairman of one of our large Chinese customers 2 weeks ago and he said that the marginal cost, domestic Chinese coal, was in the $180 to $200 range.

Any views outside of China, Don, say, fairly U.S.?

One of the factors I think people need to look at is the exchange rates, and exchange rates over the last 3 or 4 years and what's happened with the Australian dollar, Canadian dollar too. And then with the fairly strong growth in production in the U.S. and conversion to sending more to the export market, there's been quite an increase in the marginal cost there. But it also moves kind of quarter-to-quarter as different things shut down and get reconfigured. So it's hard to tell but it's -- if I were to just make a ballpark estimate, I think it's certainly $175 or higher. Actually, I see my coal marketing team are nodding they're heads very strongly, so I might be low on that.

You might be low on the $175?

Yes. But I think when you go to marginal cost, at very top end, there's not much volume as well, right? So and again, Greg, these are excellent questions, we look at these all the time trying to figure out where the threshold is that a bunch of production falls away and it's hard to tell.

And we did see some production come out of the market earlier this year when we got down to about these levels.

Yes. Well, we think some of that was over $200, right? So...

Our next question is from Garrett Nelson of BB&T Capital Markets. Garrett S. Nelson - BB&T Capital Markets, Research Division: I was just wondering if you could provide an update on negotiations at Antamina? Are you close to reaching a new collective bargaining agreement there? And I know your interest is only 22.5% but any information would be appreciated.

It's Roger, Garrett. The formal part of the process with the negotiations has commenced. That's principally the process of talking about words in the document. The discussions around value have not commenced and we wouldn't expect that, perhaps, it might come towards the end of Q3 but more likely early in Q4 before the impact agreement has to be settled and so the final deal will be done close to the deadline.

Our next question is from David Beard of Iberia.

A question related to your capital allocation. When you look at expanding QB2 versus making acquisition, are the 2 mutually exclusive?

No. We're going to look at our balance sheet very carefully. But as you know, we've termed out most of the bond issues we have out there so that our maturities coming due in the next 5 years are quite manageable. And if QB2 was on a slower schedule than we'd have [indiscernible] and the fact is that we own 76.5% of QB2 and control it. So if we saw an acquisition that made a lot of sense to us, we could always do that and put QB2 on hold for a couple of years, depending on what size and cash was required. So they're not mutually exclusive. At our board meetings in each of the September, November, and February, I allocated significant amounts of time for us to review, I think it was 480 different copper projects around the world to compare those to allocate capital to QB2, so it's a pretty disciplined process. So yes, we're always looking at both.

And just to switch to coal relative to breakeven and an adequate return on invested capital. But what price would Quintette be fully loaded, breakeven? At what coking coal price do you need to earn a decent return on capital in that project?

With Quintette, it's somewhere down like $130 or something. Like Quintette, we don't have any concerns about return on capital, our concerns are with the caribou.

And where do you think that breakeven will be? Oh, I'm sorry, you mean $130 is breakeven? Or where you can earn an adequate return on capital?

Adequate return.

Our next question is from Alec Kodatsky of CIBC.

Just a couple of questions here. You mentioned in the release that your investigating alternative port options, and I'm just curious if maybe a little bit of color around what's spurred the process and what magnitude of spare capacity you might actually see?

Good morning Alex, Bob. What we see as critical to making sure that we can move all our sales in any given quarter is making sure we have options on ports. So -- and we're very well served by Westshore and Ridley and Neptune, so it's not an issue of seeking an alternative. It's more seek and ensure that we have the options. So we did a couple of vessels out of the port of Québec to test that, through the Great Lakes, and it worked very well. It's expensive, so it's not something we would do often and that would go through Thunder Bay. But we've also used PCT, which is primarily a sulfur terminal, we've sent several vessels there and we expect we'll send more vessels there during an outage later in the year at Westshore Terminals just to ensure that we continue to have fluidity of our transportation system.

Okay. And how long was the outage at Westshore anticipated to be?

It's about 5 weeks in October. They're adding a -- they're replacing a single dumper with a double dumper, so they will have 2 double dumpers, and that's part of their expansion to 33 million tonnes. So it's a very important part of the expansion, but it does mean that they will lose one dumper during that outage. We'll still have 60% dumping capacity at the terminal, so it's not being totally shut down but, regardless, because we want to make ensure that we're not going to lose any sales during that period, we'll be taking advantage of other port options.

