Thompson Creek Metals Management Discusses 2012 Results - Earnings Call Transcript

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 |  About: Thompson Creek Metals Company Inc. (TCPTF)
by: SA Transcripts

Thompson Creek Metals (TC) Q4

Q4 2012 Earnings Call

February 25, 2013 8:00 am ET

Executives

Kevin Loughrey - Chairman and Chief Executive Officer

Pamela L. Saxton - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Analysts

David Charles - Dundee Capital Markets Inc., Research Division

Garrett S. Nelson - BB&T Capital Markets, Research Division

Oscar Cabrera - BofA Merrill Lynch, Research Division

Steve Bristo - RBC Capital Markets, LLC, Research Division

John Hughes - Desjardins Securities Inc., Research Division

Jorge M. Beristain - Deutsche Bank AG, Research Division

Ralph M. Profiti - Crédit Suisse AG, Research Division

Derek Ching

Operator

Good day, and welcome to the Thompson Creek Metals Company Fourth Quarter and 2012 Financial Results Conference Call. Today's conference is being recorded. The slides for the webcast may be accessed through the corporate website and through the webcast link. At this time, I would like to turn the conference over to Kevin Loughrey. You may begin.

Kevin Loughrey

Thank you, operator, and good morning, everyone, and welcome to the Thompson Creek Fourth Quarter and Full Year 2010 (sic) [ 2012 ] Financial Results Investor Conference Call. I am Kevin Loughrey, Chairman and CEO of Thompson Creek. I'm joined today by Pam Saxton, our Senior Vice President and Chief Financial Officer; and Pam Solly, our Director of Investor Relations. Both the Pams are in Denver, Colorado at our headquarters, and I am in Miami, Florida. So if there is some fumbling in answering the questions and going from one to the other, we appreciate your consideration of that. It's a little difficult to do when you're not face to face.

We begin, as we always begin, with the cautionary statements indicating that the statements we make with respect to future events are forward looking, and therefore, we can be mistaken. The slides, as the operator indicated, that we're going to use to speak from today can be reached on our website or on the link to the conference call. So I'll try to reference the slide as we work through, so you can stay on the same page.

We begin with Slide #3. For a mining company, obviously, safety is a paramount issue for us, and we're very proud of our safety record. As you can see here, it's improved markedly over the years to a very low point this year. We take very seriously our responsibility to send everyone, employees, visitors, contractors, enter onto our properties, send them home safely every day. Our safety record is really highlighted by the Langeloth operation, which had essentially 2 years of incident-free performance and the Mt. Milligan project, which is still in the midst of a streak of over 3.5 million employee hours without an incident, a tremendous achievement, and we're very proud of our safety record and continue to work hard on it.

Moving to Slide #4, the fourth quarter and full year 2012 financials. Obviously, the year is dominated, at this point, by the net -- by the impairment that we took in the fourth quarter. We'll discuss that more in a slide or 2. But it resulted because of that in a full year no -- loss of $613 million dollars, which adjusted out on a non-GAAP basis, not taking into account the 2 impairments, a $34 million loss focused primarily on reduced moly prices and difficulties at our Endako Mine where our production was down, and therefore, consequently, our costs were up. This performance resulted from a full year production of moly of 22.4 million pounds at a production cash cost of just over $10 a pound and an average realized price of $13.48. That price has been falling, and the moly price is under $11.50 today as we speak.

So we move to Slide #5. We'll talk a little bit about the impairments. We, as we always do, look through the factors in our business. And dominated by falling moly prices, we -- and then problems with the Endako Mine, we had to take an impairment, and the impairment then, once you reach the point where you have to take the impairment, you are required by the accounting rules to take the cash flow generated by that asset and discount it, which makes the impairment the size it was. But in 2012, in the third quarter, we took a goodwill impairment as a result of a variety of factors. The waste stripping stopped at Thompson Creek, and again, the falling of moly price, and we -- so we took a $47 million impairment to goodwill, a noncash impairment.

