Operating performance was weaker for copper, Teck's second-largest business. Production volumes fell to 179 million pounds in the quarter from 196 million pounds in the fourth quarter of 2011 principally because of lower ore grades at Highland Valley in Canada (30% of 2011 copper production) and bad weather at Quebrada Blanca in Chile (20%). Weighted average unit cash costs across Teck's four copper mines was $1.60 a pound after credits for the quarter, ranking Teck's copper operations as the highest cost among the major producers we cover, but nonetheless solidly profitable at prevailing copper prices ($3.77 a pound average in the first quarter, $3.66 a pound as of April 24).

Implementation of the Quebrada Blanca II project, which will access the hypogene orebody beneath the supergene orebody that will be mined out by 2016, would do a lot to improve Teck's average cost picture and deliver a substantial boost to total copper production as well. While QBII doesn't yet have board approval, we expect approval will come shortly, given the recent completion of a favorable feasibility study, results of which Teck announced today. As currently conceived, QBII production would kick off in 2016, averaging 550 million pounds of copper in the first five years of production. Putting that sum in perspective, Teck produced 708 million pounds in 2011, an all-time record for the company. Teck estimates unit cash costs after molybdenum by-credits at $1.08 a pound for the first five years, trending higher in subsequent years as ore grades decline. While not stellar relative to the global average, at $1.08 a pound, QBII would rank as Teck's second-lowest cost operation.