HispanicBusiness

Cost of sales rose as a result of increased lead sales volumes and partly due to timing of maintenance costs. The royalty cost increased by US$26 million reflecting the increased NANA royalty rate, which accounted for approximately one-half of the increase with the balance of the increase related to higher sales values.

In accordance with the agreements governing our development of the mine, the net proceeds of production royalty that we pay to NANA Regional Corporation Inc. increased to 30% in the fourth quarter from 25% previously.

Offsite zinc inventory available for sale from January 1, 2013 to the beginning of the 2013 shipping season totals 218,000 tonnes of contained metal. Zinc sales volumes in the first quarter of 2013 are estimated to be approximately 108,000 tonnes of contained metal. All offsite lead inventories have been sold as of the end of 2012.

Red Dog's production of contained metal in 2013 is expected to be in the range of 500,000 to 525,000 tonnes of zinc and 85,000 to 90,000 tonnes of lead.

Red Dog continues to pursue a renewal of its main water discharge permit. In January 2010, the U.S. EPA released the Aqqaluk Supplemental Environmental Impact Statement ("SEIS") and simultaneously renewed the water discharge permit for the mine under the National Pollutant Discharge Elimination System ("NPDES"). As a result of a third-party appeal of that permit, the conditions of the renewed permit governing effluent limitations for lead, selenium, zinc, cyanide and total dissolved solids ("TDS") were stayed pending resolution of the appeal by the Environmental Appeal Board. Those appeals have been favourably resolved (although a related court decision is the subject of further appeal to the Ninth Circuit Court of Appeals) and jurisdiction over the permit has passed to the State of Alaska, which is in the process of modifying the 2010 permit to reinstate effluent limitations for lead, selenium, zinc, cyanide and TDS. We expect that a modified permit will be issued in 2013. Nonetheless, there can be no assurance that further appeals or permit uncertainty will not give rise to liability or impede mining activities, or that permit conditions that are ultimately issued will not impose significant costs on the Red Dog operation.

ENERGY

Fort Hills Project

Engineering studies are ongoing to update the design basis for the project and improve the accuracy of cost estimates to facilitate a project sanction decision by the partners in 2013. Suncor, operator of Fort Hills, has indicated that it is developing a cost-driven construction schedule and as a result, should the partners approve the sanction of Phase One of the Fort Hills project in 2013, production would not be expected to start before 2017.

Our share of 2012 Fort Hills spending, including our ongoing earn-in commitments, was $122 million compared with our previous guidance of $220 million. Spending decreased in 2012 due to the focus on developing the cost-driven project schedule. Our share of 2013 Fort Hills spending is estimated at approximately $290 million.

Frontier Project

The Frontier project has been designed for up to four production lines with a total capacity of approximately 277,000 barrels per day of bitumen. The first two production lines are planned to have a production capacity of 159,000 barrels per day.

Provincial and federal regulatory agencies completed their initial review of the Frontier project application and provided supplemental information requests in July 2012. We completed preparing responses to these information requests in late 2012 and filed these responses with the provincial and federal regulatory agencies in January 2013. The Canadian Environmental Assessment Agency estimates the federal review schedule for the Frontier project application to be approximately two years. When time to respond to information requests is included, 2015 is the earliest an approval decision and receipt of required permits is expected.