In the fourth quarter, we again had to look at the moly price, and we looked at the analyst forecast for what moly prices would do and looked at our own evaluation of the moly market. And so we took a lower -- we took our downward revision in our view of the forward moly price. In addition, we had the continuing problems of recovery and recovery percentages at Endako, and then we encountered a problem with the tailings management and availability of water at the Endako Mine, something we haven't experienced before. The mine has several tailings ponds. We are accessing, at this point, only one, and because of the cold weather and the ice forming on the tailings pond and the manner in which the tailings were being deposited on that pond, we had difficulty in securing enough freshwater to keep the mill running at full capacity and consequently, had to reduce the throughput at the mill. This in turn caused a reduction in production and a concomitant rise in cost per pound. This problem is one that we think we'll be able to ameliorate over time when the ice, free ice thaws, and we're able to have a full season of depositing tailings on that tailings pond in a different fashion, and we'll be able to configure that pond in a manner in which this should not reoccur for us. It hasn't been a problem we've experienced in the past, and we think it's a onetime thing. Nonetheless, it caused us to change our guidance for 2013 and our mine plan for Endako, and as a result, it was necessitated, the calculation of the impairment. And we can talk more about that in the question-and-answer session if people have questions. But it resulted in an impairment to the Endako Mine of $530 million or $3.15 per diluted share. There's much more discussion of the impairment and the manner in which that was calculated in the 10-K, which was filed today.

Again at Endako, looking at the operations update on Slide 6, production and cash costs in the fourth quarter were 1.8 million pounds or very high cash cost for us at $13.26 per pound. That number is actually -- has -- came down in the fourth quarter, as we started to experience higher recoveries but was still high as a result of the reduced production from the problems with the winter water collection. As I mentioned, we believe that this is a problem that will go away come the spring and should not reoccur for us later in 2013 or in subsequent winters.

We also, as you know, ceased mining in the third quarter at Endako, and we're in the stockpile material. Our plan right now is to get back into the ore at some point in 2013 as early as practical. We're also working to increase recovery in the mill, and we're seeing some progress there and believe that we'll continue to experience progress throughout the year. We're getting increased throughput and mill run times. And the process control seems to be improving, as we do a better job of understanding how to manage the stockpile and access the higher-grade ore within that stockpile.

I've already spoken about the water issue there. Again, the water, because of the configuration of the tailings pond, was not as readily available in the quantities that we needed, and so we reduced our run time. This had a negative impact on throughput and of course, that redowned into a higher per pound moly cost. But again, this is a issue, which should be resolved, and by depositing tailings differently on the pond and creating a larger freshwater section, this problem should not reoccur. As a result of these issues, we changed our guidance to 7 million to 8.5 million pounds in 2013 and 10 million to 11 million pounds in 2014 at the cost you see there.

Thompson Creek had fourth quarter cash cost -- I'm on Slide 7 now. Thompson Creek had fourth quarter cash cost of $4.59 a pound for 6 million pounds and full year of 16.2 million pounds of moly production to $8 -- a little over $8 a pound. As you know, we have ceased stripping, the removal of non-ore bearing waste material, and as a result, we're getting higher -- high production with very low cash costs.

The new not-that-new mine plan should give us cost deferrals of $100 million through 2014 and another additional deferrals of about $8 million to $9 million capital expenditures for 2014. We'll recommence stripping at Thompson Creek when the market conditions warrant it. If we don't do that by the end of Phase 7, then we will either restock -- restart the stripping at that time or put the mine on a care-and-maintenance basis. In 2013, we anticipate producing 20 million to 22 million pounds at the cost of $4.75 to $5.75 per pound. In 2014, we anticipate production of 17 million to 19 million at $5 to $6 a pound.

So the compilation of those 2 forecasts, you can see on Slide 8. In both years, we expect to produce about the same amount of moly, 27.5 million to 30.5 million pounds at cash costs in the $6.50 to $7.50 range next year and $6.50 to $7.75 in 2014.

Turning to Slide 9. If you look at our capital cost expenditures, you can see that in 2012 we spent almost $800 million. The vast majority of that spent on the Mt. Milligan project. In 2013, we expect to spend the considerably less $440 million to $480 million as the Mt. Milligan project construction comes to a conclusion. And then we have the operating cost to each of the operations is -- the operating CapEx to each operations, as you can see, bringing us to a total of $440 million to $480 million. And then in 2014, you can see the impact of the cessation of project construction activities at Mt. Milligan as our top-end estimate for CapEx goes from $480 million to $80 million or $400 million less expenditures in 2014.

