Welcome to Teck's First Quarter 2014 Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. This conference call is being recorded on Tuesday, April 22nd, 2014. I would now like to turn the conference call over to Greg Waller, Vice President, Investor Relations and Strategic Analysis. Please go ahead.

Thanks very much, operator, and good morning everyone and thanks for joining us this morning for Teck's first quarter earnings conference call. Before we start, I'd like to draw your attention to the forward-looking information on Slide 2; this presentation does contain forward-looking statements regarding our business. However, various risks and uncertainties may cause actual results to vary. Teck does not assume the obligation to update any forward-looking statement. You'll notice this morning, we have got a change in our presentation format in our slides, it’s a little shorter this morning, we will get to Q&A quicker. But as we have started over the last few calls, we will be limiting the call to one hour this morning, so get your questions in. And I will turn the presentation over to Don.

Thanks Greg and good morning everyone. I will begin with a brief overview, followed by highlights from our first quarter results, and then Ron Millos, our CFO, will provide additional color on the quarter's financial perspective, we will then conclude with the Q&A session, where Ron and myself and additional members of our management team would be happy to address any questions that you may have. Starting with the brief overview on Slide 3, we continue to see good demand for all of our principal products, and we are starting to see improvements in global economic conditions. However, prices clearly remain weak, particularly for steelmaking coal. Coal prices are currently at their lowest level since 2007, and margins are at their lowest level in 10 years. We continue to be surprised that there remains so much on economical supply on the market, although we did see an announcement this morning of some supply coming off. We estimate that as much as 35 million to 40 million tonnes of global seaborne traded steelmaking coal is currently being produced at a negative cash margin at current prices, and clearly, that's not sustainable, and even a portion of that closing down, would bring the market back to balance. Fortunately, we are starting to see some curtailments, but more is needed in order to bring the market back into balance and achieve better pricing. In these circumstances, we are increasing our efforts to reduce operating costs and capital expenditures where possible. We are in a strong financial position, with $2.4 billion in cash at March 31, and no substantial debt due over the next three years. At the same time, we are mindful of returning cash to shareholders, and in January, we paid our semi-annual dividend, which is $0.90 on an annualized basis. Turning…

Thanks Don. I am moving on to Slide 13, where we have summarized our changes in cash for the quarter. Our cash flow from operations was C$470 million. We spent C$400 million on capital projects, including our investment in Fort Hills and C$204 million on capitalized stripping costs. We also paid C$259 million for our semi-annual dividend and C$172 million on principal and interest payments on our debt, and after these items, distributions to non-controlling interest, foreign exchange translation and other changes in working capital, we ended the quarter with cash and short term investments of approximately C$2.4 billion. The next slide shows our pricing adjustments for the quarter. Pricing adjustments were a negative C$63 million, primarily due to the 34% decline in the commodity price -- or copper price, sorry. These adjustments are included on our income statement under other operating income and expense. The chart on the right side of the slide simplifies the relationship between the change in copper and zinc prices, and the reported settlement adjustments. And again as a reminder, refining and treatment charges in the Canadian and U.S. dollar exchange rate should be considered in your analysis of the impact of price changes in the adjustment, and you should also consider taxes and royalties when analyzing the impact on earnings. And with that, I will turn the call back to Don.

Okay. We'd like to look at Slide 15 and operating costs and CapEx reduction. We began a cost reduction, originating in the second half of 2012, and exceeded our initial goal. We identified C$380 million in our annual operating cost savings, and to-date we have implemented C$366 million and realized C$345 million. Going forward, in light of our current market conditions, we are increasing our efforts on reducing our costs and CapEx to ensure that we maintain our competitiveness. We are intensely focused on reducing our operating costs further, targeting C$200 million in additional annual operating cost reductions, half of the reduction is expected to come from a 5% reduction in workforce, which represents approximately 600 positions. This will be achieved through a combination of attrition, higher increases in reductions and contractors and employees, including layoffs. We are also targeting an additional 5% reduction across all our other operating costs. We will also reduce our sustaining and development capital by approximately C$150 million. This will primarily be achieved through the deferral of equipment purchases and a reduction of spending on our development projects, with the exception of Fort Hills. Including approximately C$45 million in Pend Oreille restart costs, our 2014 capital expenditure forecast has been reduced by another C$105 million to C$1.8 billion. In addition, we are deferring the potential restart of our Quintette steelmaking coal mine. The project is being put on care and maintenance, until market conditions are favorable for a restart. We will continue to work on obtaining outstanding premise, so we could restart quickly when market conditions improve, and production could commence within 14 months of a construction decision. Looking forward on Slide 16 and to summarize our near term priorities; we are focused intensely on further operating cost reductions. We are prudently reducing our capital expenditures where possible. We are deferring to restart the Quintette, until steelmaking coal market conditions are favorable, and we are excited about our plan to restart our Pend Oreille lead-zinc mine, which should have final approval shortly. And with that, we would be happy to answer your questions, and please note, that some of our management team members are on the line in different locations, so there may be a pause, after you ask your question. Thank you very much. Operator, over to you.

