Gregory A. Waller - Vice President of Investor Relations & Strategic Analysis Donald R. Lindsay - Chief Executive Officer, President, Non Independent Director and Member of Executive Committee Ronald A. Millos - Chief Financial Officer and Senior Vice President of Finance Ray Reipas Ian C. Kilgour - Senior Vice President of Coal Roger J. Higgins - Senior Vice President of Copper Timothy C. Watson - Senior Vice President of Project Development Réal Foley - Vice President of Coal Marketing William A. Fleming - Vice President of Coal Operations & Engineering

Curtis Woodworth - Nomura Securities Co. Ltd., Research Division Meredith H. Bandy - BMO Capital Markets Canada Jorge M. Beristain - Deutsche Bank AG, Research Division Orest Wowkodaw - Canaccord Genuity, Research Division Greg Barnes - TD Securities Equity Research John Charles Tumazos - John Tumazos Very Independent Research, LLC Oscar Cabrera - BofA Merrill Lynch, Research Division Sohail Tharani - Goldman Sachs Group Inc., Research Division John Hughes - Desjardins Securities Inc., Research Division Kerry Smith - Haywood Securities Inc., Research Division Brian MacArthur - UBS Investment Bank, Research Division Paretosh Misra - Morgan Stanley, Research Division Alec Kodatsky - CIBC World Markets Inc., Research Division Harry Mateer - Barclays Capital, Research Division David Neuhauser

Ladies and gentlemen, thank you for standing by. Welcome to Teck's Third Quarter 2012 Results Conference Call. [Operator Instructions] This conference call is being recorded on Wednesday, October 24, 2012. I would now like to turn the conference call over to Mr. Greg Waller, Vice President, Investor Relations and Strategic Analysis. Please go ahead.

Thanks so much, operator. Good morning, everyone and thanks for joining us this morning for our third quarter earnings conference call. Before we start, I'd like to draw your attention to the forward-looking information slides on Pages 2 and 3 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 statement. And I would like to add, this morning, that our presentation is a little longer than usual so bear with us as we get through it because we've got a number of issues we want to cover. But we will get to Q&A and we look forward to that discussion. And at this point, I'd like to turn the call over to Don Lindsay.

Thanks, Greg. Good morning, everyone, and thank you for joining us. I'll start with a review of the results for the quarter, and then I'll turn the presentation over to Ron Millos, our CFO, to address some more in-depth financial topics. And I should say, a number of the other members of the management team are on the call this morning and available to answer your questions. So starting with Slide 5. This quarter, we achieved record copper production at 99,000 tonnes, and that's thanks in part to completion of Antamina's expansion, which is now up and running in its standard design capacity, and as well, it's also thanks to incremental improvements at several other copper operations. We ended the quarter with a cash balance of $3.9 billion, and today, we have approximately $4.2 billion at the time of this release. We also have announced that we are deferring about $1.5 billion of our capital spending program, and I'll get into the details of the deferrals a bit later. And subsequent to the quarter end, we did wrap up another successful shipping season at Red Dog. Finally, just last week, we announced the redemption of the last outstanding tranche of our high-yield debt and this is a milestone event as it marks the last of the high-yield debt that we issued in May 2009. Turning to Slide 6. Our second quarter revenues were over $2.5 billion, and gross profit before depreciation and amortization was approximately $933 million, and profit attributable to shareholders was $180 million. EBITDA was $721 million, and adjusted profit, which removes the effect of onetime items and derivatives and exchange gains and losses, was $349 million. I should also note that EBITDA was approximately $960 million before the $238 million pretax charge related to the redemption of…

Thanks, very much, Don. And I'm on Slide 19 where we've summarized our changes in cash for the quarter. Our cash from operations was approximately $741 million in the quarter. Capital expenditures and investments were $497 million and in early August, we issued $1.75 billion of long-term notes, with a portion used to refinance some of the outstanding high-yield debt. We are using the balance of the proceeds from this debt issue to redeem the last of our outstanding high-yield notes and we announced that last week. And in early July, we paid a $0.40 per share dividend, and after allowing for principal and interest payments on our debt, exchange rates changes and other items, our cash balance in the quarter was about 298-- $289 million lowered down at $3.9 billion, as Don mentioned earlier, we're currently -- have about $4.2 billion in cash. Slide 20 shows our final pricing adjustments for the quarter, which are included in our other operating income and expense on our income statement. Our total pricing adjustments for the quarter were positive due to rising copper prices during the quarter, resulting in a $55 million gain on a pretax basis. Turning on to Slide 21. Last quarter, we highlighted the relationship between the pricing adjustments and the changing commodity prices. Some of you may remember the chart here. The total pricing adjustments in millions of dollars on the Y axis versus the change in the quarter, open versus quarter end copper-zinc prices on the X axis. We've updated the chart and you can see the third quarter adjustment is in line with what we would expect from our historical relationships. And just as we mentioned last quarter, there are other elements that impact the total settlement adjustment and those relate to total volumes, lead and…