We continue to emphasize the ability of the company to pay the capital expenditures we have planned primarily to get Mt. Milligan done, and you can see this depicted on Slide 10. We have in place $697 million of capital funding. This is comprised of, as you can see in the bar chart, starting from left to right, $527 million of cash on hand as of year-end 2012, $40 million of additional Estimated equipment financing that we have available to us, $112 million remaining Royal Gold proceeds from the transaction we've entered into with Royal Gold to provide them with a low-cost portion of the gold production from Mt. Milligan and then other net cash flows through the year of $18 million. We have that -- that $697 million is against a high-estimate CapEx obligation in 2013 of $480 million. And if you recall the prior slide, that's the high end of every item on which we expect to spend capital in 2013, totaling $480 million. So that gives us a cushion, even if we spend at the high end of every project, of $217 million. In other words, we are very comfortably within the amount of money we need to get Mt. Milligan complete.

The Mt. Milligan capital summary is shown on Page -- on Slide 11. We spent $1.14 billion on the project already. Another $29 million has essentially been spent but is held as contract retention to ensure contractor performance. We have purchase commitments of $144 million, and the important aspect of that is that we have pricing for all those items. In addition, we have lump sum contracts of $81 million. It is possible if there's movement in those lump sum contracts as the scope of work could conceivably change, but that's essentially committed. So that leaves us with $118 million of non-fixed cost remaining to complete the Mt. Milligan project and an $18 million contingency. There is also contingency contained within that $118 million, so the actual total contingency is less -- is greater than the $18 million shown, resulting in a project cost of approximately $1.5 billion when Mt. Milligan is complete.

On Slide 12, we talked the upside potential in the robust economics of Mt. Milligan. We have a reserve there, which has been calculated at exceptionally conservative costs -- prices of $1.60 per pound for copper, $690 an ounce for gold. The current resource is open at depth and possibly extends laterally as well. In addition, there are many targets within the land position that we own, and so we believe that there's great opportunity to increase the reserve and resource at Mt. Milligan going forward. On the right-hand side of the bar chart, you can see the potential revenue-generating capacity of the mine, cash costs expected of about $280 million annually against the $575 million revenue generation capability when the mine is operating at full capacity.

Mt. Milligan is proceeding well, as we've depicted on Slide 13. The project remains on schedule. We anticipate a startup of the mill in the third quarter of 2013, with commercial production expected in the fourth quarter of 2013. And the -- we've recently achieved many of the milestones that we've discussed. We finally have a senior operating management team completely in place. We're very pleased by that. We have -- the mine has been well developed, and the advancement of the mine is actually ahead of schedule, as we've had a relatively minor -- moderate winter in Central British Columbia, which has helped us in that regard. The truck shop warehouse and administration buildings are all in commissioning and will be completed very soon. The procurement, engineering, concrete and steel work is essentially complete. As you will recall, we talked about the importance of getting the concentrator building fully enclosed, so we could retain heat and work through the winter. That has and continues to be done, so we're able to make great progress in there. The SAG mill is fully assembled, as is 1 of the 2 ball mills. All the flotation cells are positioned. I was up there last week, and the mine is really taking shape and coming along very nicely. We have 8 of the large haul trucks and 2 shovels and 1 loader in operation. So we're making great progress in Mt. Milligan.

The pictures on Slide 14 show you that kind of progress. The upper left is the concentrator building, and you can see -- from the sites, you can see, it's enclosed, and actually, it's enclosed all the way around, so that has been a major issue for us and enables us to continue work there in the colder months. The conveyor is -- on the top right-hand side, there's a picture of the conveyor from the primary crusher to the course ore stockpile that the conveyor belt itself is not on there in that picture, but that is being laid either this week or next, and all the conveyor belt material is on site. The 40-foot SAG mill in the lower left is completely assembled. It -- that picture doesn't really do justice to the size of -- it's one of the largest SAG mills in the world, with a wrap-around construction method. And then you can see the shovel and doze [bulldozer] are operating in the lower right-hand corner.

