EXHIBIT 99.1
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[GRAPHIC OMITTED -- LOGO]
TECKCOMINCO
ANNUAL INFORMATION FORM
March 19, 2008
TECK COMINCO LIMITED
Suite 600, 200 Burrard Street
Vancouver, British Columbia
V6C 3L9
An additional copy of this Annual Information
Form may be obtained upon request from the Corporate Secretary,
Teck Cominco Limited at the above address or from the company's
web site - www.teckcominco.com
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TABLE OF CONTENTS
NOMENCLATURE.................................................................III
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION..........................III
GLOSSARY OF TECHNICAL TERMS...................................................VI
CORPORATE STRUCTURE............................................................1
NAME, ADDRESS AND INCORPORATION.............................................1
INTERCORPORATE RELATIONSHIPS................................................1
GENERAL DEVELOPMENT OF THE BUSINESS............................................2
THREE-YEAR HISTORY..........................................................2
2005.....................................................................2
2006.....................................................................3
2007.....................................................................4
SIGNIFICANT ACQUISITIONS....................................................5
DESCRIPTION OF THE BUSINESS....................................................5
GENERAL.....................................................................5
Product Summary..........................................................6
INDIVIDUAL OPERATIONS.......................................................7
Copper...................................................................7
Zinc....................................................................13
Coal....................................................................16
Gold....................................................................20
Oil Sands...............................................................23
Exploration.............................................................24
Mineral Reserves and Resources..........................................25
OIL AND GAS RESOURCES......................................................33
Fort Hills Project......................................................33
Teck Cominco/UTS Joint Venture..........................................34
SAFETY AND ENVIRONMENTAL PROTECTION........................................35
SOCIAL AND ENVIRONMENTAL POLICIES..........................................35
HUMAN RESOURCES............................................................36
TECHNOLOGY.................................................................37
FOREIGN OPERATIONS.........................................................37
COMPETITIVE CONDITIONS.....................................................37
RISK FACTORS...............................................................38
DIVIDENDS.....................................................................46
DESCRIPTION OF CAPITAL STRUCTURE..............................................46
GENERAL DESCRIPTION OF CAPITAL STRUCTURE...................................46
RATINGS....................................................................47
MARKET FOR SECURITIES.........................................................48
TRADING PRICE AND VOLUME...................................................48
DIRECTORS AND OFFICERS........................................................49
DIRECTORS..................................................................49
OFFICERS...................................................................51
AUDIT COMMITTEE INFORMATION................................................53
Mandate of Audit Committee..............................................53
Composition of the Audit Committee......................................53
Pre-Approval Policies and Procedures....................................54
External Auditor Service Fees...........................................55
OWNERSHIP BY DIRECTORS AND OFFICERS........................................55
LEGAL PROCEEDINGS.............................................................55
TRANSFER AGENTS AND REGISTRARS................................................56
MATERIAL CONTRACTS............................................................56
INTERESTS OF EXPERTS..........................................................56
ADDITIONAL INFORMATION........................................................56
SCHEDULE A...................................................................A-1
AUDIT COMMITTEE MANDATE...................................................A-1
SCHEDULE B...................................................................B-1
REPORT OF MANAGEMENT AND DIRECTORS ON DECEMBER 2007
OIL AND GAS DISCLOSURE...................................................B-1
SCHEDULE C...................................................................C-1
NI 51-101 AUDIT REPORT - REPORT ON RESOURCES DATA BY
INDEPENDENT QUALIFIED RESOURCES AUDITOR..................................C-1
SCHEDULE D...................................................................D-1
FORM 51-101F2 REPORT ON RESERVES DATA BY INDEPENDENT
QUALIFIED RESERVES EVALUATOR OR AUDITOR..................................D-1
Note: All currency references are to Canadian dollars unless otherwise noted.
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NOMENCLATURE
In this Annual Information Form, unless the context otherwise dictates, "we",
"Teck Cominco" or the "Company" refers to Teck Cominco Limited and its
subsidiaries, a reference to "Aur" refers to Aur Resources Inc. and its
subsidiaries, and a reference to Teck Cominco Metals refers to our wholly-owned
subsidiary, Teck Cominco Metals Ltd., and its subsidiaries.
CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION
This Annual Information Form and certain documents incorporated by reference in
this Annual Information Form contain certain forward-looking information and
forward-looking statements as defined in applicable securities laws. These
statements relate to future events or our future performance. All statements
other than statements of historical fact are forward-looking statements. The
use of any of the words "anticipate", "plan", "continue", "estimate", "expect",
"may", "will", "project", "predict", "potential", "should", "believe" and
similar expressions is intended to identify forward-looking statements. These
statements involve known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from those
anticipated in such forward-looking statements. These statements speak only as
of the date of this Annual Information Form or as of the date specified in the
documents incorporated by reference in this Annual Information Form, as the
case may be. These forward-looking statements include but are not limited to,
statements concerning:
o prices and price volatility for zinc, copper, coal, gold and other
products and commodities that we produce and sell as well as oil,
natural gas and petroleum products;
o the long-term demand for and supply of zinc, copper, coal, gold and
other products and commodities that we produce and sell;
o our premiums realized over London Metal Exchange cash and other
benchmark prices and the sensitivity of our financial results to
changes in metals and minerals prices;
o treatment and refining charges;
o our strategies and objectives;
o our interest and other expenses;
o our tax position and the tax rates applicable to us;
o political unrest or instability in countries such as Peru and its
impact on our foreign assets, including our interest in the Antamina
copper, zinc mine;
o the timing of decisions regarding the timing and costs of
construction and production with respect to, and the issuance of the
necessary permits and other authorizations required for, certain of
our development and expansion projects, including, among others, the
Fort Hills Project;
o our estimates of the quantity and quality of our mineral and oil
reserves and resources;
o the production capacity of our operations;
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o our planned capital expenditures and our estimates of reclamation and
other costs related to environmental protection;
o our future capital and mine production costs and production levels,
including the costs and potential impact of complying with existing
and proposed environmental laws and regulations in the operation and
closure of various operations;
o our cost reduction and other financial and operating objectives;
o our exploration, environmental, health and safety initiatives;
o the availability of qualified employees for our operations, including
our new developments;
o the satisfactory negotiation of collective agreements with unionized
employees;
o the outcome of legal proceedings and other disputes in which we are
involved;
o general business and economic conditions;
o the outcome of our coal sales negotiations and negotiations with
metals and concentrate customers concerning treatment charges, price
adjustments and premiums; and
o our dividend policy.
Inherent in forward-looking statements are risks and uncertainties beyond our
ability to predict or control, including risks that may affect our operating or
capital plans; risks generally encountered in the permitting and development of
mineral and oil and gas properties such as unusual or unexpected geological
formations, unanticipated metallurgical difficulties, delays associated with
permit appeals, ground control problems, adverse weather conditions, process
upsets and equipment malfunctions; risks associated with labour disturbances
and unavailability of skilled labour; fluctuations in the market price of our
principal commodities which are cyclical and subject to substantial price
fluctuations; risks created through competition for mining and oil and gas
properties; risk associated with lack of access to markets; risks associated
with mineral and oil and gas reserve and resource estimates; risks posed by
fluctuations in exchange rates and interest rates, as well as general economic
conditions; risks associated with environmental compliance and changes in
environmental legislation and regulation; risks associated with our dependence
on third parties for the provision of transportation and other critical
services; risks associated with non-performance by contractual counterparties;
risks associated with aboriginal title claims and other title risks; social and
political risks associated with operations in foreign countries; risks of
changes in tax laws or their interpretation; and risks associated with tax
reassessments and legal proceedings.
Actual results and developments are likely to differ, and may differ
materially, from those expressed or implied by the forward-looking statements
contained in this Annual Information Form. Such statements are based on a
number of assumptions which may prove to be incorrect, including, but not
limited to, assumptions about:
o general business and economic conditions;
o interest rates and foreign exchange rates;
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o the supply and demand for, deliveries of, and the level and
volatility of prices of zinc, copper, coal and gold and our other
primary metals and minerals as well as oil, natural gas and petroleum
products;
o the timing of the receipt of regulatory and governmental approvals
for our development projects and other operations;
o the availability of financing for our development projects on
reasonable terms;
o our costs of production and our production and productivity levels,
as well as those of our competitors;
o power prices;
o our ability to secure adequate transportation for our products;
o our ability to procure equipment and operating supplies in sufficient
quantities and on a timely basis;
o our ability to attract and retain skilled staff;
o the impact of changes in Canadian-US dollar and other foreign
exchange rates on our costs and results;
o engineering and construction timetables and capital costs for our
development and expansion projects;
o costs of closure of various operations;
o market competition;
o the accuracy of our reserve estimates (including, with respect to
size, grade and recoverability) and the geological, operational and
price assumptions on which these are based;
o premiums realized over London Metal Exchange cash and other benchmark
prices;
o tax benefits and tax rates;
o the outcome of our coal price and refining and treatment charge
negotiations with customers;
o the resolution of environmental and other proceedings or disputes;
o our ability to comply with and timely renew environmental permits;
and
o our ongoing relations with our employees and with our business
partners and joint venturers.
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We caution you that the foregoing list of important factors and assumptions is
not exhaustive. Events or circumstances could cause our actual results to
differ materially from those estimated or projected and expressed in, or
implied by, these forward-looking statements. You should also carefully
consider the matters discussed under "Risk Factors" in this Annual Information
Form. We undertake no obligation to update publicly or otherwise revise any
forward-looking statements or the foregoing list of factors, whether as a
result of new information or future events or otherwise.
GLOSSARY OF TECHNICAL TERMS
BALL MILL: a rotating horizontal cylinder in which ore is ground using metal
balls.
BITUMEN: a naturally occurring heavy viscous crude oil.
CARBON-IN-PULP: a process used to recover gold that has been dissolved after
cyanide leach agitation.
CATHODE: an electrode in an electrolytic cell which receives electrons and
which represents the final product of an electrolytic refining process.
CLEAN COAL: coal that has been processed to separate impurities and is in a
form suitable for sale.
COKE: the substance formed when coking coal is heated to a very high
temperature in the absence of air, primarily used in the process of steel
making in integrated steel mills.
CONCENTRATE: a product containing valuable minerals from which most of the
waste mineral in the ore has been eliminated in a mill or concentrator.
CRUDE OIL: unrefined liquid hydrocarbons, excluding natural gas liquids.
CUSTOM CONCENTRATE: concentrate sold to third party smelters for smelting.
DORE: unrefined gold and silver bullion bars.
DRIFT: a horizontal passage from one underground working place to another and
parallel to the strike of the ore.
EXTRACTION PLANT: a facility in which bitumen is separated from sand, water and
other impurities.
FLOTATION: a method of mineral separation in which a froth created in water by
a variety of reagents floats certain finely crushed minerals, whereas other
minerals sink, so that the valuable minerals are concentrated and separated
from the waste.
GRADE: the classification of an ore according to its content of economically
valuable material, expressed as grams per tonne for precious metals and as a
percentage for most other metals.
HARD COKING COAL: a type of metallurgical coal used primarily for making coke
in integrated steel mills.
HYPOGENE: primary sulphide ore located beneath shallow zones of ore affected by
weathering processes.
INDICATED MINERAL RESOURCE: that part of a mineral resource for which quantity,
grade or quality, densities, shape and physical characteristics, can be
estimated with a level of confidence sufficient to allow the appropriate
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application of technical and economic parameters, to support mine planning and
evaluation of the economic viability of the deposit. The estimate is based on
detailed and reliable exploration and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes that are spaced closely enough for geological and
grade continuity to be reasonably assumed.
INFERRED MINERAL RESOURCE: that part of a mineral resource for which quantity
and grade or quality can be estimated on the basis of geological evidence and
limited sampling and reasonably assumed, but not verified, geological and grade
continuity. The estimate is based on limited information and sampling gathered
through appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes.
KIVCET FURNACE: a smelting furnace which produces lead bullion and slag.
MEASURED MINERAL RESOURCE: that part of a mineral resource for which quantity,
grade or quality, densities, shape, and physical characteristics are so well
established that they can be estimated with confidence sufficient to allow the
appropriate application of technical and economic parameters, to support
production planning and evaluation of the economic viability of the deposit.
The estimate is based on detailed and reliable exploration, sampling and
testing information gathered through appropriate techniques from locations such
as outcrops, trenches, pits, workings and drill holes that are spaced closely
enough to confirm both geological and grade continuity.
METALLURGICAL COAL: various grades of coal suitable for making steel, such as
coking coal.
MILL: a plant in which ore is ground and undergoes physical or chemical
treatment to extract and produce a concentrate of the valuable minerals.
MINERAL RESERVE: the economically mineable part of a measured or indicated
mineral resource demonstrated by at least a preliminary feasibility study. This
study must include adequate information on mining, processing, metallurgical,
economic and other relevant factors that demonstrate, at the time of reporting,
that economic extraction can be justified. A mineral reserve includes diluting
materials and allowances for losses that may occur when the material is mined.
MINERAL RESOURCE: a concentration or occurrence of diamonds, natural solid
inorganic material, or natural solid fossilized organic material including base
and precious metals, coal, and industrial minerals in or on the earth's crust
in such form and quantity and of such a grade or quality that it has reasonable
prospects for economic extraction. The location, quantity, grade, geological
characteristics and continuity of a mineral resource are known, estimated or
interpreted from specific geological evidence and knowledge.
OIL SANDS: sand and rock material that contains bitumen.
ORE: naturally occurring material from which minerals of economic value can be
extracted at a reasonable profit.
OREBODY: a contiguous, well defined mass of material of sufficient ore content
to make extraction economically feasible.
PROBABLE MINERAL RESERVE: the economically mineable part of an indicated and,
in some circumstances, a measured mineral resource demonstrated by at least a
preliminary feasibility study. This study must include adequate information on
mining, processing, metallurgical, economic, and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can be
justified.
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PROVEN MINERAL RESERVE: the economically mineable part of a measured mineral
resource demonstrated by at least a preliminary feasibility study. This study
must include adequate information on mining, processing, metallurgical,
economic, and other relevant factors that demonstrate, at the time of
reporting, that economic extraction is justified.
PRESSURE LEACHING: extracting a soluble metallic compound from an ore or
concentrate by dissolving it in a chemical solvent, accelerated by means of
increased temperature and pressure.
RAW COAL: coal that has been removed or exposed for removal from a mine, but
has not been processed.
REFINERY: a plant in which metal or minerals are extracted from an ore or
concentrate, or in which metallic products of a smelting process are refined to
higher purity.
ROASTING: the treatment of sulphide ore or concentrate by heat and air, or
oxygen-enriched air, in order to oxidize sulphides and remove other elements.
SEMI-AUTOGENOUS GRINDING (SAG): a method of grinding rock into fine particles
in which the rock itself performs some of the function of a grinding medium,
such as steel balls.
SHAFT: a vertical or inclined passageway to an underground mine through which a
mine is worked, e.g., for ventilation, moving personnel, equipment, supplies
and material, including ore and waste rock.
SLAG: a substance formed by way of chemical action and fusion at furnace
operating temperatures: a by-product of the smelting process.
SMELTER: a plant in which concentrates are processed into an upgraded product
by application of heat.
STOPE: an underground excavation formed by the extraction of ore.
STRIKE: the direction, course or bearing taken by a structural surface as it
intersects the horizontal.
SULPHIDE: a mineral compound containing sulphur but no oxygen.
SUPERGENE: near-surface ore that has been subject to secondary enrichment by
weathering.
SX-EW: an abbreviation for Solvent Extraction - Electrowinning, a
hydrometallurgical process to produce cathode copper from leached copper ores.
SYNTHETIC CRUDE OIL: means crude oil produced by upgrading bitumen to a mixture
of hydrocarbons similar to light crude oil produced either by the removal of
carbon (coking) or the addition of hydrogen (hydrotreating) which alters the
original hydrocarbon mark in the upgrading process.
TAILINGS: the effluent that remains after recoverable metals have been removed
from the ore during processing.
THERMAL COAL: coal that is used primarily for its heating value and that tends
not to have the carbonization properties possessed by metallurgical coals.
TREATMENT AND REFINING CHARGES: the charge a mine pays to a smelter to cover
the cost of conversion of concentrates into refined metal.
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TV:BIP: means a measure of the total volume mined relative to the bitumen
in-place and expressed as cubic metres of material mined per cubic metre of
bitumen.
UPGRADING: means the process of converting bitumen into synthetic crude oil.
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CORPORATE STRUCTURE
NAME, ADDRESS AND INCORPORATION
Teck Cominco Limited, previously Teck Corporation, was continued under the
Canada Business Corporations Act in 1978. It is the continuing company
resulting from the merger in 1963 of the interests of The Teck-Hughes Gold
Mines Ltd., Lamaque Gold Mines Limited and Canadian Devonian Petroleum Ltd.,
companies incorporated in 1913, 1937 and 1951 respectively. Over the years,
several other reorganizations have been undertaken. These include our merger
with Brameda Resources Limited and The Yukon Consolidated Gold Corporation in
1979, the merger with Highmont Mining Corporation and Iso Mines Limited in
1979, the consolidation with Afton Mines Ltd. in 1981, the merger with
Copperfields Mining Corporation in 1983, and the merger with Cominco Ltd. in
2001. On July 23, 2001, Cominco Ltd. changed its name to Teck Cominco Metals
Ltd. and on September 12, 2001, we changed our name to Teck Cominco Limited. On
January 1, 2008, we amalgamated with our wholly-owned subsidiary, Aur Resources
Inc., by way of vertical short form amalgamation under the name Teck Cominco
Limited.
Since 1978, the Articles of the Company have been amended on several occasions
to provide for various series of preferred shares and other corporate purposes.
On January 19, 1988, our Articles were amended to provide for the subdivision
of our Class A common shares and Class B subordinate voting shares on a
two-for-one basis. On September 12, 2001, the Articles were amended to effect
the name change described above and to convert each outstanding Class A common
share into one new Class A common share and 0.2 Class B subordinate voting
shares and to enact "coattail" takeover bid protection in favour of the Class B
subordinate voting shares. Effective May 7, 2007, our Articles were amended to
subdivide our Class A common shares and Class B subordinate voting shares on a
two-for-one basis. See "Description of Capital Structure" at page 46 of this
Annual Information Form for a description of the attributes of the Class A
common shares and Class B subordinate voting shares.
The registered and principal offices of Teck Cominco are located at 200 Burrard
Street, Vancouver, British Columbia.
INTERCORPORATE RELATIONSHIPS
Our financial statements consolidate the accounts of all of our subsidiaries.
Our material subsidiaries as at December 31, 2007 that are wholly-owned are
listed below. Indentation indicates that the voting securities of the relevant
subsidiary are held by the subsidiary listed immediately above.
JURISDICTION OF INCORPORATION/FORMATION/
COMPANY NAME CONTINUATION
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AurCay Holdings Inc. Cayman Islands
Canada Tungsten (Cayman) Inc. Cayman Islands
Teck Financial Ltd. Bermuda
Teck Base Metals Ltd. Bermuda
Teck Cominco Metals Ltd. Canada
Teck Cominco Coal Partnership Canada
Cominco Mining Partnership British Columbia
Teck Cominco American Incorporated Washington, U.S.A.
Teck Cominco Alaska Incorporated Alaska, U.S.A.
Teck Cominco Limited - 2007 Annual Information Form Page 1
JURISDICTION OF INCORPORATION/FORMATION/
COMPANY NAME CONTINUATION
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Teck-Hemlo Inc. Ontario
Teck Gold Limited Canada
Teck-Pogo Inc. Alaska, U.S.A.
Teck Resources Inc. Colorado, U.S.A.
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In addition to the wholly-owned subsidiaries listed above, we own, directly or
indirectly:
(i) a 97.5% partnership interest in the Highland Valley Copper partnership;
(ii) a 20% limited partnership interest in Fort Hills Energy Limited
Partnership;
(iii) through Teck Cominco Coal Partnership, a 40% partnership interest in the
Elk Valley Coal Partnership;
(iv) a 19.95% interest in Fording Canadian Coal Trust ("FCCT");
(v) through AurCay Holdings Inc., a 76.5% interest in Compania Minera
Quebrada Blanca S.A.;
(vi) through AurCay Holdings Inc. and Canada Tungsten (Cayman) Inc., a 90%
interest in Carmen de Andacollo S.A.;
(vii) through Teck Base Metals Ltd., a 22.5% indirect share interest in
Compania Minera de Antamina S.A., which owns the Antamina copper zinc
mine in Peru; and
(viii) a 50% ordinary share interest in Lennard Shelf Pty Ltd., which owns the
Lennard Shelf zinc operation in Western Australia.
GENERAL DEVELOPMENT OF THE BUSINESS
THREE-YEAR HISTORY
2005
In 2005, prices for our principal products increased in comparison to 2004. LME
cash zinc and copper prices averaged US$0.63 and US$1.67 per pound respectively
compared with US$0.48 and US$1.30 in 2004. Published molybdenum prices
increased to an average of US$32 per pound in 2005 up from US$19 per pound in
2004. Realized coal prices increased dramatically from US$52 per tonne to US$99
per tonne in 2005. Higher prices significantly improved earnings and cash flows
at all of our major operations, although results at Canadian operations were
somewhat adversely affected by a weaker US dollar.
In April 2005, we announced that we were increasing the semi-annual dividend
payable to shareholders of record on June 30, 2005 from $0.20 to $0.40 per
share.
Teck Cominco Limited - 2007 Annual Information Form Page 2
In April 2005, Donald R. Lindsay was appointed our President and Chief
Executive Officer, succeeding David Thompson and in October 2005, Ronald A.
Millos was appointed Senior Vice President, Finance and Chief Financial
Officer, succeeding John Taylor.
In November 2005, pursuant to an agreement with UTS Energy Corporation ("UTS")
and Petro-Canada, we subscribed for a 15% interest in the Fort Hills Energy
Limited Partnership, which is developing the Fort Hills oil sands project in
Alberta, Canada.
Construction of the Pogo project in Alaska progressed to substantial completion
by the end of 2005. In September 2005 we announced that we would extend the
life of the Highland Valley copper mine by 5 years to 2013.
In September 2005 we issued US$300 million aggregate principal amount of ten
year notes and US$700 million aggregate principal amount of 30 year notes. The
net proceeds of the offering were used to repay indebtedness maturing in 2006
and to fund new investment opportunities, including our investment in the Fort
Hills oil sands project, and for general corporate purposes.
Our cash and temporary investments at December 31, 2005 was $3.1 billion
against long term debt of $1.7 billion including the current portion of long
term debt, excluding our exchangeable debentures.
2006
Prices for our principal products increased further in 2006. LME cash zinc and
copper prices averaged US$1.49 and US$3.05 per pound respectively compared with
US$0.63 and US$1.67 in 2005. Molybdenum prices declined somewhat to US$25 per
pound compared to US$32 per pound in 2005. Realized coal prices increased from
US$99 per tonne to US$113 per tonne in 2006. Revenues increased significantly
over 2005, due mainly to substantially higher copper and zinc prices and higher
refined metal sales from the Trail operations. Commodity price increases were
offset somewhat by a weaker U.S. dollar.
In April 2006, we announced that we were further increasing the semi-annual
dividend on our Class A common and Class B subordinate voting shares,
commencing with the dividend payable to shareholders of record on June 19,
2006, from $0.40 per share to $1.00 per share.
On May 8, 2006, we announced an offer to acquire all of the outstanding common
shares of Inco Limited. We subsequently amended and extended our offer. The
offer expired on August 17, 2006 when insufficient shares were tendered to
satisfy the minimum tender condition. In December 2006, we tendered all of our
Inco shares to a competing bid for cash proceeds of $770 million. After the
settlement of our Inco exchangeable debentures and payment of transaction costs
related to our offer for Inco, our pre-tax gain on the disposition of our
investment in Inco was $120 million.
On June 29, 2006, our Class B subordinate voting shares were listed on the New
York Stock Exchange under the ticker symbol "TCK".
In January 2006, Ronald J. Vance was appointed our Senior Vice President,
Corporate Development. In May 2006, Peter G. Kukielski was appointed our
Executive Vice President and Chief Operating Officer and in August 2006, Boyd
Payne was appointed President and Chief Executive Officer of Elk Valley Coal
Partnership.
During the year, new collective agreements were entered into at the Line Creek,
Elkview and Fording River coal mines, the Antamina copper, zinc mine in Peru
and the Highland Valley copper mine.