Thanks, Ron. On Slide 25, we are focusing on decisions to reduce operating and capital spending, as you would have seen in the release. In terms of operating costs, we expect to achieve annual cost savings in the order of $200 million, probably higher, through various companywide cost control programs. As well, we have deferred approximately $300 million of capital spending out of 2012, and about $1.2 billion out of 2013. At QB, the re-filing of the SEIA is not expected before Q2 of 2013, this delay in the resubmission postpones the original spending program. At Quintette, environmental permitting issues are expected to delay that project as well. While at Relincho, changes in plans for local infrastructure is pushing back the completion of the feasibility study. At Trail, we've elected to defer the construction of the Number 4 slag fuming furnace. And at Fort Hills, the project schedule has been pushed back there as well. I'd like to update you on the status of the many development projects that we have under way, that's on Slide 26. At the Neptune coal terminal that I commented earlier, our plan to expand 18.5 million tonnes of capacity in the foreseeable future will be a big positive for the company. As you know, cost per tonne of loading at that terminal is lower than elsewhere, so it's a real benefit to the company. For Quintette, the feasibility study for the restart is now complete and we expect to be in a position to make a decision sometime in the latter half of 2013, subject to the permitting process. At Relincho, the completion of the feasibility study has been deferred past Q1 of 2013 now until we get some clarity on the port and power project that we have been planning to make use of. At Fort Hills, work continues towards a project sanction decision expected in the latter half of 2013. And finally, at QB, the SEIA resubmission is not expected to be resubmitted until after Q1 of 2013, but that timing is still unclear. So in summary, Teck remains in great financial shape and is well positioned in uncertain economic times. Our long-term view remains favorable, particularly for our key products, steelmaking coal and copper. Our copper production has grown materially and we continue to work on decreasing our cost position. Our coal production is making the necessary adjustments to ensure that it's responding to market demand. And lastly, we are adjusting our capital spending program, but we may modify it more depending on commodity markets and our financial position and other factors. And with that, I would like to turn the call over to questions.

[Operator Instructions] The first question is from Curt Woodworth with Nomura.

I was wondering if you could elaborate a little bit on the comments you had in the press release that the met market could remain weak into the first half of 2013, yet it seems like the sales levels have picked up given your guidance for the fourth quarter, and you mentioned that you've seen spot price bounced and maybe, order entry picking up. So I'm just kind of curious how to balance those 2 statements.

I'm very pleased that you noticed the sales levels were very strong. We're very pleased with that, but I'll turn that question over to Ray.

So and yes, to answer your question, we still see uncertainty in the world economic conditions and the steel production continues to run at that low capacity level but at the same time, the measures that are announced by the various central banks and governments seem to be starting to improve the market sentiment.

Okay, great. And then just in terms of the sales pick up, maybe from what you're seeing in the third quarter, do you think that's driven from deferrals in the quarter that have pitched into 4Q or vessel scheduling or do you think it's more of the real demand recovery or even a re-stocking event, do you have any more color you can provide?

So actually, it's a reflection of the large effort that we've put into building solid and long-term relationships with customers in all of our market areas, and that's allowing us to maintain our position even when the market conditions are uncertain. Yes, that's pretty much it.

I think if you look at the last couple of years, we've established a pretty good record of reliability and that's very important to customers. And also our relationships in China are getting stronger and stronger, partly helped by our strategic partner there.

The next question is from Meredith Bandy with BMO Capital Markets.

So on the net side, again, when we look at the spot pricing that everybody looks at in its various trade journals, how does that relate to the spot pricing that you get on the 15% to 20% of your sales that are stocked?

So Meredith, we do not comment on individual deals but what we can say is that out -- off of the price indication that we're giving for Q4, it includes all of our contract sales, our quarterly priced sales, it includes our spot sales, it includes the sales mix that we have in our sales portfolio, as well as the spot sales.

Yes, I guess maybe just to clarify, I'm not really asking or-- I don't mean to ask about a specific transaction, but just -- I guess, the question I get a lot and I don't know the answer to it, are those real spot prices? Or should we just think about them as sort of indications? How should we, as analysts, use those spot prices? Do you feel like they're real prices?

Meredith, just for clarification, are you talking about prices that you might read in trade journals, such as Platts and so on?

Sure, yes.

You have a view on that so why don't you go ahead?

Yes, so what is published by Platts or others is market assessments, Merdith. And they do not necessarily reflect -- they do not necessarily reflect actual deals that are being done in the market. It's not like an index in the case of LME, for instance, where we know that transactions are done at those pricing levels. In the case of the price assessments for coal, they do not reflect actual transactions in our view.

The next question is from Jorge Beristain with Deutsche Bank.

Don, my question is on the CapEx deferral, which is a fairly chunky number if you average it across the 2 years, it would appear to be about 30% of your CapEx is being deferred. Could you comment on the split as to how much of that deferral is voluntary, in the sense that you are sensing, perhaps, some weakness in your end markets, or it's a choice that the company is making? And how much of that would be because of regulatory permitting delays, et cetera?

Sure. Well, a significant amount is due to regulatory delays. Clearly, QB2 is the prime example of that, with the SEIA having been withdrawn and still without clarity on what the new requirements will be, or still discussions going on with the regulators there, and so we don't know how long it will take to resubmit. We can make estimates but we don't know for sure. And that's the same situation with Quintette. So those deferrals, if you like, are kind of deferring themselves. And then at Fort Hills, we've got 2 partners, we're only 20% owner there, and so their schedules are going to prevail and they're looking at all of their other commitments that would have nothing to do with Fort Hills but will affect their own timelines, and so that's fine. Relincho, we saw the Supreme Court decision in Chile on the power in the port, so that affected not just us, but 2 other projects as well. Again, it wasn't related to us but that's what happened and so that's delayed Relincho. So those 4 are all delayed by regulatory matters, and I think it's just characteristic of the industry, if you talk to other companies, they all have their own examples of that. We deliberately delayed Number 4 slag fuming furnace at Trail. We had the flexibility -- the project had to be at a point where you could delay it without having too much effect on the overall costs and go back at it 1 year or 2 from now, we'd really like to do it. But we look at the overall economic scene, and we want to make sure that we're living within our means, if you like, and just margins have compressed in coal and zinc and so we're just being careful with our spending. So I don't know what the exact percent is but clearly, more from regulatory than from choices that we've made. But if the regulatory delays weren't there, perhaps, we would've made the choices anyway.