So if you look on Slide 15, we talked about the future critical milestones. We've put this chart in each of the last several conference calls. We have 3 in there: the truck shop complete, the SAG motor mechanically complete and the reclaim water. Those -- all will be done, we believe, by the end of this month. They're in commissioning right now. They've essentially been done, and we're turning them over to the operation so that in a week or 2, those will all turn to green. And we are on schedule, and we're on schedule to complete all of the other yellow-dotted milestones, which indicate the progress of the mine. So we feel quite comfortable that we will get Mt. Milligan done well within the timeframe that we've indicated. All indications are that everything is going there very well, and as I said in the earlier slide, we have, with a large cushion, sufficient funding to get that project complete.

So the quarter, obviously, was dominated by the large impairment. We believe that we're making progress in the areas that we have control over in the recovery in the throughput at the mill. We're very confident that the water issue will go away once the warm weather occurs and will not reoccur in subsequent winters due to the tailings management practices we'll put into place. The moly market, however, continues to be disappointing for us. We have not the robust demand from the steel sector in North America that we had anticipated, and that, of course, results in less demand for molybdenum products. The growth in China appears to be picking up right now, but through most of 2012, that was not occurring at the rate that we had expected either. It was certainly less than in prior years. And then Western Europe continues to be a significant problem, as the economies there struggle and steel production and demand for molybdenum products is not what we would hope.

So we're optimistic about our performance at Endako, and we're very optimistic about where we stand with respect to Mt. Milligan and the completion of that project, which will, as we had hoped, diversify our revenue source, and we should begin to experience some revenue production from Mt. Milligan toward the end of 2013. We have not given production guidance yet, as we're still a little too far away for a brand-new mine and mill operation to give precise guidance. We will expect to do that, at some point forward, middle of the year as we come closer to production in Mt. Milligan.

And with that, I'll end the prepared remarks and open the call to questions from the audience.

Question-and-Answer Session

Operator

[Operator Instructions] We'll hear first from David Charles with Dundee Securities.

David Charles - Dundee Capital Markets Inc., Research Division

Maybe just 2 questions. The first one on the restart and stripping at Thompson Creek. Is it still safe to say that you have to make a decision on that by the middle of this year? I think the previous date was June. And could you maybe sort of -- at this point in time, you did highlight that the market was less robust than you expected. Do you think that it's likely that you'll go ahead and start stripping in the middle of June?

Kevin Loughrey

Thank you for the question. Let me just clarify the question as you put it because you said you have to start the -- a restart of the stripping by midyear. And the next phrase on question, I believe, is without interruption in production, because we can obviously restart at any point. However, if we restart past the middle of the year, perhaps somewhere in the third quarter of the year, then the answer is yes. If we don't restart by then, we would have a break in production. So we -- I just wanted to clarify, we could -- there's nothing magic about June, July or August. Somewhere in that timeframe is when we'd have to restart, but we have to restart if you want to continue with our production. At any point past that, we could, of course, restart then as well, but that would mean we'd have an ore gap at some point. I also want to point out that it -- that implies it will take us about 15 to 18 months to do that stripping, and that is the case if we do it at the same time concurrently with mining operations. If we restarted after the mining operations have ceased, then that period is probably shortened to closer to a year because we would devote all our personnel and all our equipment to the stripping at that time. The answer to the second part of your question is tougher to predict. As we said, we'll do it as market conditions warrant. And so my thought is that at current prices, we would probably not restart right now. If prices improved -- and not only is it the question of prices improving, but it's a question of what it looks like prices will do for an extended period because it takes, as we just discussed, many months to do that stripping. So it's not only question of what the price is at the time but also a question of what our expectation is of what the prices will be over the period. And so as I say, I think we need some improvement in the moly price to be optimistic about a restart of the Thompson Creek by that time frame.

David Charles - Dundee Capital Markets Inc., Research Division

Maybe you then could you make a comment, if possible, I know this is another company, but anyway, the last thing I saw is Sierra Gorda should be starting up later this year or next year? Just -- and that could have a big impact on the outlook for the moly market. How does that weigh on your decision? I mean, do you think that they could be a disruptive force on the supply side? Or do you think that they will try to manage their molybdenum production similar to other players in the industry in order not to be as disruptive on pricing?

