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Executives

Greg Waller - VP, IR

Don Lindsay - CEO

Ron Millos - SVP, Finance and CFO

Analysts

Meredith Bandy - BMO Capital Markets

Oris Walkada - Canaccord Genuity

Val Durrani - Goldman Sachs

Duncan McKeen - Macquarie

Greg Barnes - TD Newcrest

David Charles - GMP Securities

Adam Gillespie - Goldman Sachs

David Donovan - RBC Capital Markets

TECK COMINCO CL B (TCK) Q3 2010 Earnings Call October 27, 2010 11:00 AM ET

Operator

Welcome to Teck’s Third Quarter 2010 Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. This conference call is being recorded on Wednesday, October 27, 2010.

I would now like to turn the call over to Greg Waller, Vice President Investor Relations & Strategic Analysis. Please go ahead.

Greg Waller

Thank you for joining us this morning for our third quarter 2010 earnings conference call. Before we start, I would like to draw your attention to the forward-looking information slides on pages two and three of our presentation package. This presentation contains forward-looking information regarding our business. Various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking information or statements.

At this point, I would like to turn the call over to Don Lindsay.

Don Lindsay

I will start today with the review of the results for the quarter and then turn the presentation over to Ron Millos, our Senior Vice President, Finance and CFO to address some more in-depth financial topics and I do have a number of other members of the management team here on the call this morning and available to answer your questions.

Turning to Slide 5, there are a number of highlights in the quarter. With this quarter was a record revenues at over $2.5 billion. Operating profit before depreciation and amortization was $1.23 billion, and that was up almost 25% over the previous quarter of this year.

Earnings were $331 million, but our earnings were impacted by a $340 million after-tax charge resulting from our previously announced debt refinancing, so with adjustments for these items earnings were $467 million and EBITDA for the quarter was $912 million.

Turning to Slide 6, and continuing with the highlights for the quarter. Our business fundamentals are very strong with higher copper production going forward from here since we have achieved commercial production at Andacollo and we have very strong copper pricing.

During this quarter we took advantage of the historical low interest rates to refinance the portion of our long-term debt, these transactions replaced debt that had an maturity of 6 years with debt with an average maturity of 18 years. We have also reduced our future interest expense by approximately $85 million per year.

We show our review of comparative readings for the quarter on Slide 8. We had a number of unusual items this quarter to adjust for. After sales generated gains in the quarter, we had some modest exchange and derivative losses and most significant item; however, is the above mentioned charge related to the debt refinance, which was $340 million on an after-tax basis.

Adjusting for these items, earnings were $467 million for the quarter, or $0.79 cents per share. I should note that we had unusually higher stock and corporate expenses this quarter that impacted earnings by about $0.03 cents per share, as a result of the increase in our share price and adjust for this, adjusted earnings would be $0.82 per share, which is much closer to the consensus estimate of the quarter.

On the next slide, we have summarized the guidance we gave last quarter and the performance relative to that guidance. Our guidance was largely met with this quarter except for coal sales. Coal sales were hampered by Westshore throughput issues that we announced previously. However, Westshore has made changes in the operating practices and are catching up on delayed shipments.

We do not expect any impediment for capacity in achieving our 2011 plant sale. Coal costs came in above the calendar 2010 target due to higher strip ratios, higher diesel fuel prices, and the reduced sales volume. Having said that, we still expect total cost to be in the range of $0.90 per tonne for the calendar 2010, which is consistent with our previous guidance.

Turning to our operating results for the quarter, in our coal business, production was almost 4% higher on a year-over-year basis, but sales were down reflecting the congestion of Westshore.

Our sales of 5.5 million tonnes for the quarter were at the high end of our revised guidance range. The average realized price of $200 per the tonne was at the top guidance range of $195 to $200. Although the benchmark price was $225 per tonne quarter for the quarter, we continue to deliver some coal is carried over from the 2009 and 2008 coal years, and that impacted the realized price as well as the minor amounts of lower quality coal that we produced.

Unit site costs were $62 per tonne. We expect site costs to be in the range of $56 to $58 per tonne for the calendar year 2010. Unit transportation costs at $33 per tonne were higher than last year. For calendar 2010, we expect it to end up in the range of $31 to $34 per tonne.

We reached agreement with Canadian Pacific this quarter on a very important long-term rail contract, and we were very pleased with this agreement. This collaborative 10-year deal gives us the certainty we need to realize our growth strategy in coal and to deliver our increased production on a timely basis to our key markets.