And just a follow-up to that, does that change your thinking out toward 2013 in terms of uses of cash? Because you now seem to be -- your net debt is falling quite sharply quarter-on-quarter, and you did not affect, it appears, to buyback our buyback of stock in the third quarter. So can you just comment about, if you do see these kind of large-scale deferrals of CapEx that you had sort of earmarked for a year like 2013, what do you guys intend to do with that cash?

Yes. So the first part of the answer to that would be the deferrals are just that, they're deferrals. That we are strongly committed to QB and Quintette and so on, and so we will still need the capital at some point in the future, we hope not in the too distant future. So I think it's important to put that in context that they might be deferred for 1 year. But we are still very committed to our stated course strategy. And just to refresh on that, if you look out -- whether it's 4, 5 years to when Relincho is built, and that means the QB2 is built and Fort Hills is built, at that stage, every single share of Teck will have twice as much copper production backing it, about 50% more coal production, and Fort Hills Phase 1 up and running and just about -- the Energy division about to go on a very high phase. And along the way, we hope to moderately increase dividend from year to year, maybe not necessarily every year, but we certainly want to be consistently increasing the dividend, and then we want to buy back a few shares every year. So if we just do that state of course strategy, at the end of 5 years, it looks pretty good for shareholders. It may not be the most exciting strategy from an analyst's point of view and the media, not a lot of catalysts and events and those kind of things, but steady growth for the company on a per-share basis. So nothing has changed from that point of view, we're very committed to that and that means that we'll need that capital for those projects at some stage. So generally, the answer to your question is not much has changed in our philosophy.

The next question is from Orest Wowkodaw with Canaccord Genuity.

I was hoping you could provide some insight in terms of how we should think of your coal production going forward? You mentioned that you curtailed some production in August to meet customer demand levels, you've guided to sales of 6.2 million tonnes in the fourth quarter, so should we assume that you plan to run at that current rate going into 2013 or do you plan on increasing production but just building inventories? And how does Quintette fit into the picture? Will you sanction Quintette if you don't see a pickup in demand even though it's an economic project? Any insight would be helpful.

I'll turn it over to Ian Kilgour, our Senior Vice President of Coal.

In terms of coal production, we've moderated our production rate to keep pace with the sales level. Our inventories are at very satisfactory levels and they allow us the ability to react in a timely way to changes in the sales picture, for example, the opportunity that we're sustaining in quarter 4. So I guess, we're -- the most likely scenario is we'll continue with current production levels as we move into next year, but next year's production will depend on what we see actually happening in the market. We are hoping that the positive signs that you're hearing now will follow through and that we'll be able to utilize the full capacity that we have installed in our coal business. Our expansion of our Elk Valley assets, the Brownfield expansion is virtually complete and we have the capacity to increase our production and we will do so as the market demands.

And what about with Quintette, unless we see a pickup in demand, do you think that you would still push through with that project in hopes of just displacing other higher cost coal from elsewhere in the world or what's the philosophy there?

Well, Quintette is part of our long-term philosophy, which is that we see that the market for coke and coal is going to be a very strong one in the future as China's requirement for imported coke and coal increases, as India's requirement for imported coke and coal increases. So Quintette is very much a part of that long-term plan and in terms of when it will come online, assuming that we are able to get our firm in the first half next year, we'd see first coal in the first quarter of 2014. As we've seen, with increasing costs of production across the world, that the cost curve is increasing, quintette is coming in at operating costs very similar to what we had in our Elk Valley coal mines, so that we see that there is room for Quintette in the global scene and we know that it's a desirable product. We have many customers who were receiving Quintette coal before the mine shut down and we'll be very happy to receive in the future.

I was going to say -- but again, do you think -- unless we see a pickup on the demand side, do you think you would go ahead and sanction the restart or do you think there could be potential for delays on that?

The decisions that we make are all long-term, and yes, it's a weak quarter last quarter and this quarter but we don't anticipate it staying this way at all. And in fact, if you look at the 4 major coke and coal producer regions in the world, meaning Canada, the U.S., Australia and Shanxi province, and each of the U.S., Australia and Shanxi province, the costs are going up quite dramatically where we have been able to hold our costs relatively stable, and if you look forward, we'll be in even better position next year and the year after compared to those regions. When we bought Fording, it was about at the 80th percent on the cost curve, now it's in the bottom half and headed lower. So to the extent that we can bring on production that adds more cost than our competitors, we think we should do that.

The next question is from Greg Barnes with TD Securities.

Don, I guess this is a bigger picture question. In the past, you talked about potentially looking at iron ore to something you'd add to your portfolio at preferably lower-cost, high-quality iron ore close to your Asian customers. Given what we're seeing in China in steel, bigger iron ore producers cutting longer-term projects, is that still something that you're interested in pursuing or not?

You phrased your question in terms of long-term. And long-term, we still believe that iron ore would be a good fit for our portfolio. We still believe that the OECD is roughly correct that 3 billion people will be moving into the middle class between now and 2030, and that it will require a lot of steel, not just from China, but in many emerging markets. However, we have spent a lot of time looking at iron ore and we haven't been able to find an entry point. We've had detailed discussions with a number of players, but it's pretty clear that their expectations for price are very rich and so we have made the decision to move on and we are committed to our stated core strategy, looks pretty good to us. We will keep our eyes open for opportunities in copper and occasionally in other commodities, although we don't have anything of interest right now. But for this particular point, we made the decision to move on.