Teck Cominco Limited - 2007 Annual Information Form Page 3
In June 2006, we completed the exchange of approximately $112 million principal
amount of exchangeable debentures due 2024 and issued 11,489,368 Class B
subordinate voting shares in connection with the transaction.
Our cash and temporary investments as at December 31, 2006 were $5.3 billion
and long-term debt was $1.5 billion.
2007
In 2007, prices for our principal products mainly declined during the year,
although annual average prices for zinc and copper were relatively unchanged at
US$1.47 and US$3.23 per pound, respectively, compared with US$1.49 and US$3.05
in 2006. The lead price increased substantially to an average of US$1.17 per
pound compared with US$0.59 in 2006. Realized coal prices decreased from US$113
per tonne to US$98 per tonne in 2007. A weaker U.S. dollar adversely affected
our revenues.
On April 19, 2007, we announced that we had agreed with UTS Energy Corporation
to acquire a 50% interest in an Alberta oil sands lease known as "Lease 14" for
a purchase price based on a value of $1.00 per barrel of recoverable bitumen as
determined by an independent estimate. In December 2007, the purchase price for
our 50% interest was confirmed to be $200 million. During 2007 we also acquired
a 50% interest in other oil sands leases in joint venture with UTS. At year
end, we had a 50% interest in oil sands leases totaling approximately 285,000
acres (in addition to those held by the Fort Hills Energy Limited Partnership).
Effective May 7, 2007, our Class A common shares and Class B subordinate voting
shares were subdivided on a two-for-one basis.
On May 23, 2007, we announced the formation of a partnership to develop the
Galore Creek copper-gold mine in northwestern British Columbia. To earn our 50%
interest in the Galore Creek Partnership, we agreed to fund $528 million in
construction costs. Construction activities at the project were suspended in
the fourth quarter of 2007 as a result of our review of the first season of
construction and a more detailed engineering study that predicted substantially
higher capital costs and a longer construction schedule for the project. By
agreement with our partner, NovaGold Resources Inc., at the time of the
suspension, our funding obligations in connection with the project were
amended.
On July 3, 2007, we announced a friendly $4.1 billion cash and share offer to
acquire all of the outstanding shares of Aur Resources Inc. ("Aur"), a
Canadian-based copper producer with operating mines in Chile and Canada. On
August 22, 2007, we acquired approximately 93% of the outstanding shares of
Aur. On September 28, 2007, we acquired the remaining Aur shares by way of
compulsory acquisition under the CANADA BUSINESS CORPORATIONS ACT, and
effective January 1, 2008, Aur amalgamated with Teck Cominco Limited under the
name "Teck Cominco Limited".
In August 2007, Tim Watson was appointed our Senior Vice President, Project
Development.
In September 2007, we agreed with UTS Energy Corporation and Petro-Canada to
subscribe for an additional 5% interest in the Fort Hills Energy Limited
Partnership by funding an additional $375 million of partnership expenditures
beyond our current earn-in obligations. As a result, we own a 20% interest in
the partnership. We will satisfy the subscription price for the additional
interest by contributing 27.5% of Fort Hills project expenditures after project
spending reaches $2.5 billion and before project spending reaches $7.5 billion.
Teck Cominco Limited - 2007 Annual Information Form Page 4
On September 24, 2007, we announced our indirect acquisition of 16.65 million
units of FCCT, representing approximately 11.25% of the outstanding units, for
cash consideration of $599 million. This increased our interest in FCCT to
approximately 19.95%. We must pay additional amounts to the vendor if prior to
July 31, 2008 we make an offer or announce an intention to acquire more than
50% of the outstanding FCCT units, and a transaction is subsequently completed,
or if we sell FCCT units, in either case at a price in excess of $36 per unit.
Our cash and temporary investments as at December 31, 2007 were $1.4 billion as
against long term debt of $1.5 billion.
SIGNIFICANT ACQUISITIONS
On July 3, 2007, we announced an agreement with Aur to make a board supported
$41 per share, $4.1 billion cash and share offer to acquire all of the
outstanding shares of Aur. The offer was unanimously supported by the Aur board
of directors. On August 22, 2007, we took up and paid for approximately 93% of
the outstanding Aur shares. On September 28, 2007, we completed a compulsory
acquisition of the remaining Aur shares pursuant to the CANADA BUSINESS
CORPORATIONS ACT. Aur's principal assets are three operating mines: the
Quebrada Blanca and Andacollo copper mines located in Chile and the Duck Pond
copper-zinc mine located in Newfoundland, Canada. On October 29, 2007, we filed
a Business Acquisition Report on Form 51-102F4 in respect of the acquisition.
DESCRIPTION OF THE BUSINESS
GENERAL
Teck Cominco is engaged primarily in the exploration for, and the development
and production of, natural resources. We have interests in the following
principal mining and processing operations as at March 3, 2008:
TYPE OF OPERATION JURISDICTION
- -------------------------------------------------------------------------------
Antamina Copper/Zinc Mine Ancash, Peru
Highland Valley Copper/Molybdenum Mine British Columbia, Canada
Quebrada Blanca Copper Mine Chile
Andacollo Copper Mine Chile
Duck Pond Copper/Zinc Mine Newfoundland, Canada
Trail Zinc/Lead Refinery British Columbia, Canada
Red Dog Zinc/Lead Mine Alaska, USA
Pend Oreille Zinc/Lead Mine Washington, USA
Lennard Shelf Zinc/Lead Mine Western Australia
Elkview Coal Mine British Columbia, Canada
Fording River Coal Mine British Columbia, Canada
Greenhills Coal Mine British Columbia, Canada
Coal Mountain Coal Mine British Columbia, Canada
Line Creek Coal Mine British Columbia, Canada
Cardinal River Coal Mine Alberta, Canada
David Bell/Williams Gold Mine Ontario, Canada
Pogo Gold Mine Alaska, USA
Our principal products are copper concentrate and copper cathode, metallurgical
coal and gold, as well as zinc concentrate and refined zinc. Molybdenum is a
significant by-product of our copper operations and lead is a significant
by-product of our zinc operations. Other products include silver, various
specialty metals, chemicals and fertilizers. We also sell electrical power that
is surplus to our requirements at the Trail metallurgical operations. We have a
Teck Cominco Limited - 2007 Annual Information Form Page 5
20% interest in the Fort Hills Energy Limited Partnership, which is developing
the Fort Hills oil sands project in Alberta, and a 50% interest in certain
other oil sands leases in Alberta at various stages of exploration.
The following table sets out our revenue by product for each of our last two
financial years:
REVENUE BY PRODUCT
PRODUCT 2007 2006
$(MILLIONS) % $(MILLIONS) %
--------------------------------------------------------------
Copper (1) 1,753 1,875 29%
Zinc (2) 1,989 2,191 34%
Coal 951 1,177 18%
Other (3) 1,678 1,296 19%
TOTAL 6,371 6,539 100%
(1) Copper revenues include sales of copper concentrate and cathode copper
(2) Zinc revenues include sales of refined zinc and zinc concentrate
(3) Other revenues include sales of gold, silver, lead, molybdenum,
various specialty metals, chemicals, fertilizer and electrical power
PRODUCT SUMMARY
Copper
We produce both copper concentrates and cathode copper. Our principal market
for copper concentrates is Asia, with lesser amounts sold in Europe and North
America. Copper concentrates produced at Highland Valley Copper are distributed
to customers in Asia by rail to a storage facility in Vancouver, British
Columbia, and from there by ship. Copper concentrates produced at Antamina are
transported by a slurry pipeline to a port at Huarmey, Peru and from there by
ship to customers in Europe, Asia and North America. Copper cathode from our
Quebrada Blanca and Andacollo mines is trucked from the mines and sold in the
spot market.
The copper business is cyclical. Treatment charges rise and fall depending upon
the supply of copper concentrates in the market and the demand for custom
copper concentrates by the copper smelting and refining industry.
Zinc
Our principal markets for zinc concentrates are Asia and Europe. Approximately
25% of Red Dog's concentrate production is sold to our metallurgical operations
at Trail, BC. The balance of Red Dog's production is distributed to customers
in Europe and Asia by ship.
Our principal markets for refined zinc are the United States and Asia. Refined
zinc produced at Trail is distributed to customers in the United States by rail
and/or truck and to customers in Asia by ship.
All of our revenues from sales of refined zinc and zinc concentrates (other
than zinc concentrates produced at our mines and treated at Trail) are derived
from sales to third parties. We strive to differentiate our products by
producing the alloys, sizes and shapes best suited to our major customers'
needs.
Teck Cominco Limited - 2007 Annual Information Form Page 6
All of the zinc and lead concentrates produced by our Pend Oreille mine in
Washington State are shipped by truck to the Trail metallurgical operations.
Trail's supply of zinc and lead concentrates other than those sourced from our
own mines is provided through long-term and spot contracts with mine producers
in North America, South America and Australia.
We have substantial long-term frame contracts for the sale of zinc concentrates
from the Red Dog mine to customers in Asia and Europe. A portion of Red Dog
concentrates are processed at Trail.
Treatment and refining charges rise and fall depending upon the supply of zinc
concentrates in the market and the demand for custom zinc concentrates by the
zinc smelting and refining industry.
Metallurgical Coal
Our principal markets for metallurgical coal are the hard coking coal markets
in Asia and Europe. Processed coal is shipped by rail to the Westshore and
Neptune Terminals in the lower mainland of British Columbia and from there by
ship to customers, or directly by rail to North American customers or by rail
and ship through Thunder Bay Terminals in Thunder Bay, Ontario. Rail service to
the five Elk Valley mines is provided by Canadian Pacific Railway, and Canadian
National Railway provides rail service to the Cardinal River mine in central
Alberta.
Substantially all of Elk Valley Coal's production is sold under evergreen or
long-term agreements with coal prices that are negotiated annually.
Elk Valley Coal competes primarily with producers in Australia and the United
States. The supply of coal in global markets and the demand for hard coking
coal among world steel producers has historically provided for a competitive
seaborne market. Coal pricing is generally established in US dollars and the
competitive positioning among producers can be significantly affected by
exchange rates. The competitive position of Elk Valley Coal continues to be
determined primarily by the quality of its various coal products and its
reputation as a reliable supplier, as well as by its production and
transportation costs compared to other producers throughout the world.
The seaborne hard coking coal markets are cyclical in nature. Over-supply in
the years 1997 - 2000 and the economic downturn in a number of Asian countries
caused prices to drop by more than 30%. Demand strengthened in 2003 and prices
strengthened significantly through 2004 and 2005. In 2006 and 2007 hard coking
coal prices moderated slightly from record levels in 2005, in part due to
substitution by consumers of lower quality coking coals for hard coking coal.
While coal contracts for the 2008 contract year have not been finalized,
current market sentiment indicates that U.S. dollar coal prices may increase
significantly in comparison to 2007.
INDIVIDUAL OPERATIONS
COPPER
Copper Operations
ANTAMINA MINE, PERU (COPPER, ZINC)
We own indirectly 22.5% of the Antamina copper, zinc project in Peru, with the
balance held indirectly by BHP Billiton (33.75%), Xstrata plc (33.75%) and
Mitsubishi Corporation (10%). The participants' interests are represented by
Teck Cominco Limited - 2007 Annual Information Form Page 7
shares of Compania Minera Antamina S.A. ("CMA"), the Peruvian company that owns
and operates the project. Our interest is subject to a net profits royalty of
1.667% on the project's free cash flow after recovery of capital costs and an
interest factor on 60% of project expenditures.
The Antamina project property consists of numerous mining concessions and
mining claims (including surface rights) covering an area of approximately
14,000 hectares. CMA also owns a port facility located at Huarmey and an
electrical substation located at Huallanca. In addition, CMA holds title to all
easements and rights of way for the 302 kilometre concentrate pipeline from the
mine to CMA's port at Huarmey.
The deposit is located at an average elevation of 4,200 metres, 385 kilometres
by road and 270 kilometres by air north of Lima, Peru. Antamina lies on the
eastern side of the Western Cordillera in the upper part of the Rio Maranon
basin, a tributary of the Amazon River.
The mine is an open pit, truck/shovel operation. The ore is crushed at the rim
of the pit and conveyed through a 2.7 kilometre tunnel to a coarse ore
stockpile at the mill. It is then processed utilizing a SAG mill, followed by
ball mill, grinding and flotation to produce separate copper, zinc, molybdenum
and lead/bismuth concentrates. A 302 kilometre long slurry concentrate
pipeline, approximately 22 centimetres in diameter, with a single pump station
at the minesite transports copper and zinc concentrates to the port where they
are dewatered and stored prior to loading onto vessels for shipment to
refineries and smelters world-wide.
Power for the mine is taken from the Peru national energy grid through an
electrical substation constructed at Huallanca. Water requirements are sourced
from a dam-created reservoir upstream from the tailings impoundment facility.
The tailings impoundment facility is located next to the mill and waste dumps
are located adjacent to the pit. Fresh water from mill operations is collected
and contained in the tailings impoundment area. Mill process water is reclaimed
from the tailings pond. The operation is subject to water and air permits
issued by the Government of Peru and is in material compliance with those
permits. The operation holds all of the permits that are material to its
operations.
The Antamina polymetallic deposit is skarn hosted. It is unusual in its
persistent mineralization and predictable zonation, and has a SW-SE strike
length of more than 2,500 metres and a width of up to 1,000 metres. The deposit
is located mainly between elevation 4,350 and 3,790 metres, but outcrops up to
elevation 4,650 metres. The deepest drill hole, which terminated at 3,632
metres elevation, was still in mineralized skarn. The skarn is well zoned
symmetrically on either side of the central intrusion with the zoning used as
the basis for four major subdivisions being a brown garnet skarn, green garnet
skarn, wollastonite/diopside/green garnet skarn and a marbleized limestone with
veins or mantos of wollastonite. Other types of skarn, including the massive
sulphides, massive magnetite, and chlorite skarn, represent the remainder of
the skarn and are randomly distributed throughout the deposit. The variability
of ore types can result in significant changes in the relative proportions of
copper and zinc produced in any given year.
Proven and probable reserves are sufficient for a remaining mine life at
current production rates of approximately 13.5 years. Drilling in 2007 further
defined resources outside the current pit boundary that may serve to extend the
mine life.
Antamina has entered into long-term copper and zinc concentrate agreements with
major smelting companies and refineries which in aggregate account for over 85%
of the mine's production of copper and zinc concentrates. The price of copper
and zinc concentrate under these long-term sales agreements is based on LME
prices during quotational periods determined with reference to the time of
delivery, with treatment and refining charges negotiated with reference to
Teck Cominco Limited - 2007 Annual Information Form Page 8
current world market terms. The remaining copper and zinc concentrate is sold
to affiliates of the Antamina project sponsors. Molybdenum concentrates are
sold to third party refiners on market terms.
HIGHLAND VALLEY MINE, CANADA (COPPER)
We have an aggregate 97.5% partnership interest in the Highland Valley copper
mine located near Kamloops, British Columbia. The remaining 2.5% is held
indirectly by third parties through their interests in Highmont Mining Company.
Highland Valley is also a significant producer of molybdenum.
Our current interest is held through an 11.4% direct interest in the Highland
Valley Copper Partnership ("HVC") and a 50.001% interest in the Highmont
Partnership, which holds a 5% interest in HVC. Our remaining 83.6% interest is
held directly and indirectly through Teck Cominco Metals. The property
comprising the Highland Valley Copper mine consists of mineral leases, mineral
claims and crown grants which will be kept in good standing beyond the shutdown
of operations. The mine covers a surface area of approximately 34,000 hectares
and HVC holds the surface rights to that area pursuant to various leases,
claims and licenses.
The Highland Valley mine is located adjacent to a highway connecting Merritt,
Logan Lake, and Ashcroft, British Columbia. The mine itself is approximately 80
kilometres southwest of Kamloops, and approximately 200 kilometres northeast of
Vancouver. The mine operates throughout the year. Power is supplied by B.C.
Hydro through a 138kv line which terminates at the Trans Canada Highway west of
Spuzzum in the Thompson Valley. Mine personnel live in nearby areas, primarily
Logan Lake, Kamloops, Ashcroft, Cache Creek, and Merritt.
The mine is an open pit operation. The mill, which uses semi-autogenous
grinding and conventional flotation to produce metal in concentrate from the
ore, has the capacity to process 136,000 tonnes of ore per day. Water from mill
operations is collected and contained in a tailings impoundment area. Mill
process water is reclaimed from the tailings pond. The operation is subject to
water and air permits issued by the Province of British Columbia and is in
material compliance with those permits. The operation holds all of the permits
that are material to its operations.
Ore is mined from two main sources, the Lornex and Valley pits, as well as from
the Highmont pit. These are located in the Guichon Batholith which hosts all of
the ore bodies located in the area. The Lornex ore body occurs in Skeena Quartz
Diorite host rock, intruded by younger pre-mineral Quartz Porphyry and Aplite
Dykes. The Skeena Quartz Diorite is an intermediate phase of the Guichon
Batholith and is generally a medium to coarse grained equigranular rock
distinguished by interstitial quartz and moderate ferromagnesian minerals. The
sulphide ore is primarily fracture fillings of chalcopyrite, bornite and
molybdenite with minor pyrite, magnetite, sphalerite and galena.
The host rocks of the Valley deposit are mainly porphyritic quartz monzonites
and granodiorites of the Bethsaida phase of the Batholith. These rocks are
medium to coarse-grained with large phenocrysts of quartz and biotite. The
rocks of the deposit were subjected to hydrothermal alteration followed by
extensive quartz veining, quartz-sericite veining, and silicification. Bornite,
chalcopyrite and molybdenum were introduced with the quartz and quartz-sericite
veins and typically fill angular openings in them. Accessory minerals consist
of hornblende, magnetite, hematite, sphene, apatite and zircon. Pre-mineral
porphyry and aplite dykes intrude the host rocks of the deposit.
In February 2007 we announced that we would proceed with a plan to extend the
mine life of Highland Valley Copper by approximately 6 years to 2019. The
capital cost associated with the mine life extension is approximately $300
million, which includes approximately $170 million of incremental stripping and
Teck Cominco Limited - 2007 Annual Information Form Page 9
$130 million for additional mining equipment. Two in-pit crushers in the Valley
pit were successfully relocated in 2007. Copper concentrate production over the
extension period is expected to average approximately 295,000 tonnes per annum.
During a transitional period of higher strip ratios and lower grades,
concentrate production will decline. Molybdenum production is expected to range
from 3 million to 8 million pounds per annum, averaging 5.3 million pounds over
the remaining mine life. Head grades for the remaining mine life are expected
to average 0.353% copper at a strip ratio of 0.4:1.
Concentrates are transported by rail to customers in North America and to a
port in Vancouver for export overseas, with the majority being sold under
long-term sales contracts to smelters in several countries. Treatment and
refining charges under long term contracts are negotiated annually on a "brick"
system, under which annual negotiated treatment charges are averaged with prior
years' terms. The balance is sold on the spot market.
QUEBRADA BLANCA MINE, CHILE (COPPER)
The Quebrada Blanca property is owned by a Chilean private company, Compania
Minera Quebrada Blanca S.A. ("CMQB"). We own 90% of the Series A shares of
CMQB. Inversiones Mineras S.A. ("IMSA"), a Chilean private company, owns 10% of
the Series A shares and 100% of the Series C shares of CMQB. Empresa Nacional
de Minera ("ENAMI"), a Chilean government entity, owns 100% of the Series B
shares of CMQB. When combined with the Series B and Series C shares of CMQB,
our 90% holding of the Series A shares equates to a 76.5% interest in CMQB's
total share equity.
CMQB owns the exploitation and/or exploration rights over an area of
approximately 80 square km in the immediate area of the Quebrada Blanca deposit
pursuant to various mining concessions and other rights. In addition, CMQB owns
surface rights covering the mine site and other areas aggregating approximately
3,150 hectares as well as certain other exploration rights in the surrounding
area and certain water rights.
The Quebrada Blanca mine is located in northern Chile approximately 170 km
southeast of the port city of Iquique and 1,500 km north of the city of
Santiago, the capital of Chile. Access to the mine site is via road from
Iquique.
Quebrada Blanca is an open pit mine that produces an average of 22,000 tonnes
per day of heap leach ore and 39,000 tonnes per day of lower grade dump leach
ore. Copper bearing solutions are collected from the heap and dump leach pads
for processing in an SX-EW plant which produces copper cathode. The SX-EW plant
has a design capacity of approximately 75,000 tonnes of copper cathode per
year, but has been producing at a rate above this nameplate capacity. Copper
cathode is trucked to Iquique for shipment to purchasers. Approximately 97% of
the cathode produced by CMQB in 2007 was London Metal Exchange ("LME") grade A
quality.
The Quebrada Blanca orebody is a porphyry copper deposit located in a 30-40 km
wide belt of volcanic and sedimentary rocks which contains a number of the
world's largest copper mines including Collahuasi (10 km to the east) and
Chuquicamata (190 km to the south). All of these deposits are spatially related
to a major north-south fault, the West Fissure Fault, or to splays off this
fault.
The Quebrada Blanca orebody occurs within a 2 km x 5 km quartz monzonite
intrusive stock. Supergene enrichment processes have dissolved and redeposited
primary (hypogene) chalcopyrite as a blanket of supergene copper sulphides, the
most important being chalcocite and covellite, with lesser copper
oxides/silicates such as chrysocolla in the oxide zone. The supergene
mineralization averages 80 metres in thickness and is, for the most part,
overlain by a 100 metre thick, low grade or waste leached cap and unmineralized
rock and gravels. Irregular transition zones, with (locally) faulted contacts
separate the higher and lower grade supergene/dump leach ores from the leached
cap and hypogene zones.
Teck Cominco Limited - 2007 Annual Information Form Page 10
Approximately 500 tonnes per month of copper cathode is sold pursuant to a
frame agreement with a metals trading entity. The remaining copper cathode is
sold on the spot market.
In late 2007, we completed a 200 metre spaced drill program to define the
hypogene mineralization exposed in the bottom of the current open pit at
Quebrada Blanca. On March 3, 2008, we announced the completion of an estimate
of an inferred resource for the hypogene mineralization (see "Mineral Reserves
and Resources"). Copper grade continuity in the mine area has been confirmed in
all holes completed to date terminate in mineralization, leaving the deposit
open at depth. The lateral extent of the deposit remains undefined. Quebrada
Blanca plans to drill a further 25,000 to 30,000 metres in the hypogene deposit
in 2008. Development and exploitation of the hypogene resource would require
construction of a concentrator, tailings facility and associated
infrastructure. Development of the hypogene deposit will require various
environmental and other permits and governmental authorizations, and may
require additional water rights. Additional drilling and engineering studies
are underway.
ANDACOLLO MINE, CHILE (COPPER)
The Andacollo property is owned by a Chilean private company, Compania Minera
Carmen de Andacollo ("CDA"). We own 100% of the Series A shares of CDA while
ENAMI owns 100% of the Series B shares of CDA. Our Series A shares of CDA and
the Series B shares, respectively, equate to 90% and 10% of CDA's total share
equity.
CDA owns the exploitation and/or exploration rights over an area of
approximately 206 square km in the area of the Andacollo supergene and hypogene
deposits pursuant to various mining concessions and other rights. In addition,
CDA owns the surface rights covering the mine site and other areas aggregating
approximately 21 square km as well as certain water rights. CDA has, since
1996, been conducting mining operations on the supergene deposit on the
Andacollo property which overlies the hypogene deposit.
The Andacollo property is located in Coquimbo Province in central Chile. The
site is adjacent to the town of Andacollo, approximately 55 km southeast of the
city of La Serena and 350 km north of Santiago. Access to the Andacollo mine is
by paved roads from La Serena. The mine is located near the southern limit of
the Atacama Desert at an elevation of approximately 1,000 metres. The climate
around Andacollo is transitional between the desert climate of northern Chile
and the Mediterranean climate of the Santiago area.
The Andacollo mine is an open pit mine producing approximately 10,500 tonnes of
ore per day. Ore is transported to heap leach pads with a certain amount of
lower grade ore being processed through dump leaching. Copper bearing solutions
are processed in an SX-EW plant to produce LME grade A copper cathode.
The Andacollo orebody is a porphyry copper deposit consisting of disseminated
and fracture-controlled copper mineralization contained within a gently dipping
sequence of andesitic to trachytic volcanic rocks and sub-volcanic intrusions.
