Greg Waller - VP Investor Relations & Strategic Analysis Don Lindsay - President and CEO Ron Millos - SVP, Finance and CFO Bill Fleming - VP, Coal Operations & Engineering Bob Bell - VP & Chief Commercial Officer, Coal Andrew Stonkus - VP, Base Metals Marketing John Gingell - Controller

Orest Wowkodaw - Canaccord Genuity Haytham Hodaly - Salman Partners Dave Katz - JPMorgan Greg Barnes - TD Newcrest John Hughes - Desjardins Securities Kerry Smith - Haywood Securities Oscar Cabrera - Bank of America Merrill Lynch Meredith Bandy - BMO Capital Markets Sal Tharani - Goldman Sachs Haytham Hodaly - Salman Partners David Neuhauser - Livermore Partners

Thank you for joining us this morning for Teck second quarter 2010 earnings conference call. Before we start, I would like to draw your attention to the forward-looking information slides on pages two and three of our presentation package.

This presentation contains forward-looking information regarding our business. Various risks and uncertainties may cause actual results to vary.

Teck does not assume the obligation to update any forward-looking statements. At this point, I would like to turn the call over to Don Lindsay.

I will start with the review this morning of the results for the quarter and then turn the presentation over to Ron Millos, our Senior Vice President, Finance and CFO to address some more in-depth financial topics and I should say number of other members of the management team are on the call or in the room and available to answer your questions. Turning to Slide five, there are a number of highlights in the quarter.

This quarter was in fact a record for second quarter revenues at $2.1 billion. Operating profit before depreciation and amortization was $985 million, and that was up 17% over the previous quarter.

Earnings were $260 million and EBITDA for the quarter was $844 million. Earnings were impacted by an unusually high tax rate provision this quarter, but this is largely the result of non-recurring items.

Continuing with Slide 6, we have established a very strong balance sheet. On our first quarter conference call, we reported that we expected to retire very shortly the outstanding balance of the original bank debt taken on for the acquisition of the coal assets and during the second quarter, we accomplished this and have now refinanced or repaid US$9.8 billion of acquisition debt in just under 18 months.

Since we acquired the coal assets from Fording, we have reduced our total debt by $7.7 billion and seeing some days it's difficult to recall that this is only a couple of months ago that this is all put behind us. We now have investment grade credit ratings from each of the major rating agencies and we have produced our net debt, that is with our net debt to net-debt-plus-equity ratio is better than our targeted range and without being the strength of the balance sheet, the board has reinstated a semi-annual dividend, which was declared last quarter and it was paid in the beginning of this quarter.

Our business fundamentals have improved with increasing copper and coal production and relatively strong copper and coal prices. We have contracted for the current quarter for a premium blend of coal at US$225 a tonne and copper seems to have bounced off its recent lowest to the back over $3.

Turning to Slide 7, where it shows our earnings in a comparison to last year. We had earnings of $260 million, which represents $0.44 per share, which compares to $1.17 last year for the same quarter and I should note that we had a very large non-cash gain on debt revaluation due to exchange rate fluctuations in that quarter last year and some other unusual items.

If excluded the earnings would have been the same, actually at $0.44 per share. On Slide 8, we show our view of comparative earnings for the quarter and this has been a relatively clean quarter.

We had some small exchange and derivative losses in the quarter, primarily due to the slightly weaker Canadian dollar and adjusting for these items, earnings were $0.55 per share for the quarter. We realized an analyst expectations were slightly higher earnings after the quarter, but I would like to remind you the guidance that we provided in our last quarter report initiatives that need to be considered for that.

You can see on Slide 9, we have summarized that guidance that we gave last quarter and the performance relative to that list. We met or exceeded our guidance for every item on the list.

We don't give guidance on base metal prices and exchange rates, of course, and the declines in copper and zinc in the Canadian dollar, all had negative implications for our earnings this quarter. Turning to Slide 10.

This year operating results for the quarter in our coal business, production was 40% higher on a year-over-year basis and sales were almost 30% higher, reflecting a substantial recovery that we've seen in the steel industry. Our production was at an annualized rate of 24 million tonnes, which is 1 million tonnes higher on an annualized basis from last quarter as we continue to ramp up production, and we see this continuing for some time to come.

Our sales were 6.4 million tonnes for the quarter, which was at the high end of our guidance. The average realized price of US$182 per tonne was consistent with our guidance in the range of $180 to $185 per tonne.

Although the benchmark price was $200 per tonne for the quarter, we continue to deliver some coal carried over from the 2009 and 2008 coal year that impact at the overall realized price, as well as the minor amounts of lower quality coal that we do sell. Unit site costs were $56 per tonne.

Our cost guidance for the year is now in the range of $57 per tonne. Unit transportation costs at $31 per tonne were lower than last year and similar to the previous quarter and that's due to the impact of the reduced rail and port cost.