So you push it far out in your view is the way you want to be?

Well, we're not looking at iron ore at this stage and we've been through that, looked at it in a lot of detail. As I stated, fundamentally, we think it would be a good fit, but we're not spending any more time on it.

Good. Just one other question to -- on QB, it seems like it's having a bit of a tough time and cash cost in Q3 by my estimate, around $350 a pound, what's going on and what can you do to address the situation there?

Greg, I'll turn it over to Roger Higgins but I'll just make an overview comment that QB is a mature asset in its last years and that always poses some difficult challenges and Roger has put together a pretty clear strategy on how to deal with it, Roger?

You are correct and QB costs for the quarter were high, you're right about the number you mentioned. Year-to-date, we're running low of net around 275. We thought it's a function of both ore production and higher input costs, we are in a transition between ore design for leaching and ore, which we'll get -- be getting too, soon, for the QB Phase 2 project and we're having to manage that transition. We have had some events, which haven't helped us in the business. Some rain in the desert again, which is unexpected. But we are really working to rightsize the project as the leaching aspects of it do taper off a little bit and we have to make sure we have the right size, we're running the right proportion of the plant, that we have the right number of people on site and not too many. So we're working hard to bring that back into a cost range where we can comfortably continue to walk right it through until the QB Phase 2 project is constructed.

What is the right size, Roger?

It's going to be around 60,000 tonnes, more or less, through the next few years.

The next question is from John Tumazos with John Tumazos Real Independent.

I'm trying to ask the same question over again, but maybe in a way that you can answer better. World steel output is up 300 million tonnes since '09, 1.51 billion versus 1.21 billion tonnes, yet your benchmark is down to 170 from 335 peak, and the bottom in '09 was 128. I don't understand why coal is falling more than iron ore when the iron ore capacity additions are epic, epic, epic, 154 million this Q, 100 million tonnes everywhere you turn. First question, could there be a very large expansion in port terminal capacity, Queensland, BC, air transportation, infrastructure, such that part of the bottlenecks, in addition to the massive rains Australia in spring of '08 and '11, 2011, were transportation issues? And second, are some of your steel mill customers under such terrible duress by high iron ore and high scrap that they're begging you to cut price so that they can keep their blast furnaces running? I'm just trying to understand why coal is falling more than iron ore?

Okay. Well, why don't I start with some comments and then I can turn it over to Real Foley, our Vice President of Coal Marketing. So first comment would be that the coal market is a lot smaller than the iron ore market, just a very significant degree smaller. And it's a primarily seaborne market, coastal plants, so there aren't that many customers in the world. And so when markets turn down, they can all spot it and kind of act in concert and go into destocking phase pretty quickly. When you combine that with a large supplier, and in fact, the world's largest supplier, that had been constrained from the flood back in 2011, and rotating strikes and all of a sudden, they're dried out and the strikes are over and they have supply quite quickly that they haven't placed with customers and they can't keep it, there's only so much room to store coal and if you store it too long, it can lose some of its qualities, so they have to sell. So a situation like that can have quite the effect on the market, in a small-market. But it is only for a certain period of time and then you see suppliers respond to price, and we've seen a total of 25 million tonnes, I'll get one of my colleagues to confirm that number in a minute, of production that has been announced as shutting down, but more than that, and this is what gets us quite excited, is that as you've seen the cost structure, particularly in Australia, rise so significantly, up 60% in the not too distant past, that gives them pause for thought when it comes to investing in new capacity and we've seen some strong statements from the large players there, that…

I think you covered it well, John.

Don, I've got one comment I'd add to that. I'd note that the 20 or so analysts who cover us, the consensus long-term coal price that's used for valuations and devaluations is $165 a tonne. And relative to your comments about what -- how we see this $178 at a whole point of the cycle, we just don't think that $165 is the right one defining [indiscernible]

For a long-term price to be $165, you'd have to have long periods of time, significantly below that to average, you'd have long periods of time at $120 or $125, and the cost curve is well above that. And we've seen several, several quarters that are significantly above $165, from 200s, 225s 285s, 300s, 315, 330, so we think the $200 price is much higher. Now a word of caution, while Teck itself is in very strong financial condition and we have a view on supply and demand in coal and steel, the reality is the world overall is still a very fragile place, there are a number of areas in the world where people could be and should be very concerned. And depending on what happens, you never know. You could see some event occur that causes the world to get simultaneously terrified like it did in 2008, and just come to a stop and then you get demand shock, that can drive prices lower than you always expect. But so far, that hasn't happened, and if it doesn't happen, if the world just carries on, in our view, what's pretty meager growth, we think that supply is still going to have a tough time keeping up with demand and particularly in copper, I should say, that in last year, some sort of really severe demand shock, I think the copper market looks very, very strong for the foreseeable future.

The next question is from Oscar Cabrera with Bank of America Merrill Lynch.

Turning our attention now to your corporate business. If Quebrada Blanca were to obtain a permit in the second quarter 2013, when would you start spending money on the project and when would you think that you could get to first production?

Okay, I'll turn that over to Tim Watson.

So Oscar, you said that if we get approval in the first quarter of 2013, is that the first quarter of 2013, April 2013, we got the permit?

No. I think you stated that you expected the permit not before the second quarter of 2013. So let's assume second half of 2013.

