HispanicBusiness

Coal sales in 2012 reached 24.0 million tonnes, an increase of 1.8 million tonnes over last year and the third highest year on record. Increased sales were achieved through continuing progress in growth markets and occurred despite weaker demand in some of our traditional markets.

Coal prices have been agreed with the majority of the quarterly contract customers for the first quarter of 2013 based on pricing of US$165 per tonne for the highest quality products, which is consistent with prices reportedly achieved by our competitors. As of the date of this release, contracted sales are approximately 6.0 million tonnes of coal for delivery in the first quarter at an average price of US$159 per tonne. We remain in quarterly contract discussions with a small number of customers and are anticipating selling additional tonnage on the spot market. Vessel nominations for quarterly contract tonnage are determined by customers and final sales and average prices for the quarter will depend on timely arrival of vessels and the performance of our coal-loading facilities.

The cost of product sold in the fourth quarter, before transportation and depreciation charges, was $62 per tonne, or $3 per tonne lower than in the same quarter in 2011, and $13 per tonne lower than the first three quarters of 2012. Cost reduction efforts at the mines, which accompanied the reduction in production levels beginning in mid-August, have been successful. Lower unit cash production costs in the fourth quarter when compared to the same period a year ago resulted from reductions in overtime, a hiring freeze, shutdowns of higher cost equipment, shutdowns on statutory holidays and reductions in the consumption of repair parts in conjunction with minimizing the use of maintenance contractors, contract miners and consultants. The current 2013 production plan indicates that cost of product sold will fall between $71 and $77 per tonne before the effects of new accounting standards on overburden removal costs. We expect our first quarter 2013 unit costs to be in the lower end of this range, assuming that we meet our sales targets for the quarter.

Transportation costs in the fourth quarter were $41 per tonne, 24% higher compared with the same quarter a year ago due to higher ocean freight, port and rail costs. Ocean freight costs this quarter increased due to a higher portion of coal being sold inclusive of ocean freight, but are expected to decline in 2013 as the proportion of total sales to China is expected to return to prior levels. Port costs rose due to an annual increase in contract rates and inflation adjustments. Rail costs increased due to lower-than-planned shipping volumes in 2012 as well as inflation adjustments. Additional costs of utilizing different coal terminals as a means of supplementing capacity during outages that occur as part of expansion programs at the ports in greater Vancouver and during the period after the Berth 1 incident at Westshore also contributed to the higher transportation costs in the fourth quarter. Transportation unit costs in 2013 are expected to fall between $36 and $40 per tonne, which takes into account inflationary adjustments where applicable and expected sales including ocean freight.

CP Rail's ongoing investment in its network, including additional rail sidings and the extension of the Elkview load out loop supported by the recent rail loop extension at Neptune Terminals, has added rail capacity for coal through longer trains. All the trains in CP export service are now running at 152 cars in length compared with an average of 126 cars in length prior to the investment, allowing more coal to be transported with fewer trains.