Operating costs were higher this year than they were in 2011 due to higher labour, consumables and contractor costs, and due to the incremental costs associated with producing more pyrite.
2013 outlook for production
Pyhasalmi expects to mine 1.4 million tonnes of approximately 1 percent copper and 1.7 percent zinc in 2013, and produce between 12,000 tonnes and 13,400 tonnes of copper and 20,300 tonnes and 22,500 tonnes of zinc. Zinc production should be lower than it was in 2012 as we expect a decrease in zinc grades in 2013.
Pyhasalmi expects to produce and sell 820,000 tonnes of pyrite in 2013.
Operating costs are expected to remain at levels consistent with 2012.
Financial review
Lower earnings because of lower sales volumes and realized metal prices this year
---------------------------------------------------------------------------- three months ended year ended(millions unless December 31 December 31 objectiveotherwise stated) 2012 2011 2012 2011 2013----------------------------------------------------------------------------Sales analysisCopper sales (tonnes) 3,200 3,400 13,400 13,700 12,700Zinc sales (tonnes) 9,000 7,400 25,100 34,400 21,400Pyrite sales (tonnes) 299,700 175,900 852,500 809,200 820,000 ----------------------------------------------------Gross copper sales $25 $27 $106 $114 $101Gross zinc sales 18 14 48 70 47Other metal sales 21 18 72 76 61 ----------------------------------------------------Gross sales 64 59 226 260 209Smelter processing charges and freight (12) (13) (44) (56) (42)----------------------------------------------------------------------------Net sales 52 $46 $182 $204 $167----------------------------------------------------------------------------Cost analysisTonnes of ore milled (thousands) 351 348 1,384 1,386 1,370Direct production costs ($ per tonne) $47 $41 $43 $41 $42----------------------------------------------------------------------------Direct production costs $16 $14 $60 $57 $58Change in inventory - (1) - (1) -Depreciation and other non-cash costs 4 3 11 9 12----------------------------------------------------------------------------Operating costs $20 $16 $71 $65 $70----------------------------------------------------------------------------Operating earnings $32 $30 $111 $139 $97----------------------------------------------------------------------------Operating cash flow $28 $23 $97 $114 $84----------------------------------------------------------------------------
The objective for 2013 uses the assumptions listed on page 15.
The table below shows what contributed to the change in operating earnings and operating cash flow between 2012 and 2011.
---------------------------------------------------------------------------- three months ended year ended(millions) December 31 December 31----------------------------------------------------------------------------Lower copper prices $ - ($6)Higher (lower) zinc prices 1 (3)Higher (lower) zinc sales volumes 3 (11)Lower copper sales volumes (2) (5)Higher (lower) other metal sales 3 (3)Lower smelter processing prices and freight 1 4Higher operating costs in base currency (3) (8)Foreign exchange - decreased operating costs 1 5Other (2) (1)----------------------------------------------------------------------------Higher (lower) operating earnings, compared to 2011 2 (28)Change in tax expense (1) 7Changes in working capital (see note 17 on page 52) 3 5Other 1 (1)----------------------------------------------------------------------------Higher (lower) operating cash flow, compared to 2011 $5 ($17)----------------------------------------------------------------------------