This agreement ensures transparency in both Teck’s and Canadian Pacific’s growth plans and our strategic objective. Confidential agreement is effected April 1, 2011 and it affects Teck’s five mines located in southeast BC. Although the terms are confidential, we don’t expect much change in our overall distribution costs next year as a result of this new rate.

On Slide 11, in our copper business units, overall production of 67,000 tonnes was approximately 12% lower than Q3 last year. First, the quarterly production does not include production of copper in concentrate at Andacollo, which has reached commercial production as of October 1st.

Copper production was down about 10% due to expected reductions at Antamina, as we processed lower grade copper ore in the quarter. At Highland Valley as higher grade ore available was reduced and we continue to strip the next resource area and also due to Andacollo as the capital copper production continue to decline during the transition to concentrate production. Costs in our copper business accordingly were higher as a result of these above issues.

Slide 12, as of October 1, 2010 Carmen de Andacollo completed its transition to commercial production. The ramp up process was completed in just under seven months, so we were very pleased with that. Currently, the plant is averaging throughput of 53,000 tonnes of ore per day or above 97% of the 55,000 tonnes per day design capacity. The plant has also operated for a number of consecutive days at higher volumes than the targeted 55,000 tonnes per day.

The final project cost was approximately US $440 million. The mine life is estimated to be approximately 20 years with anticipated annual production of 80,000 tonnes of copper over the first 10 years of the production.

In our zinc business, zinc in concentrate production for the quarter was almost 11% lower than last year. The Red Dog mill tonnage increased by 8%, but lower ore grades resulted in decreased Zinc and Lead production.

Antamina’ Zinc production was 20% lower as a result of lower ore grades as well. As in previous quarters they should note that even though we show Antamina share of Zinc production in these figures, the financial results of Antamina are reported in our copper business.

Production of Refined Zinc trailed for the quarter was 23% higher than last year that was due to curtailments, which had began in late 2008 and lasted through August 2009. Our Zinc business contributed $204 million in cash, our operating profit for this quarter that’s up almost 30% year-over-year, the key drivers behind the increase is the higher Zinc, Lead and Silver prices.

I would like to briefly update you now on Red Dog. October 22nd, just a few days ago marked the end of Red Dog’s 2010 shipping season, the total concentrate shipments for zinc and lead were 335,000 tonnes for Zinc and 235,000 tonnes for Lead.

Zinc ore grades were lower and mining has been taking place at the edges of the main pit and this has made ore and waste separation difficult at this point. We expect zinc ore grade to be above 20% in 2011. Ore from Aqqaluk account for approximately 65% of the total throughout in 2011.

We announced in May that we have commenced development of the Aqqaluk deposit in the picture of Slide 14 shows some of the progress has taken place. First ore was delivered to the mill in August and it will be the sole source of ore to the mill by 2012.

We continue in discussions with the regulatory agencies concerning the renewal of Red Dog’s main water discharge unit and we are generally pleased with the focus on that front.

I will now turn the call over to Ron Millos to address some of the financial issues.

Ron Millos

I am moving on to Slide 16, where we summarized our changes in cash for the quarter. Our cash flow from operations was $818 million in the quarter, which is up about 21% from last quarter. Our working capital change was negative this quarter due to higher receivables associated with higher sales volumes.

Our capital expenditures and investments for $227 million for the quarter and our debt balance was up slightly as with the second stage of our debt refinancing we didn’t have as much debt tender to offer as we had expected relative to the new issue of the debt.

After allowing for the minority interest share, and the effect of the exchange rate changes on cash, our net change in cash in the quarter with an increase of $419 million. We ended the quarter with $1.18 billion in cash, but I should remind you that about $325 million of that was used to finalize the tender offering in early October.

Moving on to the next slide that would show our final pricing revenues for the third quarter. As we highlight each quarter, pricing adjustments on sales of our various products can have a significant impact on revenues. Outstanding provisionally priced receivables at the end of any quarter are finally priced based on contractual quotational period for subsequent periods resulting in positive or negative price adjustments, depending on the movements in prices.

Final pricing adjustments for this quarter were positive. On settlements within the quarter the largest impact was in copper were we had ₤85 million of receivables settled in the quarter at $0.37 for per pound higher than the price that which they were provisionally booked in the second quarter of this year.