I do want to take a moment to comment on the Selenium issue because we did put some disclosure in our Q2 release, which I want to make sure is not over interpreted. Over the past several years we have conducted investigated work and developed recommended Selenium Management plans for all of our coal sites and most recently we commissioned an independent panel of world class experts to review the Selenium Management and co-operation.

This is not a new issue. Teck has been working for years with Selenium Management; we appointed the panel to revise us on how to raise the bar to best practice and how to deal with the issue.

We do not expect the Selenium Management Plans to impact our target of 28 million tonnes of coal production and that's the question that we have been asked over the last 24 hours. We expect to implement our range of control measures as recommended in the report, which have varying costs associated with them.

Although we don't have specific cost estimates. These will be developed as part of the detailed implementation plans for each operation.

Its important to note that the panel's report promotes a sustainability approach to the management of Selenium, whereby the environment it is protected, communities are healthy and the economy is robust and as we know more we will certainly be sharing that with the market. Turning to the copper business unit on Slide 11, overall production of 77,000 tonnes was similar to Q2 of last year.

The quarterly production does include 7,000 tonnes of production of copper in concentrate from Andacollo, which is not yet reached commercial production. Without this included copper production was down about 10% due to expected reduction at Antamina as reprocess lower grade copper ore in the quarter.

At Highland Valley as higher grade ore available is reduced and as we continue to strip next resource area and Andacollo was transition from capital production to concentrate production is underway. Sales volume was up by 30% compared to Q2 '09 and sales were unusually lower than due to timing of shipping.

The weighted average overall cash costs for the quarter were consistent with the previous quarter at about $1.10 per pound. In our zinc business, zinc concentrate production for the quarter was 3% lower than last year.

Red Dog's production was lower due to lower grades in the main pit as we deplete that resource and prepare for [color cor]. Antamina's production was slightly higher due to better recovery, as they focused on mine-to-mill optimization.

I should note that even though we show Antamina share of zinc production in these figures, the financial results of Antamina are reported in our copper business. Production of refined zinc at Trail for the quarter was higher than last year, as we had curtailed metal production in 2009.

Our zinc business contributed $90 million in cash operating profit this quarter. One of the key differences versus last year's that we had one of the benefits of the surplus power sales now having sold the one-third interest in Waneta Dam.

I would like to briefly update you on Slide 13 on our permitting process at Red Dog. We announced in May that we have commenced a development of the Aqqaluk deposit, which is key to extending the life for Red Dog mine for the next 20 years.

The picture on Slide 13 shows the first blast as we commenced the pre-stripping work, our schedule is for first order to be delivered to the mill from the Aqqaluk deposit in Q4 of this year and it will be the full source of ore to the mill by 2012. Development of Aqqaluk is proceeding very well, I was out there couple of weeks ago and it seems to be well underway.

The EPA is continuing with the appeal process for the new water discharge permit in what that appeal process is underway. We continue to operate discharge water from tailing ponds under old water permit.

I should emphasize that the quality of the water we discharge is fully protected of the environment and the EPA is seeking to establish the discharge limits for the new permit at the same levels that we have been discharging at for the past 12 years or so. I would now like to turn the call over to Ron Millos to address some of the financial issues.

On moving on to Slide 15, where we have summarized our changes in cash for the quarter. Our cash flow from operations was $675 million in the quarter, which is up about 65% from last quarter.

Our working capital change was negative this quarter, which is not unusual at this time of the year due to the shipping season at Red Dog, but it was a bit larger than normal due to the semi-annual interest payments that fell within the quarter. Capital expenditures and investments were $169 million for the quarter and our debt balance was down $413 million.

After allowing for payments to our partners and the effect of the exchange rate changes on cash, our net cash change in the quarter was a decrease of $16 million and we ended the quarter with $758 million in cash. Slide 16 shows our final pricing revenues for the second quarter.

As we highlight each quarter, pricing adjustments on sales of over various products can have a significant impact on our revenues, outstanding provisionally price receivables at the end of any quarter are finally priced based on contractual quotational periods for subsequent periods resulting in positive and negative price adjustment. Final pricing adjustments for the second quarter were negative.

On settlements within the quarter, the largest impact was in copper, where we had 94 million pounds of receivables settled in the quarter at about $0.31 per pound lower than the price at which they were provisionally booked. We also incurred negative adjustments in zinc, where total negative adjustments to revenue of $36 million on sales from the previous quarter.

We also recorded pricing adjustments on sales booked during the quarter and these are mark-to-market at quarter end. As metal prices declined during the quarter, this reduced revenue by a further $47 million on a pre-tax basis, and you should remember, when analyzing the impact of price changes on our final pricing, refining and treatment charges and the Canadian-US dollar exchange rate must be included in your calculation and in addition, when trying to analyze the impact on our net earnings you need to consider taxes and royalties.