(Operator Instructions). Our first question is from Curt Woodworth from Nomura. Please go ahead.

Yeah. Hi, good morning.

Hi, good morning Curt.

Wanted to start on the met coal side. It seems like there is roughly anywhere from 30 million to 50 million tonnes at least of global supply that's uneconomic. Yet, you really haven't seen very material production cuts announced, and some companies are increasing production, that -- like BHP. Do you think that there is a lot of frictional elements in the market, such as take or pay commitments with rails or other hidden costs that you think are preventing more production cuts, and then also, I had a question on what you think China's cost position looks like, in terms of how much domestic China supply is on economic right now?

Okay. We are going to start with Réal on that one. But there may be others here at the table, who may add some color. Réal Foley: All right. So Curt, you're right. We have seen some production cuts announced -- starting to be announced, and couple of examples of those are Walter idling their Western Canadian operations. And Arch, there was reports this morning, that they are cutting production as well. They are cutting their sales estimate for next year. In terms of take or pay, we are hearing that there are still take or pay commitments, in places like Australia for instance, and that is adding an impact. In terms of domestic supply in China, we are hearing that the current market conditions and the large price drops that we have seen, with the domestic price, is also impacting their margin. So I guess in short, it’s a little bit unclear right now, how long the weak market conditions will continue. There is clearly oversupply of coal in the market, and that is definitely impacting pricing.

All right. We think Réal has covered it pretty well. The only thing I would add is, there are a number of different estimates out there as to how much of the industry is uneconomic. One last week, or maybe a week before, a major U.S. bank suggested that 60% of the whole seaborne coking coal was under -- current benchmark and 76%, then economic at current spot price. And clearly, whether that's right or wrong or the [indiscernible] was right, but one way or another, these things can't go on forever, but they certainly have gone a long time, and we are looking forward from day one, the real cuts to come, because they are needed to balance market.

Okay. And on -- just a follow-up on QB-2, in terms of -- obviously the liquidity position is good, but the cash flow profile has definitely been degraded from the met profile. Do you think that, if the met market were to stay weak for a more prolonged period of time, that that would alter some of the capital that you would look to put into QB-2?

Well at the moment it's at least two years away before we could make construction decision on QB-2, and certainly a lot can change in two years. If you look backwards two years, certainly a lot changed then, and look at the difference between March of 2009 and March of 2011 is a two year period. So if it were similar conditions to today, yes, we would not have the financing available to go ahead with QB-2, and we'd have to look for new partners to do something else. But it's far enough away, and that's not even a firm date, in terms of when the construction decision is that we will deal with that, when we get much closer to it.

Okay. Thank you.

Thank you. The following question is from Meredith Bandy from BMO Capital Markets. Please go ahead.

Hi, good morning. I just wanted to ask you a little bit more about the cost reductions that you announced. Specifically the C$200 million, how much of that is related to the reduction in workforce? Is it particularly weighted toward any one area, that sort of thing? And then I guess the same question for the development, sustaining and development CapEx, is that spread fairly evenly?

Well I will turn it over to Ian, but I'd just start by saying that it is not in just one area, it is across the company.