We also incurred positive adjustments in zinc, for total positive adjustments the revenue of 34 million on sales from the previous quarter. We also record pricing adjustments on sales book during the quarter as these are mark-to-market at quarter end. As metal prices improved during the quarter, this increased revenue in the quarter by a further $62 million on the pre-tax basis. Remember, when analyzing the impact of price changes on our final pricing revenues refining and treatment charges in the Canadian and US dollar exchange rate must be included in your calculation and if you are looking at earnings, do not forget to consider the impact of taxes and royalties.

Moving on to the next slide, this slide helps to illustrate the changes in our debt maturity profile. The chart at the top illustrates our debt maturity profile before the refinancing actions that we took, while the bottom chart represents our current maturity profile. You can see clearly how we reduced our debt in total and extended the maturities.

The tender offer reduced obligations coming due in 2014, 16 and 19, while the new note offerings redistribute and smooth maturity profile, all are reducing our debt servicing costs. By replacing debt with an average life of 6 years, for debt with an average life of 18 years, we have extended our overall average life of our debt by about 4 years from 8 years to 12 years. Our annual interest expense will be reduced by the $85 million per year that Don mentioned earlier.

Moving forward to our guidance for the fourth quarter, again you should be aware the seasonality in our zinc sales due to the shipping season of Red Dog and the impact of unit costs due to varying Lead sales. We do expect our coal sales finished the year in the range of 23 to 28 million tonnes. I would like to point out that this is consistent with the guidance that we did provide about a month ago, so we are not revising those figures that people think that this is another revision.

Pricing for the quarter is expected be between US $200 and $205 per tonne. This includes the impact of all types of coal sold expected carry over from 2009 and ‘08 and expected spot sales. Coal costs for the year are expected to be in the range of $56 to $58 per tonne per site costs and $31 to $34 per tonne per transportation cost.

Copper production will continue to be lower at Highland Valley, as we work through the geotechnical issues, but will be higher at Carmen de Andacollo as concentrate production has now reached commercial levels in starting October 1st those results will be factored into our consolidated earnings and statistics.

You should be aware that settlement adjustments are dependent on the direction of prices and need to factor in the effects of treatment and refining charges in the Canadian-US dollar exchange rate and also remind you that we do have another $68 million charge for debt refinancing for the portion of the tender offered and settled in early October and that’s a results how the accounting rules work.

With that, I will turn the call back to Don Lindsay.

Don Lindsay

Before we close I would like to update you on the status of many development projects that we have underway on Slide 23. At Quebrada Blanca we are proceeding into a full feasibility study so we are pleased with that. At Relincho the feasibility is under way and is expected to be complete by midyear 2011 and also in copper, the Galore Creek pre-feasibility is expected in the second quarter 2011.

In our energy division, we are working on a pre-feasibility study for the Frontier Oil Sands Mine project with the possibility of Equinox as a satellite mine and this study is expected to be complete as well in the second quarter 2011, which will also be marked by filing of a regulatory application.

In coal, the feasibility study for the restart of the Quintec operation is proceeding and it’s expected in late 2011.Thats four pre-feasibilities in 2011 that are expected to be completed so our engineers are pretty busy. We do have lots of exciting growth opportunities coming and I look forward to reporting on the developments status of these projects in the coming quarters.

Slide 22 and summary and before I turn it over to questions, we have further strengthened the balance sheet and now focused on the strong and increasing cash flow from our business. Our coal business is very exciting with robust fundamentals and market prices and our increasing production for a very efficient amount of capital.

Our copper production will grow to over 400,000 tonnes annualized rate over the next 15 months and moving forward with several development projects to further enhance shareholder value.

Question-and-Answer Session

Operator

(Operator Instructions)

The first question is from Meredith Bandy from BMO Capital Markets.

Meredith Bandy - BMO Capital Markets

My first question is Don, when your were closing up you mentioned you have a strong balance sheet now and also very good cash flows. Is this the balance sheet you want is this that where your target?

Don Lindsay

I’d say its in the range of what we want. We have been concentrating on extending the term of the dept, and the transaction that we do in the quarter took the average debt maturity that we refinanced from six years to 18 years, so that’s a real strengthening and reduced the interest costs.

The target balance sheet I guess is in the 25% to 30% of the debt-to-debt plus equity, we are going to be below that for quite a while on a net debt to debt plus equity basis as the cash fills up, while that’s not optimal. We do have major capital expenditures further out starting in the mid-2012 with the projects Quebrada Blanca, (inaudible), Relincho and Galore Creek and so on. This is the phase when probably be building up quite a bit of cash and balance sheet may look less not, but its appropriate to prepare for the CapEx that comes from 2012 to 2050.