Turning to Slide 17, our debt position at the end of the quarter had been reduced to $5.3 billion. During the quarter, we paid the outstanding balance of our term loan as Don mentioned earlier and since we completed the acquisition of Fording's coal assets we have eliminated the $9.8 billion of bank debt that two years ahead of its due date and reduced our total debt by $7.7 billion in just over a year-and-a-half.

Our debt-to-debt plus equity ratio is 27% factoring in our cash position, our net debt to net-debt-plus-equity ratio is 24%. Moving on to Slide 18, the results of our debt reduction program is that we have reestablished our investment grade credit ratings with all of the major rating agencies.

During the quarter, S&P revised our rating from BB+ up two notches to BBB stable. Moody's revised our rating in late April to investment grade with a positive outlook.

With S&Ps and Moody's ratings to the investment grade was stable or better outlook, our debt is now unsecured and some of the previous restricted covenants related to uses of excess cash coverage ratio et cetera, have been eliminated. Turning to Slide 19, I would like to highlight the guidance we have given in our Q2 release for the quarter.

Again, you should be aware that seasonality in zinc sales due to the shipping season at Red Dog and the impact of unit cost due to varying lead sales. We expect coal sales in the range of 5.8 to 6.2 million tonnes in the quarter at average realized pricing between US$195 and US$200 per tonne.

This includes the impact of all types of coal sold expected carryover from the 2009 and 2008 coal years and expected spot sales. Coal costs for the year are now expected to be in the range of Canadian $56 per tonne for site cost, and Canadian $33 per tonne per transportation cost.

The site cost guidance is about $2 per tonne higher for the year now due to the impact of costs associated with dealing with the plant disruption at Greenhills. Copper production will continue to be lower at Highland Valley, as we work through the geotechnical issue and at Andacollo as the transition to concentrate production progresses.

You should be aware that settlement to adjustments are dependent on the direction of prices and you need to back during the effects of treatment of refining charges in the Canadian and US dollar exchange rate. Those are some of the key items to consider as you develop your earnings estimates for the third quarter.

With that I will turn the call back to Don.

On Slide 21, I would like to give you an update on our Greenhills mine, which suffered an explosion in late June. This picture shows the preparation plant including the dryer building and the exhaust on the right.

Raw coal comes in from the conveyor on the left and is washed and dried and exits to the right to a load outside and well that's you can't see in this picture. You can see some damage in the middle of the building the vicinity of the dryer.

We have used this larger scale photo to show some idea of the size of the building and you can see a helicopter in the picture for perspective. This picture was taken on the afternoon of the incident and the helicopter has been mobilized to drop water and brush fire that had been diluted by debris from the explosion.

Reconstruction of the building and the damaged equipment is underway and a full rebuild plan is being developed. The length of time to get the entire plant fully operational is still a bit of uncertain, but it is likely to be a number of month.

In the meantime, we have done a number of things to mitigate the impact on production. First we started hauling rock whole to the Fording River operations, where we have some excess plant capacity.

Greenhills and Fording were linked by a haul road and it's only about 10 kilometers from the Greenhills mine to the Fording plant. Second we have activated bypasses to within the Greenhills plant to send washed, wet coal directly to the load-out silos.

This wet coal is shifted and blended with dry coal from other mines to achieve the moistures specification needed for shipping. Third, we advanced to plan maintenance shutdown.

We were planning to take this summer anyway, so for the time that would have been lost and is been captured in this work, I think that's a pretty important factor. The net effect to this is that we expect to be able to limit the impact on production this year to under $0.5 million tonnes.

We will get a more accurate picture of this over the next few months when we complete the development of the full rebuild plans to schedule and the cost estimate. The cost of the rebuild will largely be covered by insurance.

On slide 23 and before we close I would like to update you on the status of the many development projects that we have underway. Like Quebrada Blanca we expect to complete our advance engineering studies this quarter and we will likely immediately proceed into a full feasibility study.

At Relincho the pre-feasibility is underway and is expected to be complete in mid 2011. Also in corporate the Galore Creek pre-feasibility is expected in Q2 2011.

In our energy division, we are working on a pre-feasibility study for the Frontier Oil Sands Mine with the possibility of Equinox as a satellite mine of Frontier. This study is expected to be complete in Q2 of 2011 which will also be marked by filing of the regulatory application.

In Coal, the feasibility study for the restart of the Quintette Coal Mine is proceeding and is expected to be complete in late 2011. So we're going to have lot of news in 2011 related to these projects.

Lots of exciting growth opportunities are coming, look forward to reporting on development status of these projects in future quarters. Finally, before I turn it over to questions, we closed the chapter on the require strengthening of the balance sheet and we're now focused on the strong and increasing cash flow from our business.

Our coal business is very exciting which robust fundamentals in markets prices and our increasing production for just a nominal amount of capital per tonne of increased to production. Our copper production will grow over 40% over the next two years as well.

So we are moving forward with several development projects to further enhance shareholder value and generally we have a pretty positive outlook on the next couple of years. With that, I'd like to turn it over to questions.