The mineralization is spatially related to a feldspar porphyry intrusion and a
series of deeply rooted fault structures. A primary copper-gold sulphide
deposit (the "Hypogene Deposit") containing principally disseminated and quartz
vein hosted chalcopyrite mineralization lies beneath the supergene deposit. The
Hypogene Deposit was subjected to surface weathering processes resulting in the
formation of a barren leached zone from 10 to 60 metres thick. The original
copper sulphides leached from this zone were re-deposited below the barren
leached zone as a copper-rich zone comprised of copper silicates (chrysocolla)
and supergene copper sulphides (chalcocite with lesser covellite).
Teck Cominco Limited - 2007 Annual Information Form Page 11
Approximately 1,200 tonnes per month of copper cathode produced by Andacollo in
2007 has been sold to a metal trading entity pursuant to a frame contract. The
remaining Andacollo copper cathode production is sold in the spot market.
Andacollo is currently mining supergene mineralization. A hypogene deposit
beneath the supergene deposit is being developed, with production start-up
scheduled for 2010, allowing for an expected additional 21 year mine life. The
current capital cost estimate for the project, consisting primarily of a
concentrator and tailings facility, is approximately US$380 million based on an
exchange rate of US$1.00 = $535 Chilean pesos. Over the first 10 years of the
project, production is expected to be 81,000 tonnes of copper and 66,000 ounces
of gold in concentrate annually. Cathode copper production from the supergene
deposit is scheduled to cease in 2010, but studies are underway to potentially
extend production for a further two years to 2012.
DUCK POND MINE
We hold a 100% interest in the Duck Pond copper-zinc property located in
central Newfoundland. We are required to pay a former owner of the property a
2% net smelter returns royalty on production from the property. The Duck Pond
mine achieved commercial production on April 1, 2007.
The Duck Pond property is located in central Newfoundland approximately 100 km
southwest of the city of Grand Falls-Windsor. The property covers 12,847
hectares and is held under various mining and surface leases, mineral licenses
and contractual mining rights.
The Duck Pond deposit is a relatively flat-lying Cambrian-age, volcanogenic
massive sulphide (VMS) lens enriched in copper and zinc with lesser lead,
silver and gold.
The Duck Pond deposit is to be mined through combination of open pit and
underground mining methods. Production is expected to average 41 million pounds
of copper, 76 million pounds of zinc, 574,000 ounces of silver and 5,000 ounces
of gold annually during the period from 2007 to 2011, based on existing
reserves. Conventional flotation produces copper and zinc concentrates that are
trucked to the port of St. Georges on the west coast of Newfoundland.
Copper and zinc concentrates produced at the Duck Pond mine are sold to Xstrata
plc under life of mine concentrate sales agreements.
Copper Projects
GALORE CREEK
We have a 50% interest in a partnership formed in 2007 to develop the Galore
Creek copper project in northwestern British Columbia. NovaGold Resources Inc.
("NovaGold") holds the other 50% of the partnership. Galore Creek is a major
copper/gold resource. Construction activities on the project were suspended in
the fourth quarter of 2007 as a result of our review of the first season of
construction and a more extensive and detailed engineering study that
anticipated substantially higher capital costs and a longer construction
schedule for the project than previously anticipated. By agreement with
NovaGold at the time of the suspension, our funding obligations in connection
with the project were amended. In addition to $264 million invested by us in
the Galore Creek partnership as of the suspension date, we are obliged to fund
two-thirds of the next $100 million of project costs (other than project study
costs described below). Thereafter, each partner will fund its pro rata share
of partnership costs. In addition, we have agreed to invest an additional $72
million in the partnership over the five years from the date of suspension to
be used principally to reassess the project and evaluate alternative
Teck Cominco Limited - 2007 Annual Information Form Page 12
development strategies. Demobilization activities are underway to place the
project on care and maintenance while this work is ongoing.
PETAQUILLA
We have the right to acquire a 26% equity interest in Minera Petaquilla S.A.
("MPSA"), the Panamanian company that holds concession rights to the Petaquilla
copper deposit in Panama, a major copper porphyry ore body. In order to earn
our equity interest, we must commit prior to March 31, 2008 to participate in
work plans and budgets leading to commercial production and to fund or arrange
funding of development costs on behalf of Petaquilla Copper Ltd., a 52%
shareholder in MPSA. Inmet Mining Corporation holds the remaining 48% share
interest in MPSA. If we fund development costs on behalf of Petaquilla Copper,
we will recoup amounts funded plus interest at U.S. prime plus 2% per annum,
prior to any distributions to Petaquilla Copper. In lieu of receiving funding
from us, Petaquilla Copper may elect, within 30 days of our production
commitment, to finance all or part of the development costs for its 26% equity
interest in MPSA.
On February 8, 2008, we announced, along with Petaquilla Copper and Inmet
Mining, the results of an interim report on the FEED study being conducted on
the Petaquilla project. The interim report estimated that the capital cost
required to develop Petaquilla would be US$3.5 billion (including a contingency
of US$515 million but not including working capital and escalation). We are
continuing to work on the FEED study and are evaluating opportunities to reduce
capital costs from the interim FEED study estimate. We are evaluating our
options in relation to the election required of us under the MPSA Shareholders
Agreement.
SAN NICOLAS PROJECT, MEXICO (COPPER, ZINC)
The San Nicolas property, which is located in Zacatecas State, Mexico, is a
major massive sulphide deposit containing copper, zinc, gold and silver. The
property is held by Minas de San Nicolas S.A. de C.V. ("MSN"), which is owned
40% directly by us and 60% by Minera Tama S.A. de C.V. ("Tama"). Tama in turn
is owned 65% by us and 35% by Western Copper Holdings Ltd. (now a subsidiary of
Goldcorp Inc.) resulting in our holding a net 79% interest in the property. Our
interest may vary depending on certain financing elections the parties may make
under the agreements governing the project. The project is being held on a care
and maintenance basis.
ZINC
Mining Operations
RED DOG MINE, UNITED STATES (ZINC, LEAD)
The Red Dog zinc-lead mine, concentrator and shipping facility in the Northwest
Arctic Borough near Kotzebue, Alaska, commenced production in December 1989 and
began shipping concentrates in July 1990. The Red Dog mine is 100% owned and
operated by Teck Cominco Alaska Incorporated, subject to a royalty as described
below.
The mining method employed is conventional drill and blast open pit mining. The
main pit has an expected life of six years at current rates of production.
Additional reserves have been identified in the vicinity of the processing
facilities sufficient to extend the life of the operation by a further 18 years
for a remaining mine life of 24 years. The mineral processing facilities employ
conventional grinding and sulphide flotation methods to produce zinc and lead
concentrates.
Teck Cominco Limited - 2007 Annual Information Form Page 13
The mine and concentrator properties are leased from, and are being developed
under the terms of a development and operating agreement with the NANA Regional
Corporation, Inc. ("NANA"), a native Alaskan development corporation. Since the
third quarter of 2007, we pay NANA a percentage of the net proceeds of
production from the mine, starting at 25% and increasing to 50% by successive
increments of 5% at five-year intervals. In addition to the royalties payable
to NANA, the operation is subject to state and federal income taxes.
All contaminated water from the mine area and waste dumps is collected and
contained in a tailings impoundment and seasonally discharged through a water
treatment plant. Mill process water is reclaimed from the tailings pond. The
mine and an associated port facility operate under effluent permits issued by
the United States Environmental Protection Agency (the "EPA") and air permits
issued by the State of Alaska. In 2007, the EPA withdrew the mine's recently
renewed water discharge permit for procedural reasons. The previous permit has
been extended pending the issuance of a new permit to be issued in connection
with the permitting of the Aqqaluk deposit. The mine cannot meet an end-of-pipe
discharge limit in that permit. It is, however, in material compliance with the
provisions established by the EPA in the 2007 permit and with State water
quality limits. Otherwise, the operation is in material compliance with all of
its permits and related regulatory instruments and has obtained all of the
permits that are material to its operations, although additional permits will
be required in the future as mining extends beyond the main pit.
Red Dog is comprised of a number of sedimentary hosted exhalative (SEDEX)
lead-zinc sulphide deposits hosted in Mississippian-age to Pennsylvanian-age
sedimentary rocks. The orebodies are lens shaped and occur within structurally
controlled (thrust faults) plates, are relatively flat-lying and are hosted by
marine clastic rocks (shales, siltstones, turbidites) and lesser chert and
carbonate rocks. Barite rock is common in and above the sulphide units.
Silicification is the dominant alteration type.
The sulphide mineralization consists of semi-massive to massive sphalerite,
pyrite, marcasite and galena. Common textures within the sulphide zone include
massive, fragmental, veined and, rarely, sedimentary layering.
Approximately 25% of the zinc concentrate produced at Red Dog is shipped to our
metallurgical facilities at Trail, British Columbia and the balance to
customers in Asia and Europe. The lead concentrate production is also shipped
to Trail and to customers in Asia and Europe. The majority of concentrate sales
are pursuant to long-term contracts at market prices subject to annually
negotiated treatment charges. The balance is sold on the spot market at prices
based on prevailing market quotations. The shipping season at Red Dog is
restricted to approximately 100 days per year because of sea ice conditions and
Red Dog's sales are seasonal with the majority of sales in the last five months
of each year. Concentrate is stockpiled at the port facility and is typically
shipped between July and October.
PEND OREILLE MINE, UNITED STATES (ZINC, LEAD)
We own 100% of the Pend Oreille mine, near Metaline Falls, Washington, which
began commercial production in early 2004. All of the concentrate from Pend
Oreille is trucked to our Trail metallurgical operations for processing.
Pend Oreille holds all permits necessary for its operation and is in material
compliance with these permits.
The Pend Oreille mine is a carbonate hosted zinc-lead ore body situated within
the Metaline Formation in the southern portion of the Kootenay arc, an arcuate,
narrow belt of sedimentary, volcanic and metamorphic rocks separating
Teck Cominco Limited - 2007 Annual Information Form Page 14
Precambrian metasediments to the east and Mesozoic volcanic and sedimentary
units to the west. Metaline carbonates host the known zinc-lead deposits within
the district.
Mineralization at the Pend Oreille mine is located within the Yellowhead
horizon of the Metaline Formation, an intensely altered stratabound dolomitic
solution breccia, which has been invaded and replaced by fine grained pyrite
with lesser zinc and lead sulphides. The sulphide zone has relatively simple
mineralogy. Sphalerite and galena are the two ore minerals of interest. Gangue
minerals include pyrite, dolomite and calcite.
The Pend Oreille mine is an underground mine. The mineral processing facilities
employ conventional grinding and sulphide flotation methods to produce high
quality zinc and lead concentrates. Annual mill throughput in 2007 was 638,000
tonnes of ore, producing 49,000 tonnes of zinc in concentrate and 8,300 tonnes
of lead in concentrate. See "Mineral Reserves and Resources" at page 23 of this
Annual Information Form.
PILLARA MINE, LENNARD SHELF, AUSTRALIA (ZINC)
We own a 50% share interest in Lennard Shelf Pty Ltd., which owns the Pillara
underground mine in the Kimberly region of Western Australia, 2,600 kilometres
northeast of Perth and 400 kilometres east of Broome along the Great Northern
Highway. We acquired our interest in the Lennard Shelf mine in 2003, when the
mine was placed on care and maintenance by a receiver acting for the vendor.
Mining operations resumed in 2007 following a $26 million redevelopment
program. Concentrate shipments started in the second quarter of 2007.
The Pillara deposit consists of coarse-grained zinc-lead mineralization within
limestones, typical of a Mississippi Valley type deposit. Mining at Pillara is
by sublevel uphole benching. Ground conditions are generally good. Access to
the mine is by a single entry decline which is used for access as well as ore
and waste haulage to surface.
Zinc and lead concentrates are trucked 350 kilometres to Derby where they are
loaded via a barge to ocean-going ships. Concentrates are sold under long-term
contracts. Lennard Shelf holds all permits necessary for its operation and is
in material compliance with those permits.
Refining and Smelting
TRAIL METALLURGICAL OPERATIONS
Teck Cominco Metals owns and operates the integrated smelting and refining
complex at Trail, British Columbia. The complex's major products are refined
zinc and lead. It also produces silver and gold, germanium dioxide, indium,
cadmium and copper compounds as metal co-products, along with a variety of
sulphur products and ammonium sulphate fertilizers.
Trail's zinc operations consist of six major metallurgical plants, one
fertilizer plant and two specialty metal plants. The facility has an annual
capacity of approximately 295,000 tonnes of refined zinc. Zinc concentrates are
initially treated in roasters or pressure leach facilities. The zinc and other
elements are put into solution before the zinc is purified and electroplated
onto cathodes in an electrolytic refining plant. Refined zinc is produced by
remelting the zinc cathodes and then casting the zinc into various shapes,
grades and alloys to meet customer requirements. A range of valuable metals,
including indium and germanium, are extracted as co-products. Lead
concentrates, recycled batteries, residues from the zinc circuits and various
other lead- and silver-bearing materials are treated in the KIVCET flash
furnace and electro-refined into lead in the refinery. Silver and gold are also
recovered from this circuit after further processing. In 2007, the facility
Teck Cominco Limited - 2007 Annual Information Form Page 15
started to recycle electronic waste and is aiming to process 8,000 tonnes of
such material in 2008.
Metallurgical effluent and drainage water from the smelter site that requires
treatment is collected in ponds and treated through a water treatment plant.
The smelter operates under a variety of permits, including effluent and air
emission permits issued by the British Columbia Ministry of Environment. The
operation is in material compliance with all of its environmental permits and
has obtained all of the permits that are material to its operations.
Teck Cominco Metals also owns the Waneta hydroelectric power plant near Trail.
It has an installed capacity of 450 megawatts and an annual average output of
approximately 2,700 gigawatt hours of energy. This plant, pursuant to
agreements with B.C. Hydro and Fortis Inc., provides electric power to the
Trail metallurgical operation. The operation of Waneta and other hydroelectric
plants in the watershed is governed by the Canal Plant Agreement (CPA), a
contractual arrangement with B.C. Hydro and other related parties under which
we receive approximately 2,700 gigawatt hours per year of energy even during
low water years. A new CPA that extends the existing arrangements through 2035
has been executed by all parties and has received regulatory approval.
We also own a 15 kilometre transmission line from Waneta to the United States
power distribution system. Power that is surplus to our needs at Trail
Metallurgical Operations is sold at prevailing market rates in Canada and the
United States.
COAL
Elk Valley Coal Partnership, Canada
We hold our metallurgical coal mining interests through our 40% direct interest
in Elk Valley Coal. We hold a 39.836% interest in Elk Valley Coal through the
Teck Cominco Coal Partnership, a partnership between Teck Cominco (99.992%) and
Teck-Bullmoose Coal Inc. (0.008%). Quintette Coal Partnership (which is
directly and indirectly wholly-owned by us) owns an additional 0.164% interest
in Elk Valley Coal. Teck Cominco Coal Partnership is the managing partner of
Elk Valley Coal. The remaining 60% interest in Elk Valley Coal is held by
Fording Limited Partnership, a wholly-owned subsidiary of FCCT.
In addition to our 40% direct interest in Elk Valley Coal, we own an
approximate 19.95% interest in FCCT, representing a further 12% effective
interest in Elk Valley Coal.
Elk Valley Coal is a general partnership established under the laws of the
Province of Alberta. In its capacity as managing partner of Elk Valley Coal,
Teck Cominco Coal Partnership manages and makes all decisions relating to the
business and affairs of Elk Valley Coal, subject to obtaining the approval of
Fording Limited Partnership in respect of certain enumerated matters. These
matters include certain fundamental changes with respect to Elk Valley Coal,
and approval of an annual operating and capital plan and budget for Elk Valley
Coal.
Elk Valley Coal has a $200 million five-year revolving floating rate, annually
extendible credit facility that can be used for general operating purposes. Elk
Valley Coal has also given an unsecured guarantee, limited in recourse as
against Teck Cominco to the assets of Elk Valley Coal and our interest therein,
with respect to borrowings by FCCT under FCCT's $400 million credit facility,
which was initially incurred principally in connection with the financing of
the transaction pursuant to which we acquired our interest in Elk Valley Coal.
The FCCT and Elk Valley Coal credit facilities have the same attributes, terms
and conditions.
Teck Cominco Limited - 2007 Annual Information Form Page 16
While the foregoing guarantee is in place, FCCT may not sell its interest in
Elk Valley Coal or carry on any business other than in respect of Elk Valley
Coal or its industrial minerals business substantially as currently conducted,
unless in our reasonable judgment the carrying on of such business could not,
under any reasonably foreseeable circumstances, have an adverse effect on the
financial condition of FCCT.
Elk Valley Coal has six operating mines. It wholly owns Fording River, Coal
Mountain, Line Creek and Cardinal River, has a 95% partnership interest in the
Elkview mine, and has an 80% joint venture interest in the Greenhills mine. The
Cardinal River mine is located in west central Alberta. The other five mines
are located in close proximity to each other in the Elk Valley region of
southeast British Columbia. All of Elk Valley Coal's mines are open pit
operations and are designed to operate on a continuous basis, 24 hours per day,
365 days per year. Operating schedules can be varied depending on market
conditions and are subject to shutdowns for maintenance activities. All of the
mines are accessed by two lane all-weather roads which connect to public
highways. All the mines operate under permits granted by Provincial and Federal
regulatory authorities. Provincial remediation reclamation permits are placed
to permit all facets of the mining process. From time to time each of the mines
may require additional permits in respect of the location of additional dumps
and tailings impoundment areas that will be required as mining operations
proceed. All permits necessary for the current operations of the mines are in
hand and in good standing.
The following chart lists significant coal rights held by Elk Valley Coal as at
December 31, 2007:
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MINERAL HOLDINGS (THOUSAND CROWN LEASE
HECTARES, ROUNDED) FEE SIMPLE AND LICENSE TOTAL
- -------------------------------------------------------------------------------
Coal
British Columbia 39 68 107
Alberta 1 39 40
- -------------------------------------------------------------------------------
All Mines and Minerals except
Petroleum & Natural Gas
British Columbia 10 - 10
- -------------------------------------------------------------------------------
TOTAL 50 107 157
- -------------------------------------------------------------------------------
In British Columbia, coal licenses are issued for one-year terms and have an
initial cost of $7 per hectare, increasing by $5 per hectare every five years
to a maximum of $30 per hectare. Elk Valley Coal currently pays license fees
ranging from $7 to $30 per hectare. Coal leases are granted for periods of 30
years and have an annual cost of $10 per hectare. In Alberta, Crown leases are
granted by the provincial government and are generally issued for 15 years.
Annual lease rentals are approximately $3.50 per hectare. In the past, renewals
of these licences and leases have generally been granted although there can be
no assurance that this will continue in the future.
Five of Elk Valley Coal's six coal mines operate in British Columbia and are
therefore subject to mineral taxes. British Columbia mineral tax is a two-tier
tax with a minimum rate of 2% and a maximum rate of 13%. A minimum tax of 2%
applies to operating cash flows, as defined by the regulations. A maximum tax
rate of 13% applies to cash flows after taking available deductions for capital
expenditures and other permitted deductions. Alberta Crown royalties are
assessed on a similar basis, at rates of 1% and 3%, and apply to the Cardinal
River mine.
Elk Valley Coal's mines employ conventional open-pit mining techniques and coal
preparation plants. Following mining, the coal is washed using a variety of
Teck Cominco Limited - 2007 Annual Information Form Page 17
conventional techniques and conveyed to coal or gas fired dryers for drying.
Processed coal is conveyed to clean coal silos or other storage facilities for
storage and load-out to railcars.
COAL TRANSPORTATION AND SALES
Elk Valley Coal typically transports approximately 90% of its coal shipments
from the Elk Valley Coal mines to west-coast ports in British Columbia pursuant
to long-term rail contracts. Rail service to the five mines located in the Elk
Valley is provided by Canadian Pacific Railway Limited ("CPR") pursuant to an
agreement expiring March 31, 2009. Rail service to the Cardinal River mine is
provided by Canadian National Railway Company pursuant to an agreement expiring
January 2009.
Westshore Terminals Ltd. provides ship-loading services at Roberts Bank for
approximately 75% of Elk Valley Coal's metallurgical coal pursuant to long-term
contracts. Elk Valley Coal requested a review of the loading rate for the
Elkview operations effective April 1, 2005. The relevant contract provides that
if the parties cannot agree on appropriate adjustments to the rate, the matter
will be settled by arbitration. An arbitrator found against Elk Valley Coal in
connection with this review and Elk Valley Coal has appealed the arbitral
decision. Neptune Terminals, in which Elk Valley Coal has a 46% ownership
interest, provides ship-loading services for the balance of Elk Valley Coal's
metallurgical coal loaded at the west coast. Approximately 10% of Elk Valley
Coal's metallurgical coal products are shipped from the mine sites to eastern
North American customers either directly by rail or by rail and ship via
Thunder Bay Terminals in Thunder Bay, Ontario.
Elk Valley Coal's coal is sold principally under evergreen contracts at
annually negotiated prices to approximately 45 customers around the world. Coal
is generally priced, particularly in Asia and Europe, on an annual basis for
the 12-month period beginning April 1 in each year, referred to as a "coal
year".
ELKVIEW MINE, CANADA
Elk Valley Coal has a 95% partnership interest in the Elkview mine. The
remaining 5% is held equally by Nippon Steel Corporation and POSCO, a Korean
steel producer, each of which acquired a 2.5% interest in 2005 for US$25
million. The Elkview mine is an open pit coal mine located in the Elk Valley in
southeastern British Columbia. The mine has a current production capacity of
approximately 5.6 million tonnes of clean coal. Capacity may be restricted for
reasons including availability of truck tires and actual production will depend
on sales volumes. At 2007 production rates, the Elkview mine is estimated to
have a remaining reserve life of 22 years.
The mine is a conventional open pit operation comprised of 14,700 hectares of
coal lands of which 4,100 hectares have been mined or are scheduled for mining.
The mine proper and the associated fee simple lands at Elkview cover a portion
of the Crowsnest coal field that runs from just north of the Elkview property
to 20 kilometres south of the City of Fernie, British Columbia. The mineral
reserves associated with the Elkview mine lie in the Mist Mountain formation of
the Crowsnest coal field with the mine exploiting 16 coal seams in the area of
Baldy and Natal Ridge, just outside the Town of Sparwood, British Columbia,
bounded by Michel Creek to the south and the Elk River to the west.
Annual in-fill drilling programs are conducted to confirm and update the
geological model used to develop the yearly mine plans.
The coal produced is a high-quality mid-volatile hard coking coal. Lesser
quantities of lower grade hard coking coal are also produced. The Elkview mine
uses conventional open pit truck/shovel mining methods. The preparation plant,
which has a capacity of 7 million tonnes per year of clean coal, is a
conventional coal washing plant, using standard technology of cycloning and
heavy media flotation.
Teck Cominco Limited - 2007 Annual Information Form Page 18
FORDING RIVER MINE, CANADA
The Fording River mine is located 29 kilometres northeast of the community of
Elkford, in southeastern British Columbia. The mine is a conventional open pit
operation comprised of 20,304 hectares of coal lands of which 4,220 hectares
have been mined or are scheduled for mining. Fording River has been in
operation since 1969.
Coal mined at Fording River is primarily metallurgical coal, although a small
amount of thermal coal is also produced. An expansion program was completed in
2005 at Fording River. The current annual production capacity of the mine is
8.9 million tonnes and the preparation plant is 10 million tonnes. Annual
in-fill drilling programs are conducted to refine mine plans and confirm and
update the geological model.
The majority of current production is derived from the Eagle Mountain pit.
Proven and probable reserves at Fording River are projected to support mining
at 2007 production rates for a further 27 years. Fording River's reserve areas
include Eagle Mountain, Turnbull, Henretta, and Castle Mountain.
GREENHILLS, CANADA
The Greenhills mine is located eight kilometres northeast of the community of
Elkford, in southeastern British Columbia. The mine site is comprised of 10,092
hectares of coal lands of which approximately 2,200 hectares have been mined or
are scheduled for mining. Greenhills holds a forest licence and manages a 7,610
hectare forest located outside the active mining area.
Coal mined at Greenhills is primarily metallurgical coal, although a small
amount of thermal coal is also produced. The current annual production
capacities of the mine and preparation plant (on a 100% basis) are 5.1 and 5
million tonnes, respectively.
