For the year, and the quarter, changes in our copper treatment and refining charges are due to changes in copper-in concentrate sales volumes. Sales volumes also drove variations in zinc treatment charges at Cayeli and Pyhasalmi, in addition to more favorable terms with smelters, reflecting a deficit in the zinc concentrate market at the time our 2012 contracts were negotiated.
2013 outlook for smelter processing charges and freight
We expect our costs for copper treatment and refining to be higher in 2013 than in 2012 as the global copper concentrate supply is expected to narrowly exceed smelter capacity in 2013, shifting the market to a slight surplus position towards the end of the year. We do not expect to pay copper price participation in 2013.
We expect total zinc smelter processing charges, including price participation, to be slightly higher than 2012.
Las Cruces sells its copper cathode production directly to buyers in the Spanish and Mediterranean markets and therefore does not incur smelting processing charges and has relatively low freight costs.
We expect our ocean freight costs to be similar to rates realized in 2012.
Higher direct production costs and cost of sales
---------------------------------------------------------------------------- three months ended December 31(thousands) 2012 2011 change----------------------------------------------------------------------------Direct production costs by operation Cayeli $25,758 $23,991 +7% Las Cruces 43,506 37,798 +15% Pyhasalmi 16,475 14,173 +16%----------------------------------------------------------------------------Total direct production costs 85,739 75,962 +13%Inventory changes (4,549) (6,780) -33%Charges for mine rehabilitation and other non-cash charges 10,083 20,995 -52%----------------------------------------------------------------------------Total cost of sales (excluding depreciation) $91,273 $90,177 +1%-------------------------------------------------------------------------------------------------------------------------------------------------------- year ended December 31(thousands) 2012 2011 change----------------------------------------------------------------------------Direct production costs by operation Cayeli $94,330 $93,237 +1% Las Cruces 167,142 142,941 +17% Pyhasalmi 59,913 56,715 +6%----------------------------------------------------------------------------Total direct production costs 321,385 292,893 +10%Inventory changes 3,740 (645) -680%Charges for mine rehabilitation and other non-cash charges 21,502 24,427 -12%----------------------------------------------------------------------------Total cost of sales (excluding depreciation) $346,627 $316,675 +9%----------------------------------------------------------------------------