Couple of questions. You are guiding for a pretty hefty discount on your coal price realization in Q3, bigger than normal.

I am wondering, is that a function of carryover tonnage or is that just higher percentage of lower quality coal in the mix and do you expect that to carry forward that kind of discount into Q4 and into next year?

Turning that over to Bob Bell.

I think, as Ron mentioned, it's actually a function of several factors. It is a fact that we are shipping more of the lower quality coals in the Q3 than we did in Q2.

It's also a function of some of the remaining pricing from prior years and also the spot market prices that we are anticipating, so all that's factored in. Into the fourth quarter, it's probably too early to speculate but I don't think we would see anymore of the lower quality coals that we have in Q3 and we will just have to wait and see how our production goes.

But do you still expect carryover tonnage to impact Q4 or have we now seen the last of that?

It would be minimal in Q4.

Okay and just that Andacollo, when do you expect commercial production there, and I think in late last year you were sort of looking for production this year of around 60,000 tonnes of copper. Based on the ramp-up, it looks like it's going to be below that number.

I'm just wondering where you see that number coming in.

Another question just for Ron Millos. Ron, your total debt levels at the end of the second quarter were about $5.33 billion, I guess.

What are you looking at that being roughly by the end of this year?

There is not substantive repayment left with the debt this year. The next payment is as the 2012 when the notes come due, so other than small repayments related to some of the capital lease obligations and changes on exchange fluctuations, there will be no substantive changes to the debt level.

That's a reasonable number. Secondly, just to follow-up on the coal side of the last question.

Could you give us an idea and I know you did this in the first quarter of how much carryover tonnage is left from the 2008 coal year and 2009 coal year. Now you're still getting the same pricing or is there any pushback on the pricing?

Haytham, this is Greg Waller. Again, what we have decided to do given that there was a lot of confusion in the past regarding people trying to do the math on the amount of carryover tonnage from the various years with the new quarterly contract pricing and sort of thing.

We've gone away from giving guidance on the amount of carryover and we are just giving specific guidance on expected realized price for the quarter rather than forcing people to have to do the math, and in many cases, they were getting it wrong. So, we're just giving you guidance on pricing going forward now.

So, that pricing guidance that you gave for the third quarter full-year, that's a fairly accurate number that you are fairly sure you'll fall in that range?

We gave guidance for Q2 between $180 and $185 per tonne and we came in at about $182.50 right smack in the middle of that guidance. We are now giving guidance for Q3 between $195 and $200 and that's the best estimate we have on guidance for that number for Q3 at this point.

Operator, we would like to go back to that previous question from Orest Wowkodaw. I think Don Lindsay, who was calling in for this call this morning must have got cut off and it appears that we didn't get a chance to respond to that question.

We would like to respond to that question. So, Orest, your question on production at Andacollo, we are expecting commercial production by the end of the year.

Still, the plant is doing ramp up where we have had some very good results recently in terms of achieving daily throughput, the target there is 55,000 tonnes a day. We have had some days where we have been over 40,000 tonnes just recently and it's progressing.

There is always issue of some sort as you're ramping up a new plant, but it's going pretty much according to our schedule and we expect to be able to clear commercial production likely sometime in Q3.

Thank you, Greg, and just a little bit more color one of the key de-bottling issues is installing these large electromagnets and that's basically happening as we speak. So, we think that will make a big difference in the coming weeks, and then this past week was one of the best weeks yet.

I want to congratulate you guys on the tremendous amount of balance sheet improvement that you've done. But I did have a question about that.

Would it be possible to take the proceeds that you've received from some of the equity issuance is that you've done and use those to do a call back on the bonds, and would that be something that you would consider?

We are well aware of that option and it's a kind of thing that we couldn't really comment on. We are in recede of several different proposals related to the bonds outstanding in different ways to modify our maturities schedule and sort of thing and no one can say is that we continue to review it and we can get much more feedback on that.

Bob Bell, I am wondering if you can give us some kind of view on whether coking coal markets is right now is seem to be a lot of noise?

I'll give Don Lindsay a chance to offer his comments but if he turns his back I'll offer mine as well.

Okay.

I guess there is a short-term and long-term answer to the question. Short-term is no question to market softer and spot prices have declined from as high as 240 to as low as 188 I think, and backup $5 or $6.

Now the spot prices are always kind of funny indicator because you don't really know what the quality of the ship and they are using is and how to compare that to the coal we actually sell, and generally they are at a lower quality blend than the bulk of our product, but it is kind of an indication of where the market is. Although more recently there is been so little spot business it's almost none that if it's again hard to get indication.

So a short-term, the key customers have slowed down their purchasing on the spot market but they haven't changed anything related to the contracts that we have and not a single ship has been rescheduled or not arrived according to this schedule, so I keep watching that very closely. It's our best indicator.

There has been no change in the shipping schedule from any of our customers. Although rumors that others may have been affected that way, we haven't seen any and we watched that very closely.