Kevin Loughrey

Yes. And to the last part of your question, I have frankly no information. I don't know how they'll manage, as you put it, their molybdenum production. My understanding is that they're scheduled to start up sometime mid-time next year. Certainly, that is one of the factors that will weigh on us, as we look at the overall moly market and the supply-demand fundamentals within that market and try to anticipate where the prices are headed.

Operator

We'll take our next question from Garrett Nelson with BB&T Capital Markets.

Garrett S. Nelson - BB&T Capital Markets, Research Division

It looks like your total Q4 CapEx was only $137 million, which is a lot lower than the $253 million to $293 million guidance implied by the actuals for the first 3 quarters and your 2012 guidance. Is it fair to say that most of the increase in the 2013 CapEx are expenditures you thought would be made in Q4 being pushed into this year?

Kevin Loughrey

Yes, there's quite a bit of change just related to timing, and we are not -- it doesn't apply we're behind schedule. To the contrary, we're right on schedule for that. So this doesn't represent a problem in that regard, yes.

Operator

We'll hear next from Oscar Cabrera with Bank of America Merrill Lynch.

Oscar Cabrera - BofA Merrill Lynch, Research Division

Kevin, on the Mt. Milligan project, you quote $1.5 billion in capital expenditures, but there's -- in your guidance, there's a couple of lines that I was wondering if you can clarify it for us, where have an additional $40 million to $50 million for buildings and construction, and there's another $20 million to $30 million that relate to the project, but just wondering if that's working capital.

Kevin Loughrey

Yes, there is some additional working capital on there, and the $40 million to $50 million that we include is really a change in the scope in the project. If you'll recall, when we initially did this and we took the plan over from Terrane, who I always emphasize we think they did a very good job in the design and engineering of the project, but the one area in which we disagreed with them was that they had a commuting situation for the employees where the employees would commute from Mackenzie or Fort St. James, the 2 closest communities, which are still some 90 kilometers away over difficult roads. So we changed the scope of the project and included a -- an operations camp, a full-time operations camp where employees would come and stay for several days and then only commute at the beginning and end of that several-day shift. It has resulted in the addition of the cost of building that operations camp, which we've estimated to be in the $40 million to $50 million range and that's that addition to the CapEx for that -- the change in scope of the project.

Oscar Cabrera - BofA Merrill Lynch, Research Division

Okay. But I mean, this wasn't part of the initial $1.5 billion that you have been discussing before, correct?

Kevin Loughrey

No.

Oscar Cabrera - BofA Merrill Lynch, Research Division

Okay. Then on -- just staying in -- with Mt. Milligan, you are pretty confident that you will get the startup in the third quarter and the fourth quarter. Can you -- I know that you're not providing guidance for 2014, but how are you budgeting your ramp-up for the mill and the operation? Do you think you can manage to get full ramp-up by 2014? Or should we expect something a little longer?

Kevin Loughrey

No, we certainly expect full run in -- at some point in 2014. In 2013, we anticipate that the copper production, as is typical in such operations, will come up more quickly than the gold production because the gold, obviously, is much smaller volume and more disseminated and a little more complicated in the milling of the gold to make sure that we collect it. Also, our anticipation is that we'll make a relatively quick several-month ramp-up to get the copper near full production. It'll take a little longer for gold. But as I said, we're shying away from giving precise production guidance because we think we need to get a little closer to that point in time, and so as it's coming toward the end of the year, the timing is critical. So we're holding off on giving guidance, and we'll do that as quickly as we can in order to give a sense of when we think that production will occur. But as we said, we're quite confident that we'll get commercial production in 2013 in the fourth quarter.

Oscar Cabrera - BofA Merrill Lynch, Research Division

Right. And then lastly on your molybdenum operations, understand the factors that you're considering for whether you shelve the Thompson Creek mine or not? But assuming that you decide to go ahead with the mine, how much would it take to undertake the stripping for the next phase or Phase 8? And what would you expect the sustaining capital to be with and without the Thompson Creek Mine?

Kevin Loughrey

The sustaining capital and the care-and-maintenance operation is $7 million to $8 million in that range, a little more, a little less. Hard to stay until you get a little closer. The deferred cost of the stripping is $100 million, so that implies that, that stripping cost is about that. However, if you cease operations and then restart the stripping at some point after that, then the cost of that stripping will go up somewhat. We don't have a precise number and that -- it was somewhat higher than that $100 million. You have to remobilize your equipment and get your workforce back together.