Thanks Don. The cost reduction effort will be right across the company, and it's really an intensification of program has been ongoing. We expect around half of the savings will be from the personnel reduction, but we will also be looking at reducing the cost of consumable, adjusting our mine plans, carrying on with improvements in truck productivity, managing contract, managing over time, the whole gamut of levers that we have to pull to reduce our costs. And again, with the capital reduction, that will be spread right across the business units and our development projects, with the exception of Fort Hills, and will be basically looking to defer replacement of equipment. We have really invested very strongly in mining equipment over the last three years and we have excellent truck and travel fleets. We have upgraded the size of our truck fleet in coal from principally 240 tonne trucks to 320 tonne trucks, with some 400 tonne trucks there. And need to replace capital equipment in the next 18 months is not as great, so we are going to be very disciplined about that.

Do you think there is any potential for lower met coal or copper cost guidance? I don't see any change this quarter.

Predict a lower guidance?

Yeah, for the cost guidance. Thanks.

Yeah. I think we'd want to wait at least a quarter to see these results come in, and always recall that fluctuations in diesel and gas and other sorts of inputs can cancel out the actual productivity improvements and cost reductions that you make, and we have seen some of that already. So we won't be changing the guidance just yet.

Okay. Thank you.

Thank you. The following question is from Mitesh Thakkar from FBR Capital Markets. Please go ahead.

Good morning everybody. My first question is just kind of getting more color on the operating cost reductions, which Meredith asked about was, how should we think about the impact on various segments? I know you can't update your guidance right now, but if we were to think where are -- from an operating segment standpoint, where are most of these cuts coming from, like the staffing reductions and everything else?

We will be very cognizant of the different situations of the different business units, whereas in copper and zinc, we have the opportunity to push reduction and we are working very hard to get the very motive out of our operations and our concentrators don't know that the excellent throughputs we have got out of the Highland Valley copper exceeding our initial expectations. We really can't do the same thing in coal, as the market is weaker. So the cuts will be biased in -- towards larger cuts in coal than the other business units. But they will be right across the organization.

Okay, great. And just a follow-up on the CapEx reduction side, can you update us on your new sustaining CapEx number after accounting for this C$150 million?

Yeah, probably about half would be under the sustaining capital. So we had, -- C$620 million I think was the previous guidance, C$580 million-ish.

Okay. Perfect. Thank you very much guys.

Thank you. The following question is from Lucas Pipes from Brean Capital. Please go ahead.

Good morning. That's Pipes, but appreciate you taking my question. I also wanted to follow-up on the C$200 million of potential cost savings. Could you maybe just give us the timeframe by when do you hope to realize those?

I guess, we see that as being realized over the rest of the year. We will be taking action immediately, which will reduce costs going forward in the short term. For example, the Quintette deferral, we will see a reduction of about 80 people, and other short term reductions will occur. But the remainder will happen gradually over the next six months -- over the rest of the year.

But -- so essentially holding all else equal, costs in 2015 should be C$200 million lower than kind of Q1 annualized -- Q1 2013 annualized? Is that the right way to think about it?

They will be C$200 million lower than our budget.

Okay. All right. Thank you. Then maybe a follow-up question, also for Ian and maybe Réal and also pitch in a little bit. A lot of these discussions on production cuts have been described in the third party type of environments. But when you look at your portfolio, prices are getting pretty awfully close to your production costs. So at what point would you say, its exercised a little bit more disciplined, or would you may be even take the opposite approach? Your nameplate capacity is above your current projected sales levels. Could you maybe even increase production in order to lower costs? How do you think about, kind of your strategy in this market environment?

I am going to start with that one, and Ian may add some color. So we are in a better position on the cost curve than a large part of the industry, particularly those that are cash negative. So if we actually cut production and cause the price to go up, we would be helping them to stay in business, and our shareholders would be the losers for that, at least in terms of market share, they may gain somewhat and then increase the price. As we have mentioned, there are millions of tonnes that are negative cash margin, and eventually, that has to stop. I mean, bankers or others won't fund it eventually. As each week and month goes by, we get closer to that day. The key for us, is to maintain our position on the cost curve as more competitive than all of those others, and so that's certainly what we are doing and these cost reductions help with that position. Ian, you want to add anything?

And basically, we have to think about the cost of the marginal tonne. AT this point, we are still looking to achieve a budgeted production for the year. In general, you've got to strike a balance between the effort you put into that marginal tonne and therefore how much it costs, and the benefits of the marginal tonne, which generally are right, because they do not absorb -- or they help absorb the fixed costs, and therefore the actual profit on the marginal tonne, unless you're on overtime, we're using contractors or something like that, is generally good. So at this point, we are sticking to budget.