It doesn't mean that it won't come in the future but we haven't seen that so far. I do think that the bulk of the tightening, if you like, in China and weakness in the markets that we have seen since another rate fall is probably behind us and the growth figures on the big three market, which is China for GDP at over 10% in industrial production at over 14% are still very, very substantial and remembering the law of large numbers that their economy is that much bigger each year, so it's having a big impact.

I have also noticed that the coking coal imports into China remain at quite a high level at 3.6 million tonnes for June, so first half for this year is well over 20 million tonnes. There are people calling for it to decline in the second half of the year.

They have been calling it for decline for sometime and it may do. Part one of the reasons it might is because the sales from some of the major producers like ourselves are being devoted more to the long-term customers, for example our mix which was about 70% Asia in 2009, that was unusual.

It will be less this year as we sell more to European customers and elsewhere and so that means there is less available for the spot markets, so you have to look at the coal imports into China number and from that basis to see where did all the coal go, but in general over two to three-year period, we still see the market quite tight. We are increasing production and we can do quite a better of it this year and hopefully another 2 million tonnes each of the next two years, but in the grand scheme of things that's not that much and the new projects that are coming on still there are fair ways away in terms of ramping up to major tonnage, so we still see the outlook as being pretty positive for the next two or three years and frankly we think that the fourth quarter price will be very solid too.

Bob, that's my overview. How about any other color from yourself?

The only tiny comment I can add to your very thorough response, Don, is that just in the last few days, we started to see the price of steel products in China turn around, and this period last year we also saw it got fairly quiet in the spot market as you noted there we've seen this year, so right now it's kind of early to say that this is going to be anything, but fairly short-term phenomena.

Just a couple of quick sort of number-related. Ron, I work at tax rate of around 44% for the quarter, 43, 44.

What should we be using going forward? Has that been impacted by the revaluation on the debt side, or what's happening?

Probably on a go-forward basis, assuming there's no unusual items, the tax rate would be about 35% that sort of weighted average blend. Then of course it varies depending on, which jurisdiction provides the contributions to earnings.

The unusual rate in this quarter was the revaluation of the debt and some of the embedded derivatives we have which were negative. Those are not tax deductibles so that it holds the rate up that sort of all in a normal environment relatively normal distribution of profits among the various jurisdictions 35% is quarter magnitude.

Of course, we'll never get there because there is always unusual item.

Okay. That's good.

I had a question as well just on the Zinc concentrate side, Red Dog on inventory. Can you give us sort of a tonnage and indicated inventory and tonnage of the zinc gone today?

Yes, John. Same response you're asking what the inventory at Red Dog or what the shipment was new?

Yes, the inventory level.

Yes, we just commenced shipments a few weeks ago. Our (inaudible) is leading today, so we are at about 24% or 27% our forecast shipments as of today.

So, we have found our way on the shipping program, and expectations are to ship approx just over 1 million tonnes of the zinc concentrates and just over 200,000 tonnes of that concentrates.

Are you full now, I mean, at the port?

The shipping season started so while we joined down those inventories at the port side as we speak, so that was our moving going to the market right now, so the inventories at the mines side are being pulled down.

Did you have a zinc inventory today or is it changing on a ship by ship basis I guess?

Yes, they change about day by day basis. The production is going from mine to the port side with us as it is coming on a daily basis than what we are permitting.

Bob, just a quick one on the coal side. Is there a targeted sales number into China for this year?

It's more that we are wanting to make sure that we sell cargos to the strategic buyers that we've been focused on over the last year-and-a-half of so, and it's really a matter of making sure that when they are ready to take a trial cargo or when they are ready to start to take the cargos on the regular basis, we're ready to supply it. And we'll probably do 10% to 12% of our sales into China this year, but as I say it's focused on making sure that we take advantage of those strategic opportunities to build our book in China.

One last question on Aqqaluk. I note in the quarter the mining began, I think, in May or June formally, and I am just wondering on timing of ore release, I would assume there is a lot pre-scrap.

Is there ore release in the fourth quarter at some point?

Yes. The short answer is yes.

As we have said in the presentation, the first ore from Aqqaluk into the mill will be in the fourth quarter, and that will transition to it in the full source of feed by 2012.

Greg, how long will it take to repair the plant and Greenhills dryer, Greenhills is once you actually know what you have to do like just roughly?

I am going to turn this over to Don. If you want to provide some preliminary comments.

We did say in our presentation, there will be a number months. We haven't got the schedule fully detailed yet, but Bill Fleming is available to respond to this as well.

I think it's best Bill Fleming and Tim Watson give their guidance. The short answer is that we don't know in detail yet, so we are being very cautious about what we say until the studies are finished, but Bill and Tim, you want to add some on that?

It's Bill Fleming here. Kerry, the issue is, we know what we need to do, and we plant to put quotes on the various components that need to rebuilt or fabricated, and we expect to that information back in the next week to two weeks.