Meredith Bandy - BMO Capital Markets

As you mentioned, you don’t have any very serious CapEx until fairly late with these large copper projects. Would you be willing to consider acquisitions prior to those projects coming online and if so, what are your preferred commodities?

Don Lindsay

Well, we always are looking at potential acquisition targets out there. As I said before, I don’t feel that we need any acquisition because the growth profile was quite substantial with what we went through a phase, where we needed to increase the reserves space, we did that. We have a lot to work with that was now.

The fairly active market out there right now. We have shown lots of opportunities we reviewed them, but nothing is caught interest just yet. We have the financial capabilities to do so, but we have also compared the quality of what’s available with what we have and so far nothing has met the task.

Meredith Bandy - BMO Capital Markets

Are there any commodities particularly keen on or not keen on.

Don Lindsay

Well, as I said before we think iron ore would be a very good set with our portfolio because it clearly matches well with our steal making coal business and has the same customers and that would just make us a more strategic supplier to those customers. We have also said that we didn’t really want to get in to iron ore by through development project because we have quite a number of developmental projects already.

I just listed how much work our engineers are doing and four, five of them Tim Watson is there pretty busy. We trying to get into it through an operating assets pretty difficult because anybody, who owns operating our own mines these days are enjoying the best times of their careers and wouldn’t really want to sell for a price that we would consider reasonable. We don’t think much will happen there, but that would certainly be one that would favor the portfolio.

The other point I will make actually to your first question is that, well we have been refinancing some of the data and pushing the term out. In the next four years, we have very minimal obligation in fact there is only one $200 million bond that comes due in 2012. As you can calculate our precash flow is more than some month so we have a four year structure where you really do buildup a strong cash balance and anticipation of projects that we are going to build.

Operator

The following question is from Oris Walkada from Canaccord Genuity. Please go ahead.

Oris Walkada - Canaccord Genuity

In the list today you gave the production guidelines for 2011 for (inaudible). I am wondering if we can get some guidance for Andacollo and specifically whether you except the cathode production to continue pass the end of this year? If you have any estimated work, cash cost might come in for the hypergene project on a profound basis.

Roger Higgins

On the production side yes we are going on the production side, we are reaching and achieving and recoveries in the new constant that would expect 2011 to be sort of the plan is designed to produce, which is 80,000 tones of metal containing concentrate. On the cathode side that is diminishing very quickly as well that could be run out of the CBG in order to sitting on top of that concentrate of these. There would be some small quantities into 2011 perhaps even in 2012 recognizing that the leaching process is well ahead of 400 a day leaching cycle. After we start irrigating those each it does take sometime to get the last of the material out of it, but that will be very small quantity throughout in some of the tones relative to production from the concentrate.

Oris Walkada - Canaccord Genuity

Any idea on where you see cash cause on the hypergene on a profound basis?

Don Lindsay

We have, we have not given any of work on that at this point ….

Roger Higgins

As we develop the plan and get it running up consistently now after some course before we give before we estimate that to target. We will expect to be the cost to be probably in the second quarter of the (inaudible).

Operator

Thank you. The following question is from Val Durrani from Goldman Sachs. Please go ahead.

Val Durrani - Goldman Sachs

Good morning. Where to understand the cash cause at the coal mine. How far do you have the visibility because you are nothing to the cost will be within the annual guidance profoundly of the visibility that the cost for the fourth quarter will be relatively lower, but when we were going to the second quarter conference assuming do you have the visibility to see whether the step ratios are going to be and how things going to be?

Bob Bell

Val, Bob here. We certainly understand our task going forward and as Don mentioned, in the third quarter of crossword higher because of our production levels were lower and those most production levels are going up in the final quarter we can calculate the numbers its off of annual guidance. That is why we know there are cost will be going down. Obviously, they have a pretty good visibility on the cost and that forms the basis of our guidances as we give our guidance.

Val Durrani - Goldman Sachs

The step ratio was actually a smaller component of this cause increase but mostly the lower volume, is that correct to say?

Unidentified Company Speaker

There were a number of factors in I think we gave them all of them we did not say whether any one factor was a primary factor they often contributed.

Operator

Thank you. The following question is from Duncan McKeen from Macquarie. Please go ahead.

Duncan McKeen - Macquarie

You indicated that you are going to be processing more copper only ore and less copper zinc or/and actually gave us the guidance for 2011. Just wondering how we could think about sort of that balance of that mix going on further beyond 2011?