Thank you very much for this detailed answer. That's very helpful.

Thank you. The following question is from Greg Barnes from TD Securities. Please go ahead.

Thank you. May be Réal could get a little more granular on the coal market. And the 35 million to 40 million tonnes of too much production, how much surplus production is there right now? How much is the market in surplus in your view? Réal Foley: Thanks Greg. Our estimates looking at company reports and analysts are pretty similar to what you're describing, the 35 million to 40 million tonnes. When we look at overall market, there is probably more than half of that, that is in the U.S. But at the current pricing levels, I mean, there is no question that its putting pressure on all suppliers in the market. There is few things to keep in mind too; if you go back to pre-2008, U.S. exports were less than 30 million tonnes, and in some years, they were even less than 20 million tonnes. So that might help to put it a little bit in perspective, and we have already seen, there is reports in Q1 saying that East Coast exports are down around 20% this year so far. So it seems like, there are some changes that are happening in future direction, I suspect, that there will be more production cuts.

So Réal, you think the market is in surplus by 35 million to 40 million tonnes? Réal Foley: No. We think that there is around 35 million to 40 million tonnes that is uneconomic right now.

Okay. Just switching gears quickly, Don, there has been some talk about the dividends in the current environment, and you did say at the beginning, you're mindful of returning capital to shareholders. The Board, you, where do you stand right now, given your current liquidity and your CapEx going forward and current markets?

Just before I touch on that, I am not sure we ever clearly answered your question on what is the surplus, and truthfully nobody knows exactly, but our estimates have been 12 million to 15 million, and it really depends on the production levels you see coming out of Australia, because that's where the big ramp-up has come. They have taken an approach of significantly ramping up, in order to help reduce their costs, and in doing so, of course, they have reduced the revenue per tonne on their costs. But in the fight for market share, that's the approach they have taken, and until you see a change in that, until you have a good handle on that, its hard to know exactly what the surplus is. So I hope that's a little bit more helpful?

Yes, thanks.

On the dividend, I mean, our answer remains the same, that's the Board's decision. But currently, we have C$2.4 billion in cash at quarter end. We are reducing our CapEx, reducing our costs, and all the other projects in Fort Hills are within our control. So we don't have very much debt due in the next three years. So we feel we are in a pretty strong condition. But I wouldn't want to pre-judge the Board with their decision. Our approach on dividend as we have said in different shareholder meetings is that, there are two different types of approaches in the mining industry or commodity industry. Generally, there are those that have a base dividend and then top-up, if commodity prices are good and that sort of thing, and some of the unlisted companies are like that, and there are those that have a stable, and dividend that rises over time and I think increases in productive capacity and ability to do so, and that seems to be the North American way. We have more North American shareholders as you know, so that's the approach our Board has adopted. And while dividend signaling is important and part of the decision on dividend, I think, a stable dividend is a pretty important thing to us. So again, its up to the Board, and I will leave it to them.

Great. Thanks Don.

Thank you. The following question is from Oscar Cabrera from Bank of America Merrill Lynch. Please go ahead.

Thanks operator. Good morning everyone. Wanted to first start with a comment, we shared your enthusiasm on the zinc market, but could you provide more color on the decision to reopen Pend Oreille versus expanding production at Red Dog?

That's an interesting one. Rob, do you want to start with that, and then -- Rob Scott, our Senior VP of Zinc will comment. But do note, I think most of the notes that we have been expanding production at Red Dog, due to higher throughput through [indiscernible] at the moment. That won't last forever, but so far so good.

That's a good introduction Don. I mean, Red Dog is limited by mill throughput, so that there is a potential to increase the production of Red Dog by expanding the mill, or at least maximizing the throughput of existing mill, and you can see in our results this quarter and in previous quarters, where we have gone along way towards increasing the throughput or offset the lowering grade there. But in Pend Oreille's case, Pend Oreille is uniquely positioned, its 80 kilometers from Trail versus importing concentrates to the port of Vancouver, which is over 1,200 kilometers by rail -- 1,300 kilometers by rail to Trail. So it has got a unique position that the benefit of operating Pend Oreille, together with Trail provides a good economic return for Teck overall, and so that's how we have been looking at the Pend Oreille decision.