Greenhills is operated under a joint venture agreement (the "Greenhills Joint
Venture Agreement") among Elk Valley Coal, POSCO Canada Limited ("POSCAN") and
POSCAN's parent, POSCO. Pursuant to the agreement, Elk Valley Coal has an 80%
interest in the joint venture while POSCAN has a 20% interest. The mine
equipment and preparation plant are owned by Elk Valley Coal and POSCAN in
proportion to their respective joint venture interests. Under the Greenhills
Joint Venture Agreement, Elk Valley Coal is the manager and operator of
Greenhills. Elk Valley Coal and POSCAN bear all costs and expenses incurred in
operating Greenhills in proportion to their respective joint venture interests.
POSCAN, pursuant to a property rights grant, has a right to 20% of all of the
coal mined at Greenhills from certain defined lands until the Greenhills Joint
Venture Agreement terminates on the earlier of: (i) the date the reserves on
the defined lands have been depleted; and (ii) March 31, 2015.
Production is derived from the Cougar reserve, which is divided into two
distinct pits, Cougar North and Cougar South. Cougar North has been fully
developed and currently produces the bulk of the coal for the mine. Development
and pre-stripping of Cougar South is underway and is expected to provide a
long-term source of coal. Proven and probable reserves at Greenhills are
projected to support mining at 2007 production rates for a further 13 years.
COAL MOUNTAIN, CANADA
The Coal Mountain mine is located 30 kilometres southeast of Sparwood in
southeastern British Columbia. The mine site is comprised of 2,521 hectares of
coal lands of which approximately 950 hectares are currently being mined or are
scheduled for mining. Coal Mountain produces both metallurgical and thermal
coal. The current annual production capacities of the mine and preparation
Teck Cominco Limited - 2007 Annual Information Form Page 19
plant are 2.7 and 3.5 million tonnes, respectively. Proven and probable
reserves at Coal Mountain are projected to support mining at 2007 production
rates for a further 10 years.
LINE CREEK, CANADA
The Line Creek mine is located approximately 25 kilometres north of Sparwood in
southeastern British Columbia. Line Creek supplies metallurgical and thermal
coal to a variety of international and domestic steel producers and Pacific Rim
electric utilities. The Line Creek property consists of 8,124 hectares of coal
lands of which approximately 1,150 hectares are currently being mined or are
scheduled for mining.
The mine is a conventional open pit operation. Raw coal is transferred to an 11
kilometre coal conveyor for transportation to a processing plant, where it is
crushed, cleaned, and dried using conventional technology. The current annual
production capacities of the mine and preparation plant are 2.5 and 3.5 million
tonnes, respectively.
The metallurgical and thermal coal at Line Creek is mined from 9 seams lying in
a syncline. The seams average 2 to 13 metres in thickness, with the thickest
seam reaching 15 metres in several places. Line Creek has an estimated
remaining reserve life of approximately 7 years.
CARDINAL RIVER MINE, CANADA
The Cardinal River mine is located approximately 42 kilometres south of Hinton,
Alberta. In 2005, Elk Valley Coal completed the development of the Cheviot
Creek pit located approximately 20 kilometres south of the Cardinal River coal
plant. The total capital cost for the haul road, pit development, plant
refurbishment and mobile fleet was approximately $120 million. The current
annual production capacities of the mine and preparation plant are 2.2 and 2.8
million tonnes, respectively. At 2006 production rates, Cardinal River is
expected to have a mine life of approximately 23 years.
GOLD
HEMLO OPERATIONS, CANADA (GOLD)
We have a 50% joint venture interest in two gold mines in the Hemlo Gold Camp
located near Marathon, Ontario: the Williams and David Bell gold mines (the
"Hemlo Operations"). Homestake Canada Inc., a wholly-owned subsidiary of
Barrick Gold Corporation ("Homestake"), holds the remaining 50% joint venture
interest. Our share of production is subject to a 2.25% net smelter return
royalty at Williams and a 3% net smelter return royalty at David Bell.
The Hemlo Operations lie adjacent to the Trans-Canada Highway in the Hemlo
district of Ontario, and operate throughout the year. The mill located at the
Williams mine processes ore for both the Williams mine and the David Bell mine.
Power for the Hemlo Operations is taken from the Ontario Hydro grid, and
back-up standby diesel generators are available at the site to provide some
emergency support should the grid not be able to supply power. Water
requirements are sourced from Cedar Creek and personnel from both mines live in
nearby areas, the majority in Marathon, Ontario.
The Hemlo Operations operate a combined tailings management system including a
tailings basin and polishing pond. The property includes one tailings pond,
located approximately four kilometres from the Williams mill, and four waste
stockpiles located adjacent to the Williams open pit. Both operations comply
with certificates of approval for industrial wastewater and air, which are
administered by the provincial regulatory authorities. The Williams mill and
Teck Cominco Limited - 2007 Annual Information Form Page 20
both mines hold all the necessary permits and certificates that are material to
the operations.
The Hemlo Operations are located in a small east-west trending archean
greenstone belt in central Ontario known as the Hemlo zone. The Williams mine
is located at the western end of the Hemlo zone, the David Bell mine is located
at the eastern end of the Hemlo zone, and Newmont Mining Corporation's Golden
Giant mine is located between the Williams and David Bell mines along the Hemlo
zone. The total length of the mineralized zone comprising the Williams, David
Bell and Golden Giant mines is over three kilometres.
The Williams and David Bell ore bodies lie at the contact between overlying
metasedimentary rocks and underlying felsic metavolcanic rocks. The Williams
ore zone dips north at 60-70 degrees and the David Bell ore zone dips north at
50-60 degrees. The ore zones continue to approximately 1,200 metres below the
surface and vary in width from 45 metres to 1 metre at Williams and from 15
metres to 1 metre at David Bell. The ore at both mines is hosted by three
principal rock types, feldspathised porphyry, muscovite schist and biotite
fragmental, and is characterized by gold, pyrite, molybdenite, and barite and
various arsenic, mercury, and antimony mineral species. Both main ore bodies
are composed of fine grained quartz-feldspar rock with gold occurring as finely
disseminated particles within the groundmass as well as with pyrite grains.
Our share of gold production from the Hemlo Operations is sold on a spot basis
at prevailing market prices at the time of production. We have also entered
into certain hedging contracts in respect of certain portions of our
production.
WILLIAMS MINE
The Williams mine, primarily an underground operation with some open-pit
mining, has been operating since 1985. The property comprising the Williams
mine consists of 11 patented mining claims and 6 leased claims. The mine covers
a surface area of approximately 270 hectares.
The Williams mine is one of the largest gold-producing mines in Canada. The
underground mine is accessed by a 1,300 metre production shaft, and mining is
carried out by longhole stoping with paste backfill. The Williams open pit mine
lies immediately above and adjacent to the underground mine, and ore from these
two sources and the David Bell mine is treated in the Williams mill. The mill
started production in 1985 at the rate of approximately 3,000 tonnes per day,
and capacity was expanded to 6,000 tonnes per day in late 1988. The Williams
mill was further expanded to 10,000 tonnes per day but currently operates at a
rate of approximately 8,300 tonnes per day as underground reserves are being
depleted. The Williams mill uses semi-autogenous grinding and a carbon-in-pulp
gold recovery circuit. Approximately 20% of the gold is recovered by a gravity
circuit.
In 2006 the Hemlo operations reached agreement with Newmont Mining Canada
granting Hemlo the right to explore, develop and mine the Interlake property,
which is the down dip extension of the Williams ore zone to the west of the
current property boundary. Exploration will continue in 2008 to test the
potential of the Interlake property.
As a result, a strategic review of the life of mine plan and operating cost
structure was completed in 2007 and a detailed life of mine plan is currently
being developed. The review indicated a lower production profile going forward
with declining head grades as underground ores are becoming depleted and more
low-grade open pit ore is mined. As a result of lower production and less
development activities planned going forward, the mine implemented cost cutting
measures that included a work force reduction of 150 positions, including
Teck Cominco Limited - 2007 Annual Information Form Page 21
contractors, and an overall reduction in operating costs by $60 - $70 million
per annum.
DAVID BELL MINE
The property comprising the David Bell underground mine consists of granted
mining leases and mining claims, covering a surface area of approximately 274
hectares.
The David Bell mine was developed through a 1,160 metre production shaft, and
mining is by longhole stoping and Alimak methods with cemented paste fill. Ore
from the David Bell mine is transported to, and processed at, the nearby
Williams mill. The David Bell mine is scheduled to close in early 2010 based on
current reserves.
POGO MINE, UNITED STATES (GOLD)
In June 1997, we entered into an agreement with Sumitomo Metal Mining America
Inc. and SC Minerals America Inc. to earn a 40% joint venture interest in the
Pogo gold deposit located in Alaska, 40 air miles (64 kilometres) from Delta
Junction at the terminus of the Alaska Highway. In 2007 we satisfied the final
conditions necessary to fully vest our interest in the mine. We are the project
operator and are entitled to a management fee.
The Pogo property is approximately 16,700 hectares in size. Access to the site
is provided by a dedicated 50 mile all-season road from the Richardson Highway
north of Delta Junction to the property. The mine area is the subject of a
mining lease, which requires annual rental payments. The balance of the
property is comprised of 1,281 state mining claims, each requiring a specified
nominal amount of annual assessment work.
The project consists of an underground mine and 2,500 tonne per day mill
expected to produce 350,000 to 450,000 ounces of gold per year over a 10 year
mine life. The mining methods are cut and fill and drift and fill. The mill
utilizes conventional milling, and gravity and carbon-in-pulp technology. The
gold from both the gravity and carbon-in-pulp circuits is produced as dore
bullion.
Construction of the Pogo Mine was completed in the first quarter of 2006 except
for the installation of the underground ore conveying system which was
completed in the second quarter. The final construction cost for the project
was US$350 million. The Pogo mine commenced operations in January with the
first gold bar poured on February 12, 2006.
A third filter press was installed in the second half of 2006 to improve
filtration capacity and was commissioned in January 2007. Modifications to the
filtered tailings handling system to improve paste backfilling were completed
in the first quarter of 2007. Commercial production was reached in April 2007
following completion of the filter plant projects.
The property is subject to a 1.5% net smelter return royalty payable by the
venturers on the first two million ounces of gold produced. After the first two
million ounces of gold is produced, the 1.5% net smelter return royalty is no
longer payable. However, we (through our indirect wholly-owned subsidiary,
Teck-Pogo Inc. ("TPI")) must then pay Sumitomo Metal Mining America Inc. and SC
Minerals America Inc. a production royalty on TPI's share of any additional
ounces of gold that it takes as its share of production from the property. This
royalty on each ounce of gold to TPI's account is equal to the greater of 5% of
the price of gold and US$25.
Teck Cominco Limited - 2007 Annual Information Form Page 22
OTHER GOLD PROJECTS
Prefeasibility work continues on the Morelos gold project in Mexico, in which
we have a 78% interest. Infill drilling resource estimation, environmental
baseline studies and scoping level engineering studies are underway. During the
latter part of 2007, road access to a small part of the project was interrupted
by an illegal blockade. Discussions continue in an attempt to resolve the
access issue.
A scoping study to reassess the potential economic viability of our 60% owned
Lobo-Marte gold property in Chile is underway and should be completed in early
2008.
Oil Sands
FORT HILLS PROJECT
On November 30, 2005, we acquired a 15% limited partnership interest in Fort
Hills Energy LP (the "Fort Hills Partnership"), which owns the Fort Hills oil
sands project. On September 19, 2007, we entered into an agreement to increase
our interest in the Fort Hills Partnership to 20%. The other limited partners
are Petro-Canada, with a 60% limited partnership interest and UTS Energy
Corporation ("UTS") with a 20% interest. Relations among the partners are
governed by a limited partnership agreement and a unanimous shareholder
agreement pertaining to the governance of Fort Hills Energy Corporation, the
general partner of the Fort Hills Partnership, in which the limited partners
hold pro rata share interests. Pursuant to the limited partnership agreement,
we are required to contribute 34% (or $850 million) of the first $2.5 billion
of project expenditures made after March 1, 2005, and 27.5% (or $1.375 billion)
of the next $5 billion of project expenditures. These amounts include the
subscription price for our 20% interest. The partners will fund further project
expenditures in proportion to their respective partnership interests. Our share
of project expenditures to the end of 2007 was $233 million.
The Fort Hills Project is a project to develop, mine, extract and sell the
recoverable bitumen found in certain oil sands deposits underlying Alberta Oil
Sands Lease No. 7598060T05 ("Lease 5"), Alberta Oils Sands Lease No. 7281020T52
("Lease 52") and Alberta Oil Sands Lease No. 7400120008 ("Lease 8"),
(collectively, with certain other leases acquired for tailings disposal, the
"Leases"). The Leases are located approximately 90 kilometres north of Fort
McMurray, Alberta. The Leases cover a contiguous area of approximately 23,950
hectares on the east bank of the Athabasca River. The current terms of Lease 5
and Lease 52 continue indefinitely, provided the mine development plan approved
by Alberta Energy is met. The development plan, initially submitted by
TrueNorth Energy L.P. ("TrueNorth"), a predecessor to the Fort Hills
Partnership, was amended in 2005 to provide for a commitment to construct a
mine with a capacity of 100,000 barrels per day of bitumen by 2011. The
development plan includes certain other interim milestones. Lease 8, which is
not subject to the Development Plan, covers approximately 2,286 hectares and
its primary term continues to 2015.
An affiliate of Petro-Canada acts as contract operator of the project pursuant
to an operating services contract. The contract operator has exclusive
authority to operate the project, subject to the oversight of a management
committee on which each of the shareholders of the general partner is
represented. Certain fundamental decisions concerning the project require
super-majority approval of the Management Committee. The Partnership Agreement
contemplates that the contract operator will market 100% of project production
on behalf of the partnership for a minimum initial period of 4 years after
first commercial production of bitumen. Subject to certain exceptions, limited
partners have a right of first refusal in the event of a transfer of another's
limited partnership interest.
Teck Cominco Limited - 2007 Annual Information Form Page 23
In December 2006, the Fort Hills Partnership filed an application with the
Alberta Energy and Utilities Board to construct and operate an upgrader in
Sturgeon County, approximately 40 kilometres northeast of Edmonton. The
upgrader is expected to eventually process up to 340,000 barrels per day of
bitumen production from the Fort Hills mine and other sources to produce
280,000 barrels per day of synthetic crude oil. A design basis memorandum and
preliminary cost estimate for the Fort Hills project were completed in
mid-2007. The Fort Hills project is expected to be developed in two phases. The
first phase of the project is planned to produce 140,000 barrels per day of
synthetic crude oil. Associated bitumen production is expected to be about
160,000 barrels per day. First bitumen production is expected to begin in the
fourth quarter of 2011, with first synthetic crude oil production from the
Sturgeon upgrader anticipated in the second quarter of 2012. The preliminary
capital cost estimate for the mine and upgrading components of the first phase
of Fort Hills is $15.2 billion, not including FEED engineering and third party
capital. The second phase of the project is expected to double the first phase
capacity to produce up to a total of 280,000 barrels of synthetic crude oil by
2014. The preliminary capital cost estimate for the second phase is $13
billion, not including FEED engineering and third party capital. The Fort Hills
partners expect to make a final go-ahead project decision in the third quarter
of 2008, following the expected regulatory approval for the Sturgeon upgrader.
Sproule Associates Ltd. ("Sproule"), an independent reserves evaluator, has
audited the Fort Hills Partnership's estimate of contingent bitumen resources
of the Fort Hills project in accordance with the standards set out in the
Canadian Oil and Gas Evaluation Handbook. The estimate audited by Sproule
includes a best estimate of the contingent bitumen resource for the project (on
a 100% basis) as at December 31, 2007, of 4.03 billion barrels of recoverable
bitumen, with a low estimate of 3.37 billion barrels and a high estimate of
4.38 billion barrels. Contingent bitumen resources are those quantities of
bitumen estimated, as of a given date, to be potentially recoverable from known
accumulations using established technology or technology under development, but
which are not currently considered to be commercially recoverable due to one or
more contingencies. A "resource" for oil and gas reporting purposes is
different than a mineral resource. See "Risk Factors - Reserve and Resource
Estimates."
OTHER OIL SANDS INTERESTS
Under a joint bidding agreement with UTS Energy Corporation ("UTS"), we have
acquired a 50% interest in approximately 285,000 acres of oil sands leases in
the Athabasca region of Alberta. Our total acquisition and exploration costs of
these leases were $219 million. We also own a 50% interest in an oil sands
lease known as Lease 14 in joint venture with UTS. Lease 14 covers
approximately 7.150 acres and is located to the west of the Fort Hills
property, across the Athabasca River. We continue to conduct exploration and
other work on these leases with UTS. GLJ Petroleum Consultants ("GLJ"), an
independent reserves evaluator, has audited an estimate of contingent bitumen
resources of Lease 14 in accordance with the standards set out in the Canadian
Oil and Gas Evaluation Handbook. The estimate audited by GLJ includes a best
estimate of the contingent bitumen resource for Lease 14 (on a 100% basis) as
at December 31, 2007 of 350 million barrels of recoverable bitumen, with a low
estimate of 270 million barrels and a high estimate of 400 million barrels. A
"resource" for oil and gas reporting purposes is different than a mineral
resource. See "Risk Factors - Reserve and Resource Estimates."
EXPLORATION
In 2007, our exploration expense was $105 million. Approximately 65% of
expenditures were dedicated to exploration for gold and copper and the balance
on nickel, diamonds and polymetallic projects. Of the total expenditures,
approximately 41% was spent in North America, 24% in South America, 14% in
Europe, and 21% in Australia.
Teck Cominco Limited - 2007 Annual Information Form Page 24
Exploration is carried out through sole funding and joint ventures with major
and junior exploration companies. Exploration is focused on areas in proximity
to our existing operations or development projects in regions that we consider
have high potential for discovery. Planned expenditures for 2008 are
approximately $98 million excluding mine exploration and development projects.
MINERAL RESERVES AND RESOURCES
See notes to Mineral Reserves and Resources tables at page 26, after the
Mineral Reserves table.
MINERAL RESERVES (1) AT DECEMBER 31, 2007
- ---------------------------------------------------------------------------------------------------------------------
PROVEN PROBABLE TOTAL
---------- ---------- ----------- --------- ---------- ----------
Tonnes Grade Tonnes Grade Tonnes Grade OUR
(000's) (%) (000's) (%) (000's) (%) INTEREST
- ---------------------------------------------------------------------------------------------------------------------
COPPER
Highland Valley Copper 441,100 0.39 9,900 0.23 451,000 0.38 97.5%
Antamina
Copper only ore 46,000 1.18 257,000 1.10 303,000 1.11 22.5%
Copper-zinc ore 28,000 1.07 87,000 1.14 115,000 1.12 22.5%
---------- ---------- ----------- --------- ---------- ---------- ----------
74,000 1.14 344,000 1.11 418,000 1.11 22.5%
Quebrada Blanca
Heap leach ore (2) 63,586 0.85 801 0.65 64,387 0.85 76.5%
Dump leach ore (2) 119,969 0.27 10,953 0.25 130,922 0.27 76.5%
---------- ---------- ----------- --------- ---------- ---------- ----------
183,555 0.47 11,754 0.28 195,309 0.46 76.5%
Andacollo
Heap leach ore (2) 9,266 0.52 3,164 0.49 12,430 0.51 90%
Dump leach ore (2) 2,293 0.24 2,293 0.24 90%
---------- ---------- ----------- --------- ---------- ---------- ----------
11,559 0.47 3,164 0.49 14,723 0.47 90%
Hypogene 5,485 0.50 458,373 0.36 463,858 0.36 90%
Duck Pond 1,536 3.20 1,762 3.30 3,298 3.25 100%
MOLYBDENUM
Highland Valley Copper 441,100 0.007 9,900 0.015 451,000 0.007 97.5%
Antamina 46,000 0.036 257,000 0.035 303,000 0.035 22.5%
ZINC
Red Dog 12,600 20.0 51,600 16.7 64,200 17.3 100%
Pend Oreille 2,227 5.7 564 4.8 2,791 5.6 100%
Lennard Shelf 823 7.7 1,586 7.5 2,409 7.6 50%
Antamina 28,000 3.2 87,000 2.7 115,000 2.8 22.5%
Duck Pond 1,536 4.3 1,762 5.5 3,298 4.9 100%
LEAD
Red Dog 12,600 5.5 51,600 4.4 64,200 4.6 100%
Pend Oreille 2,227 1.0 564 0.8 2,791 1.0 100%
Lennard Shelf 823 2.2 1,586 2.0 2,409 2.1 50%
Teck Cominco Limited - 2007 Annual Information Form Page 25
MINERAL RESERVES (1) AT DECEMBER 31, 2007
- ------------------------------------------------------------------------------------------------
PROVEN PROBABLE TOTAL
------------------- ------------------ -------------
Tonnes Tonnes Tonnes OUR
(000's) (000's) (000's) INTEREST
- ------------------------------------------------------------------------------------------------
COAL (4)
Fording River 110,300 106,400 216,700 40%(5)
Elkview 181,300 53,700 235,000 38%(5)
Greenhills 71,100 17,800 88,900 32%(5)
Coal Mountain 28,200 28,200 40%(5)
Line Creek 17,400 17,400 40%(5)
Cardinal River 7,100 33,600 40,700 40%(5)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
PROVEN PROBABLE TOTAL
-------------------- ----------- --------- ---------- ----------
Tonnes Grade Tonnes Grade Tonnes Grade OUR
(000's) (g/t)(3) (000's) (g/t)(3) (000's) (g/t)(3) INTEREST
- ------------------------------------ --------- ----------- --------- ---------- ---------- ----------
GOLD
Pogo 2,075 17.46 3,830 15.09 5,905 15.92 40%
Williams
Underground 1,317 5.23 1,420 5.76 2,737 5.50 50%
Open pit 8,653 1.84 1,570 1.79 10,223 1.83 50%
David Bell 501 11.08 501 11.08 50%
Andacollo - Hypogene 5,485 0.12 458,373 0.12 463,858 0.12 90%
NOTES TO MINERAL RESERVES AND RESOURCES TABLES
(1) Mineral reserves and resources are mine and property totals and are not
limited to our proportionate interests.
(2) For heap leach and dump leach operations, copper grade is reported as %
soluble copper rather than % total copper. Soluble copper is defined by an
analytical methodology which uses acid and cyanide reagents to approximate
the portion of copper recoverable in the heap and dump leach process.
(3) g/t = grams per tonne.
(4) Coal reserves expressed as tonnes of clean coal.
(5) Representing a 40% direct interest in Elk Valley Coal Partnership. Does
not include a 12% indirect interest through our investment in Fording
Canadian Coal Trust.
(6) Other refers to the aggregated measured, indicated and inferred resources
associated with undeveloped or non-operating properties. Tonnages
represent Elk Valley Coal Partnership's interests in these properties.
(7) Grade reported as %TiO2.
(8) Coal resources expressed as tonnes of raw coal.
(9) Historical Resource Estimates. These estimates pre-date the adoption of NI
43-101. These estimates are reported using resource classification
categories that conform to those prescribed by NI 43-101, but are not
supported by quality assurance and quality control procedures that conform
to current practice. In some cases, management has reclassified material
from the measured or indicated resource category to the inferred category.
Nonetheless, management believes these estimates are reliable and relevant
because they are based on engineering and feasibility studies prepared
prior to 2000 in accordance with then-prudent engineering practice.