Okay. And just in terms of your production outlook, you obviously haven't shifted from where you were. Just wondering if, at what point do you actually start to reconsider other production outlook based on how your order book is building, is it something you're going to worry about this quarter, next quarter? Or at all, based on how much the phones ringing?

Well, it will certainly be too soon to make any decisions to change it at this point. Just tracking it kind of quarter-to-quarter, we went to last quarter this call, most people were pretty negative because we've had 2 weak quarters but we were seeing really strong demand and no one believed us. But we've just delivered a quarter where we sold more than 6.7 million tonnes and a million tonnes more than we produced. So we know how much it can swing quarter-to-quarter. We don't see any change in the sort of the macro trends in terms of development in China and emerging markets that's requiring a lot of steel. It is weaker, right now, but the government in China are about to changeover, in terms of leadership, in the next few months and there has been a number of projects that have got approval, that they're building, that are -- they require steel and some of our customers are getting their plants approved that will require coal. So we don't see any reason to change our long-term plan to get capacity in the coal business to 31, 32 million tonnes. And in fact, long-term, we see that there's going to be more needed and we're looking at the conceptual plans for how to go further than that. Since you asked the question, it brings me back to the question that was asked earlier about what coal price would you need to have an adequate return on Quintette, and a little more color on that. The reason we can say that is because the capital to get Quintette into production is relatively low and about half the capital is mobile equipment that we can use elsewhere in Highland Valley or in Elk Valley, or even in Chile. So in order to get your capital back, it doesn't -- you're producing 4 million tonnes a year, it doesn't take much. One good year like we had last year and you basically get it all back, so whether it's $130 or $135, but it's certainly nowhere near $200, and we think that it's a good investment to bring into production if we can get a solution to the caribou management issue.

Great, and I think you already partially answered my last question. That was just really to contrast your view on China relative to last quarter, I think, the last discussion, you held a pretty constructive view, the markets obviously starting to shift in terms of sentiment towards the prospects for China and just curious as to your thoughts on how or if anything you've seen change in the last 3 months?

Yes. So I had a good visit 2 weeks ago when I met with quite a number of reasonably senior people at our customer levels and with PIC and government and so on, Nick Carmers [ph] and the rest. And we don't think anything has changed in the macro trend that -- and we'll go back to one of the slides we have in our IR presentation, it just shows the map of what 7% growth really means. And 7%, because the denominator is so large, that's an incremental addition of $500 billion of absolute GDP growth and when you compare that to 5 or more years ago when the growth percentage rate was higher, 10%, 12%, 13%, the actual incremental addition to GDP in dollars, was lower, it was $250 billion to $300 billion. So we think that you're adding half of -- $500 billion or $0.5 trillion to the economy that, that's pretty good. We see that the Premier has announced several times that they're concerned about the slowing growth, and we think they're highly likely to continue to do something about it. We don't think that there will be a very large stimulus program, in fact, we were told several times that there wouldn't be, like the one that was in 2008, the 4 trillion RMB. That that won't occur, they believe they overdid it at that stage. But they have the ability to manage their economy quite tightly, which the western world clearly doesn't. And the fact that inflation came in at 2.2% gives them room to make some moves, if they so choose.I think they're going to do that but on a cautious basis until leadership transition is finished, which won't be long now. So yes, we see that in the macro trend, nothing has…

Our next question is from Brian MacArthur of UBS.

I have a couple of questions. I just want to go back to QB again. Maybe I asked the question differently. One of the nice things this, originally, was sequenced after the expirye of QB1. At what point does it become critical in the delay path that you'd actually have a big gap between say, QB1 and QB2? If you're going to do it, you'd have to worry about relocating people and issues like that.

We have production of copper at QB continuing through 2017. So a year or so, at this stage, beyond where we would expect to bring in concentrated production but probably more importantly, the mine changes very little, so the mine keeps operating at approximately the same rate, slight increases as we go into QB Phase 2 but not significant because the ore body for the QB Phase 2 project is essentially being stripped, and been stripped by the current operations. So point in fact, mining operations can be pretty continuous and we would be able to sustain most of our people through that period. We will have also be wanting to retrain and engage some additional people for concentrator operations compared with leaching operations. So we've got quite a bit of flexibility, in a period measured in -- after couple of years, I would say.