Operator

We'll take our next question from Steve Bristo with RBC Capital Markets.

Steve Bristo - RBC Capital Markets, LLC, Research Division

Just wondering what your share of total CapEx for Endako expansion has been so far. I believe the last number you mentioned was like $594 [ph] million. Wondering how that compares to the write-down amount.

Kevin Loughrey

Yes, that's very close to correct.

Steve Bristo - RBC Capital Markets, LLC, Research Division

Okay. Now I think that $594 [ph] million was before all the operational issues. Have you dumped more money in there trying to address those issues in the last year?

Kevin Loughrey

Pam, do you have the number for that, for CapEx for Endako past the project's completion date?

Pamela L. Saxton

For Endako, I'm just looking it up here. It's not a substantial amount of capital for 2012. Our share has been only about $10 million. And as you look at next year for Endako, our share is about that same amount.

Kevin Loughrey

The problem there is really not been one that's addressed with capital, for example, the water issue. We deposit tailings on that tailings dam, and we have concluded there is a more efficient, productive way to do that. It requires very little in the way of capital. It's to continue operating expense we would have had an any event, and then we spent a little money bringing people in, but not much in the way of capital to address the issues with recovery. That's management and running of the mill and bringing expertise to bear on that issue. So there is a little bit of capital spent, but it's in the -- very relatively small amount to try to address that problem.

Steve Bristo - RBC Capital Markets, LLC, Research Division

Okay. And just following on with Endako, you mentioned you will bring the team in to try to address those recoveries. What are the current recoveries you're getting versus design?

Kevin Loughrey

We are -- the design calls for 76% ramping up, at some point for 79%. We are having some days in the low 70s, right now running the one mill and not doing it -- not using the ore material, so that's improving over time. And our expectation is that over the course of the year and into next year, we'll get it up closer to design capability.

Steve Bristo - RBC Capital Markets, LLC, Research Division

And then just the last one, can you remind me when you're going to begin mining again? I think you said as soon as possible. Can you put more of a date on that?

Kevin Loughrey

Yes. That's still somewhat open to question. We're looking at the mine plan right now, and it becomes a question of how efficiently we're operating the stockpile and what we think those results will be compared to what they would if they go back to the mine. Not meaning to avoid your question, but it's a little bit of a fluid decision-making process. But certainly, at some point in the second half of 2013, we'd expect to be back into ore.

Operator

We'll take our next question from John Hughes With Desjardins Securities.

John Hughes - Desjardins Securities Inc., Research Division

Many items or just one last, could you just provide for us, I guess at the end of December, what the remaining book value is for both Endako as well as Thompson Creek?

Kevin Loughrey

Pam?

Pamela L. Saxton

For Endako, the remaining book value, there is about $189 million. Of course, that's our 75% share. And Thompson Creek, I don't have -- let me look this up real quick. I don't have right at my fingertips, but it's much less than that. It's probably $100 million. [indiscernible] ...

John Hughes - Desjardins Securities Inc., Research Division

Well, that gives us a good ballpark. That's great.

Operator

[Operator Instructions] We'll take our next question from Jorge Beristain with Deutsche Bank.

Jorge M. Beristain - Deutsche Bank AG, Research Division

My question is about Endako, if you could just -- you said the residual value there for your 75% is about $189 million. Could you just walk us through the methodology that you used to come to that discounted net present value, what discount rate you used, how many years of life mine and what moly assumption your used?

Kevin Loughrey

Pam, you want to take that?

Pamela L. Saxton

Sure. So Jorge, as we take the life-of-mine plan, for the remaining proved and then probable reserves, and we take a look at that, we ended up using a moly price that was the same as what we've done our reserves at, which is $12 a pound. And then we discounted that based on our weighted average cost of capital, which we really don't disclose. But you -- I'm sure you can calculate that to come up with the net cash flow from the property. And we wrote down to that value, which gets us down to the $189 million. The other piece that we did is with regards to the mobile mining fleet. We looked at that also in terms of liquidation value to see if there was any excess of value there compared to having the asset in use, and that liquidation value was less. And so again, we just used the discounted cash flows to come up with the write-down of $189 million.