Teck Cominco Limited - 2007 Annual Information Form Page 26
MINERAL RESOURCES (1) AT DECEMBER 31, 2007
- -------------------------------------------------------------------------------------------------------------------
MEASURED INDICATED INFERRED
--------------------- ---------------------- ------------------------
Tonnes Grade Tonnes Grade Tonnes Grade OUR
(000's) (%) (000's) (%) (000's) (%) INTEREST
- ----------------------------------------- ---------- ------------ --------- ------------- ---------- ------------
COPPER
Highland Valley Copper 161,100 0.32 35,700 0.17 97.5%
Antamina
Copper only ore 32,000 0.50 158,000 0.94 470,000 0.93 22.5%
Copper-zinc ore 16,000 0.47 56,000 1.06 43,000 0.91 22.5%
---------- ---------- ------------ --------- ------------- ---------- ------------
48,000 0.49 214,000 0.97 513,000 0.93 22.5%
Quebrada Blanca
Heap leach ore (2) 33 0.70 76.5%
Dump leach ore (2) 307 0.24 76.5%
------------- ---------- ------------
340 0.28 76.5%
Quebrada Blanca
Hypogene deposit 1,030,000 0.50 76.5%
Andacollo - Hypogene 66,946 0.36 90%
Duck Pond 47 3.10 19 3.70 1,119 2.80 100%
San Nicolas 1,880 0.73 78,100 1.34 7,020 1.28 79%
Kudz Ze Kayah (9) 12,800 0.81 100%
Galore Creek 4,700 0.52 781,000 0.52 357,700 0.36 50%
MOLYBDENUM
Highland Valley Copper 161,100 0.013 35,700 0.020 97.5%
Antamina 32,000 0.040 158,000 0.026 470,000 0.025 22.5%
Quebrada Blanca Hypogene 1,030,000 0.020 76.5%
ZINC
Red Dog 6,100 19.5 33,200 15.1 100%
Pend Oreille 1,235 7.2 100%
Lennard Shelf 189 6.3 5 8.2 50%
Antamina 16,000 0.9 56,000 2.3 43,000 2.0 22.5%
Duck Pond 47 6.0 19 10.9 1,119 5.3 100%
San Nicolas 1,880 3.6 78,100 1.8 7,020 1.4 79%
Kudz Ze Kayah (9) 12,800 5.9 100%
LEAD
Red Dog 6,100 6.6 33,200 4.5 100%
Pend Oreille 1,235 1.8 100%
Lennard Shelf 189 2.2 5 2.0 50%
Kudz Ze Kayah (9) 12,800 1.7 100%
TITANIUM
White Earth (7)(9) - - 428,000 11 1,031,000 10 100%
Teck Cominco Limited - 2007 Annual Information Form Page 27
MINERAL RESOURCES (1) AT DECEMBER 31, 2007
- -------------------------------------------------------------------------------------------------------------------------
MEASURED INDICATED INFERRED OUR
Tonnes (000's) Tonnes (000's) Tonnes (000's) INTEREST
- -------------------------------------------------------------------------------------------------------------------------
COAL (8)
Fording River 318,000 874,000 1,255,000 40%(5)
Elkview 443,000 136,000 119,000 38%(5)
Greenhills 5,300 297,400 669,400 32%(5)
Coal Mountain 79,500 38,400 15,300 40%(5)
Line Creek 428,900 376,400 504,400 40%(5)
Cardinal River 112,800 8,000 1,100 40%(5)
Other (6) 604,000 746,500 810,400 40%(5)
- -------------------------------------------------------------------------------------------------------------------------
MEASURED INDICATED INFERRED
---------------------- ---------------------- -------------------------
Tonnes Grade Tonnes Grade Tonnes Grade OUR
(000's) (g/t) (000's) (g/t)(3) (000's) (g/t)(3) INTEREST
- -------------------------------------------------------------------------------------------------------------------------
GOLD
Pogo 391 10.83 871 11.60 821 17.25 40%
Williams
Underground 923 4.66 1,916 5.82 4,843 4.91 50%
Open pit 1,269 0.75 332 0.74 1,141 1.10 50%
David Bell
Underground 270 12.12 50%
Open pit 680 3.77 50%
Lobo-Marte
Lobo (9) 64,210 1.79 5,660 1.70 60%
Marte (9) 33,470 1.58 3,590 1.35 60%
Andacollo - Hypogene 66,946 0.12 90%
Morelos 26,166 3.55 235 2.99 78.8%
Galore Creek 4,700 0.37 781,000 0.29 357,700 0.18 50%
Kudz Ze Kayah (9) 12,800 1.38 100%
STANDARD
Proven and Probable Mineral Reserves and Measured, Indicated and Inferred
Mineral Resources have been estimated in accordance with the definitions of
these terms adopted by the Canadian Institute of Mining, Metallurgy and
Petroleum (CIM) in November 2005 and incorporated in National Instrument
43-101, "Standards of Disclosure for Mineral Projects" (NI 43-101), by Canadian
securities regulatory authorities. Estimates of coal reserves and resources
have been prepared and classified using guidance from the Geological Survey of
Canada Paper 88-21. Classification terminology for coal conforms to CIM
definitions incorporated into NI 43-101. Mineral Resources are reported
separately from and do not include that portion of the Mineral Resources that
is classified as Mineral Reserves. That portion of Mineral Resource which is
not classified as Mineral Reserve does not have demonstrated economic value.
DEFINITIONS
The CIM definitions on Mineral Resources and Mineral Reserves provide as
follows:
A MINERAL RESOURCE is a concentration or occurrence of diamonds, natural solid
inorganic material, or natural solid fossilized organic material including base
and precious metals, coal and industrial minerals in or on the earth's crust in
such form and quantity and of such a grade or quality that it has reasonable
prospects for economic extraction. The location, quantity, grade, geological
Teck Cominco Limited - 2007 Annual Information Form Page 28
characteristics and continuity of a Mineral Resource are known, estimated or
interpreted from specific geological evidence and knowledge.
An INFERRED MINERAL RESOURCE is that part of a Mineral Resource for which
quantity and grade or quality can be estimated on the basis of geological
evidence and limited sampling and reasonably assumed, but not verified,
geological and grade continuity. The estimate is based on limited information
and sampling gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes.
An INDICATED MINERAL RESOURCE is that part of a Mineral Resource for which
quantity, grade or quality, densities, shape and physical characteristics can
be estimated with a level of confidence sufficient to allow the appropriate
application of technical and economic parameters, to support mine planning and
evaluation of the economic viability of the deposit. The estimate is based on
detailed and reliable exploration and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes that are spaced closely enough for geological and
grade continuity to be reasonably assumed.
A MEASURED MINERAL RESOURCE is that part of a Mineral Resource for which
quantity, grade or quality, densities, shape, and physical characteristics are
so well established that they can be estimated with confidence sufficient to
allow the appropriate application of technical and economic parameters, to
support production planning and evaluation of the economic viability of the
deposit. The estimate is based on detailed and reliable exploration, sampling
and testing information gathered through appropriate techniques from locations
such as outcrops, trenches, pits, workings and drill holes that are spaced
closely enough to confirm both geological and grade continuity.
A MINERAL RESERVE is the economically mineable part of a Measured or Indicated
Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This
Study must include adequate information on mining, processing, metallurgical,
economic, and other relevant factors that demonstrate, at the time of
reporting, that economic extraction can be justified. A Mineral Reserve
includes diluting materials and allowances for losses that may occur when the
material is mined.
A PROBABLE MINERAL RESERVE is the economically mineable part of an Indicated
and, in some circumstances, a Measured Mineral Resource demonstrated by at
least a Preliminary Feasibility Study. This Study must include adequate
information on mining, processing, metallurgical, economic, and other relevant
factors that demonstrate, at the time of reporting, that economic extraction
can be justified.
A PROVEN MINERAL RESERVE is the economically mineable part of a Measured
Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This
study must include adequate information on mining, processing, metallurgical,
economic, and other relevant factors that demonstrate, at the time of
reporting, that economic extraction is justified.
METHODOLOGIES AND ASSUMPTIONS
Mineral reserve and resource estimates are based on various assumptions
relating to operating matters, including with respect to production costs,
mining and processing recoveries, mining dilution, cut-off values or grades, as
well as assumptions relating to long-term commodity prices and, in some cases,
exchange rates. Cost estimates are based on feasibility study estimates or
operating history.
Methodologies used in reserve and resource estimates vary from property to
property depending on the style of mineralization, geology and other factors.
Teck Cominco Limited - 2007 Annual Information Form Page 29
Geostatistical methods, appropriate to the style of mineralization, have been
used in the estimation of reserves at the company's material base metal and
gold properties.
Assumed metal prices vary from property to property for a number of reasons.
Teck Cominco has interests in a number of joint ventures for which assumed
metal prices are a joint venture decision. In certain cases, assumed metal
prices are historical assumptions made at the time of the relevant reserve and
resource estimates. For operations with short remaining lives, assumed metal
prices may be based on shorter-term commodity price forecasts.
HIGHLAND VALLEY COPPER
Mill production in 2007 processed 42.6 million tonnes from the Valley, Lornex
and Highmont open pits. Mine throughput included 9.4 million tonnes of low
grade material that was not previously included in reserves but was processed
to take advantage of short-term metal prices. The most significant reserve
change is attributed to the reclassification of a 189 million tonne resource at
Valley and a 10 million tonne resource at Highmont to reserve status. In 2007,
the assumed copper price for reserves was increased from US$1.10 to US$1.40 per
pound and molybdenum price from US$5.00/lb to US$7.50/lb. The combined impact
of higher metal prices, costs and design changes resulted in a 14.3 million
tonne reserve increase. Reserves have been drill defined at 60 to 115 metre
centres and resources at 125 metre centres. In 2007, a positive geotechnical
study at Lornex added 197 million tonnes of indicated resource at a US$1.65/lb
copper price and US$9.50/lb molybdenum price. All reserve and resource
estimates assume a C$1.10 per US$1.00 exchange rate.
ANTAMINA
Mineral reserves at Antamina were estimated using assumed metal prices of
US$1.32/lb copper, US$0.63/lb zinc and US$8.22/lb molybdenum. Two general ore
types occur at Antamina. These are copper ores, from which copper and
molybdenum concentrates are produced, and copper-zinc ores, from which copper
and zinc concentrates are recovered. Reserves and resources are reported by ore
type. In 2007, mine production reduced reserves by 31 million tonnes. Higher
metal prices and mine design changes added 16 million tonnes to reserve and 471
million tonnes to resource.
QUEBRADA BLANCA
Teck Cominco has not previously reported reserves and resources for Quebrada
Blanca, acquired in 2007. Mineral reserves and resources assume a US$1.50/lb
copper price and a cut-off grade of 0.50% soluble copper for heap leach
reserves and resources. Dump leach reserves and resources use a 0.08% soluble
copper cutoff. Proven reserves are defined at 50 metre drill hole spacing and
probable reserves at 70 metres.
In late 2007, Teck Cominco completed a 200 meter spaced drill program to define
hypogene (primary) mineralization exposed in the bottom of the current open
pit. Block models and preliminary pit optimization studies in early 2008
outlined a low strip 1.03 billion tonne inferred resource above a 0.3% copper
cut off, based on assumed metal prices of US$1.50/lb copper and US$10.00/lb
molybdenum.
ANDACOLLO
Teck Cominco has not previously reported reserves and resources for Andacollo,
acquired in 2007. The Andacollo project includes an operating heap/dump leach
operation as well as a hypogene (primary) copper-gold development project.
Mineral reserves and resources assumed metal prices of US$1.50/lb copper and
US$500/oz gold.
Teck Cominco Limited - 2007 Annual Information Form Page 30
In 2007, mine production reduced leach reserves by 6.3 million tonnes. The
reduction was largely offset by upgrading 5.5 million tonnes of leach resource
to reserve status. Heap leach reserves and resources assumed a 0.30% soluble
copper cut off and dump leach a 0.14% soluble copper cut off. Drill definition
resulted in the reclassification of 4.5 million tonnes of leach resource to
hypogene reserve status. Proven leach reserves are drill defined at 50 metre
intervals and probable reserves at 75 to 100 metre intervals.
Proven hypogene reserves have been drill defined at approximately 75 metre
intervals and probable reserves at 100 metre intervals. Higher metal prices and
the transfer of leach resource to hypogene reserve status added 30 million
tonnes to the hypogene reserve.
DUCK POND
Teck Cominco has not previously reported reserves and resources for Duck Pond,
acquired in 2007. The Duck Pond mine began commercial production in April 2007.
Duck Pond reserve and resource estimates assume a copper price of $2.00/lb,
zinc price of $1.00/lb, silver price of $9.00/oz and an exchange rate of C$1.10
per US$1.00.
RED DOG
Reserve changes at Red Dog are consistent with normal mining depletion. Mine
production removed 3.4 million tonnes of reserves from the main pit in 2007.
Although reserves at the Main pit and Aqqaluk deposit were updated with current
geologic and drill information, there was no material change in reserve
estimates as a result. Proven reserves have been drill defined at 30 metre
centres, probable reserves at 60 metre centres and indicated resources at
greater than 60 metre centres. All mineral reserves and indicated resources are
mineable by open pit and assume a US$0.70/lb zinc price and US$0.35/lb lead
price. Royalties payable at Red Dog have been taken into account in the reserve
estimation process.
Reserve estimates for the Red Dog Mine assume that necessary permits will be
renewed, and that new permits will be issued for the development of the Aqqaluk
deposit. Please see our Management's Discussion and Analysis for the year ended
December 31, 2007 for further information.
PEND OREILLE
Mineral reserves at Pend Oreille increased slightly above 2006 reported
figures. Depletion from mine production was offset by the drill definition of
resource to reserve status, higher metal prices and changes to mine design.
Mineral reserves and resources assumed a US$1.00/lb zinc price and US$0.50/lb
lead price. Proven reserves occur between or below mined areas and have been
defined by underground development and sampling. Probable reserves were drill
defined at 20 metre centres and inferred resources at 80 to 100 metre centres.
Inferred resources at Washington Rock assume US$0.60/lb zinc and US$0.25/lb
lead.
LENNARD SHELF
The Lennard Shelf mine resumed operation in early 2007. In 2007, the mill
processed 912 thousand tonnes, including 500 thousand tonnes of low grade
material that was not previously included in reserve. Mineral resources have
increased since 2006 due to exploration drilling. Reserve and resource
estimates assumed a US$1.00/lb zinc price, US$0.50/lb lead price and an A$1.20
per US$1.00 exchange rate.
A revised mine plan will be completed in the first quarter of 2008, which may
affect future mineral reserve and resource estimates.
Teck Cominco Limited - 2007 Annual Information Form Page 31
ELK VALLEY COAL
Coal reserves are reported in metric tonnes of clean coal after mining and
processing losses. Reserve estimates assume a US$85/tonne coking coal price
(free on board) at Roberts Bank terminal and include 2.5 million tonnes of
thermal coal used for plant operations. A review of reporting standards at
Fording River and Elkview resulted in significant reallocations among reporting
categories within, but no material changes in overall reserves or resources.
Reserve and resource reporting criteria will be reviewed at all operations in
2008. Mine production in 2007, at the six operating coal mines, reduced
reserves by 23.4 million tonnes. In addition, reserves at Cardinal River
decreased by an additional 13.5 million tonnes due to revised pit designs and
the elimination of certain unrecoverable coal seams. Resources are based on a
US$110/tonne coking coal price, and are reported as raw coal without losses for
mining and processing. All reserve and resource estimates assume a C$1.10 per
US$1.00 exchange rate.
POGO
During 2006, mine operations removed 649,000 tonnes from reserve. Mineral
reserve and resource estimates assume a US$475/oz gold price for reserves and
US$550/oz price for resources. The combined impact of higher gold prices,
operating costs and diamond drilling added 265,000 tonnes to reserve and 1.2
million tonnes to resource.
WILLIAMS
Mineral reserve and resource estimates on the Williams property assume a
US$550/oz gold price for reserves, US$650/oz gold price for resources and a
C$1.15 per US$1.00 exchange rate. Mine production in 2006 removed 1.1 million
tonnes from the underground reserve and 1.6 million tonnes from the open-pit
reserve. Underground drill programs added 934,000 tonnes to reserve.
In 2006, open-pit production from the C Zone produced significantly fewer
ounces than predicted. Engineering and remodelling in 2007 removed 2.3 million
tonnes from reserve. This decrease was partially offset by higher metal prices,
operating costs and the drill definition of resource to reserve status.
DAVID BELL
Mine production in 2007 removed 288,000 tonnes from reserve, 23,000 tonnes from
resource and mined 70,000 tonnes of new reserve in previously undefined areas.
Definition drilling transferred 29,000 tonnes from resource to reserve.
Refinement of the mine plan removed 23,000 tonnes due to stope losses. Mineral
reserve and resource estimates assume a gold price of US$575/oz for reserves
and US$650/oz for resources. All reserve and resource estimates assume a C$1.15
per US$1.00 exchange rate.
OTHER GOLD PROPERTIES
Mineral resources at Morelos were estimated using an assumed gold price of
US$500/oz. A pre-feasibility study and additional drill definition of the
deposit was completed in 2007. Drill density is sufficient to reclassify most
of the resource from inferred to indicated status. Historic estimates on the
Lobo-Marte deposits were prepared in a 1998 feasibility study prior to the
adoption of NI 43-101 reporting standards. These estimates are reported using
resource classification categories that conform to those prescribed by NI
43-101 but are not supported by quality assurance and quality control
procedures that conform to current practice. Nonetheless, management believes
these estimates are reliable and relevant because they are based on a
feasibility study prepared prior to 2000 in accordance with then-prudent
engineering practice.
OTHER RESOURCES
In 2007, Teck Cominco acquired a 50% interest in the Galore Creek property. The
resource model was updated in late 2007 with current drill results. The
resource was constrained within four Lerchs-Grossman pit shells developed using
US$1.55/lb copper, US$650/oz gold, US$11/oz silver and a C$1.10 per US$1.00
exchange rate.
Mineral resource estimates at San Nicolas were based on assumed prices of
US$0.90/lb copper and US$0.50/lb zinc (2001 study). Historic estimates at Kudz
Ze Kayah were prepared in 1995 prior to the adoption of NI 43-101 reporting
standards. These estimates are reported using resource classification
categories that conform to those prescribed by NI 43-101 but are not supported
by quality assurance and quality control procedures that conform to current
practice. Management has reclassified material from the measured or indicated
resource category to the inferred category. Nonetheless, management believes
these estimates are reliable and relevant because they are based on engineering
studies prepared prior to 2000 in accordance with then-prudent engineering
practice.
Teck Cominco Limited - 2007 Annual Information Form Page 32
RISKS AND UNCERTAINTIES
Mineral Reserves and Mineral Resources are estimates of the size and grade of
the deposits based on the assumptions and parameters currently available. These
assumptions and parameters are subject to a number of risks and uncertainties,
including, but not limited to, future changes in metals prices, issuance of
permits and/or production costs, differences in size and grade and recovery
rates from those expected and changes in project parameters due to changes in
production plans. Except as discussed above, there are no known environmental,
permitting, legal, title, taxation, sociopolitical, marketing or other issues
that are currently expected to materially affect the mineral reserves or
resources.
QUALIFIED PERSONS
Estimates of the mineral reserves and resources for our material properties
have been prepared under the general supervision of Paul C. Bankes, P.Geo., who
is an employee of Teck Cominco. Mineral reserve and resource estimates for
Antamina have been prepared under the supervision of Dan Gurtler, AIMM, who is
an employee of Compania Minera Antamina. Messrs. Bankes and Gurtler are
Qualified Persons for the purposes of National Instrument 43-101. Estimates of
reserves and resources at Elkview, Fording River, Greenhills, Coal Mountain,
Line Creek and Cardinal River were prepared under the general supervision of
Don Mills, P.Geol. and Ross Pritchard, P.Eng., employees of Elk Valley Coal
Partnership, who are the Qualified Persons for the purposes of National
Instrument 43-101.
OIL AND GAS RESOURCES
A contingent resource for oil and gas reporting purposes is different that a
mineral resource. Contingent resources are estimated in accordance with the
standards set out in the Canadian Oil and Gas Evaluation Handbook. Contingent
resources are defined in the handbook as those quantities of oil and gas that
are estimated on a given date to be potentially recoverable from known
accumulations but are not currently economic. There is no certainty that it
will be commercially viable to produce any portion of the resources.
Fort Hills Project
We hold a 20% limited partnership interest in the Fort Hills Partnership, which
is developing the Fort Hills oil sands project. The Fort Hills Partnership
retained independent reserves evaluators Sproule Associates Limited ("Sproule")
Teck Cominco Limited - 2007 Annual Information Form Page 33
to prepare an audit of the contingent bitumen resource estimated for the Fort
Hills project as at December 31, 2007.
The range of contingent bitumen resources associated with the proposed Fort
Hills oil sands project as audited by Sproule is summarized as follows:
December 31, 2007
Contingent Bitumen Resource
- --------------------------------------------------------------------------------
100% Our 20% share
(billion barrels) (million barrels)
- --------------------------------------------------------------------------------
Low estimate 3.37 674
Best estimate 4.03 806
High estimate 4.38 876
The bitumen estimates in the above table were calculated on the basis of the
amount of bitumen that can be mined and recovered in the proposed extraction
plant. The best estimate is the current basis of the conceptual mine plan for
the project. The low and high estimates are derived from a Fort Hills
Partnership report entitled the "Fort Hills Conceptual Mine Plan Study,"
completed in March 2006.
Teck Cominco/UTS Joint Venture
Together with UTS, we have jointly acquired oil sands leases on approximately
285,000 acres of land in the Athabasca region of northern Alberta. Lease 14
covers approximately 7,150 acres and adjoins the northwest corner of the Fort
Hills property.
We and UTS retained GLJ Petroleum Consultants (GLJ), independent petroleum
consultants, to prepare estimates of contingent bitumen resources associated
with Lease 14 as at December 31, 2007.
The range of contingent bitumen resources associated with Lease 14 as estimated
by GLJ is summarized as follows:
December 31, 2007
Contingent Bitumen Resource
- --------------------------------------------------------------------------------
100% Our 50% share
(million barrels) (million barrels)
- --------------------------------------------------------------------------------
Low estimate 270 135
Best estimate 350 175
High estimate 400 200
Lease 14 is still in the early evaluation stage and fcquisition and evaluation
are required to confirm the planning basis before reserves can be assigned. At
this time, neither a feasibility study nor application for regulatory approval
has been prepared. Pit design assumptions used in preparing the estimates are
within ranges currently being considered by the industry in applications for
regulatory approval of commercial surface mining developments. However, we have
not committed to mine any of the contingent resources and any decision to mine
may reflect a different planning basis than that used in preparing these
estimates.
Teck Cominco Limited - 2007 Annual Information Form Page 34
SAFETY AND ENVIRONMENTAL PROTECTION
Our current and future operations, including development activities and
commencement of production on our properties or areas in which we have an
interest, are subject to laws and regulations in Canada and elsewhere governing
occupational health, waste disposal, protection and remediation of the
environment, reclamation, mine safety, management of toxic substances and
similar matters. Compliance with these laws and regulations affects the costs
of and can affect the schedule for planning, designing, drilling, developing,
constructing, operating and closing the Company's mines, refineries and other
facilities.
Whether in Canada or abroad, we attempt to apply technically proven and
economically feasible measures to protect the environment throughout
exploration, mining, processing and closure. Although we believe that our
operations and facilities are currently in substantial compliance in all
material respects with all existing laws, regulations and permits, there can be
no assurance that additional significant costs will not be incurred to comply
with current and future regulations or that liabilities associated with
non-compliance will not occur.
Safety performance is a key priority for us. Safety statistics are collected
from each operation monthly. Targets for safety performance are set each year
and are used in determining management compensation. Safety incidents are
investigated and finding reports are shared across our business to assist in
the prevention of recurrence of the incident.
For accounting purposes, current costs associated with permit compliance are
treated as normal operating costs necessary to maintain operations on an
ongoing basis. In addition, amounts are accrued in our accounts to provide for
certain future reclamation, site restoration and other closure costs. Financial
guarantees of various forms are posted, if required, with various governmental
authorities as security to cover estimated reclamation obligations. Our
provisions for future reclamation and site restoration are estimated based on
known requirements. It is not currently possible to estimate the impact on
operating results of future legislative or regulatory developments.
We conduct regular environmental and safety and health audits. The overall
objective of our audits is to identify environment, health and safety risks,
assess regulatory compliance and conformance with applicable laws and assess
conformance with appropriate environment, health and safety management systems
and good management practices.
All of our mining operations have closure and reclamation plans in place and
these undergo regular updates. The reclamation programs are guided by land
capability assessments, which integrate several factors in the reclamation
approach including biological diversity, establishment of sustainable
vegetation, diversity of physical landforms and requirements for wildlife
habitat. In addition to reclamation of operating mines, certain idle and closed
mines are under continuous care and maintenance as well as progressive closure.
Our Charter of Corporate Responsibility and Code of Business, Environmental and
Health & Safety Practices require that sites be reclaimed in an appropriate
manner. We manage a number of decommissioned mine sites in Canada and conduct
regular inspections to verify the success of reclamation activities.