And a totally different question. I notice this quarter, in the last couple of quarters actually, the deferred tax portion is very, very low of your taxes. Now I know some of that is obviously a function of earnings going down at HVC and Trail and the coal operations off the big deferrals, but it still looks like it's awfully low as a percentage, which obviously affects your cash flow coming out, is there something different that's happening right now, or is it just purely lower earnings, even though I don't think the ratio is right? Or does that negative loss at Trail come into it? Or is there less deferred taxes at Andacollo? Is there something going on differently because the cash portion of the taxes, and I'd like to start a pretty big tax pulls, is pretty low at the moment.

It's John Gingell, the controller. Really the change comes about as a result of where our earnings are. And as a higher proportion -- or as a lower proportion of our earnings are in Canada this quarter, particularly, because our gross profit has shrunk in relation to our overhead. And all the overhead and interest charges are in Canada. The deferral is less, because that's only on the mainly on the Canadian income. So it's a function of where our earnings are and the relationship of our gross profit to our overhead.

So and I guess it's also because your -- all the debts in Canada, too. So that's gone up, that's driven that relative margin down as well, too. I guess that what's happened.

That's exactly the case.

Our next question is from Kerry Smith of Haywood Securities.

Don, for the expansion of Neptune to 12.5 million and, ultimately, 18.5 million tonne a year, does that lower your cost much? Or is it really just a way to give you more flexibility in terms of tonnes out to the customers?

Kerry, it's Bob Bell here. It certainly will lower the cost of handling coal at Neptune because a large portion of the cost, or a material portion of the cost is fixed cost. So any time you add additional throughput then the overall costs go down. Very definitely though, it's also intended to give us access to port capacity, which has proven to be a strategic asset on the West Coast, so that's driven primarily by making sure we have the capacity to expand our mines as we planned and offer potential if something else comes along.

Okay. And so can you give us a rough idea as to what the impact on the cost might be at, say, 12.5 million tonnes a year there, like even percentage or is it a couple of bucks a tonne or?

Well of course, you're looking -- we have a mix of -- the problem of talking in specific is, from quarter-to-quarter, we have a varying mix between the 3 ports and how much is going north and plus we give our distribution costs, it includes rail. So it's quite a mix. But you've seen Westshore's disclosure and you would get a sense of it from us.

Kerry, you also have to remember that we have to negotiate contracts with the other 2 ports and so some of this information we kind of protect for that reason.

And then for QB, as I remember it, you carry ENAMI on the capital side, so for QB2 you would secure it there, 10%, but for your partner, they have contribute. Is there some kind of a dilution clause and, if there is, would Teck be prepared to put up 100% of the capital to build it through some sort of dilution clause? Or do you really only want to put up as minimal capital as required?

Yes, that's a good question. I think what we have to say at this stage is that we are in discussions with ENAMI and IMSA about a number of factors and trying to get final resolution on how things will be going forward. So we're not in a position right to date, to answer that question as clearly as you would like, so probably, save it for the next quarter and hopefully, we will be.

But Don, am I correct that is ENAMI carried or...?

Yes. You're absolutely correct, that the 10% ENAMI interest is carried.

Okay. So the only real discussion is with IMSA then?

Right.

Okay. And then just one last question, maybe for Ron. You have $265 million of CapEx in 2012 at QB2, and this project is kind of essentially on hold pending the resubmission of the EIAS, what is that $265 million actually for?

I'll let Roger speak to that one.

Or Tim.

The short answer, Kerry, is that we're not putting it on hold. We're continuing with the program that we have on the project at this stage, which is mostly around engineering and the securing of some long lead time items. But Tim might like to add some more color to that.

Okay, but so the bulk of it is engineering and ordering a long lead items for this, okay. That's fine, that answers the question, I think that's fine.

Remember, we should say, and Roger did earlier, is that we have been strongly encouraged by the government and the local communities that they do want to see this project go ahead, so we have a pretty good degree of confidence that all these issues will be resolved eventually.

Our next question is from John Hughes of Desjardins Securities.

Just a couple of quick ones. On Slide 10, I saw -- I think that's a great slide, the total material move, this is coal-related. But that 300-plus million bcm material move in that trend, is that upward trend going to continue? Or now that we got to that 310 mark or around there, is it going to start to level off because that, of course, that leads into the strip ratio and should we be using 11, 12 or 13, or less going forward?