Unidentified Company Speaker

The trend continues for (inaudible).

Duncan McKeen - Macquarie

I am sorry did not catch that.

Unidentified Company Speaker

2012 is not dissimilar. (inaudible) 2011 the trend continues with what ore proper as zinc ore until we have to give you push back that reaches the transition ore or the gang to (inaudible) late 2012 to 2013.

Duncan McKeen - Macquarie

I just also wanted to ask just switch him over to the coarse side just to a new decision to switch the focus essentially from cost reduction over to increasing production and what is the actually mean? What is physically changed in that operation as a part of that shift and focus?

Don Lindsay

We have not taken away our focus on cost and as we said for the entire year we will be within the guidance we have given before. We are very much focused on achieving our growth objectives, but that’s being done through capital investment and managing the plans.

Duncan McKeen - Macquarie

Just wanted to check on the call you have given guidance for Q4 of $200 to $205 per tonne, is that accounting for some of the higher nicer coal that’s coming through from the exposure to Greenhills.

Don Lindsay

Of course that project is well on the way to recover the operation of that plant, but everything is factored into that, all of the pricing we have already achieved plus our understanding where the markets are, plus whatever the coals we have available in the fourth quarter.

Operator

(Operators instruction)

The following question is from Greg Barnes from TD Newcrest.

Greg Barnes - TD Newcrest

You have highlighted iron ores something you want to get into on an operating basis. There are a number of operating iron ore mines in the (inaudible) is that something that would interest you?

Don Lindsay

Well, as we know, I spent the early part of my career there and obviously have followed it over the years. There are a range of operations, a range of qualities there, and our approach always been that if we were going to do that, that we want to make sure that we are at the higher end of the quality or lower into the cost curve because it is still long delivery distance to the Asian markets and that sort of thing so. I think that’s all I could say and the owners of those assets generally are predisposed to selling. As I said that pretty much is going to happen.

Greg Barnes - TD Newcrest

The second question on Galore creek has popped up a couple of times in the discussion today that increasing its profile for you?

Greg Waller

That’s an interesting question. We love Galore Creek and one of the real advantage is, it has there is so much gold there and makes a big difference to the other body overall. I going to turn it over to Tim Watson in a second, but we have gone through a process of reengineering and design and still in that process. There have been a lot of really creative ideas that have put that project in a different way and pretty optimistic for the future, but the timetable is still a ways out so, you want to give some color on that?

Don Lindsay

Sure, from an overall plant configuration perspective, [Glora Creek] was initially been constructed everything was basically contained within the valley and over the last couple of year we have gone through considerable number of optimization studies. Looking at effectively de-risking the project and making the project more constructible, and in doing so, we have relocated the process plant in the payment facilities outside of the valley closer to high would be 37. Our overall timeframe for completing the pre-feasibility study in the second quarter of next year so at this point in time, we have not started the costing process, which is really the fundamental basis for the work going forward is to produce a new bottoms of cost estimate and execution plans for Glora Creek. So, as we move from the first quarter into the second quarter of the next year, we should have a little bit clear picture on the updated cost estimate for Glora Creek.

Greg Barnes - TD Newcrest

Would you say this is later this decade project IE 17, 18, 19 somewhere around that?

Don Lindsay

We didn’t want to play a real date on like that, but what I would say is this is all about having a very high degree of confidence in the execution of the project in the do ability and that’s what Tim and the team are working at.

Operator

Thank you. The following question is from David Charles from GMP Securities. Please go ahead.

David Charles - GMP Securities

Hi, good morning. I was just wondering if we should expect that CapEx in 2011 will be similar or lower than 2010.

Don Lindsay

It’s probably premature to conclude on that. We’re in the middle of our budgeting process right now and you know we did note in the news release that our guidance for this year is a little bit lower than we had originally given. So, a lot some of that will flow into next year as well. So, I would be hesitant to give you a number, but would expect it would be at similar levels, but that’s very preliminary at this stage.

David Charles - GMP Securities

Okay. While may be Don, can you answer the question Don that given that you’ve basically completed as much as you can, did that be financing and you did highlight that your building cash nicely and may be even at very strong levels. I am wondering if you would have any interest in sharing that with your investors by increasing your dividend.