SOCIAL AND ENVIRONMENTAL POLICIES
We have adopted and implemented social and environmental policies that are
fundamental to our operations. Our operating practices are governed by the
principles set out in our Charter of Corporate Responsibility (the "Charter")
and Code of Business, Environmental and Health & Safety Practices (the "Code").
The Charter sets out corporate commitments related to ethical business conduct,
Teck Cominco Limited - 2007 Annual Information Form Page 35
providing a workplace free of discrimination, open and fair dealings with all
stakeholders, and support for sustainable development.
The Code sets out specific requirements in areas related to (i) legal
compliance and ethical business conduct, (ii) prohibition of discriminatory
conduct and commitment to job selection on the basis of merit and ability,
(iii) identification, control and promotion of safety and health performance,
(iv) sound environmental conduct and continuous improvement in performance, (v)
regular auditing of environmental, health, safety and emergency preparedness,
(vi) continual improvement of environmental, health and safety management
systems, (vii) closure and reclamation planning as a component of all
development projects, (viii) the safe use, reuse and recycling of products,
(ix) support for research on environmental, health and safety performance, (x)
fostering dialogue with stakeholders and respect for the rights, interests, and
aspirations of indigenous people, and (xi) support for local communities and
their development.
In addition to the Charter and Code, we have adopted a Health and Safety
Policy, a Health and Safety Guide for Exploration, and a Code of Ethics. We
have taken steps to implement the Charter, Code and policies through adoption
of Environmental, Health and Safety Management Standards, which provide
direction to all operations and auditable criteria against which performance is
measured.
We set objectives in these areas for improvement on an annual basis and these
are used to determine specific objectives for corporate and operational groups
within our organization. Overall responsibility for achievement of objectives
rests with senior personnel. Our Environmental, Health and Safety Committee of
the Board which reports to the Board of Directors, and our Corporate
Environment and Risk Management Committee and our Product Stewardship
Committee, which are comprised of members of senior management, provide
oversight in these areas.
We measure our performance on an ongoing and comprehensive basis. Internal
monthly and quarterly environmental reporting tracks performance indicators
including compliance with permits, environmental monitoring, health and safety
performance, materials inputs and outputs, community concerns expressed and
actions taken in response, and amount of reclaimed land. We report publicly on
our performance through our Sustainability Report and website.
HUMAN RESOURCES
As at December 31, 2007 there were approximately 8,900 employees working at the
various operations we managed. Collective bargaining agreements covering
unionized employees at our material operations are as follows:
EXPIRY DATE OF COLLECTIVE AGREEMENT
-------------------------------------------------------------------
Trail May 31, 2008
David Bell October 31, 2010
Antamina July 24, 2009
Highland Valley Copper September 30, 2011
Quebrada Blanca January 31, 2012
Andacollo December 31, 2011
Elkview October 31, 2010
Coal Mountain December 31, 2009
Line Creek May 31, 2009
Fording River April 30, 2011
Cardinal River June 30, 2012
===================================================================
Teck Cominco Limited - 2007 Annual Information Form Page 36
TECHNOLOGY
The company undertakes and participates in a number of research and development
projects designed to improve exploration, extraction, product and operational
technologies, and reduce costs by improving efficiencies.
We have research and technology facilities located in our CESL research
facility in Richmond, B.C., our Product Technology Center in Mississauga,
Ontario and our Applied Research and Technology group located in Trail, B.C.
The primary focus of these facilities is the development of new mineral
processing technologies and the development of new applications for, and the
refinement of existing technologies using, our principal refined products.
Other business units receive support on an as-needed basis.
Our research and development expense for 2007 and 2006 was $32 million and $17
million, respectively.
FOREIGN OPERATIONS
The Red Dog mine and the Pogo mine located in Alaska, U.S.A., the Pend Oreille
mine in Washington State, the Pillara mine in Australia, the Antamina mine
located in Peru and the Quebrada Blanca and Andacollo mines located in Chile
are our significant assets located outside of Canada. We hold our 22.5%
interest in Antamina through our equity interest in the operating company for
the mine, CMA. We hold a 100% interest in the Red Dog mine, subject to the
royalty in favour of NANA described under the heading "Individual Operations -
Zinc - Red Dog" above. We hold a 50% interest in the Pillara mine at Lennard
Shelf. We own 76.5% and 90%, respectively, of the Chilean operating companies
that own Quebrada Blanca and Andacollo. Foreign operations accounted for 42% of
our 2007 consolidated revenue and represented approximately 65% of our total
assets as at December 31, 2007.
We also have interests in various exploration and development projects in
various foreign countries, with significant activities in the United States,
Mexico, Peru, Chile, Brazil, Australia, Turkey and Namibia. We currently have
foreign exploration offices in all of the foregoing countries.
See "Risk Factors- Foreign Activities" for further information on the risks
associated with these foreign properties.
COMPETITIVE CONDITIONS
Our business is to sell base metals, metal concentrates, by-product metals and
concentrate, metallurgical coal and gold at prices determined by world markets
over which we have no influence or control. These markets are cyclical. Our
competitive position is determined by our costs compared to those of other
producers throughout the world, and by our ability to maintain our financial
integrity through metal and coal price cycles and currency fluctuations. Costs
are governed principally by the location, grade and nature of ore bodies and
mineral deposits, the location of our metal refining facility and its cost of
power and, as well, by operating and management skill.
Over the long term, our competitive position will be determined by our ability
to locate, acquire and develop economic ore bodies and replace current
production, as well as by our ability to hire and retain skilled employees. In
this regard, we also compete with other mining companies for employees, mineral
properties, for joint venture agreements and for the acquisition of investments
in other mining companies.
Teck Cominco Limited - 2007 Annual Information Form Page 37
RISK FACTORS
Before making an investment decision, you should carefully consider the risks
and uncertainties described below as well as the other information contained
and incorporated by reference in this Annual Information Form. These risks and
uncertainties are not the only ones facing us. Additional risks and
uncertainties not presently known to us or that we currently consider
immaterial may also impair our business operations. If any such events actually
occur, our business, prospects, financial condition, cash flows and operating
results could be materially harmed.
WE FACE RISKS IN THE MINING AND METALS BUSINESS
The business of exploring for minerals is inherently risky. Few properties that
are explored are ultimately developed into producing mines.
Mineral properties are often non-productive for reasons that cannot be
anticipated in advance. Even after the commencement of mining operations, such
operations may be subject to risks and hazards, including environmental
hazards, industrial accidents, unusual or unexpected geological formations,
unanticipated metallurgical difficulties, ground control problems and flooding.
The Trail metallurgical operations, and our concentrate mills and coal
preparation plants are also subject to risks of process upsets and equipment
malfunctions. Equipment and supplies may from time to time be unavailable on a
timely basis. The occurrence of any of the foregoing could result in damage to
or destruction of mineral properties or production facilities, personal
injuries or death, environmental damage, delays or interruption of production,
increases in production costs, monetary losses, legal liability and adverse
governmental action.
OUR INSURANCE MAY NOT PROVIDE ADEQUATE COVERAGE
Our property, business interruption and liability insurance may not provide
sufficient coverage for losses related to these or other hazards. Insurance
against certain risks, including certain liabilities for environmental
pollution, may not be available to us or to other companies within the
industry. In addition, our insurance coverage may not continue to be available
at economically feasible premiums, or at all. Any such event could have a
material adverse affect on our business.
WE COULD BE SUBJECT TO POTENTIAL LABOUR UNREST OR OTHER LABOUR DISTURBANCES AS
A RESULT OF THE FAILURE OF NEGOTIATIONS IN RESPECT OF OUR COLLECTIVE AGREEMENTS
Over 6,400 of our approximately 8,850 employees are employed under collective
bargaining agreements. We could be subject to labour unrest or other labour
disturbances as a result of delays in or the failure of negotiations in respect
of our collective agreements, which could, while ongoing, have a material
adverse effect on our business.
WE MAY NOT BE ABLE TO HIRE ENOUGH SKILLED EMPLOYEES TO SUPPORT OUR OPERATIONS
We compete with other mining companies to attract and retain key executives and
skilled and experienced employees. The mining industry is labour intensive and
our success depends to a significant extent on our ability to attract, hire,
train and retain qualified employees, including our ability to attract
employees with needed skills in the geographic areas in which we operate. We
could experience increases in our recruiting and training costs and decreases
in our operating efficiency, productivity and profit margins, if we are not
able to attract, hire and retain a sufficient number of skilled employees to
support our operations.
Teck Cominco Limited - 2007 Annual Information Form Page 38
WE COULD BECOME SUBJECT TO MATERIAL PENSION LIABILITIES
We have assets in defined benefit pension plans which arise through employer
contributions and returns on investments made by the plans. The returns on
investments are subject to fluctuations depending upon market conditions and we
are responsible for funding any shortfall of pension assets compared to our
pension obligations under these plans.
We also have certain obligations to former employees with respect to
post-retirement benefits. The cost of providing these benefits can fluctuate
and the fluctuations can be material.
Our liabilities under defined benefit pension plans and in respect of other
post-retirement benefits are estimated based on actuarial and other
assumptions. These assumptions may prove to be incorrect and may change over
time and the effect of these changes can be material.
FLUCTUATIONS IN THE MARKET PRICE OF BASE METALS, SPECIALTY METALS,
METALLURGICAL COAL AND GOLD MAY SIGNIFICANTLY AFFECT THE RESULTS OF OUR
OPERATIONS
The results of our operations are significantly affected by the market price of
base metals, specialty metals, metallurgical coal and gold, which are cyclical
and subject to substantial price fluctuations. Our earnings are particularly
sensitive to changes in the market price of zinc, copper and metallurgical
coal. Market prices can be affected by numerous factors beyond our control,
including levels of supply and demand for a broad range of industrial products,
substitution of new or different products in critical applications for our
existing products, expectations with respect to the rate of inflation, the
relative strength of the Canadian dollar and of certain other currencies,
interest rates, speculative activities, global or regional political or
economic crises and sales of gold and base metals by holders in response to
such factors. If prices should decline below our cash costs of production and
remain at such levels for any sustained period, we could determine that it is
not economically feasible to continue commercial production at any or all of
our mines. We may also curtail or suspend some or all of our exploration
activities, with the result that our depleted reserves are not replaced.
Our general policy is not to hedge changes in prices of our mineral production.
From time to time, however, we may undertake hedging programs in specific
circumstances, with an intention to reduce the risk of a commodity's market
price while optimizing upside participation, to maintain adequate cash flows
and profitability to contribute to the long-term viability of our business.
There are, however, risks associated with hedging programs including, among
other things, an increase in the world price of the commodity, an increase in
gold lease rates (in the case of gold hedging), an increase in interest rates,
rising operating costs, counterparty risks and production interruption events.
FLUCTUATIONS IN THE PRICE AND AVAILABILITY OF CONSUMED COMMODITIES AFFECT OUR
COSTS OF PRODUCTION
Prices and availability of commodities consumed or used in connection with
exploration, development, mining, smelting and refining, such as natural gas,
diesel, oil and electricity, as well as reagents such as copper sulfate, also
fluctuate and these fluctuations affect the costs of production at our various
operations. Our smelting and refining operations at Trail require concentrates
that we purchase from third parties. The availability of those concentrates and
the treatment charges we can negotiate fluctuate depending on market
conditions. These fluctuations can be unpredictable, can occur over short
periods of time and may have a materially adverse impact on our operating costs
or the timing and costs of various projects. Our general policy is not to hedge
our exposure to changes in prices of the commodities we use in our business.
Teck Cominco Limited - 2007 Annual Information Form Page 39
WE FACE RISKS ASSOCIATED WITH SHORTAGE OF MINING EQUIPMENT AND SUPPLIES
The growth in global mining activities has created a demand for mining
equipment and related supplies that exceeds supply. For example, there is a
global shortage of haulage truck tires which is expected to continue into 2008.
Consequently, if equipment or other supplies cannot be procured on a timely
basis, our expansion activities, production, development or operations could be
negatively affected. The pace of global mining development activities has also
led to supply constraints, limitation on the availability of labour and other
cost pressures that will affect our development operations. Lead times for
major equipment orders have increased. Wage pressures and other cost escalation
will also affect construction activities at our development projects.
OUR ACQUISITION OF PROPERTIES MAY BE AFFECTED BY COMPETITION FROM OTHER MINING
COMPANIES
Because the life of a mine is limited by its ore reserves, we are continually
seeking to replace and expand our reserves through the exploration of our
existing properties as well as through acquisitions of interests in new
properties or of interests in companies which own such properties. We encounter
strong competition from other mining companies in connection with the
acquisition of properties. This competition may increase the cost of acquiring
suitable properties, should such properties become available to us.
WE FACE COMPETITION IN PRODUCT MARKETS
The mining industry in general is intensely competitive and even if commercial
quantities of mineral resources are developed, a profitable market may not
exist for the sale of such minerals. We must sell base metals, metal
concentrates, by-product metals and concentrate, metallurgical coal and gold at
prices determined by world markets over which we have no influence or control.
Our competitive position is determined by our costs in comparison to those of
other producers in the world. If our costs increase due to our locations, grade
and nature of ore bodies, foreign exchange rates, or our operating and
management skills, our profitability may be affected. We have to compete with
larger companies that have greater assets and financial and human resources
than us, and which may be able to sustain larger losses than us to develop or
continue business.
WE MAY FACE RESTRICTED ACCESS TO MARKETS IN THE FUTURE
Access to our markets may be subject to ongoing interruptions and trade
barriers due to policies and tariffs of individual countries, and the actions
of certain interest groups to restrict the import of certain commodities.
Although there are currently no significant trade barriers existing or
impending of which we are aware that do, or could, materially affect our access
to certain markets, there can be no assurance that our access to these markets
will not be restricted in the future.
OUR RESERVE AND RESOURCE ESTIMATES MAY PROVE TO BE INCORRECT
Disclosed reserve estimates should not be interpreted as assurances of mine
life or of the profitability of current or future operations. We estimate and
report our mineral reserves and resources in accordance with the requirements
of the applicable Canadian securities regulatory authorities and industry
practice.
We estimate and report oil and gas reserves and resources in accordance with
the requirements of the applicable Canadian securities regulatory authorities
and industry practice. Estimates of reserves and resources for oil and gas
reporting purposes are not comparable to mineral reserve and resource
estimates.
Teck Cominco Limited - 2007 Annual Information Form Page 40
The SEC does not permit mining companies in their filings with the SEC to
disclose estimates other than mineral reserves. However, because we prepared
this disclosure document in accordance with Canadian disclosure requirements,
this disclosure document also incorporates estimates of mineral resources.
Mineral resources are concentrations or occurrences of minerals that are judged
to have reasonable prospects for economic extraction, but for which the
economics of extraction cannot be assessed, whether because of insufficiency of
geological information or lack of feasibility analysis, or for which economic
extraction cannot be justified at the time of reporting. Consequently, mineral
resources are of a higher risk and are less likely to be accurately estimated
or recovered than mineral reserves.
Our mineral reserves and resources are estimated by persons who are employees
of the respective operating company for each of our operations under the
supervision of our employees. These individuals are not "independent" for
purposes of applicable securities legislation. As a rule, we do not use outside
sources to verify mineral reserves or resources except at the initial
feasibility stage.
The mineral and oil and gas reserve and resource figures incorporated in this
disclosure document by reference are estimates based on the interpretation of
limited sampling and subjective judgments regarding the grade, continuity and
existence of mineralization, as well as the application of economic
assumptions, including assumptions as to operating costs, foreign exchange
rates and future commodity prices. The sampling, interpretations or assumptions
underlying any reserve or resource estimate may be incorrect, and the impact on
reserves or resources may be material. Should the mineralization and/or
configuration of a deposit ultimately turn out to be significantly different
from that currently envisaged, then the proposed mining plan may have to be
altered in a way that could affect the tonnage and grade of the reserves mined
and rates of production and, consequently, could adversely affect the
profitability of the mining operations. In addition, short term operating
factors relating to the reserves, such as the need for orderly development of
ore bodies or the processing of new or different ores, may cause reserve and
resource estimates to be modified or operations to be unprofitable in any
particular fiscal period.
There can be no assurance that our projects or operations will be, or will
continue to be, economically viable, that the indicated amount of minerals or
petroleum products will be recovered or that they will be recovered at the
prices assumed for purposes of estimating reserves.
THE DEPLETION OF OUR MINERAL RESERVES MAY NOT BE OFFSET BY FUTURE DISCOVERIES
OR ACQUISITIONS OF MINERAL RESERVES
We must continually replace mineral reserves depleted by production to maintain
production levels over the long term. This is done by expanding known mineral
reserves or by locating or acquiring new mineral deposits.
There is, however, a risk that depletion of reserves will not be offset by
future discoveries of mineral reserves. Exploration for minerals and oil and
gas is highly speculative in nature and the projects involve many risks. Many
projects are unsuccessful and there are no assurances that current or future
exploration programs will be successful. Further, significant costs are
incurred to establish mineral or oil and gas reserves and to construct mining
and processing facilities. Development projects have no operating history upon
which to base estimates of future cash flow and are subject to the successful
completion of feasibility studies, obtaining necessary government permits,
obtaining title or other land rights and availability of financing. In
addition, assuming discovery of an economic orebody, depending on the type of
mining operation involved, many years may elapse from the initial phases of
drilling until commercial operations are commenced. Accordingly, there can be
no assurances that our current work programs will result in any new commercial
mining operations or yield new reserves to replace and/or expand current
reserves.
Teck Cominco Limited - 2007 Annual Information Form Page 41
WE MAY BE ADVERSELY AFFECTED BY CURRENCY FLUCTUATIONS
Our operating results and cash flow are affected by changes in the Canadian
dollar exchange rate relative to the currencies of other countries. Exchange
rate movements can have a significant impact on results as a significant
portion of our operating costs are incurred in Canadian and other currencies
and most revenues are earned in U.S. dollars. To reduce the exposure to
currency fluctuations, we enter into limited foreign exchange contracts from
time to time, but these hedges do not eliminate the potential that such
fluctuations may have an adverse effect on us. In addition, foreign exchange
contracts expose us to the risk of default by the counterparties to such
contracts, which could have a material adverse effect on our business.
WE MAY BE ADVERSELY AFFECTED BY INTEREST RATE CHANGES
Our exposure to changes in interest rates results from investing and borrowing
activities undertaken to manage our liquidity and capital requirements. We have
incurred indebtedness that bears interest at fixed and floating rates, and we
have entered into interest rate swap agreements to effectively convert some
fixed rate exposure to floating rate exposure. There can be no assurance that
we will not be materially adversely affected by interest rate changes in the
future. In addition, our use of interest rate swaps exposes us to the risk of
default by the counterparties to such arrangements. Any such default could have
a material adverse effect on our business.
CHANGES IN ENVIRONMENTAL, HEALTH AND SAFETY LAWS MAY HAVE A MATERIAL ADVERSE
EFFECT ON OUR OPERATIONS
Environmental, health and safety legislation affects nearly all aspects of our
operations, including mine development, worker safety, waste disposal,
emissions controls and protection of endangered and protected species.
Compliance with environmental, health and safety legislation can require
significant expenditures and failure to comply with environmental, health or
safety legislation may result in the imposition of fines and penalties, the
temporary or permanent suspension of operations, clean-up costs arising out of
contaminated properties, damages, and the loss of important permits. Exposure
to these liabilities arises not only from our existing operations, but from
operations that have been closed or sold to third parties. We are required to
reclaim properties after mining is completed and specific requirements vary
among jurisdictions. In some cases, we may be required to provide financial
assurances as security for reclamation costs, which may exceed our estimates
for such costs. Our historical operations have generated significant
environmental contamination. We could also be held liable for worker exposure
to hazardous substances. There can be no assurances that we will at all times
be in compliance with all environmental, health and safety regulations or that
steps to achieve compliance would not materially adversely affect our business.
Environmental, health and safety laws and regulations are evolving in all
jurisdictions where we have activities. We are not able to determine the
specific impact that future changes in environmental laws and regulations may
have on our operations and activities, and our resulting financial position;
however, we anticipate that capital expenditures and operating expenses will
increase in the future as a result of the implementation of new and
increasingly stringent environmental, health and safety regulations. For
example, emissions standards for carbon dioxide and sulphur dioxide are
becoming increasingly stringent as are laws relating to the use and production
of regulated chemical substances. Further changes in environmental, health and
safety laws, new information on existing environmental, health and safety
conditions or other events, including legal proceedings based upon such
conditions, or an inability to obtain necessary permits, could require
increased financial reserves or compliance expenditures or otherwise have a
material adverse effect on us. Changes in environmental, health and safety
legislation could also have a material adverse effect on product demand,
product quality and methods of production and distribution. In the event that
Teck Cominco Limited - 2007 Annual Information Form Page 42
any of our products were demonstrated to have negative health effects, we could
be exposed to workers compensation and product liability claims which could
have a material adverse effect on our business.
WE ARE HIGHLY DEPENDENT ON THIRD PARTIES FOR THE PROVISION OF TRANSPORTATION
SERVICES
Due to the geographical location of many of our mining properties and
operations, we are highly dependent on third parties for the provision of rail
and port services. We negotiate prices for the provision of these services in
circumstances where we may not have viable alternatives to using specific
providers, or have access to regulated rate setting mechanisms. Contractual
disputes, demurrage charges, rail and port capacity issues, availability of
vessels and rail cars, weather problems or other factors can have a material
adverse effect on our ability to transport materials according to schedules and
contractual commitments.
Our Red Dog mine operates year-round on a 24 hour per day basis. The annual
production of the mine must be stored at the port site and shipped within an
approximately 100-day window when sea ice and weather conditions permit. Two
purpose-designed shallow draft barges transport the concentrates to deep water
moorings. The barges cannot operate in severe swell conditions.
Unusual ice or weather conditions, or damage to the barges or ship loading
equipment could restrict our ability to ship all of the stored concentrate.
Failure to ship the concentrate during the shipping season could have a
material adverse effect on our sales, as well as on our Trail metallurgical
operations, and could materially restrict mine production subsequent to the
shipping season.
ABORIGINAL TITLE CLAIMS AND RIGHTS TO CONSULTATION AND ACCOMMODATION MAY AFFECT
OUR EXISTING OPERATIONS AS WELL AS DEVELOPMENT PROJECTS AND FUTURE ACQUISITIONS
Governments in many jurisdictions must consult with aboriginal peoples with
respect to grants of mineral rights and the issuance or amendment of project
authorizations. Consultation and other rights of aboriginal people may require
accommodations, including undertakings regarding employment and other matters
in impact and benefit agreements. This may affect our ability to acquire within
a reasonable time frame effective mineral titles in these jurisdictions,
including in some parts of Canada in which aboriginal title is claimed, and may
affect the timetable and costs of development of mineral properties in these
jurisdictions. The risk of unforeseen aboriginal title claims also could affect
existing operations as well as development projects and future acquisitions.
These legal requirements may affect our ability to expand or transfer existing
operations or to develop new projects.
WE OPERATE IN FOREIGN JURISDICTIONS AND FACE ADDED RISKS AND UNCERTAINTIES DUE
TO DIFFERENT ECONOMIC, CULTURAL AND POLITICAL ENVIRONMENTS
Our business operates in a number of foreign countries where there are added
risks and uncertainties due to the different economic, cultural and political
environments. Some of these risks include nationalization and expropriation,
social unrest and political instability, uncertainties in perfecting mineral
titles, trade barriers and exchange controls and material changes in taxation.
Further, developing country status or an unfavourable political climate may
make it difficult for us to obtain financing for projects in some countries.
WE FACE RISKS ASSOCIATED WITH OUR DEVELOPMENT PROJECTS
The Fort Hills project is at an early stage of development. Petro-Canada, as
project operator, in consultation with UTS and us, will be responsible for
further definition of the scope and parameters of the project and its design
Teck Cominco Limited - 2007 Annual Information Form Page 43
and development. There can be no assurance that the development or construction
activities will commence in accordance with current expectations or at all. The
Galore Creek project is at a similar stage of development. Construction and
development of these projects are subject to numerous risks, including, without
limitation:
o risks resulting from the fact that the Fort Hills project and the
Galore Creek project are at an early stage of development and
therefore are subject to development and construction risks,
including the risk of significant cost overruns and delays in
construction, and technical and other problems;
o risks associated with delays in obtaining, or conditions imposed by,
regulatory approvals;
o risks associated with obtaining amendments to existing regulatory
approvals and additional regulatory approvals which will be required;
o risks of significant fluctuation in prevailing prices for copper,
gold, oil, other petroleum products and natural gas, which may affect
the profitability of the projects;
o risks resulting from the fact that we are a minority partner in the
Fort Hills Energy Limited Partnership and major decisions with
respect to project design and construction may be made without our
consent;
o risks associated with the fact that our company and NovaGold Canada
Inc. are 50% partners in the Galore Creek project and major project
decisions require the agreement of both parties;
o risks associated with litigation;
o risks resulting from dependence on third parties for services and
utilities for the project;
o risks associated with the ability of our partners to finance their
respective shares of project expenditures; and
o risks associated with our obtaining financing for these projects on
commercially reasonable terms.