John, Ian Kilgour here. We are going to be leveling off. We have pretty much reached the level that we need to continue at, to get to our 28 million tonnes per annum, and the ratio is going to continue around the 11:1.

And will that be true through to 2013 as well?

Yes, pretty much for next couple of years.

Okay, great. And one sort of technical, Ian, on that. What specific gravity should we be using for the coal? Like average gas just for conversion purposes?

About one, basically you turn one bcm of coal into one tonne kind of clean coal.

Very good. Last question, Don, leadership transition in China, we're all watching that. Its certainly been in the -- over the summer and the late spring, its been in the news. Does this transition present any additional opportunities for Teck?

In what way? Can you elaborate?

Yes. I'm just sort of thinking with your -- you obviously do spend quite a bit of time there, but whether it be coal sales into the country, let's say, every 10 years we really get a political change, and with your ownership connection and that type, I'm just wondering, is there opportunity for doing more business following October than there has been in the past?

I wouldn't want to make any definitive statement on that. I guess, I would say that we've made a lot of progress with Chinese customers since the CIC investment. And it continues to be really helpful, enormously helpful. We have the largest market share of 2 of the very largest fuel companies now in terms of their purchases of seaborne coal where we certainly we're in that position before. And we have personal access to very senior leaders, I see them frequently. So all that has been beneficial, I think it will continue to be beneficial. But the leadership change hasn't occurred yet and we'll have to see what happens. But I go back to my original comments. I think nothing has changed in terms of the macro trend, and at this stage, we don't see any sign that, even with the leadership change that there will be any significant change in direction. That of 12 5-year plan will carry on, and within the 12 5-year plan, there's going to be lot of tonnes of coal, copper and so on. So I think we'll continue to make progress there but I wouldn't want to make anything too definitive about the actual leadership change.

Our next question is from David Lipschitz of CLSA. David Lipschitz - Credit Agricole Securities (USA) Inc., Research Division: Yes, you know you talked about -- not to beat a dead horse, but on the coal side, you talked about you're still in negotiations with people on price, how does that work if he can't come to an agreement? And also if they do come back to you, let's say, a month from now and say, "yes, we need the coal now," do they have to go back to the benchmark price or is it negotiated more on the current prices?

Well, Dave, it's Bob Bell here. It's price negotiations so you can't force someone to accept your price. But obviously, we're not going to undermine the agreements we've already reached with our other customers. So, if it came to a point where they we just wouldn't agree to the price, then they'd have to risk not getting the coal. They certainly couldn't come back later and demand coal at a price that they hadn't accepted. So -- and if you look at it from the customer perspective, in the end, they want access to our coal, it's very good quality coal and we're one of the reliable suppliers, one of the largest suppliers in the market. So in the end, it's often just a matter of it takes a certain amount time for customers to get the internal approval and get their head around the requirement to finally come and agree with the price.

I might comment -- a lot of questions of this nature from the street are fairly short-term but when you're in the negotiating room with the customers, these are long-term relationships and each side knows what the other can do, next quarter, or the quarter after, if the market conditions turn, and that's not far from the negotiation. For example, in the 2008, 2009 period when, of course, the global of financial crisis occurred, we had several customers who actually reneged on their contracts, so then when the market turned tight after -- we cut their volume in half and 3 of them came to us and wrote a check to make up the lost margin that we had from the volume that they reneged on because they needed to get back to the volume. And so we did with them, but 2 customers who didn't do that, we kept them at half and they had to pay very high prices in the spot market. So people remember that and, likewise, we remember customers who performed their contracts when the markets were very weak. And so when we had a strike and other companies declared force majeure, or didn't deliver volumes, we delivered volumes at the price that they would have had to because we respected the long-term relationship. So you've got to have all those factors in mind when you look at the negotiations. And so if the customer takes a week or 2, or 3 longer to finalize their decision in that context, I guess that's just part of the game. David Lipschitz - Credit Agricole Securities (USA) Inc., Research Division: Okay. So basically, you're sticking to the $225, even if they take a couple of more weeks and spots, if it's $190 or something like, you're going to stick to that, no matter what?

Oh, yes.