We should all see that we have limited port capacity at Red Dog as well and occasionally, we get right up again [indiscernible] pretty close. So if we wanted to spend at Red Dog, there will be more capital north of that as well.

Yeah, that's correct Don. At a certain concentrate level, the port becomes the limiting constraint, not only in mill expansion but also in port expansion. And there is the shipping season to consider there. There is [indiscernible] shipping season and there is a fair quantity of concentrate that has to be shipped out, and as well as supplies coming in. So it’s a more complicated expansion, and a longer term decision than just talking about an existing mine that's already permitted to both.

And also I guess, there are other short term opportunities in talking about the potential to marginally increase copper and zinc production this year. We are able to make use of the synergies we have across tech. We have a project ongoing called Mine to Mill, which is all about maximizing the fragmentation of the ore in the pit, before it goes to the SAG mill, and thus, increasing SAG mill throughput, and work on that project is ongoing at Highland Valley, Carmen de Andacollo and Red Dog, and so we are able to use the learnings from one side to apply to another, and that's something that we are also using in our cost reduction program, where the projects that are happening at one side, communicated to all other side, and thus were we are moving forward in a very efficient way.

Great. That's all very helpful. Thank you. And then, going on to the copper business now, interested in your comments about changes in Chile with respect to policy. And you name here, the increase in the effective tax rate. So we understand that there would also be changes in power requirements, like the government I think is looking for mining companies to reduce power utilization between 5% and 10%, and then, there is other impacts in [indiscernible] with regards to water. So I am just wondering, if you have talked to the government about this, and also if that has changed your plans or if you see changes in OpEx or CapEx going forward?

Dale Andres?

Sure. I will respond to that. The new administration under the Bachelet government is relatively new. We are meeting with the government at multiple levels, and understanding their position and their initiatives going forward. Obviously tax reform is number one on their list, and they have put out a proposal that's currently being debated in Congress, that we think will likely go ahead. They do have the position in Congress to push that forward. In the end, that will raise the effective tax rate and we put that into the release and I have commented on that previously. But as far as water and power, those are two big issues in Chile today, and that's not just for the mining companies, that's across the Board. I think that fits with our cost reduction program, when we look at power and being more efficient in the way we use power at our sites, and no different on water and water efficiency. So I think our overall position on our investments in Chile and our current operations in Chile are no different. We still think it’s a good place to do business, but we need to be efficient and that's no different than in Chile or anywhere else.

I should add that, at least with respect to QB, QB-2, we have already designed into the project, that we are using desalinated water from the ocean. So the fact their requirement now doesn't affect the plans that we have and as we noted in our disclosures, sometimes, we secured power for QB-2 already and so those plans are in place. So from that point of view, there is no effect on QB-2.

Thank you.

Thank you. The following question is from Kerry Smith from Haywood Securities. Please go ahead.

Thanks operator. Don, just on Pend Oreille, you talked about some approvals that are needed. Is that like a Board approval to proceed or is that like a permit that's required that you need? I am just trying to clarify exactly what you need there?

Basically, final Board approval -- the final decision will be made shortly. But we didn't have to leave it out of our disclosure, because we are not closed and its relatively material to be mining for 1,000 tonnes of production. But the final decision hasn't quite been made, so I am just not [indiscernible]. But I stand by it.

Okay. So its not a permit that you're waiting for, its really just your own approval [indiscernible] to proceed.

That's fair.

And just on the coal side, you talked about this 35 million to 40 million tonnes that are not making any cash or have negative margins. Would any I mean, on a gross basis, your overall business has great margins, and these prices are reasonable margins, I think it was 30%. Do you have any individual operations that are close to having a negative margin today, at current, say, spot pricing?

We always have a range of operations, so I am going to turn it over to Ian.

Yeah. We have a range of operating costs, and it generally goes with volume that comes out of the mine, and our smaller mines are finding it more difficult at the moment, and that's where we have a -- the maximum focus I guess on our cost reduction program, and so, we are actively carrying out measures, as we speak, to ensure that it will allow -- all our mines are going to be cash positive this year.

Okay. But if we assume the current spot price of, say call it C$110 a tonne. Would all of your mines still have at least modestly positive margin, Ian, or?

We will be making sure that's the case in the next few months.

Okay. That's great. Thanks. And then maybe just one last question, Don, could you provide an estimate of what the C1 costs might be for Pend Oreille, if you thought in that way? I know you don't give those kinds of numbers for the business unit. But just for that operation?