REGULATORY EFFORTS TO CONTROL GREENHOUSE GAS EMISSIONS COULD MATERIALLY
NEGATIVELY AFFECT OUR BUSINESS
Our businesses include several operations that emit large quantities of carbon
dioxide, or that produce or will produce products that emit large quantities of
carbon dioxide when consumed by end users. This is particularly the case with
our metallurgical coal operations and our oil sands projects. Carbon dioxide
and other greenhouse gases are the subject of increasing public concern and
regulatory scrutiny.
The Kyoto Protocol is an international agreement that sets limits on greenhouse
gas emissions from certain signatory countries. While the United States
government has announced that it will not ratify the protocol, the Canadian
Parliament voted to ratify its participation in this agreement and the Kyoto
Protocol came into force in Canada on February 16, 2005. The Kyoto agreement
commits Canada to limit its net greenhouse gas emissions to 6% below the levels
emitted in 1990. Canada's current level of greenhouse gas emissions
significantly exceeds the agreed-upon limit.
Teck Cominco Limited - 2007 Annual Information Form Page 44
In 2007, the Government of Canada announced a policy objective of reducing
total Canadian greenhouse gas emissions by 20% below 2006 levels by 2020 and by
60% to 70% below that level by 2050. As part of this initiative, the federal
Government intends to require reductions in emission intensity levels from
certain industrial facilities, including oil and gas facilities and smelting
and refining facilities, by 6% per year for each year from 2007 to 2010 and 2%
per year each year thereafter. Affected facilities will be permitted to meet
reduction targets by emissions trading or contributions to a technology fund,
in addition to emissions abatement. Additional policy measures are anticipated
in coming years under this federal policy framework.
In Alberta, the Climate Change and Emissions Management Act and the Specified
Gas Emitters Regulation require certain existing large emitters (facilities,
including oil sands facilities, that are releasing 100,000 tonnes or more of
greenhouse gas emissions in any calendar year after and including 2003) to
reduce their emissions intensity by 12% starting July 1, 2007. The regulation
also outlines options for meeting reduction targets. If reducing emissions
intensity by 12% is not initially possible, large emitters will be able to
invest in an Alberta-based technology fund to develop infrastructure to reduce
emissions or to support research into innovative climate change solutions.
Large emitters will be required to pay $15 per tonne to the technology fund for
every tonne of emissions above the 12% reduction target. Alternatively, large
emitters could also invest in Alberta-based projects outside their operations
that reduce or offset emissions on their behalf.
In British Columbia, the provincial government has announced a policy goal of
reducing greenhouse gas emission by at least 33% below current levels by 2020.
In February 2008, the provincial government of British Columbia announced that
it intends to impose carbon taxes on fuel beginning in July 2008. Under the
proposal, the carbon tax rates on fuel would increase annually through 2012. If
the legislation is enacted as proposed, it will act to increase our fuel costs,
which would impact our competitiveness in the global marketplace. The
provincial government is also currently contemplating "cap and trade"
legislation that could impose additional costs on our operations located in the
province.
The primary source of greenhouse gas emissions in Canada is the use of
hydrocarbon energy. Our operations depend significantly on hydrocarbon energy
sources to conduct daily operations, and there are typically no economic
substitutes for these forms of energy. The federal and provincial governments
have not finalized any formal regulatory programs to control greenhouse gases
and it is not yet possible to reasonably estimate the nature, extent, timing
and cost of any programs proposed or contemplated, or their potential effects
on operations. Most of Elk Valley Coal Partnership's products are sold outside
of Canada, and sales are not expected to be significantly affected by Canada's
Kyoto ratification decision. However, the broad adoption by Kyoto signatory
countries and others of emission limitations or other regulatory efforts to
control greenhouse gas emissions could materially negatively affect the demand
for coal, oil and natural gas, as well as restrict development of new coal or
oil sands projects and increase production and transportation costs.
ALTHOUGH WE BELIEVE OUR FINANCIAL STATEMENTS ARE PREPARED WITH REASONABLE
SAFEGUARDS TO ENSURE RELIABILITY, WE CANNOT PROVIDE ABSOLUTE ASSURANCE
We prepare our financial reports in accordance with accounting policies and
methods prescribed by Canadian generally accepted accounting principles. In the
preparation of financial reports, management may need to rely upon assumptions,
make estimates or use their best judgment in determining the financial
condition of the company. Significant accounting policies are described in more
detail in the notes to our annual consolidated financial statements for the
year ended December 31, 2007, which are incorporated by reference into this
disclosure document. In order to have a reasonable level of assurance that
financial transactions are properly authorized, assets are safeguarded against
unauthorized or improper use and transactions are properly recorded and
reported, we have implemented and continue to analyze our internal control
Teck Cominco Limited - 2007 Annual Information Form Page 45
systems for financial reporting. Although we believe our financial reporting
and financial statements are prepared with reasonable safeguards to ensure
reliability, we cannot provide absolute assurance in that regard.
WE ARE SUBJECT TO LEGAL PROCEEDINGS, THE OUTCOME OF WHICH MAY AFFECT OUR
BUSINESS
The nature of our business subjects us to numerous regulatory investigations,
claims, lawsuits and other proceedings in the ordinary course of our business.
The results of these legal proceedings cannot be predicted with certainty.
There can be no assurances that these matters will not have a material adverse
effect on our business.
DIVIDENDS
Our Class A common shares and Class B subordinate voting shares rank equally as
to the payment of dividends. We may not pay dividends on the Class A common
shares and Class B subordinate voting shares unless all dividends on any
preferred shares outstanding have been paid to date. In April, 2006 we
announced the semi-annual dividend payable to shareholders of record on June
19, 2006 would be increased from $0.40 to $1.00 per share (on a pre-split
basis), commencing with the dividend payable on July 4, 2006. In November, 2006
we announced a dividend payment of $1.00 per share (on a pre-split basis) on
outstanding Class A common shares and Class B subordinate voting shares to be
paid on January 3, 2007 to shareholders of record on December 18, 2006. In
2007, we reduced our dividend to $0.50 per share coincident with the
two-for-one subdivision of our Class A common shares and Class B subordinate
voting shares, in order to maintain the same effective dividend payout. All
dividends paid on these two classes of shares after 2005 are eligible dividends
for purposes of the enhanced dividend tax credit that may be claimed by
Canadian resident individuals.
DESCRIPTION OF CAPITAL STRUCTURE
GENERAL DESCRIPTION OF CAPITAL STRUCTURE
The Company is authorized to issue an unlimited number of Class A common shares
and Class B subordinate voting shares and an unlimited number of preference
shares, issuable in series.
Class A common shares carry the right to 100 votes per share. Class B
subordinate voting shares carry the right to one vote per share. Each Class A
common share is convertible, at the option of the holder, into one Class B
subordinate voting share. In all other respects, the Class A common shares and
Class B subordinate voting shares rank equally.
The attributes of the Class B subordinate voting shares contain so called
"coattail provisions" which provide that, in the event that an offer (an
"Exclusionary Offer") to purchase Class A common shares which is required to be
made to all or substantially all holders thereof, is not made concurrently with
an offer to purchase Class B subordinate voting shares on identical terms, then
each Class B subordinate voting share will be convertible into one Class A
common share. The Class B subordinate voting shares will not be convertible in
the event that an Exclusionary Offer is not accepted by holders of a majority
of the Class A common shares (excluding those shares held by the person making
the Exclusionary Offer). If an offer to purchase Class A common shares does
not, under applicable securities legislation or the requirements of any stock
exchange having jurisdiction, constitute a "take-over bid" or is otherwise
Teck Cominco Limited - 2007 Annual Information Form Page 46
exempt from any requirement that such offer be made to all or substantially all
holders of Class A common shares, the coattail provisions will not apply.
The voting rights attached to Class B subordinate voting shares represent
29.85% of the aggregate voting rights attached to the Class A common shares and
Class B subordinate voting shares.
RATINGS
The following table sets forth the current ratings that we have received from
rating agencies in respect of our outstanding securities.
DOMINION BOND RATING
MOODY'S STANDARD & POOR'S SERVICE
Senior Unsecured/Long-term Rating Baa1 BBB BBB (high)
Trend/Outlook Stable Stable Stable
Credit ratings are intended to provide investors with an independent measure of
the credit quality of an issue of securities and are indicators of the
likelihood of payment and of the capacity and willingness of a company to meet
its financial commitment on an obligation in accordance with the terms of the
obligation. A description of the rating categories of each of the rating
agencies in the table above is set out below.
Credit ratings are not recommendations to purchase, hold or sell securities and
do not address the market price or suitability of a specific security for a
particular investor. Credit ratings may not reflect the potential impact of all
risks on the value of securities. In addition, real or anticipated changes in
the rating assigned to a security will generally affect the market value of
that security. We cannot assure you that a rating will remain in effect for any
given period of time or that a rating will not be revised or withdrawn entirely
by a rating agency in the future.
MOODY'S INVESTOR SERVICES (MOODY'S)
Moody's long-term credit ratings are on a rating scale that ranges from Aaa to
C, which represents the range from highest to lowest quality of securities
rated. Moody's Baa1 rating assigned to our senior unsecured debt instruments is
the third highest rating of nine rating categories. Obligations rated "Baa" are
considered medium-grade and as such may possess certain speculative
characteristics. Moody's appends numerical modifiers from 1 to 3 to its
long-term debt ratings, which indicates where the obligation ranks within its
ranking category, with 1 being the highest. Moody's has also assigned a
positive outlook to the rating, which is its assessment regarding the likely
direction of the rating over the medium-term.
STANDARD & POOR'S (S&P)
S&P's long-term credit ratings are on a rating scale that ranges from AAA to D,
which represents the range from highest to lowest quality of securities rated.
S&P's BBB rating assigned to our senior unsecured debt instruments is the
fourth highest rating of 10 major rating categories. A "BBB" rating indicates
that the obligor's capacity to meet its financial commitment is adequate, but
that the obligation is somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher rated
categories. S&P uses "+" or "-" designations to indicate the relative standing
of securities within a particular rating category. S&P has also assigned a
Teck Cominco Limited - 2007 Annual Information Form Page 47
stable outlook to the rating, which is its assessment regarding the potential
direction of the rating over the immediate to long-term.
DOMINION BOND RATING SERVICE (DBRS)
DBRS's long-term credit ratings are on a rating scale that ranges from AAA to
D, which represents the range from highest to lowest quality of securities
rated. DBRS's BBB (high) rating assigned to our senior unsecured debt and BBB
(high)m to the exchangeable debentures is the fourth highest of the 10 rating
categories for long-term debt. Debt securities rated "BBB" are of adequate
credit quality and protection of interest and principal is considered
acceptable, but the obligor is fairly susceptible to adverse changes in
financial and economic changes, or there may be other adverse conditions
present which reduce the strength of the obligor. A reference to "high" or
"low" reflects the relative strength within the rating category. A reference to
"m" reflects that the potential for volatility due to market risk factors
greatly exceeds what would be considered normal. DBRS has also assigned a
stable outlook to the ratings, which helps give investors an understanding of
DBRS's opinion regarding the outlook for the ratings.
MARKET FOR SECURITIES
TRADING PRICE AND VOLUME
Our Class A common shares are listed on The Toronto Stock Exchange under ticker
symbol TCK.A. Our Class B subordinate voting shares are listed on The Toronto
Stock Exchange under ticker symbol TCK.B and on the New York Stock Exchange
under the symbol TCK. The following tables set out the monthly price ranges and
volumes traded on The Toronto Stock Exchange during 2007 for the Class A common
shares and Class B subordinate voting shares.
TECK COMINCO A TECK COMINCO B
DATE HIGH LOW VOLUME DATE HIGH LOW VOLUME
January $92.00 $79.35 50,234 January $89.46 $77.09 29,057,198
February $92.29 $84.00 29,793 February $88.69 $80.36 23,840,126
March $87.00 $79.85 44,387 March $83.44 $75.60 32,037,482
April $92.00 $83.01 33,838 April $89.00 $80.25 25,847,491
May $90.60 $45.50 62,687 May $87.34 $41.55 52,355,998
June $54.46 $47.01 49,554 June $50.01 $43.70 54,799,989
July $58.50 $49.00 107,229 July $53.35 $44.75 57,190,129
August $55.96 $45.60 134,156 August $46.98 $38.04 56,387,114
September $55.65 $50.26 38,200 September $49.11 $41.78 52,170,476
October $58.00 $50.25 46,011 October $52.40 $45.56 46,236,084
November $53.25 $42.01 65,628 November $46.70 $33.71 78,523,395
December $50.85 $42.00 81,623 December $40.21 $33.03 58,262,811
Source: Bloomberg
Note: The Class A common shares and Class B subordinate voting shares were
subdivided on a two-for-one basis effective May 7, 2007.
Teck Cominco Limited - 2007 Annual Information Form Page 48
DIRECTORS AND OFFICERS
DIRECTORS
NAME, PROVINCE/STATE AND COUNTRY OFFICE HELD WITH COMPANY AND PRINCIPAL OCCUPATIONS WITHIN DIRECTOR
OF RESIDENCE PREVIOUS FIVE YEARS SINCE
- --------------------------------------------------------------------------------------------------------------------
Mayank M. Ashar (2) Executive Vice President of Suncor Energy Inc. Executive November 2007
CALGARY, ALBERTA, CANADA Vice President, Suncor Energy USA 2003 - 2007. EVP Suncor
Energy, Oil Sands until 2003
J. Brian Aune (1)(3)(4)(5) Chairman of St. James Financial Corp., 1990 to September February 1995
WESTMOUNT, QUEBEC, CANADA 2005 and President of Alderprise Inc. (private investment
companies)
Jalynn H. Bennett (2)(4)(5) President, Jalynn H. Bennett and Associates Ltd. (consulting June 2005
TORONTO, ONTARIO, CANADA firm)
Hugh J. Bolton (2)(3) Chairman, Epcor Utilities Inc., (electrical utility), and September 2001
EDMONTON, ALBERTA, CANADA Lead Director of Matrikon Inc. (industrial IT company), from
2000 to present
Norman B. Keevil (1) Chairman of the Company July 1963
WEST VANCOUVER, BRITISH COLUMBIA,
CANADA
Norman B. Keevil III (6)(7) Chief Operating Officer and Vice President of Engineering, April 1997
VICTORIA, BRITISH COLUMBIA, CANADA Triton Logging Inc. (underwater harvesting company) from
2004 to present; prior thereto President and Chief
Executive Officer, Pyramid Automation Ltd.(manufacturers of
special purpose automation equipment)
Takashi Kuriyama(6) Executive Vice-President of Sumitomo Metal Mining America June 2006
VANCOUVER, BRITISH COLUMBIA, CANADA Inc. (mining company) from May 2006 to present; Councilor at
Metals Exploration Group (seconded by SMM) from 2004 to
2006; Director at Joint Venture Exploration Division, Metal
Mining Agency of Japan from 2003 to 2004; Manager at Geology
and Exploration Section, Hishikari Mine, Sumitomo Metal
Mining Co. from 2002 to 2003
Donald R. Lindsay (1) President of the Company from January 2005 to present; February 2005
VANCOUVER, BRITISH COLUMBIA, CANADA appointed CEO of the Company in April, 2005; President of
CIBC World Markets Inc. (investment banking), from 2001 to
2004
Takuro Mochihara(1)(6) Director and Senior Managing Executive Officer, Sumitomo September 2000
TOKYO, JAPAN Metal Mining Co., Ltd. (mining company)
Derek G. Pannell (6) (7) Managing Partner, Brookfield Asset Management (asset October 2006
TORONTO, ONTARIO, CANADA management company) from November 2006 to present; President
and Chief Operating Officer, Noranda/Falconbridge Limited
from 2001 to October, 2006
Teck Cominco Limited - 2007 Annual Information Form Page 49
NAME, PROVINCE/STATE AND COUNTRY OFFICE HELD WITH COMPANY AND PRINCIPAL OCCUPATIONS WITHIN DIRECTOR
OF RESIDENCE PREVIOUS FIVE YEARS SINCE
- -------------------------------------------------------------------------------------------------------------------
Janice R. Rennie (2)(4) Corporate Director; Senior Vice President, Human Resources April 2007
EDMONTON, ALBERTA, CANADA and Organizational Effectiveness for Epcor Utilities Inc.
2004 - 2005. Principal of Rennie and Associates until 2004
Warren S. R. Seyffert (2)(5)(6) Lead Director of the Company; Counsel to Lang Michener (law August 1989
TORONTO, ONTARIO, CANADA firm) 2002 - 2007
Keith E. Steeves (2)(4)(7) Corporate Director October 1981
RICHMOND, BRITISH COLUMBIA, CANADA
Chris M.T. Thompson (1)(2)(3)(7) Corporate Director; Chairman of the Board of Gold Fields June 2003
DENVER, COLORADO, Ltd. (gold mining) to November, 2005
UNITED STATES
Robert J. Wright (1) (2)(3) (5) Lead Director of the Company until February 2008 May 1994
TORONTO, ONTARIO, CANADA
===================================================================================================================
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Pension Committee
(5) Member of the Corporate Governance and Nominating Committee
(6) Member of the Environment, Health & Safety Committee
(7) Member of the Reserves Committee
Each of the directors is elected to hold office until the annual meeting to be
held on April 23, 2008 or until a successor is duly elected or appointed.
Teck Cominco Limited - 2007 Annual Information Form Page 50
OFFICERS
NAME, PROVINCE/STATE AND COUNTRY OF OFFICE HELD WITH COMPANY AND PRINCIPAL OCCUPATIONS WITHIN
RESIDENCE PREVIOUS FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------
Norman B. Keevil Chairman of the Company; Chief Executive Officer of the Company prior to
WEST VANCOUVER, BRITISH COLUMBIA July 25, 2001
CANADA
Donald R. Lindsay President of the Company from January 2005 to present; appointed CEO of the
VANCOUVER, BRITISH COLUMBIA, CANADA Company in April, 2005; prior thereto President, CIBC World Markets Inc.
Douglas H. Horswill Senior Vice President, Environment and Corporate Affairs
WEST VANCOUVER, BRITISH COLUMBIA,
CANADA
Peter G. Kukielski Executive Vice President and Chief Operating Officer of the Company since
VANCOUVER, BRITISH COLUMBIA, CANADA July 17, 2006; previously Chief Operating Officer from 2005 to 2006,
Executive Vice President, Projects & Aluminum from 2003 to 2005 and Senior
Vice President, Projects from 2001 to 2003 of Falconbridge Limited
G. Leonard Manuel Senior Vice President and General Counsel; previously Vice President and
WEST VANCOUVER, BRITISH COLUMBIA, General Counsel
CANADA
Ronald A. Millos Senior Vice President, Finance and Chief Financial Officer of the Company
VANCOUVER, BRITISH COLUMBIA, CANADA since October 3, 2005; previously Vice President and Chief Financial
Officer of the Fording Canadian Coal Trust, Fording LP (formerly known as
Fording Inc.) and Elk Valley Coal Corporation since June 1, 2003;
previously Vice President, Corporate Finance of the Company
Peter C. Rozee Senior Vice President, Commercial Affairs since October 1, 2005; previously
WEST VANCOUVER, BRITISH COLUMBIA, Vice President, Commercial and Legal Affairs from 2001 to 2005
CANADA
Ronald J. Vance Senior Vice President, Corporate Development of the Company since
EVERGREEN, COLORADO, USA January 1, 2006; previously Managing Director and Senior Advisor,
Rothschild Inc.
Timothy C. Watson Senior Vice President, Project Development of the Company since August 6,
VANCOUVER, BRITISH COLUMBIA, CANADA 2007; previously Chief Operating Officer, Power and Process with AMEC PLC
Michael E. Agg Vice President, Refining and Metal Sales since December 1, 2005; previously
VANCOUVER, BRITISH COLUMBIA, CANADA General Manager, Trail Operations from 2003 to 2005, and General Manager of
Cajamarquilla from 1998 to 2003.
Michael J. Allan Vice President, Engineering
WEST VANCOUVER, BRITISH COLUMBIA,
CANADA
Teck Cominco Limited - 2007 Annual Information Form Page 51
OFFICERS
NAME, PROVINCE/STATE AND COUNTRY OF OFFICE HELD WITH COMPANY AND PRINCIPAL OCCUPATIONS WITHIN
RESIDENCE PREVIOUS FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------
Dale E. Andres Vice President, International Mining of the Company since November 23,
VANCOUVER, BRITISH COLUMBIA, CANADA 2006; previously General Manager, Underground Operations of the Company
from 2004 to 2006; Project Manager from 2002 to 2004 and Operating Manager
(2002) of the Polaris Mine
Fred S. Daley Vice President, Exploration
DELTA, BRITISH COLUMBIA, CANADA
Michel P. Filion Vice President, Environment, Health and Safety since June 2005; previously
SURREY, BRITISH COLUMBIA, CANADA Vice President, Environment
Gary M. Jones Vice President, Business Development
DELTA, BRITISH COLUMBIA, CANADA
Robert G. Scott Vice President, North American Mining since January, 2006; previously
NORTH VANCOUVER, BRITISH COLUMBIA, General Manager of Red Dog from 2003 to 2005; prior thereto General
CANADA Manager/Mine Manager of Quintette
Andrew A. Stonkus Vice President, Concentrate Marketing of the Company since December 1,
NORTH VANCOUVER, BRITISH COLUMBIA, 2005; previously General Manager, Concentrate Marketing
CANADA
John F.H. Thompson Vice President, Technology and Development since January 1, 2008;
VANCOUVER, BRITISH COLUMBIA, CANADA previously Vice President, Technology from January 1, 2006 to January 1,
2008; previously Chief Geoscientist of the Company
James A. Utley Vice President, Human Resources
WEST VANCOUVER, BRITISH COLUMBIA,
CANADA
Gregory A. Waller Vice President, Investor Relations & Strategic Analysis of the Company
NORTH VANCOUVER, BRITISH COLUMBIA, since November 23, 2006; previously Director, Financial Analysis & Investor
CANADA Relations from 2004 to 2006 and Director, Financial Analysis & Planning
from 2001 to 2004
Lawrence A. Mackwood Treasurer
WEST VANCOUVER, BRITISH COLUMBIA,
CANADA
John F. Gingell Controller since June 1, 2007; previously Assistant Controller of the
VANCOUVER, BRITISH COLUMBIA, CANADA Company
Karen L. Dunfee Corporate Secretary
RICHMOND, BRITISH COLUMBIA, CANADA
Anthony A. Zoobkoff Senior Counsel and Assistant Secretary
NORTH VANCOUVER, BRITISH COLUMBIA,
CANADA
===================================================================================================================
Teck Cominco Limited - 2007 Annual Information Form Page 52
AUDIT COMMITTEE INFORMATION
MANDATE OF AUDIT COMMITTEE
The full text of our Audit Committee's mandate is included as Schedule A to
this Annual Information Form.
COMPOSITION OF THE AUDIT COMMITTEE
Our Audit Committee consists of seven members. All of the members of the
Committee are independent and financially literate. The relevant education and
experience of each Audit Committee member is outlined below:
Jalynn H. Bennett
Ms. Bennett is a graduate of the University of Toronto where she specialized in
economics. She is the President of a consulting firm in strategic planning and
organizational development. She is a past Commissioner of the Ontario
Securities Commission and was a member of the Toronto Stock Exchange Joint
Committee on Corporate Governance (the Saucier Committee).
Hugh J. Bolton, FCA
Mr. Bolton is a chartered accountant and a graduate of the University of
Alberta (BA Economics). Mr. Bolton was managing partner of Coopers & Lybrand
Canada from 1984 to 1990 and its Chairman and CEO from 1991 to 1998. He is
presently a Chairman of Epcor Utilities Inc., Lead Director of Matrikon Inc.
and a director of the Toronto Dominion Bank, Canadian National Railway Company
and Westjet Airlines Ltd.
