Operations Red Dog Red Dog, which is located in northwest Alaska, is one of the world’s largest zinc mines. Red Dog’s gross profit before  depreciation and amortization was $418 million, compared with $547 million in 2011 and $571 million in 2010. The lower  2012 gross profit was mainly due to lower metal prices and lower zinc sales volumes.  In 2012, zinc production at Red Dog was 529,100 tonnes compared to 572,200 tonnes in 2011. This was due to milling  rates being lowered to reduce silica in the zinc concentrate and due to lower ore grades. Lead production in 2012 was  95,400 tonnes compared to 84,000 in 2011, due to improved recoveries as significantly less near-surface weathered  ore from the Aqqaluk pit was processed. Red Dog’s location exposes the operation to severe weather and winter ice conditions, which can significantly affect  production, sales volumes and operating costs. In addition, the mine’s bulk supply deliveries and all concentrate shipments  occur during a short ocean shipping season that normally runs from early July to late October. This short shipping season  means that Red Dog’s sales volumes are higher in the last six months of the year, resulting in significant variability in  its quarterly profit, depending on metal prices. In accordance with the operating agreement governing the Red Dog mine between Teck and NANA Regional Corporation  Inc. (NANA), the royalty we pay NANA increased in the fourth quarter of 2012 to 30% of net proceeds of production  from the previous 25%. This royalty increases by 5% every fifth year to a maximum of 50%. The NANA royalty charge  in 2012 was US$137 million, compared with US$129 million in 2011. NANA has advised us that it ultimately shares  approximately 62% of the royalty, net of allowable costs, with other Regional Alaskan Native Corporations pursuant  to section 7(i) of the  Alaska Native Claims Settlement Act. In February 2013, the State of Alaska issued a renewal of Red Dog’s main water discharge permit. The water discharge  permit was previously renewed in 2010 by the United States Environmental Protection Agency (EPA), but was stayed  following a third-party appeal. As a result of the appeal, the conditions of the 2010 permit governing effluent limitations  for lead, selenium, zinc, cyanide and total dissolved solids (TDS) were withdrawn and the limitations in the mine’s  1998 water discharge permit remained in effect. The limitations in the 1998 permit included an effluent limitation  for TDS that the mine could not meet. That appeal was favourably resolved (although a related court decision is the  subject of further appeal to the Ninth Circuit Court of Appeals) and jurisdiction over the permit passed to the State of  Alaska. The 2013 permit issued by the State of Alaska reinstated the 2010 permit effluent limitations for TDS. Despite  the issuance of this new permit, there can be no assurance that further appeals or permit uncertainty will not give rise  to liability or impede mining activities, or that permit conditions that are ultimately issued will not impose significant  costs on the Red Dog operation. We expect 2013 production to be approximately 500,000 to 525,000 tonnes of zinc contained in concentrate and  approximately 85,000 to 90,000 tonnes of lead contained in concentrate.  Teck 2012 Annual Report 46