Highland Valley Copper's fourth quarter gross profit before depreciation and amortization increased significantly from a year ago due to substantially higher production and sales volumes. In addition, Highland Valley's 2011 operating costs included a one-time labour settlement charge of $44 million that contributed to the lower gross profit in the fourth quarter of 2011.
Copper production in the fourth quarter of 37,400 tonnes was 37% higher than a year ago primarily as a result of significantly higher grades. Production was focused on the higher grade ore in the Valley pit during the fourth quarter of 2012. Molybdenum production was 10% lower than the same period a year ago primarily due to lower ore grades.
The mill optimization project progressed in the fourth quarter with commencement of structural steel erection and placement of major equipment. Detailed engineering was substantially complete at the end of the year. The project is on track for completion by the end of 2013, which will enable increased throughput rates and recoveries in 2014.
Ore feed grades are expected to return to the average reserve grade in 2013, with slightly lower grades expected in the first quarter due to pit sequencing. Mill throughput is also expected to be constrained in 2013 due to various shutdowns required for tie-ins to advance the mill optimization project.
Highland Valley Copper's production in 2013 is expected to be in the range of 100,000 to 110,000 tonnes of copper. Molybdenum production in 2013 is expected to be approximately five million pounds.
Antamina (22.5%)
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) Copper-only ore 8,619 6,930 32,160 25,335 Copper-zinc ore 3,133 2,726 14,323 12,259 -------------------------------------------------------------------------- 11,752 9,656 46,483 37,594Copper (note 1) Grade (%) 1.16 1.15 1.10 1.04 Recovery (%) 88.7 87.4 87.9 85.9 Production (000's tonnes) 121.6 95.0 446.8 333.7 Sales (000's tonnes) 131.3 97.6 448.3 337.0Zinc (note 1) Grade (%) 1.73 2.03 1.85 2.26 Recovery (%) 82.5 81.4 80.7 84.4 Production (000's tonnes) 44.4 47.6 219.0 235.4 Sales (000's tonnes) 62.9 44.4 229.2 232.8Molybdenum Production (million pounds) 2.7 5.0 12.1 13.8 Sales (million pounds) 2.4 3.9 13.5 12.3Cost of sales (US$ millions) Operating (note 2) $ 272 $ 154 $ 842 $ 563 Distribution $ 29 $ 25 $ 109 $ 92 Royalties and other (note 3) $ 54 $ 34 $ 206 $ 204 Depreciation and amortization $ 81 $ 30 $ 184 $ 110Gross profit summary (our 22.5% share) ($ millions) Before depreciation and amortization $ 173 $ 149 $ 633 $ 588 Depreciation and amortization (18) (7) (42) (23)---------------------------------------------------------------------------- After depreciation and amortization $ 155 $ 142 $ 591 $ 565----------------------------------------------------------------------------1. Copper ore grades and recoveries apply to all of the processed ores. Zinc ore grades and recoveries apply to copper-zinc ores only.2. Cost of sales in the fourth quarter includes a US$43 million one-time labour settlement charge.3. In addition to royalties paid by Antamina, we also pay a royalty in connection with the acquisition of our interest in Antamina equivalent to 7.4% of our share of cash flow distributed by the mine.