And until we get that, we really won't have a good sense on when the timing comes but we are at this point feeling somewhat comfortable that we will be up early in the fourth quarter. Although, we really have to wait a couple of weeks to be sure.

Then just secondly, Don, can you just take me through, just in general terms, how the dynamic works for the negotiations now that you have for your quarterly coal contracts. Is it like kind of a two-week negotiation that starts middle of the quarter?

Preceding the quarter, you are negotiating on or how does the dynamic work and what sort of targeted level of contract sales are you thinking about on a go-forward basis as a percentage of your total sales?

In general, with our core customers, we have a letter of understanding on what the volume for the year will be, and then the prices being reset quarterly, it does happen quite quickly, but I would like to turn it over to Bob Bell for more details.

Yes. The last couple of quarters, we tend to be well into the discussions by about 30 days prior to the end of the previous quarter.

There is no set pattern, but that's what we've targeted to do. And in terms of contract versus development customers, we are really focused, let's say, something 10% to 15%, where we are reserving tonnes for strategic development business.

But that will change as we assess our book going forward, but that's more or less where we were focused as we began the coal year.

So, you're suggesting kind of 80% committed on these quarterly contracts and then go 10% to 20% for spot?

At the moment though, we'd be more like 90% for this year, and we had about 85% is what we expected to have under traditional contracts with letters of intent as Don mentioned and then 15% as available for opportunities.

Then as Don commented, the negotiations on a quarterly basis tend to happen pretty quickly, because it's really just on price, you don't have to worry about volume or anything else.

That's right. And as I mentioned, about a month before and we make sure that we are out visiting our customers and this past quarter, it happened very quickly.

Questions with regards to the coal business. In terms of your guidance, can you give us an idea what the percentage of hard coking coal you have in that?

And then, I believe you alluded to the fact that you expect that mix to improve to hard coking coal in the fourth quarter.

Of course, we have different grades of our hard coking coal, but about 90% is typically hard coking coal. In Q3, it's actually going to be a little less than that.

We actually have a higher proportion of thermal product in Q3. When we get back into Q4, I wouldn't see it going less than what we have in Q3.

I wouldn't see anymore higher proposition than Q4, but more likely we'll be back towards the 90% as hard coking coal. But even in the hard coking coal, there is a mix of qualities.

We have right from the top quality that in Q3, generally, got the 225 price, but we also have some slightly lesser qualities that are still actually hard coking coal from a technical point of view.

If you were to just exclude those higher volatility cost, would that number be pushed on to like 80% or 85%?

It would be more like 80%.

80%? Okay, good.

That's helps. The second question now in the Selenium Management.

In your press release, you say that the cost of the Selenium Management could be material. Just wondering if could just give us an idea what that would do to your cost of operations.

I believe, Don, you mentioned that there won't be any effect on the 28 million tonnes, but I was also wondering if the expansion in Quintette, would the CapEx be affected. I believe in the past all of you guys have been talking about expansion to cap it up and then you talked about $150 a tonne.

I was wondering can you give us an idea what this Selenium Management may do to that CapEx?

We are right in the middle of all of that now. So, it's difficult to answer with any specific numbers, but let me turn it over to Bill Fleming to give yet additional color that he can.

I guess on Quintette we would not expect any change in the capital cost. That's my estimate at this point, and as far as materiality, it's a difficult thing to say in order of material.

We expect that we are going after (inaudible) the way we do some things, water management perhaps the way we build our waste oils and at the extreme perhaps build a water treatment plant. So, depending on where the studies come out, then we'll have the better sense on the cost.

It's difficult at this point to say if material and how material as we get to that point.

In terms of the current operations, what would you define materiality as like 5% of revenue and the operations like count as two or?

It's really roughly, but we expect this issue to be something we have to deal with on an ongoing basis for decades. And if we talked, and I'm just throwing out a number $0.50 a ton and $10 million a year would add up to perhaps $300 million over 30 years, so I don't expect it to be 5% of revenue.

To put it in context, obviously the swings in exchange rates are far, far more material than what Don just described.

So, my first question is on the zinc market. It appears in some of the zinc to be in surplus.

I was wondering if you could comment on your near-term outlook for zinc.

Andrew?

Yes, Meredith. It's Andrew Stonkus.

The zinc market as you point out it is in the surplus situation today, but we are seeing the inventory basically a stock increase and we had increases in the inventory early on this year that seems to be stabilizing. What we are seeing in the North American marketplace is a little bit of seasonal softness from our major customers, but we see that, as I mentioned, it's a seasonal issue.

We are expecting the growth of the profile to continue to pickup in the months ahead, as we get to the summer months, but the Chinese continue to import both concentrates and metals. So, there will be a surplus this year in metal and next year we also maybe expect a surplus of metal production but the copper trade deficit overall will eventually work its way to the system and metal production be impacted by the lack of concentrates.

On a second point, you mentioned about the pre-feasibility and when you are expecting some of those projects to come up. Relincho and Galore Creek, the pre-feasibility study seemed to be coming at a similar time.