I think we need to clarify, we expect to refile SEIA at that time, that doesn't mean the permit.

Okay. So let me rephrase that then. If when you get the permit, what do you expect the construction period to be in first production?

Oscar, there's still the period following the SEIA approval that we've estimated to be approximately 3 months that will require us to get our actual construction permits. For the project, we estimate that there are, in total, about 300 individual construction permits that we'd require. The earliest ones are a period of about 3 months, and can be as long as about -- we estimate 18 months for permits, for things like the ability for us to construct the tailings down. With the timeframe that we're talking, that you've mentioned, we believe from the point of the SEIA approval, we would have construction completion in approximately 39 months.

Okay. And just staying with that project, you mentioned the changes -- the challenges faced by copper producers for development projects in Chile. I know coal plants -- will this have an impact on your estimates for QB in terms of CapEx or OpEx?

From a specifically a QB perspective, we do not believe that what has occurred, same in the case of Relincho, on the big steel power projects having an impact on the availability of power for QB. So we have negotiations ongoing with a power producer for the delivery of power for QB.

Okay. And then going back into the coal business, I was interested in one of the comments on your release where you mentioned that ocean freight costs increases to higher portion of coal that has been sold inclusive of ocean freight, has that changed? Because we understand that DHP is trying to move the quarterly settlements and contracts to monthly. Are freight, ocean freights going to be starting to be included in this and so we're not going to see full reprices anymore? Réal Foley: Oscar, it's Real Foley here, I don't think that will be the case. It seems like the pricing out there is still FOB and that is the way most of the business is done. In the case of Teck, as we say in our release, the majority of our quarterly price business is the freight is controlled by the customers, by the steelmakers, so it's a whole new base of sales, so they control when the vessels come in and we don't see any changes from that point of view.

Okay. And if I may, one last thing. You're sustaining CapEx from the estimates provided last quarter, it came down from $230 million to $660 million, how should we think about the sustaining CapEx for the next year or so? And then if you have Quintette, how should we think about that sustaining CapEx?

We will be finishing our budgeting process in November and we'll have more definitive numbers on both sustained CapEx and development capital that we'd put out in the next press release normally. But I think you should look at it over the next couple of years, it will go down because we're finishing large expansion programs, long-yield equipment shells, and trucks and so on in the coal business in particular. And with that newer equipment, the sustaining capital requirement should decline. So it should go on to a period in the next 2 to 5 years, that should be pretty positive from a sustaining capital point of view, positive meaning it will be lower than it has been.

The next question is from Sohail Tharani with Goldman Sachs.

I want to ask just a couple of quick questions. On the labor issue at Antamina, there's a lot of labor issues on the board and I was wondering if something is happening over there, as the union is working without contract since, I believe, July?

Roger Higgins?

Sohail, you're correct but this is completely normal in Peru. The contracts over the last 3 or 4 have expired in mid-year and new contracts have not been negotiated or signed until about November or even early December. So differently from some of our jurisdictions in Peru, the serious discussions start about the time the contract expires and run for 4 to 5 months after that before an agreement is reached. That process is underway. The company and the representatives of the union there are meeting regularly, meeting last week, this week, next week. And they appear to be on track for an agreement to be reached sometime during November although, of course, that could slip or could even come forward, depending on how those discussions go.

Okay. And one last question, in your press release, you have mentioned some water treatment issues that you're handling at alkali sites, $175 million you're going to spend over the next 3 years, but you also said that the plans are not finished yet and it may end up to be a significantly higher cost. I was just wondering if significant, we assume is it double of the cost or even more?

It's a little early to say how these costs are going to pan out in the long-term. We're currently going through permitting processes for the extension of our mine properties and coming to agreements with the province on border quality requirements. And as we work through that process, we're looking at the various forms of treatment that are going to be required for the -- to achieve those limits. We've got a number of projects happening on number of types of mitigation processes, one of the most expensive ones is the one that is noted in the notes there, which is a water treatment plant using a bacterial process to reduce the selenium levels. That's an active treatment process, we're also looking at other alternatives, which are passive treatment process which are less expensive capital wise and operating wise. We're also conducting extensive R&D programs to look at other means of combating the selenium issue in terms of building out waste dumps in different ways, using different covers, diverting water. Quite a number of activities, which will gradually unfold into a total picture and as that picture emerges, we'll be able to give better guidance as to what costs we expect going forward.

The next question is from John Hughes with Desjardins Securities.

Just 2 quick ones. Just to step back on Relincho in QB on Phase 2, is it in following the stay the course strategy, is it reasonable that those of us who do model for valuation purposes, that we just push these 2 projects out 1 year?

Well, we don't know. If I were doing it, that's what I would do, yes.

Okay, great. And is the Quintette feasibility study available? Like on the website or otherwise?

I think the question, John, you're asking is, do we file a 43101 report associated with that. And Tim, can you comment on what the...

Yes. In the terms of the 43101, 43101 will be filed associated with the fourth quarter results. So the actual feasibility study has been completed and we are going through a preparation and review of the 43101 and we expect to have it filed in the first quarter of next year.

The next question is from Kerry Smith with Haywood Securities.

Don, has the price declined in the net coal business traded? Any other opportunities for you to acquire complementary net coal assets that might not have been available 6 months or 12 months ago?

