There is no assurance that we will ultimately be successful in our defense of the litigation or that we or our affiliates will not be faced with further liability in relation to this matter. Until the studies contemplated by the EPA settlement agreement and additional damage assessments are completed, it is not possible to estimate the extent and cost, if any, of remediation or restoration that may be required or to assess our potential liability for damages. The studies may conclude, on the basis of risk, cost, technical feasibility or other grounds, that no remediation should be undertaken. If remediation is required and damage to resources found, the cost of remediation may be material.
Red Dog (100%)
Operating results at the 100% level are summarized in the following table:
Three months ended Year ended December 31, December 31, 2012 2011 2012 2011----------------------------------------------------------------------------Tonnes milled (000's) 1,001 856 3,576 3,673Zinc Grade (%) 18.1 19.7 18.2 19.1 Recovery (%) 78.6 80.0 81.3 81.5 Production (000's tonnes) 142.3 135.3 529.1 572.2 Sales (000's tonnes) 188.5 191.8 509.6 555.9Lead Grade (%) 4.6 5.5 4.6 5.0 Recovery (%) 57.5 46.4 57.7 45.9 Production (000's tonnes) 26.3 22.1 95.4 84.0 Sales (000's tonnes) 49.2 32.7 95.6 78.3Cost of sales (US$ millions) Operating $ 107 $ 88 $ 234 $ 219 Distribution $ 41 $ 41 $ 107 $ 114 Royalties (NANA) $ 73 $ 47 $ 137 $ 129 Depreciation and amortization $ 17 $ 15 $ 57 $ 51Gross profit summary ($ millions) Before depreciation and amortization $ 157 $ 159 $ 418 $ 547 Depreciation and amortization (17) (15) (57) (51)---------------------------------------------------------------------------- After depreciation and amortization $ 140 $ 144 $ 361 $ 496----------------------------------------------------------------------------
Red Dog's gross profit in the fourth quarter was similar to the same period a year ago. Higher prices and higher lead sales, comprised in part of sales deferred from the third quarter due to weather-related shipping delays, were offset by a 5% increase in the NANA royalty rate, as described below.
Mill throughput in the fourth quarter rose 17% compared with the same period a year ago as throughput in the fourth quarter of 2011 was partly affected by intermittent mill shutdowns when the new ISA mills were commissioned. Mining was exclusively from the Aqqaluk pit in the fourth quarter of 2012, versus approximately 79% in the same period a year ago, which resulted in lower ore grades.
Zinc production in the fourth quarter increased by 5% from a year ago to 142,300 tonnes as the increased mill throughput was partly offset by the lower ores grades and recoveries to manage silica levels. Lead production was 19% higher than the fourth quarter of 2011 due to improved recoveries as significantly less near-surface, weathered ore from the Aqqaluk pit was processed in the quarter.