Janice R. Rennie
Ms. Rennie is a chartered accountant and a graduate of the University of
Alberta (BComm.). She was the Senior Vice President, Human Resources and
Organizational Effectiveness for Epcor Utilities Inc. from 2004 to 2005. She is
currently a director of Greystone Capital Management Inc., Matrikon Inc.,
Methanex Corporation and West Fraser Timber Co. Ltd.
Keith E. Steeves, FCA
Mr. Steeves received his Chartered Accountant certification in 1963 in Alberta
and in 1964 in British Columbia. Mr. Steeves was Senior Vice President, Finance
and Administration at Bethlehem Copper Corporation until 1981 and an officer of
Teck Corporation from 1981 to 1996.
Warren S.R. Seyffert
Mr. Seyffert is a graduate of the University of Toronto Law School (LL.B.) and
York University (LL.M.). He is counsel to Lang Michener and was its former
chair and Managing Partner. Mr. Seyffert is a director of Allstate Insurance
Company of Canada, Pafco Insurance Company, Pembridge Insurance Company, the
Kensington Health Centre, the Kensington Foundation and St. Andrew Goldfields
Ltd. He is also an honorary Trustee of the Royal Ontario Museum.
Teck Cominco Limited - 2007 Annual Information Form Page 53
Chris M.T. Thompson
Mr. Thompson is a graduate of Rhodes University, SA (B.A. Law and Economics)
and Bradford University, UK (MSc). Mr. Thompson was Chairman of the Board and
CEO of Gold Fields from 1998 to 2002 and is currently its Non-Executive
Chairman.
Robert J. Wright, Q.C.
Mr. Wright is a graduate of Trinity College, University of Toronto (B.A.) and
Osgoode Hall Law School (LL.B.). He was a partner with Lang Michener from 1964
to 1989 and Chairman of the Ontario Securities Commission from 1989 to 1993.
PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has adopted policies and procedures with respect to the
pre-approval of audit and permitted non-audit services to be provided by
PricewaterhouseCoopers LLP. All non-audit services are pre-approved by the
Committee prior to commencement. In addition, the Committee has prohibited the
use of the external auditors for the following non-audit services:
o bookkeeping or other services related to the accounting records or
financial statements;
o financial information systems design and implementation;
o appraisal or valuation services, fairness opinions or
contribution-in-kind reports;
o actuarial services;
o internal audit outsourcing services;
o management functions or human resources functions;
o broker or dealer, investment advisor, or investment banking services;
o legal services;
o expert services unrelated to the audit; and
o all other non-audit services unless there is a strong financial or
other reason for external auditors to provide those services.
Teck Cominco Limited - 2007 Annual Information Form Page 54
EXTERNAL AUDITOR SERVICE FEES
For the years ended December 31, 2007 and 2006, the Company paid the external
auditors $4,142,000 and $4,218,000 respectively as detailed below:
Year Ended Year Ended
2007 ($000) 2006 ($000)
Audit Services(1) 3,217 3,405
Audit Related Fees(2) 513 593
Tax Fees(3) 354 191
All Other Fees(4) 58 29
(1) Includes services that are provided by the Company's independent
auditor in connection with the audit of the financial statements and
internal controls over financial reporting.
(2) Includes assurance and related services that are related to the
performance of the audit, principally for quarterly reviews, pension
plan audits and prospectuses.
(3) Fees are for international tax services and advice provided to foreign
offices.
(4) Fees are in connection with assistance with an ISO registration
application and access to financial information databases.
OWNERSHIP BY DIRECTORS AND OFFICERS
The directors and executive officers as a group beneficially own directly or
indirectly or exercise control or direction over the following shares issued by
the Company:
SHARES BENEFICIALLY OWNED OR OVER WHICH AS A % OF THE TOTAL
CONTROL OR DIRECTION IS EXERCISED OUTSTANDING OF THE CLASS
- -----------------------------------------------------------------------------------------------------------
Class A common shares 418,880 4.5%
Class B subordinate voting shares 1,451,646 0.34%
===========================================================================================================
In addition, one of our directors is a trustee of a trust which holds shares
carrying 98% of the votes attached to outstanding shares of Keevil Holding
Corporation and is a director of Keevil Holding Corporation. Keevil Holding
Corporation holds 51% of the voting shares of Temagami Mining Company Limited
("Temagami") which holds 2,150,000 Class A common shares, representing 46% of
the shares of this class. Three of our directors are directors of Temagami.
LEGAL PROCEEDINGS
The disclosure with respect to the Upper Columbia River at pages 17-18 of our
Management's Discussion and Analysis for the year ended December 31, 2007 is
incorporated herein by reference. This document is available on SEDAR at
www.sedar.com.
Teck Cominco Limited - 2007 Annual Information Form Page 55
TRANSFER AGENTS AND REGISTRARS
CIBC Mellon Trust Company is the transfer agent and registrar for the Class A
common and Class B subordinate voting shares and maintains registers in
Vancouver, British Columbia and Toronto, Ontario.
MATERIAL CONTRACTS
The following is the only contract entered into by the Company since January 1,
2002 which is material and not entered into in the ordinary course of business:
o Partnership Agreement dated February 28, 2003, as amended, between the
Company, FCCT, Quintette, Elk Valley Coal and Teck-Bullmoose Coal
Inc., providing for the formation and operation of Elk Valley Coal.
INTERESTS OF EXPERTS
PricewaterhouseCoopers LLP, Chartered Accountants, are the Company's auditors
and have prepared an opinion with respect to the Company's consolidated
financial statements as at and for the year ended December 31, 2007.
Paul C. Bankes, P.Geo., Dan Gurtler, AIMM, Don Mills, P.Geol. and Ross
Pritchard, P.Eng. have acted as Qualified Persons in connection with the
estimates of mineral reserves and resources presented in this Annual
Information Form. Mr. Bankes is an employee of the Company. Messrs. Mills and
Pritchard are employees of Elk Valley Coal Partnership, of which the Company is
the managing partner. Mr. Gurtler is an employee of Compania Minera Antamina
S.A., in which the Company holds a 22.5% share interest. Sproule Associates
Ltd. has acted as an independent reserves evaluator in connection with our
interest in the Fort Hills oil sands project. Messrs. Bankes, Gurtler, Mills
and Pritchard, and principals of Sproule Associates Ltd. and GLJ Petroleum
Consultants hold beneficially, directly or indirectly, less than 1% of any
class of the Company's securities.
ADDITIONAL INFORMATION
(1) Additional information relating to the Company may be found on SEDAR
at www.sedar.com.
(2) Additional information, including directors' and officers'
remuneration and indebtedness to our business, principal holders of
the Company's securities, options to purchase securities and interests
of insiders in material transactions is contained in the Management
Proxy Circular to be issued for our Annual and Special Meeting of
Shareholders to be held on April 23, 2008. Additional financial
information is also provided in our comparative financial statements
and Management's Discussion and Analysis for the year ended December
31, 2007. Copies of these documents are available upon request from
our Corporate Secretary.
(3) Unless otherwise stated information contained herein is as at March
19, 2008.
Teck Cominco Limited - 2007 Annual Information Form Page 56
SCHEDULE A
AUDIT COMMITTEE MANDATE
PURPOSE OF THE COMMITTEE
The purpose of the Audit Committee (the "Committee") of the Board of Directors
(the "Board") of Teck Cominco Limited ( the "company") is to provide an open
avenue of communication between management, the external auditor, the internal
auditors and the Board and to assist the Board in its oversight of the:
o integrity, adequacy and timeliness of the company's financial reporting
and disclosure practices;
o processes for identifying the principal financial risks of the company and
reviewing the company's internal control systems to ensure that they are
adequate to ensure fair, complete and accurate financial reporting;
o company's compliance with legal and regulatory requirements related to
financial reporting;
o accounting principles, policies and procedures used by management in
determining significant estimates,
o antifraud programs and controls, including management's identification of
fraud risks and implementation of antifraud measures,
o mechanisms for employees to report concerns about accounting policies and
financial reporting,
o engagement, independence and performance of the company's external
auditor; and
o internal audit mandate, internal audit and Sarbanes Oxley and Bill 198
("SOX") plans, internal audit and SOX audit programs and results of
internal audits and SOX compliance audits performed by the company's
internal audit department.
The Committee shall also perform any other activities consistent with this
Charter, the company's by-laws and governing laws as the Committee or Board
deems necessary or appropriate.
The Committee shall consist of at least three directors. Members of the
Committee and the Chairman shall be appointed by the Board and may be removed
by the Board in its discretion. All members of the Committee shall be
independent directors and shall be sufficiently financially literate to enable
them to discharge their responsibilities in accordance with applicable laws
and/or requirements of the various stock exchanges on which the company's
securities trade and in accordance with Multilateral Investment Instrument
52-110. Financial literacy means the ability to read and understand a balance
sheet, income statement, cash flow statement and associated notes which
represent a breadth and level of complexity of accounting issues that are
generally comparable to the breadth and complexity of the issues that can
reasonably be expected to be raised by the financial statements of Teck Cominco
Limited. At least one member of the Committee shall have accounting or related
financial management expertise that allows that member to read and understand
financial statements and the related notes attached thereto in accordance with
generally accepted accounting principles ("GAAP").
TECK COMINCO LIMITED - 2007 ANNUAL INFORMATION FORM Page A-1
The Committee's role is one of oversight. Management is responsible for
preparing the company's financial statements and other financial information
and for the fair presentation of the information set forth in the financial
statements in accordance with GAAP. Management is also responsible for
establishing, documenting, maintaining and reviewing systems of internal
control and for maintaining the appropriate accounting and financial reporting
principles and policies designed to assure compliance with accounting standards
and all applicable laws and regulations.
The external auditors' responsibility is to audit the company's financial
statements and provide an opinion, based on their audit conducted in accordance
with Canadian generally accepted auditing standards, that the financial
statements present fairly, in all material respects, the financial position,
results of operations and cash flows of the company in accordance with Canadian
GAAP and reconciled to US GAAP.
In accordance with the Sarbanes Oxley Act of 2002, Section 404, the external
auditors are also responsible for providing an opinion on the effectiveness of
the company's internal controls over financial reporting.
The Committee is directly responsible for the appointment, compensation,
evaluation, termination and oversight of the work of the external auditor and
oversees the resolution of any disagreements between management and the
external auditor regarding financial reporting and SOX assessment. The external
auditor shall report directly to the Committee, as the external auditor is
accountable to the Board as representatives of the company's shareholders. As
such, it is not the duty or responsibility of the Committee or any of its
members to plan or conduct any type of audit or accounting review or procedure.
AUTHORITY AND RESPONSIBILITIES
In performing its oversight responsibilities, the Committee shall:
1. Review and assess the adequacy of this Charter and recommend any proposed
changes to the Board for approval at least once per year.
2. Review the appointments of the company's Chief Financial Officer and any
other key financial executives involved in the financial reporting
process.
3. Review with management, the external auditor and the Director Compliance
and Internal Audit the adequacy and effectiveness of the company's systems
of internal control, the status of management's implementation of internal
audit recommendations and the remediation status of any reported control
deficiencies particularly those evaluated as either a significant internal
control deficiency or material weakness, identified as a result of
internal audits and/or during annual controls compliance testing as
required under SOX legislation.
4. Prior to their approval by the Board review with management and the
external auditor the annual audited financial statements, the unaudited
quarterly financial statements, the management discussion and analysis
reports, annual and interim earnings press releases.
5. Review other financial reporting documents prior to their public
disclosure by filing or distribution of these documents. Such review
includes financial matters required to be reported under applicable legal
or regulatory requirements.
TECK COMINCO LIMITED - 2007 ANNUAL INFORMATION FORM Page A-2
6. Ensure that adequate procedures are in place for the review of the
company's public disclosure of financial information extracted or derived
from the company's financial statements, other than the public disclosure
referred to in the immediately preceding item, and periodically assess the
adequacy of these procedures.
7. Review with management and the external auditor and approve earnings news
releases and other financial information and earnings guidance disclosures
contained in such news releases prior to approval by the Board and their
release.
8. Where appropriate and prior to release, review with management and approve
any other news releases that contain significant financial information
that has not previously been released to the public.
9. Review the company's financial reporting and accounting standards and
principles and significant changes in such standards or principles or in
their application, including key accounting decisions affecting the
financial statements, alternatives thereto and the rationale for decisions
made.
10. Review the quality and appropriateness, not just the acceptability, of the
accounting policies and the clarity of financial information and
disclosure practices adopted by the company, including consideration of
the external auditors' judgments about the quality and appropriateness of
the company's accounting policies. This review shall include discussions
with the external auditor without the presence of management.
11. Review with management, the external auditor and the Director, Compliance
and Internal Audit significant related party transactions and potential
conflicts of interest.
12. Recommend to the Board to assist them in recommending to the shareholders
(a) the external auditor to be nominated to examine the company's accounts
and financial statements and prepare and issue an auditor's report on them
or perform other audit, review or attest services for the company and (b)
the compensation of the external auditor. The Committee has the
responsibility to approve all audit engagement terms and fees. The
Committee shall pre-approve all audit, non-audit and assurance services
provided to the company and its subsidiary entities by the external
auditor, but the Chairman or another member of the Committee appointed by
the Chairman may be delegated the responsibility to approve non-audit
services where the fee does not exceed $25,000. The pre-approval of such
services by any member to whom authority has been delegated must be
reported to the Committee at its first scheduled meeting following such
pre-approval.
13. Review with management and the external auditor and approve the annual
audit plan and results of and any problems or difficulties encountered
during any external audits and management's responses thereto.
14. Receive the reports of the external auditor on completion of the quarterly
reviews and the annual audit.
15. Monitor the independence of the external auditors by reviewing all
relationships between the independent auditor and the company and all
audit, non-audit and assurance work performed for the company by the
independent auditor on at least a quarterly basis. The Committee will
receive an annual written confirmation of independence from the external
auditor.
16. Review and approve the company's hiring policies regarding partners,
employees and former partners and employees of the present and former
external auditor of the company.
TECK COMINCO LIMITED - 2007 ANNUAL INFORMATION FORM Page A-3
17. Review and approve the functions of the company's Compliance and Internal
Audit Department, including:
o its mandate, authority and organizational reporting lines;
o its annual and longer term internal audit plans, budgets and
staffing;
o its performance; and
o the appointment, reassignment or replacement of the Director,
Compliance and Internal Audit.
This review will include discussions with the Director, Compliance and
Internal Audit without the presence of management or the external auditor.
18. Review with senior financial management, the external auditor, the
Director, Compliance and Internal Audit, and such others as the Committee
deems appropriate, the results of internal audits, SOX controls compliance
audits and any problems or difficulties encountered during the audits.
19. Review the company's procedures and establish procedures for the Committee
for the:
o receipt, retention and resolution of complaints regarding accounting,
internal accounting controls, financial disclosure or auditing
matters; and
o confidential, anonymous submission by employees regarding
questionable accounting, auditing or financial reporting and
disclosure matters or violations of the Company's Code of Ethics or
Standard of Business Practices.
20. Prepare an audit committee report to be included in Teck Cominco Limited's
annual proxy statement.
21. Conduct or authorize investigations into any matter that the Committee
believes is within the scope of its responsibilities. The Committee has
the authority to (a) retain independent counsel, accountants or other
advisors to assist it in the conduct of its investigation, at the expense
of the company, (b) set and pay the compensation of any advisors retained
by it and (c) communicate directly with the internal and external
auditors.
22. The Committee shall report its recommendations and findings to the Board
after each meeting and shall conduct and present to the Board an annual
performance evaluation of the effectiveness of the Committee.
TECK COMINCO LIMITED - 2007 ANNUAL INFORMATION FORM Page A-4
SCHEDULE B
REPORT OF MANAGEMENT AND DIRECTORS
ON DECEMBER 2007
OIL AND GAS DISCLOSURE
Management of Teck Cominco Limited (the "Corporation") is responsible for the
preparation and disclosure of information with respect to the Corporation's oil
and gas activities in accordance with securities regulatory requirements.
An independent qualified reserves evaluator has evaluated the resources data
associated with the Fort Hills oil sands project and has concluded that the
best estimate of contingent resources associated with the Corporation's 20%
interest in the project as at December 31, 2007 is 806 million barrels of
recoverable bitumen.
A second independent qualified reserves evaluator has evaluated the resources
data associated with Oil Sands Lease 14 and has concluded that the best
estimate of contingent resources associated with the Corporation's 50% interest
in Lease 14 as at December 31, 2007 is 175 million barrels of recoverable
bitumen.
A committee of the Board of Directors of the Corporation composed of a majority
of independent directors has
(a) reviewed the Corporation's procedures for providing information to
the independent qualified reserves evaluators;
(b) met with the independent qualified reserves evaluators to determine
whether any restrictions affected the ability of the independent
qualified reserves evaluators to report without reservations; and
(c) reviewed the resources data with management and the independent
qualified reserves evaluators.
The same committee of the Board of Directors has reviewed the Corporation's
procedures for assembling and reporting other information associated with oil
and gas activities and has reviewed that information with management. The Board
of Directors has, on the recommendation of the committee, approved
(d) the content and filing with securities regulatory authorities of the
resources data and other oil and gas information;
(e) the filing of the reports of the independent qualified reserves
evaluators; and
(f) the content and filing of this report.
TECK COMINCO LIMITED - 2007 ANNUAL INFORMATION FORM Page B-1
Because the resources data are based on judgments regarding future events,
actual results will vary and the variations may be material.
Dated March 19, 2008.
/s/ Donald R. Lindsay /s/ Chris M.T. Thompson
- ------------------------------------- -----------------------------------
Donald R. Lindsay Chris M.T. Thompson
President and Chief Executive Officer Director
/s/ Ronald A. Millos /s/ Keith Steeves
- ------------------------------------- -----------------------------------
Ronald A. Millos Keith Steeves
Senior Vice President, Finance and Director
Chief Financial Officer
TECK COMINCO LIMITED - 2007 ANNUAL INFORMATION FORM Page B-2
SCHEDULE C
NI 51-101 AUDIT REPORT
REPORT ON RESOURCES DATA
BY INDEPENDENT QUALIFIED RESOURCES AUDITOR
REPORT ON RESOURCES DATA
To the Board of Directors of Teck Cominco Limited (the "Company"):
Sproule Associates Limited ("Sproule") prepared an audit of the Fort Hills
Oilsands Project (the "Project") bitumen in place estimate and the contingent
bitumen resource estimates. Sproule also audited the methodology used by the
Project to calculate these volumes from the current mine plan design.
The preparation and disclosure of the reported resource estimates are the
responsibility the Company's management. Sproule's responsibility is to express
an opinion on the bitumen in place and contingent bitumen resources data based
on the audit. Sproule carried out the audit in accordance with standards
established by the Canadian Securities Administrators ("CSA") within National
Instrument 51-101 ("NI 51-101"), including the Notice of Amendments to NI
51-101 published on October 12, 2007, and the guidance of the companion
document CSA Staff Notice 51-321 published on November 17, 2006. These
standards require that the bitumen in place and contingent resources data are
prepared in accordance with the Canadian Oil and Gas Evaluation Handbook
("COGEH"), as published by the Canadian Section of the Society of Petroleum
Evaluation Engineers.
In Sproule's opinion, the bitumen resources data audited by us have, in all
material respects, been determined and are presented in accordance with COGEH.
In Sproule's opinion, the methodology used by the Project to calculate the
range of contingent bitumen resources and synthetic crude oil associated with
the Company's 20% interest in the proposed Fort Hills Oilsands Project, as
defined below, is reasonable:
FORT HILLS PROJECT CONTINGENT BITUMEN AND SYNTHETIC CRUDE OIL RESOURCE
ESTIMATES AS OF DECEMBER 31, 2007
- ----------------------------------------------------------------------------------------------------
PROJECT - 100% COMPANY GROSS
CLASSIFICATION OF ---------------------------------- ----------------------------------
ESTIMATE (BBBLS) (MMBBLS)
- ----------------------------------------------------------------------------------------------------
BITUMEN SYNTHETIC CRUDE OIL BITUMEN SYNTHETIC CRUDE OIL
- ----------------------------------------------------------------------------------------------------
Low 3.37 3.00 674 599
Best 4.03 3.59 806 717
High 4.38 3.90 876 779
- ----------------------------------------------------------------------------------------------------
The contingencies that prevent these bitumen resources from being classified as
reserves include, but are not limited to; revised regulatory approval,
completed feasibility study and company commitment. There is no certainty that
it will be commercially viable to produce any portion of the contingent bitumen
or synthetic crude oil resources.
TECK COMINCO LIMITED - 2007 ANNUAL INFORMATION FORM Page C-1
Further details on the results of Sproule's audit, audit process, and technical
issues identified are presented in the report entitled, "Audit of the
Contingent Bitumen Resources of the Fort Hills Oilsands Mining Project, as of
December 31, 2007", which will be issued by the end of February 2008.
The term "Contingent Resources" is taken from COGEH. The volumes listed in the
chart above entitled, "Contingent Bitumen Resources" refer to potentially
recoverable volumes of bitumen resources. These volumes of contingent bitumen
resources, in the above chart, were calculated at the outlet of the proposed
extraction plant. These volumes of Synthetic Crude Oil, in the above chart,
were calculated using the Project's estimate of 89 percent upgrader yield.
The current audited mine plan is the basis of the Best Estimate. The Low and
High estimates are derived from variations of the current mine plan, as
prepared by the Project.
Sproule has no responsibility to update the report for events and circumstances
occurring after the respective preparation date.
Because the resources data are based on judgements regarding future events,
actual results will vary and the variations may be material.
Executed as to our report referred to above:
Sproule Associates Limited
Calgary, Alberta
February 7, 2008
/s/ Grant I. Sanden
-------------------------------
Grant I. Sanden, P.Eng.
Supervisor, Unconventional Oil
8/2/2008 dd/mm/yr
/s/ R. Keith MacLeod
-------------------------------
R. Keith MacLeod, P.Eng.
President
7/2/2008 dd/mm/yr
TECK COMINCO LIMITED - 2007 ANNUAL INFORMATION FORM Page C-2
SCHEDULE D
FORM 51-101F2
REPORT ON RESERVES DATA
BY
INDEPENDENT QUALIFIED RESERVES
EVALUATOR OR AUDITOR
To the board of directors of Teck Cominco Ltd. (the "Company"):
1. We have prepared an evaluation of the Company's reserves data associated
with Oil Sands Lease 14 as a December 31, 2007. The reserves data is a
best estimate of contingent bitumen resources as at December 31, 2007.
Further data acquisition and analysis are required to confirm both the
mine planning basis and owner commitment before reserves can be assigned
to Lease 14. An economic evaluation was not prepared.
2. The reserves data are the responsibility of the Company's management. Our
responsibility is to express an opinion on the reserves data based on our
evaluation.
We carried out our evaluation in accordance with standards set out in the
Canadian Oil and Gas Evaluation Handbook (the "COGE Handbook") prepared
jointly by the Society of Petroleum Evaluation Engineers (Calgary Chapter)
and the Canadian Institute of Mining, Metallurgy & Petroleum (Petroleum
Society).
3. Those standards require that we plan and perform an evaluation to obtain
reasonable assurance as to whether the reserves data are free of material
misstatement. An evaluation also includes assessing whether the reserves
data are in accordance with principles and definitions in the COGE
Handbook.
4. The best estimate of contingent bitumen resources associated with the
Company's 50 percent working interest in Oil Sands Lease 14 is 175 million
barrels, as presented in our report prepared February 14, 2008.
5. In our opinion, the reserves data respectively evaluated by us have, in
all material respects, been determined and are in accordance with the COGE
Handbook.
6. We have no responsibility to update our report referred to in paragraph 4
for events and circumstances occurring after the preparation dates.
7. Because the reserves data are based on judgements regarding future events,
actual results will vary and the variations may be material. However, any
variations should be consistent with the fact that reserves are
categorized according to the probability of their recovery.
EXECUTED as to our report referred to above:
GLJ Petroleum Consultants Ltd., Calgary, Alberta, Canada, February 14, 2008
ORIGINALLY SIGNED BY
James H Willmon, P. Eng.
Vice-President Corporate Evaluations
TECK COMINCO LIMITED - 2007 ANNUAL INFORMATION FORM Page D-1