Quebrada Blanca's gross profit before depreciation and amortization in the fourth quarter declined substantially due to significantly higher unit costs, and a 14% decrease in sales volumes as a result of lower production.
Copper production in the fourth quarter declined by 19% to 14,300 tonnes compared with the same period a year ago. Production decreased as a result of processing lower amounts of heap and dump-leach ore placed in this and previous quarters. In addition, dump leach mining activities were stopped in the fourth quarter as a result of a flow of dump leach solution into the open pit through a gravel lens in the pit wall. Dump leach mining is expected to resume in the first quarter of 2013.
Operating costs increased by US$34 million in the fourth quarter compared with the same period a year ago. The increase was due to significant increases for labour costs, reflecting the new terms of the collective agreement ratified earlier in 2012, higher contractor and consumables costs.
Steps were taken in the fourth quarter to address lower production and higher costs at Quebrada Blanca, as the leaching operation reduces in scale ahead of the Phase 2 concentrator project due to lower ore grades. Manpower of both company employees and contractor employees was reduced and a review of supply and maintenance contracts was undertaken. These and other actions are expected to improve results in 2013, although challenges will remain as the Quebrada Blanca Operation nears the end of its life.
Quebrada Blanca's production in 2013 is expected to be in the range of 50,000 to 60,000 tonnes of copper cathode.
Carmen de Andacollo (90%)
Operating results at the 100% level are summarized in the following table:
Three months ended Year ended December 31, December 31, 2012 2011 2012 2011----------------------------------------------------------------------------Tonnes milled (000's) 4,233 3,763 16,723 14,751Copper Grade (%) 0.54 0.51 0.52 0.51 Recovery (%) 87.1 89.5 86.8 88.2 Production (000's tonnes) 19.7 17.3 75.8 66.1 Sales (000's tonnes) 19.2 16.2 69.7 63.0Gold (note 1) Production (000's ounces) 16.7 15.8 57.6 54.3 Sales (000's ounces) 17.4 12.2 56.3 47.5Copper cathode Production (000's tonnes) 0.8 1.8 4.0 6.3 Sales (000's tonnes) 1.1 1.3 4.4 6.0Cost of sales (US$ million) Operating $ 96 $ 78 $ 344 $ 304 Distribution $ 9 $ 6 $ 28 $ 22 Depreciation and amortization $ 23 $ 15 $ 84 $ 76Gross profit summary ($ millions) (note 2) Before depreciation and amortization $ 70 $ 42 $ 225 $ 288 Depreciation and amortization (22) (16) (83) (75)---------------------------------------------------------------------------- After depreciation and amortization $ 48 $ 26 $ 142 $ 213----------------------------------------------------------------------------1. Carmen de Andacollo processes 100% of gold mined, but 75% of the gold produced is for the account of Royal Gold Inc.2. Results do not include a provision for the 10% non-controlling interest in Andacollo.