Well, Rob's going to --

Its in the release, and its C$0.80 for Pend Oreille, it was our estimate for the C1 cash costs.

Okay. That's an all-in cost and the C1 cost. Okay, okay. Great. Thank you.

That is before the benefit to the overall company from Pend Oreille concentrate going to Trail, which are pretty good.

Great. That's the C$15 million a year you talked about, is that right?

So when you calculate an IRR in this, its very good.

All right, okay. Okay, great. Thank you.

Thank you. The following question is from Brian Yu from Citi. Please go ahead.

Great, thanks. I have got a couple of clarifications on Pend Oreille. First, are you incurring any meaningful care and maintenance costs at the moment to kind of go away? And then secondly, the C$50 million in transport savings, are we going to see that as a higher netback on Pend Oreille volumes, or will that accrete to Trail?

Sorry, can you repeat the first question? I didn't quite hear you?

Yeah. Just the care and maintenance costs that you're incurring now, and is that a meaningful number, if that will go away, once it restarts?

It is a fairly significant number, and it will go away once the project restarts. Its because we are holding the mine on a dewatered basis. We are continuing to dewater the operation, so we are keeping the underground open, which requires inspections and the like and maintain a dewater. So it’s a fairly significant open cost to keep it on care and maintenance.

Yeah, but dollar estimate for that?

Its in the range -- probably minimal costs in the range of $5 million to $6 million per year.

Okay.

And in terms of the overall benefits, the benefits are accrued to Teck overall as a company, and so where they reside in each individual operations, is not the way of looking at it. We are looking at it as an overall benefit.

All right. Thank you.

Welcome.

Thank you. The following question is from Alec Kodatsky from CIBC. Please go ahead.

Thanks. Good morning. Just two questions. Firstly, on the coal side, curious if you could just provide a bit more color around the shipping issues that you experienced in Q1, and sort of -- are they resolved and where they are sitting now, and then just curious, how the 600,000 tonnes of material will be treated? Is it being sold in Q1, and therefore, will be carryover tonnes at a Q1 price level. Just sort of curious, how we should account for those going forward?

Ian?

The logistics issues in Q1 were drawing [ph] narrowly rile, where we riled about 10% less than our plan. Essentially due to issues attributed by CP as being due to weather, extreme cold weather in parts of the country. They need to move a bumper growing crop. And basically that led to us, not necessarily having the right blended coal at the port, able to fill the vessels which we have contracted. So eventually, that has led to about 0.3 million tonnes loss in natural sales volume, which yes, we will carry forward into Q2.

Okay, great. And if I could just follow-up on Pend Oreille, I am curious. With these C$50 million annual benefit that you've calculated, is that done on a present market basis, and I guess, what I am curious is, presumably, as the zinc market tightens and the concentrate market tightens, this material, this place, what you intended to buy and just curious if that C$50 million is based off of current TCs that will ultimately move lower as the market tightens, and then the annual benefit will -- or, all things being equal in a better market, actually improve? I am just sort of curious if I am thinking about it the right way, or just sort of, how you're thinking about it?

Its Rob Scott to answer the question again, and the C$50 million consists of two components. There is a component related to reduced transportation costs. The mine is only 80 kilometers from the Trail smelter, versus bringing in concentrates to the port of Vancouver and its about a 1,300 kilometer rail from the port of Vancouver and including operating costs of the ship. So there is a transportation benefit to [indiscernible] overall shipping from Pend Oreille versus bringing it to the port of Vancouver. That's part of the C$50 million. The second component of the C$50 million is, there are byproduct credits in the Pend Oreille concentrate, that we can recover out of the Trail smelter, and that's another overall benefit, that's independent of the treatment charges.

Okay. No, I think I understand it now. Thanks, appreciate it.

Thank you. The following question is from Harry Mateer from Barclays. Please go ahead.

Hi, good morning. First question, just tell us what your targeted cash balance is in terms of the minimum you want to have on hand, just to run the business?

We think we need about C$500 million to run the day-to-day operations.

Okay, thanks. And then in terms of the CapEx reduction, I think you guys mentioned earlier on the call, about half of that is from lower sustaining CapEx. Is that something we should think of as permanent, and can be applied to sustaining CapEx in future years?