Our next question is from John Tumazos of Very Independent Research.

Earlier decide this morning, your partner, Suncor, reported earnings, and Mr. Williams appeared unhappy that the earnings were down, and specifically talked about lowering capital spending, and he didn't exactly say he was canceling Joslyn, Fort Hills and Voyager, he said he was looking at it. Maybe this is new news and you can't comment, but could you just run through your carrying value on Fort Hills? I am interpreting that Suncor had its own specific issues, including a write off of natural gas in Syria and things that weren't related to the project specifically, but might be corporate reasons why it would spend less.

I'm not sure what the actual end question was there but...

What would you do if Suncor doesn't go forward?

If they don't go forward, then they don't go forward for now. And this scenario has occurred to us before and we don't think anybody gives us any value on our share price for Fort Hills at the moment anyway. So it's not a question -- for us, we have 20% interest. We really want it to go ahead because we like the project. [ph] We think the returns are pretty solid. It's 50-year mine life. Once you get through the construction phase, the capital phase, then it will be a core asset in the company for generations. So big picture, we like it. Whether it goes on the current schedule or is deferred for a year, based on Suncor and Total's needs is not a huge deal to us. But at the moment, the way we look at it, well, we'd like to see it go ahead.

Our next question is from Fraser Phillips of RBC Capital Markets.

Don, I just wanted if I could to confirm 2 time lines, Relincho and QB, just in case of Relincho when, I'm not sure I heard you correctly, when feasibility is due to be finished and when you might make a decision. In QB, I know it's up in the air, but where -- when you're expecting to be in a position to make a decision prior to the latest environmental pushback?

Okay. On Relincho, we're keeping the full feasibility on schedule to be complete at the end of Q1 of 2013 and that is to give us the option that, if QB has been delayed, that we could just go ahead with Relincho instead. But currently, our priority is QB2 and that's what we want to go ahead with. And to your question of when will we get a final decision. You know, we don't know. We'd like to get on with it, but we've got these -- the SEIA and the discussions with the owners, so we're just working through those, but eventually, we'll get there.

And when will you expect -- before that environmental, I guess, I was just curious when you're expecting, you might have been, I know it's now up in the air, but was it the end of this year, at that point? Or was it a little later that you're hoping or you're able to be in that position?

Well, so there's a 2 or 3-part answer to that question. And it depends on what level decision you're talking about. So we hope from an owner's point of view, actually, that the 3 owners would be clear on their agreement to go forward, probably we'd hope that to have occurred by the April board meeting. So that's 3 months behind or so. In terms of the SEIA, maybe on that schedule, I'll turn it back to Roger and then for final construction of things, decisions, with all those other permits, I'll let Roger and Tim answer that.

Sure. In the case of the approval process, we had originally submitted a month or so ago, and allowed approximately a 12-month approval process, which was in line with the approval processes within the government of Chile's process. So we had assumed we would get an approval, we're working on the assumption we're getting an approval in the second quarter of next year. But as of today, we're not sure of that now, and we'll have to see how that goes depending on the ongoing discussions with government authorities. Once we have that approval, we would be in a position to commence execution with a construction period through till 2016 and I'm sure Tim would like 2016. I'm sure Tim would like to comment on that further. It is a 2-line plant so we would be starting out one line ahead of the other line so it's not even just a fixed, an easy single date for when we would been starting production.

Just back to first, you have to go the net book value of Fort Hills, that's $730 million. And obviously, we feel we could sell it for a lot more than that.

We have no further questions registered at this time. I will now like to return the meeting over to Mr. Lindsey.

Okay. Well thank you very much for joining the call this morning. Just to summarize, we are pleased with the operating results. Coal sales were much higher than, I think, people expected. The operations and expansion is going very well and we're pleased with the record copper production and we look to be on track to hit our target of annualized rate of production of 400,000 tonnes a year. So operationally, we're feeling pretty good. The market though is weaker and the outlook is uncertain, still driven by western Europe uncertainty, which we didn't discuss much today, but that's an ongoing issue. But our firm belief is that the long-term macro trend is still in place, and that China and other emerging markets are going to continue to require more commodities as they urbanize their countries and continue their development. Thank you once again and we look forward to speaking to you for the third quarter conference call.

Thank you. The conference has now ended. Please disconnect your lines at this time and we thank you for your participation.