Would you rank one over the other or would you go for both or how would you think about that?

To this point, we have always ranked the QB Hypogene project ahead of Relincho. There are a number of reasons for that, just the timing of when the current operation would be depleted.

The first five years of operation in the QB Hypogene project are very exciting. There is a dormant mineralization that's exposed.

There will be a zero strip ratio. It's significantly higher grade than what we mine.

For example on Highland Valley and higher moly grade and it looks like it would be a very exciting start to a long life operation. Relincho is a lower grade operation, but it has the advantage of, in the sense, being an easier project to execute to build its lower elevation closer to the port, use your train a bunch of advantages.

And so, we actually have a bit of an internal debate between our project people as to which one should go first. From the company overall, I still think that QB is probably the most logical, but given the strong cash flows that we have and relatively low CapEx for the next couple of years are declining CapEx.

We may build up pretty decent cash balance, and that could at least give us the financial flexibility. To consider doing both, becomes a people challenge.

You know, you want to have the right skills totally focused on the project to make sure clean execution, but we will looking at all of these, so there is clearly not a clear answer to your questions, but raise a kind of an exciting issue for us. That's probably all I can say now.

Just a couple of financial questions for Ron. Just on Andacollo, when can we expect that to flow through the financial statements?

Is that a Q3 event or is that a 2011 event?

It would be when we achieve commercial production in our guidance as we expect to be there in the fourth quarter of this year.

Then on the administrative cost, they were way down this quarter at $15 million. You've been averaging something close to $50 million for the last year or were they for the last year or two.

Is this a sustainable run rate or is there something that's credit in this current quarter.

Our stock-based compensation is in there, so the options and the DSUs and RSUs with the decline in the share price during the quarter that's a recovery, so that's.

What do you see as a good run rate per quarter without any movements in your share price?

That would be in the order of about roughly $20 million or so.

Okay, so still conservatively below were it has been in the last year?

No. Not really.

I think it would be similar to prior years.

If you looked in the last year, you would have the positive effect of share price increases on stock based compensation. So, that's what we take in to some quarters much higher.

Finally on your tax shield from the Fording acquisition, I would have expected sort of a higher future income-tax assets to be show up on the cash flow statement each quarter just based on the amount of money you are making from the coal assets. Can you just walk us through how you are recognizing that shield?

The shield is on the books when we did the acquisition of Fording. So, it doesn't affect our tax rate on the income statement, it does affect the cash taxes that we pay.

So, we don't see is had we not had that shield, the taxes that we would be paying would be much higher.

Like, for instances in the current quarter, you are booking about $200 million on the income statement, but you are only shielding about $40 million on the cash flow?

This is John Gingell, the Controller. The other factor I guess is that we pay mineral taxes in Canada, which are cash taxes and a lot of our taxes are in foreign jurisdiction, where we are not shielded.

Okay. Still seems like a pretty big difference to me, but thank you very much.

There are a lot of factors that go in to that and some positives or negatives in each quarter.

Can you give us an idea about the bypass system you have for the coal? When do you think you will be attending to the problem of weather where you may not be able to ship it and would you be able to increase your dry coal, dry order shipment at that time to compensate for that?

Bill Fleming?

The bypass system, it works very well in the warm weather here at (inaudible). We expect it will be good through most of September and then it's really a function of the onset of cold weather at coast side.

So it's really a wait and see and then also the timing of when we the dry back up but so far we have been very pleased with the way that the bypass system has worked.

Then Japan goes beyond that, do you have in place, or are you putting in place a system to ship more dry ore to Fording River?

We're trying to take advantage of the capacity that Fording River has. So we're supplementing their feed to their own plant and dryer.

So we can't go higher than that but we would take advantage of whatever we could.

Okay. Don, I have a question.

One, you have in the past shown on slide where you show all these Chinese mills, new mills which are being developed on the coastal region of China and expectations are that they will depend more on the seaborne coking coal market which makes sense. Some of these one which may have already come up and have you seen any change in their purchasing habit or purchasing pattern for the coke coal?

Are they dependent on the seaborne market or are they sourcing internally and how are you doing with these furnaces which are starting to come up? I think at least one or two have already come up in the last year or so.

That's right, and the only thing that has changed from the story that we had put in different slides in the presentation a year or more ago, they are all at different stages. I have visited one that was already up and running for Phase 1, they do have three phases.

So you have to start to look at each of these projects and see what phase they are at. At different times, they slow down or get delayed and then I have seen although they have accelerated again, and I'd probably ask Bob Bill to comment on what kind of blend that they are purchasing but clearly they are being deliberately built on the coast so that they can access both seaborne coking coal and iron ore just because the logistics makes sense not to have to trans-shipments on, but I don't know whether they take some percentage from domestic coal and such thing.

Bob, do you have any comment?