Good question. Well, we do watch opportunities in that quite closely. Our general philosophy is that we have 100% control or almost 100% control of what I would characterize -- usually characterize as the second best resource in the world, it's looking better and better over time compared to our competitors. So with literally several billion tonnes of high-quality resource, from a capital point of view, is generally more efficient to expand our core operation than it would be to acquire something. That's not to say that it's not possible to acquire something on an efficient basis, and we will watch it closely. But generally, we like what we have, and it's performing very well. And so when we get finished this current round of expansion to 31 million tonnes or a bit more, we'll stick our heads up and see what the market looks like and what the demand is likely to be. And then we can look at another 10 million tonne expansion if we want slightly to be more capital efficient to that with our own resource and elsewhere. Particularly now that we've really ironed out the port situation, we're using actually 4 or 5 different ports now, if you add it up, but with 3 on the west coast with good contracts. And with the expansion of Neptune up to 18 million tonnes plus, that gives us a lot of flexibility, and the 10-year deal with CP is working very well. So we kind of think we should just stick to what we've got because it's very high quality and getting better.

Okay. And just on next year's coal production. You had a slide in your last presentation. It said that you were targeting 28 million tonnes of coal production in 2013. Is that still roughly the thinking then for next year?

Well, I don't have that slide in front of me, so I'm not sure if that's exactly what it said but it will be dependent on demand. So we certainly have increased capacity, which is working very well, but that production number will be dependent on demand.

Okay. And was that 28 million tonnes, was that sort of productive capacity next year? Because that looks like...

I think that was at the end of 2013, not at the beginning of 2013. So we're probably targeting 27 for the year and hitting 28 by the end of the year, so 28 at 2014. I'm just looking at the end to make sure that's correct.

Is that correct Ian?

We are obviously moderating our production due -- as south to mid over next year. Our capacity will -- it's basically in place for us to go to higher south level just as the market permits. But I think it's a little bit early to be too definitive on that.

Okay. Ian, what would the productive capacity be next year based on the equipment you have?

Around 27 million tonnes peak production.

Okay. Because I just pulled up the presentation on the website, and it says -- at Slide 18, targeting 28 million tonnes per annum in 2013. So I'm just trying to understand what that number is.

Yes. Kerry, we were very clear when we presented that. That was -- getting into a 28 million tonnes annualized rate by the end of the year in 2013.

By year end, okay. Okay, that's helpful.

I'm not having that capacity in the year. And as Ian just talked about, that's the productive capacity we would have subject to what the market then determines we should produce at.

Right, okay. Okay, perfect. That's helpful. And then just on Relincho, it -- can you talk a bit about what the permitting issues are that the third parties are having? I'm not that familiar with the issues. But just wondering how critical these issues are and if they're going to delay the project significantly, if you had a backup plan for port and power or if that's really the only option you have?

We have Roger Higgins.

With our Relincho plans, we were relying on third-party supplies for both power and port. And we had in mind, in particular, the use of project that was under development by a third party and which did have some of its approvals. Those approvals were subsequently withdrawn through an action in the Supreme Court in Chile. So there's a great deal of uncertainty about if and when that port will be booked. So we are, in fact, now actively exploring what our alternatives would be about other alternatives, which would be third-party supply for the port or even the possibility of a port construction in -- within our own plan and looking at what other options are available for power supply. We are, at this stage, looking to build a powerhouse of our own. We're not the only development that's being affected this way, and this is not the only -- there aren't many in Chile powerhouse importers. It's not the only development in Chile that's been overturned by plans against approvals that have already been granted. So there is a period of flux in Chile at the moment as some of the new regulations and the new distribution of authority from the center to the regions is taking place, and we just have to watch how that goes. In the meantime, we are starting to develop our own pullback positions.

Okay. And just maybe the last question, Don. You had some discussions about possible funding partner for QB2. Is there any discussions going on as to -- on that side now? Or is that kind of on hold until the EIA is filed and approved?

I guess they're both at the -- we do have the 2 partners there, ENAMI, the state agency, own 10% carried interest, and IMSA, a private company in Chile, owns 13.5%. And we're waiting for them to go through their processes and determine whether they're -- well, ENAMI will stay in the course, but whether IMSA will stay in or sell their interest, and if they do, who the new owner is before there'd be any further decisions on that.

The next question is from Brian MacArthur with UBS Securities.

Can you just remind me exactly how this royalty in Red Dog's going to work? Does it work on production in Q4, and therefore, there's a delay and the inventory goes through? Or does it just start immediately in Q4 on sales, and therefore, the fact that sales got pushed from Q3 to Q4, you actually absorbed the higher royalty?

It's actually -- it's sort of a cash flow type royalty, Brian. So it depends on when you collect your receivables, when you pay your bills, that sort of thing, so it kicks in. The first payment will be made in January under the new royalty regime. So depending on the timing of the sales and the timing of the collection of the receivables, that'll be a sort of a key driver, and then of course, you've got the capital spending that will go in there as well. So it's a rather complicated, detailed calculation where you need to see the actual spreadsheet to go through it.

Okay. But for my simple external thing, so I can still work probably on 25% or whatever I think you're going to sell in Q4, it'll be -- still take the 25% in Q4 and then just put it 30% next year. Simple thing...

Yes, that's probably going to get you relatively close.

The next question is from Paretosh Misra with Morgan Stanley.

Just wanted to go back to the cuts in sustaining CapEx to $660 million now. Is that mostly driven by less equipment requirement? Or are there big moving parts there?

Two parts. Going forward, there will be less equipment requirements because we have so much new equipment. So that's correct. They also -- the other part to think about, there are some big chunks in there. So for example, doing the acid plant at Trail, that's a onetime item but it's considered to be sustaining capital for that operation. So you get a big chunk and then that's behind you. So -- and we want to get that finished. It's important to do.

