ManageMent’s Discussion anD analysis For our refinery operations, labour remains the largest cost item.The labour agreements for both the Montreal and Vancouver  refineries terminated in February 2013. Three-year labour agreements were reached with the main unit and three of the  four smaller units of the unionized employees of the Montreal refinery and a five-year labour agreement was reached with  the unionized employees of the Vancouver refinery. All agreements were signed at competitive rates. Negotiations with the  remaining unit of the Montreal refinery are on-going with the intent of reaching satisfactory agreement in the near future. Energy is our second largest operating expense, as we use large amounts of natural gas in our refineries.We have a hedging  strategy in place with futures contracts to mitigate the effects of sudden rises in the price of natural gas. In fiscal 2013, most  open positions were purchased on spot values due to the lower value of the commodity.With the flattening of the forward  curve, Lantic added some hedge positions for fiscal 2014 through 2017 at prices equal or lower than fiscal 2013’s average  price.We will continue to closely monitor the natural gas market in order to add hedge positions at competitive prices. Even  with this forward hedging policy, Lantic remains exposed to year-to-year trends in natural gas prices. In Montreal, we have  the ability to switch to low sulphur oil when natural gas prices are higher than the comparable price of low sulphur oil. Natural gas price continuation chart (January 2003 to September 2013) Source: NYMEX Production reliability is also critical to the success of our operations. Every year, each plant makes considerable investments  in preventive maintenance and repairs, thus maintaining their efficient working order and competitiveness.  Lantic invested approximately $7.7 million in capital projects for plant reliability, product security, information systems,  environmental requirements and cost improvements in fiscal 2013. In addition, over the course of any given fiscal year,  the Company will normally undertake capital investment projects. These investment projects are not necessary for the  operation of the plants, but are undertaken because of the substantial operational savings to be realized when such projects  are completed. In fiscal 2013, the Company committed $2.2 million for the acquisition of a palletizing station for the  Vancouver refinery, of which, $0.6 million was spent in fiscal 2013 and is part of the $1.4 million invested into energy and  labour savings projects. The palletizing project is forecast to be completed in fiscal 2014 and will start generating labour  savings late in fiscal 2014. A number of other investment projects are under analysis which may start in fiscal 2014. 2  4  6  8  10  12  14  16  J an-03 J an-04 J an-05 J an-06 J an-07 J an-08 J an-09 J an-10 J an-11 J an-12 J an-13 J an-14 9 Annual Report 2013