Sure, they are taking a mix of domestic and seaborne and right now, I think because of the price differential between the two, the emphasis has still been on the domestic but we have actually made sales to the new blast furnaces and we certainly see their buying pattern will definitely include seaborne imports for coking coal. So it's really as we had expected and we are seeing our sales to those very mills.

There is just one follow-up question. It's again for Ron on the debt.

Is there any plans to repay any of the Antamina senior revolving credit facilities earlier than is currently allocated?

Not at this stage. No.

So there is effectively no additional debt repayments you could make throughout the remainder of this year?

Nothing that's mandatory. No.

My question is more back on China with the growth profile, where we've seen a sharp decrease in the price of iron ore here in the last several months and just trying to get a flavor as far as where you see a normalized price for iron ore at this point if you believe that we'll see further weakness or if we're going to start to see a movement back up to the highest that we saw earlier in the year?

David, as you know, we're not in the iron ore business, so we'd hesitate to comment on pricing for iron ore, but what I would say is that relative to the steel business. We have seen a turn just in the last week pricing for HRC up 6% or something, then a quick turn, and that tends to eventually flow through to both, coking coal and iron ore, but one week doesn't really drive things.

You need to see a more sustainable trend. There are number of reports out there saying that the correction, if you like, or the worst of the correction is behind us and that the thing has found a base and started to turn up, but we'll have to wait and see.

Do you think, we're going to see some normalization from this price point with regarding coking coal and obviously ore and steel or is the idea that we'll further growth as the future goes and you will see price start to increase, meaning, is there a tightness still in supply?

We think in coking coal it still relatively tight. The volumes that we are talking about that can do, when things increase it doesn't take much of an increase further to be nothing available and China is still growing at 10% plus per year and even if they manage to cool things down to 8%, 8% on the larger basis is still a big number.

They have told us directly that they are accelerating urbanization in the Tier III and Tier IV cities and they tend to always exceed their plans. So, we remain pretty optimistic over the next two to three years that the market in coking coal, which is our expertise is going to stay pretty tight, but there is always going to be ups and downs and slower periods and that's sort of thing.

I think we have just been going through one since middle of April. If you go back to root cause, the fact that China's GDP in the first quarter was growing at 11.9% caused the Chinese government to tighten and tighten fairly quickly, but in the long run we think that's a good thing that they are managing their economy quite well and that allow them to avoid some of the overheating that causes so much trouble.

So that's our view.

Then a follow-up just in terms of the balance sheet. Obviously your balance sheet is much stronger, you back to investment grade, your net-debt to cap much lower at this point.

What's the idea as far as moving forward? Are you looking to bill cash and further strength in the balance sheet focusing still more on the conservative nature of organic growth or is there potential, and again depending upon valuation, is there potential for another type of dynamic acquisition at some point?

We have such material in internal growth, right now in our copper and coal business, that there would have to be something pretty compelling for us to sort of go elsewhere for additional growth. At some stage you have to ask yourself the question, how much growth do you need and we have 40% in copper in the next two years and 50% in coal over three or four year period.

That's pretty good relative to our competitors, and in longer term down the road additional growth in oil sands projects. Now, that doesn't mean that we don't look.

We look at a lot of things and people are showing us a lot of opportunities but at this point nothing has been compelling and so we haven't made any moves. So that would suggest that we're going to build up quite a bit of cash in the next couple years unless something does come along.

And then also, I wanted to see if you guys can give us a little update on the Fort Hills project. Where are you at there?

That's in Suncor hands. They are 50% owner and the operator and they have probably announced they are doing this study on how it does fits with their other projects and we won't hear from that until sometime in the fourth quarter.

We are just delighted to have Suncor as a partner and looks like going forward to Fort Hills as a partner as well. So the Fort Hills project is a very good project for the future.

My last question really is, I would say, with all the strength in growth what are some of the major challenges that are keeping you up at night at this point?

There is range of things just operationally that is quite interesting how difficult it is permanent point of view or just to keep day-to-day production at maximum levels is pretty tough for the whole industry and so I often think that people underestimate how difficult it will be for the industry to meet the demand that's going to come if China and India and other emerging markets keep growing and improving their lifestyle using commodities as much as they are. The sense that keeps me up because it's a positive thing for us but it's difficult for us to meet production targets.

I think everyone one has experienced shortfalls at sometime for something or other. Economically, there are a lot of different things you could worry about and every now and then the world moves into a phase where it just wants to worry and it can pick anything from European contagion to housing in the US to China tightening to resource taxes in Australia.

There is a whole long list of things, if you want to worry that you can choose to worry about but eventually the world always fixes itself and things move on. So I think we have gone through a corrective phase.

It looks like it might bond up but you never know. So we will see.

With that, thank you very much all for attending. To summarize, we think it was a relatively clean quarter.

We look forward to the next quarter with increased coal price and copper seems to have come back over $3 and Andacollo getting closer and closer. So I look forward to speaking to you all in October.

Thanks very much.