Got it. And one last question. When you cut production in your coal segment, let's say in response to weak demand, how do you decide where to cut it? Is that totally driven by cost or do you look at the quality so you're looking at the margins also? How do you think about it?

I guess the main driver really is the sales. We measure our production to the sales. So in the products that have the most restrictions, it's where we have our production restrictions.

The next question is from Alec Kodatsky with CIBC.

Just 2 questions. With respect to the cost reduction, the $250 million annual operating cost reduction, what segments of the business do you think offer the most opportunity, is this more the corporate level, is it an operating level, and just some sense for how that might filter through? And then the second question is with respect to the 25 million tonnes in capacity reductions that you quoted. Is there any sense for how much of that has already been done? And can -- by extension, how much is yet to be worked through? And do you have any sort of sense of what sort of the conversion rate for these sort of cuts? Do they actually happen or not, or do the people just sort of claim that there's a reduction and it never occurs? And just any color around that, it's sort of an open-ended question, but would be much appreciated.

Okay. On the first question, it is at the operating level, not the corporate level. It is a bit being on corporate. But to get materiality, it's at operations. And we've been going through a process, literally the last day or so, where each General Manager of all our sites has come here to present their plan, both what they've done already and what they intended to do. And I sit through all of them personally, and they get questions and suggestions from all of their peers. And so that's where the operating cost cutting is coming from. I mean, coal is our largest business. So the most -- a larger part will come from coal, but certainly, each part of the company is doing their bit on that. And then on the coal production cuts, I'll turn that back to Bill Fleming.

Yes. So on production cuts, the production cuts would be real because the coal doesn't have a long shelf life.

Okay. So it's a pretty real number. But do you have any -- is that real as in this has already happened in terms of you monitoring the market? Or is this just a review of comments that people have said as far as cutbacks?

Yes. It's based on what has been announced, what has been reported by the various companies.

Just for clarity, you can't store it. So like if you keep producing and you can't sell it, it'll eventually backs up your stock, right? How long could you store it, Bill?

It really depends on -- if you have the room by the way, on the product. But it could be 3 to 6 months to maybe a year, at the very max, but depending on the quality of the product.

The next question is from Harry Mateer with Barclays.

Just a quick question on the balance sheet. How should we be thinking about your cash balance? Is there a specific liquidity target we should keep in mind in light of the uncertain environment? I know that the $4.2 billion number you gave in the press release, as of yesterday, will come down a bit for the bond redemption. But what should we be thinking about in terms of how you guys approach liquidity targets? And how much cash is the right amount to keep on hand?

Well, our debt requirements between now and 2017, without the redemption behind us, are only $323 million, and of course, we'll have $4.2 billion cash left for redemption. So the cash is there in advance of the project development that we have ahead of us. So we don't really think of it as a liquidity target because it's so far beyond what a normal operating threshold of cash should be. We use $500 million as kind of a minimum cash level in our models, just to fund working capital and various other things. That can vary a bit, and it will depend on market and so on. But clearly, we're going to be well above that for some time.

So is it really just out of abundance of caution, or just waiting for the right spot to spend it?

I go back to what I said earlier on our stated course of strategy, which we're committed to and looks pretty good. We have major capital spending ahead of us for QB2 and Fort Hills and Quintette and in Relincho. And so we're going to need that cash and put it to good work. I just make a comment, we've been spending a lot time looking at copper opportunities lately, as I mentioned, having moved on from the iron ore thing. And the more we look at what's out there and compare it to QB2, we wish we could just snap our fingers and build QB2. Because once QB2 is built and it's going to run for 50 years and be expandable, cash cost of $1.07, a high-grade clean concentrate using water from the ocean, so not interfering with this salar and local communities and stuff, boy, it looks really good, nice, clean solid operations. We'd sure like to get that built. So that's a good use for the cash so -- once we get to that point from a permitting point of view.

The next question is from David Neuhauser of Livermore Partners.

What's your view at this point of current views regarding the market? Obviously, there's been some sustained weakness. And this type of weakness, of course, is different from several years ago when you had more of a shock to the system, and now it seems like we're much more on a prolonged, sustainable balanced trend. I know you touched on the comment earlier that confidence seems to be improving based on central banks' views. But is that simply -- is that going to turn into demand at some point? Or is this just a short-term view that things are puffed/propped up a bit?

Okay. Well, I could talk about this at length, and I'll try and be brief. Looking at 3 big sources of demand, first, China, November 8 is a key date, leadership change, at least the congress. But then I'm not sure exactly when the leadership change will be announced but it's coming soon. We're looking forward to getting that behind us. And we think once that's in place and there's stability going forward, that, generally, the new leadership are not going to want to have a bad first year. That's just human nature. And I think that elements that are already published in the '12 5-year plan will proceed and there's going to be a fair bit of fixed asset investment, and that will help drive demand for commodities. I note that a 7% growth rate, as we have in our website IR presentation, on such a large denominator, the second largest economy in the world, adds up to $550 billion of absolute incremental GDP growth. And even if there's more consumption in that number, it's still a very large number, and it's larger, by orders of magnitude, than it was 5, 6 or 7 years ago when growth rates were 10% to 13%. As we've said before, we don't really care about the percent, we care about tonnes, and the tonnes are going up. Last month's copper imports, 390,000, 395,000 tonnes, and the average over the last 12 months was 350,000. Record iron ore imports into China last month, record exports for the country. So China looks pretty good to us. In the U.S. side, I'm not sure who's going to get elected. I'm not sure anybody could make a very solid prediction on that. But either way, we look at the underlying industrial production in auto sales and so on. And even at the recent turn in housing, I think that's pretty encouraging because confidence begets confidence. So we're watching it closely. Things could change. But we almost think no matter who gets elected, that the sentiment and the level of confidence is starting to improve in the U.S., and that's encouraging. Notwithstanding the fact that the U.S. is not the market that drives commodity prices nearly as much as it used to. Western Europe, now that's a big problem. No one seems to have a very clear solution or a clear timetable. So that's probably the biggest factor that shakes market confidence. And when there's no confidence, people invest less. But I think China overwhelms Western Europe, but we'll have to see as it unfolds quarter-to-quarter.