Some of that will be deferral from 2014 into future years. Some of it will be permanent, in the sense that we will be really looking at some of the assumptions we are making about equipment replacement schedules. So it will be a mixture.

Okay. Any sense you can give us for kind of percentage, that's deferrals versus other?

I think it’s a little bit early for us to be able to give you more detail on that.

Okay. And then last one for me, just -- are there any commodities you guys see out there right now strategically where, you think there actually is value in terms of being able to add exposure at an attractive cost? And I guess specifically, are precious metals of any interest, or is that still not a strategic fit?

That's an interesting question. So the position we have had on gold -- we use gold rather than the various precious metals, because PGM is a whole different thing. But gold historically has been, that the gold companies traded at significantly higher multiples than a diversified mining company. So it made sense for us to find the gold through our exploration department. We got 150 geologists around the world, relationships with juniors and grassroots properties and the like and our engineering department takes it through the resource and reserve and pre-feasibility study and feasibility study and add value, and then sell it to a gold company or often to a junior and mid-cap gold companies, that want a near term property and we have made very good money doing that. And so we have been running the gold division with that philosophy for some time, and we do have Teck Gold which attends the conferences and has its own management team and its own internal Board of Directors and it has an appraisal each year and they have a goal to -- they get C$20 million a year, and if they want more money, the come back to the board. Its sort of like a junior that would go to the market for C$20 million, and then if they have something exciting, they might go to the market again. But they don't want spending time doing that financing, and they can concentrate all their efforts on creating value. Their target is to build something worth between C$500 million and C$1 billion in five years, and they are on track to achieve that. So in the last couple of years, there has been a structural shift in the gold industry, as the multiples in the gold sectors have dropped dramatically. Originally…

That's great color. Thanks very much.

Operator, I think we just got time for one more call, and then for those of you, who are cued up and don't get a chance, certainly happy to returning your call after our formal conference call this morning.

Thank you. So the last question is from Lance Ettus from Tuohy Brothers. Please go ahead.

Hi guys. Thanks for taking the question. Just wanted to know, with your -- you're cutting maintenance CapEx by C$150 million. Is that all going to be just less equipments, or now, especially with the global commodity prices down, are you finding it a little bit easier, bargaining with suppliers, and maybe some giveback, I would note that Joy Global, I am sure is one of your suppliers, and I think they are still -- let's say, have EBITDA margins of close to 20% this year?

Its right across the board, including equipment reductions, including looking at spending on our development projects, and reducing those as well. We are in discussions with all of our suppliers, in terms of -- particularly reducing the use of them as contractors on our sites, and replacing them with our own people, and we have [indiscernible] which we call strategic sourcing, which is always looking at our overall global agreements with those large suppliers, to get the very best deal that we can.

Okay. Thank you.

Okay, with that, I think we are going to wrap it up. But just before you do, I want to add one more point on the gold question, just to give some illustration of when we might do something in gold, and that has to do with mine life. One of the things in gold, geologically, is it tends to have much sort of mine life than what you will see in our portfolio. Our portfolio has several operations with 50 years plus, and we know that, if you have 50 years, that we are going to experience not one, but several cycles of two or three good years, when you get all your capital back. And if you back calculate your IRR again, the 50 years that you've had five, six or seven times, when you're going to come back [ph], you get a very good return. One dilemma with gold is that most of them are 10-12 years or even shorter, and if you get a bad run of three or four years, you don't get a chance to earn that kind of return. So that makes a big difference to us. We have a ratio that I have talked about before, but maybe not enough, that we use called mine life to payback. So for example if you have a large capital investment or acquisition cost that you normally think of a payback in the seven to eight year range. If we want a minimum mine life to payback of three, which is our target, then you want to have at least 25 year mine life. In several of our operations in QB and Fort Hills that we are building. These things have a six or seven times mine life to payback. So we have a lot of comfort that we are going to get a good return. Its very hard to find that in gold. But if we do, we'd be very interested. So I hope that adds a little bit color on how we think about that. And with that, I want to thank you very much for your questions. As Greg said, if you have further questions, please don't hesitate to call him directly, and with that, we look forward to talking to you next quarter. Bye for now.

Thank you. That concludes today's conference call. Please disconnect your lines at this time, and we thank you for your participation.