Don Lindsay

We will look at that question. This decision of the board as you know, and when we originally set the dividend, we set it at a yield that was compatible to the other companies that the people compares to and we will have to sort of assess it at year end to whether we should think it should be increased or not. There are different approaches that people take in this, sometimes people set it at a level that they want to maintain for years going forward, other times that people do at top-up at the end of the year depending on how the year has gone so, the board will have that discussion later on. I may just add a little bit of color on that the CapEx and to say one way that I think it because, we set it a bit lower this year than we thought, but that’s really related to some of the things that we thought we get under equipment that we got arrived, the bills that would pay ended up happening next year so, on a two year basis the total will be pretty closed to what we’d originally thought is just some of the falls in the next year. Means last this year than we thought in more next year.

Operator

Thank you. The following question is from [Adam Gillespie] from Goldman Sachs. Please go ahead.

Adam Gillespie - Goldman Sachs

Thanks very much. Can you comment a little bit more on the strong steel maker demand for metallurgical coal in the quarter and looking forward that’s it arts with some of the comments coming out of some North American and Global producers over the last few days. Thanks.

Don Lindsay

I’ll turn it over to Bob Bell with comment that real of all these things I know what you are referring to you have to look at the details and the differences between the qualities of the blends and if it is at the higher end market then it is much tighter than other customer. Bob?

Bob Bell

Adam, one of the key markets of course is the Chinese market and we just saw the numbers for September imports and those imports are running at annualized almost 50 million tons of the imports. So, we’re still seeing very strong import demand from that market and not despite of the efforts by the Chinese government to contain their economic growth within certain levels. That’s really being driven by a few major factors, one being the ongoing urbanization in China, it is not going to stop, some very interesting studies have come out showing how urbanization will continue over the next 20 years, but they’re also shifting their production and consolidating their industry and shifting their production to larger blast furnaces. When hit those large blast furnaces you need a much better quality coke to operate the blast furnace and to do that you need better quality coke and coal and that’s precisely the kind of coal that we produce. We produced almost all our products with very high strength coke and coal that is very good for the larger more productive blast furnaces. So, we benefit from that.

Even and you cannot really focus overly on the US market for us that’s about 10% of our sales and in given year it’s up or down, but when you look at our overall market base, we’ve seen recovery over the last year in our traditional European and Atlantic base and then we’ve seen and benefited from the strong demand in the Chinese market and then North Asia in general. So, we were well-positioned with the quality of our coals and the areas where we are seeing the recovery at demand.

Operator

Thank you. The following questions is from (inaudible) from Colmar securities. Please go ahead.

Unidentified Analyst

I was just wondering if you guys have included any carryover times from Q3 and Q4 in that $200 to $205 range. I think you might partly address that before.

Yes, (inaudible) those numbers are included in the $200 to $205. It includes everything that will affect the price where coal is sold within the final quarter.

Operators

Thank you. The next question is from [David Donovan] from RBC Capital Markets. Please go ahead.

David Donovan - RBC Capital Markets

Thanks. (inaudible) value in Q3, the [sub-ratios] were higher than usual. Should we assume that are something to do with the bottleneck West Shore. Did you do some extra stripping because of that, so we could therefore see that ratio drops back to the normal going forward?

Don Lindsay

No, we continued our operations now during that quarter, we did have obstruction in the Coal Mountain operation, but we continue to operations at other mines without shutting down because of West, what happens once we built our inventories and new strategies in other locations to export our product and we would have sold more in the quarter, but we still manage to sell roughly what we have produced. That didn’t affect our strip ratio.

David Donovan - RBC Capital Markets

We expect to see that strip ratio remain high or it will dropdown again in Q4?

Ron Millos

Well, the important thing to focus on the cost values because strip ratio was comes up the second cost and that’s all we work in to the cost value.

Operator

We have no further questions registered at this time. I’d now like to turn the meeting back over to Mr. Lindsay. Please go ahead.

Don Lindsay

I’d like to just add a little bit more color on the question because any problems quite right that we should focus on the cost. We did four reengineering of all six coal mines about two and half years ago and as we go in to it mine by mine the strip ratio can vary and be in one phase of operation be much higher and then dropdown again for two to three years then go back depending on what seems you are accessing.

In any one quarter a number like that won’t necessary be predictive of what’s going to occur in the long-term and so really we put a lot of time in to coming up with the guidance and cost that reflects all the factor. That’s the additional thought.

I guess if there are no other questions or comments, we want to thank you for your attention today, we are looking forward to a very strong coming quarter with [Andacollo] being included for the first time in commercial production and we will speaking to you in February. Thanks very much.

Operator

Thank you. The conference has now ended. Please disconnect your lines and we thank you for your participation.

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