Okay. And what about, though, in terms of the view of -- the whole play, for long periods of time, has been the super cycle, of course. And you're seeing a lot of people start to forecast that we're going to see an end to the super cycle. How -- what's your views on that, I guess, at this point in time? Being it's -- I know your long-term plans and views are for the company. But if you look at the past decade where prices are, it seems like a lot of the base metals, as well as even some of the energy products, have sort of flattened off. So is this something that's going to be prolonged? Or do you expect the super cycle to continue?

That's a good question. I'm not sure what a super cycle is. But we certainly have had positive times since about 2004, 2005, where there was a significant increase in demand, not just from China but from emerging markets generally. And the industry couldn't keep up with supply, and there was a need for a lot of investment. And so I guess the common theme these days is the investment is starting to catch up and demand has slowed. And to me, that's part of the ebbs and flows of the industry. There's always going to be cyclicality. And so this has been the weaker part of the cycle and weaker in some commodities than others. I'd point out the difference between copper and zinc, for example, just in terms of our portfolio. Copper at $3.50 to $3.75, that's a pretty good price, and we feel pretty good about our copper division and their projects going forward. So it's all relative to what your expectations are. As we go forward, we are certainly convinced that the urbanization trend in China will continue. They will still move another 350 million people from rural to urban, and in fact, those trends will continue in other emerging markets. As I mentioned earlier, the OECD is calling for 3 billion people to move into the middle class, and that will involve the consumption of a lot of commodities. So we think the long-term demand trends will continue. The real challenge is on the supply side. And I will say this -- I've said it before, but I will say this that supply will not show up in any commodity anywhere near what the PowerPoint presentation you see say. And we've seen a lot of evidence to that fact the -- in commodity after commodity, and that trend will continue because it's just getting tougher and tougher to bring on new production. Look at what we've announced in our press release this quarter, about 4 key projects: QB2, the SCIA, Relincho, a Supreme Court decision in the country. And this is in Chile, which is a pretty good country for mining. And we've got delays due to partners, delays due to permitting here in British Columbia. And every company is suffering through those challenges right now. So I think that if global growth even carries on at a moderate to meager rate, the mining industry will still be challenged to keep up with supply. So we think the long-term trend still looks pretty good. There will obviously be ebbs and flows. This is a weaker period. We will get through it. And so we're sticking to our stated core strategy because we strongly believe that we'll need a QB2 to be built, for example.

Okay. But at this point, it seems like your sense of being still somewhat nimble because it seems a little cloudy out there. And in terms of -- you also sort of have this bifurcation in some of the base metals and some of the other commodities, where you look like back '08, '09, everything was a straight downdraft. And today, even though you had deceptive growth, you had ore fall, but yes, you have things like gold and silver and, to some degree, like Brent oil still maintained their bids, and even copper. But do you think that's going to sort of continue on and now each commodity is sort of following their footing, so to speak? Or do you think that -- and also just -- I hate to touch on that, but you mentioned with China at 7% growth. But China hasn't been really a country that's shown stability to their growth, either it's a 10% or 13%, like you said, or it's down to 7%. And the 7% going to essentially be the trend going forward, or are we going to start to see that ramp up a bit in terms of use?

Again, I got to refresh people's minds on the map. When it was 10% to 13%, the absolute dollar value of incremental growth was $250 billion to $350 billion. Now at 7% but the denominator is still large, the absolute dollar value growth is $550 billion. So we don't think that what you just described is the situation at all. It's not about percent. It's about absolute growth, and in our case, in particular, in terms of tonnes. And the tonnes are still going up. So we feel pretty confident about that. And the policies of China are actually pretty stable compared to the western world, so -- right? They've only -- they have the ability to implement their policies. And as we've seen in Western Europe or on super communities in the U.S., there's nothing -- the western world doesn't have quite as much abilities to do that. I'm being told we're running out of time here, so I just went to make a couple of comments, one about strategy. And we've made a number of kind of significant calls over the year, and we chose to invest in our steelmaking coal business and our copper business, and we chose not to invest in zinc, for example. But one of the things driving that is that there is geological scarcity to high-quality hard coking coal. It only occurs in about 7 places in the world, and then it takes a significant infrastructure to develop it. And so in terms of choosing which commodities we go into, that geological scarcity is very important to us. And in copper, we've seen the same thing. The exploration results in copper over the last -- not 5 years, but 10 years or probably 20 years, hasn't really kept up with the world's needs.…

Yes. I just want to get a reminder out. We have our annual Investor Analyst Day coming up November 6. That's a half-day event in the afternoon. So if you haven't heard about it and this is the first time you're hearing about it, you can certainly contact us if you want to register to attend. And certainly, we'd look forward to seeing you there. And other than that, operator, I think we're done with today's call.

And the conference call has now ended. Please disconnect your lines at this time. Thank you for your participation.