Jorge M. Beristain - Deutsche Bank AG, Research Division

What assumed cash cost were you using for the Endako life of mine?

Pamela L. Saxton

That this is based in the life-of-mine plan, again, that we don't disclose, but it is certainly lower than what we're seeing today, but not substantially lower. It's really the costs themselves are pretty constant. It's really the units that make the cash cost per pound move around. And so those were pretty constant through the life of mine. And then Of course, there's also some assumptions of sustaining capital and whatnot in there as well.

Jorge M. Beristain - Deutsche Bank AG, Research Division

Okay. And then also on your Mt. Milligan project,, have you been under IFRS then forced to keep a kind of mark-to-market accounting as to what the NPV of that project is worth? Or will that not be known until it's actually in operation?

Pamela L. Saxton

No, certainly, we are on U.S. GAAP, including all of our Canadian operations, and so we are not on IFRS. Under U.S. GAAP, again, you take the 2-step approach on this. You look at your undiscounted cash flow to begin with, and if that indicates a problem, then you go to that step 2, which gives you the discounted cash flow. So there's no intention right now for us to move off of U.S. GAAP. It's just a matter of if and when U.S. GAAP moves in line with IFRS with regards to fixed asset impairments.

Operator

We'll take our next question from Ralph Profiti with Credit Suisse.

Ralph M. Profiti - Crédit Suisse AG, Research Division

Maybe, Pamela -- and I apologize if this has already been addressed in earlier questions. Will you be capitalizing all the interest on all these series of notes through 2013 until commissioning is actually declared? And secondly, what is the actual commissioning tests? Is it the typical 60% of operating capacity test?

Pamela L. Saxton

Sure. Yes, Ralph, that's correct. We will continue to capitalize the interest until we say we're through the commissioning phase, and much like Endako, once it hits 60% of our expectations, then we would stop that capitalization going forward. So you're exactly correct.

Ralph M. Profiti - Crédit Suisse AG, Research Division

And that capitalization also includes the tMEDS coupon as well?

Pamela L. Saxton

Correct.

Operator

We'll take our next question from Zach Zolnierz with GMP Securities.

Derek Ching

This is Derek Ching for Zach. First question I had was on the CapEx funding chart you show on Slide 10. There's above a $90 million difference between the $217 million cash cushion you show and the $309 million you had in your December presentation. I understand a part of that was due to the $35 million, $40 million for the permanent camp for Milligan. I was just wondering if you can talk about the remaining $50 million, $60 million of the difference.

Kevin Loughrey

Pam, do you want to detail that for him, please?

Pamela L. Saxton

Sure, yes, I'd be glad to. Certainly, As you noted, there's just higher CapEx primarily related to the camp. Also, when we did the bond offering at the time from the last slide, we had only projected $300 million, and we ended up raising $350 million. So net, there was about $30 million plus coming through. There's also timing differences and working capital, what our assumptions were then and now, which is negative about $28 million. And the other piece was reclamation deposits, the assumption we were using before we were negotiating with Deutsche Bank at the time when we did the bond offering of some kind of letter of credit facility, which we ended up finding it was more cost effective to just put cash deposits on deposit with the B.C. government, and that's about $45 million. So within that -- holding down [ph], that gets you to about your $90 million.

Derek Ching

Okay. Got it. And secondly, I'm not sure if this was covered earlier, but on Endako, I was wondering if you can talk about how the stockpile recoveries were trending in the quarter.

Kevin Loughrey

Yes, the recoveries are trending up. The grade has been going up. The recoveries have been going up. We're getting better, I think, in managing the throughput of the mill and getting better recoveries from that mill. Still not what we hoped anywhere near where we hoped to be when we finally complete that process, but trending up throughout the quarter.

Operator

And this will conclude the question-and-answer session. At this time, I would like to turn the call back over to Mr. Loughrey for closing remarks.

Kevin Loughrey

Thank you, operator, and thank you, everyone, for your attention and your interest and for all the good questions, which we anticipate every quarter. And we look forward to talking to you next quarter for the first quarter results conference call. Thank you again, and goodbye.

Operator

This does conclude today's conference. We thank you for your participation. You may now disconnect.

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