Coppernico Metals Inc

Rod Shier – CFO Jim O'Rourke – CEO

Aleem Ladak – PI Financial Corporation Mark Turner – Scotia Bank Stefan Ioannou – Haywood Securities Matt Murphy – UBS Steve Parsons – National Bank Financial John Hayes – BMO Capital Markets Adam Low – Raymond James Garnet Salmon – Jennings Capital Chris Chang – Laurentian Bank

Thank you, [Malick]. After opening remarks by management in which we will review the business and operating results for Q1 2013, we’ll open the lines to participants as [Malick] has noticed.

Please note that all comments made today that are not of a historical factual nature may contain forward-looking statements. This information by its nature is subject to risks and uncertainties that may cause the stated outcomes to differ materially from the actual outcomes.

Please refer to the bottom of our latest news release for more information. I will now turn the call over to Jim O’Rourke, Chief Executive Officer, for his remarks.

Thank you, Rod. Good morning everyone and thank you for joining us.

Today we’ll discuss the first quarter results as Rod has mentioned and the operation of Copper Mountain Mine. I’ll briefly review the financial results and provide an update on various activities, after which Rod will provide the financial details for the 2013 first quarter.

The company completed three shipments of copper concentrate during the quarter, generating $55.1 million in revenue net of provisional pricing adjustments. The mine produced a total of 14.2 million pounds of copper, 5,300 ounces of gold, and 64,200 ounces of silver.

Gross profit for the quarter was $8.1 million. For the first quarter of 2013, total cash cost per pound of copper sold net of precious metal credits was USD2.18.

Site cash cost per pound of copper produced net of precious metal credits was USD1.62 for the period. Mining is progressing in both Pit 3 and Pit 2 during the quarter.

Mine operations were steady at an average rate of about 172,000 tonnes per day moved. In total, the 15.5 million tonnes moved in the quarter included 4.3 million tonnes of ore, 10.2 million tonnes of waste and 700,000 tonnes from the ore stock pile.

The average strip ratio was 2.4 to 1 as compared to the average 2-point-1 strip ratio projected in the current life of mine plan. We faced many challenges during 2012 and most of these issues were resolved last year and in January of this year.

Mill availability was low at 80% in January but averaged 85.9% for the first quarter of 2013. The majority of mill downtime during the quarter was scheduled as part of the maintenance program.

Going forward, management are confident they will achieve our targeted 92% operating time. During the quarter, the concentrator treated 2.2 million tonnes of ore with head grade of 0.35% copper.

The average recovery was 82.6% copper which is slightly above plan. Copper production during the quarter at 14.2 million pounds copper was about 29% below the annual guidance provided at the start of the year.

On this total shortfall, 23.9% is attributable to the mill throughput. Mill operating time accounted for 6.6% of the shortage.

Increasing the mill throughput remains our key focus and a priority in order to consistently achieve or exceed our 35,000 tonne per day design tonnage when treating Pit 3 ore. At our conference call on March 18 of last year -- sorry, this year, we discussed the effect of pre-crushing feed to the SAG mill.

The camera we installed on the SAG mill feed conveyor provides a measure of the size of the ore pit to the SAG mill. The relationship of the minus 1-inch ore in the feed to the SAG mill correlates very closely with the mill throughput.

Based on this information and plant test in March, we have accelerated programs to test additional explosives to increase fragmentation of the ore in the pit and we have contracted to increase the portable crusher capacity to 10,000 tonne per day range. A notable increase in mill tonnage has been obtained when the minus 1-inch content exceeds 35%.

Looking forward to the second quarter, we continue to see improvements in all aspects of operation. Increasing mill throughput remains our key focus in order to achieve our targeted throughput.

In the short term, plans are to continue to utilize high-energy blasting and to continue with contractor to crush ore to minus 2-inch. Our long-term plan is to continue to work out the details in order to proceed with the secondary crusher in the second half of this year.

The capital cost for the crusher facility is estimated at $35 million. We intend to finance this out of our internal cash flow.

Along with other recent changes at the mine, effective April 1, Mr. Don Strickland has joined our team as Vice President and General Manager at the mine site.

Don has a successful mine management track record and is a dynamic leader. He also has a strong technical background as a process engineer in mill operation.

I’ll answer specific questions in the question-and-answer period for those wishing more detail. At this time, I’d like to turn the call over to Rod to discuss financial details.

Thank you.

Thanks, Jim. During the first quarter of 2013, the company recognized revenue of $55 million net of pricing adjustments and smelter charges based on an average provisional copper price of $3.56 per pound of copper as compared with $71 million net of pricing adjustments at an average provisional copper price of $3.73 per pound for the three months ended March 31, 2012.

This reduction in revenue is a result of quarter-end pricing adjustments on provisionally priced shipments as well as lower metal prices received during the quarter as compared to the same period last year. The mine shipped and sold is a total of 15 million pounds of copper, 5,800 ounces of gold, and 69,000 ounces of silver for the three months ended March 31, 2013, as compared to a total of 15.7 million pounds of copper, 5,900 ounces of gold, and 124,500 ounces of silver during the three months ended March 31, 2012.

Cost of sales for the first quarter were $47 million which resulted in a gross profit of $8.1 million, compared to cost of sales of $41.9 million which resulted in a gross profit of $29.2 million for the three months ended March 31, 2012. The increase in costs during the quarter is a result of the increased size of mine operating fleet over the prior period as well as the increase in the operating time and the concentrator which increased consumable consumption compared to the three months ended March 31, 2012.

General and administrative expenses for the three months ended March 31, 2013 were $1.7 million compared to $1.2 million for the prior period. Non-cash share-based compensation reflected an expense of $58,000 for the three months ended March 31, 2013 compared to an expense of $258,000 for the three-month period ended March 31, 2012.

The decrease in non-cash share-based compensation was a result vesting of provisions of stock options in prior periods. During the first quarter of 2013, the company received a finance income of $100,000 and finance expense of $2.1 million which primarily consists of interest on loans and the amortization of loan-related financial fees.

This compares to a finance income of $200,000 and finance expense of $1.8 million for the three months ended March 31, 2012. For the three months ended March 31, 2013, the company recognized a non-cash unrealized foreign exchange loss of $6.3 million related to the company's US-denominated staff.

This compares with a non-cash unrealized foreign exchange gain of $5.3 million for the three months ended March 31, 2012. During the quarter, the company recognized a non-cash unrealized gain on the interest rate swap of approximately $290,000 as compared with nil for the same period of last year.

The non-cash unrealized gain on the interest rate swap for the quarter was a result of the revaluation of interest rate swap entered into by the company as part of the project loan which was required by the project lenders. It should be noted that these adjustments, the income are required under IFRS and are non-cash nature as outlined in the company’s statement of cash flows.

For the quarter, the company recorded current resource tax expense of about $297,000 as compared with an expense of $674,000 for the three months ended March 30, 2012. During the first quarter of 2013, the company recognized a deferred income tax expense of $314,000 as compared with nil for the same period in the previous year.

This all resulted in net loss attributable to the shareholders for the first quarter of 2013 of $2.3 million or $0.2 per share as compared to net income of $22.6 million or $0.23 per share for the three months ended March 31, 2012. If we take all the accounting non-cash items out, the company recorded an adjusted earnings of $7.8 million or about $0.8 per share for the three months ended March 31, 2013 compared with adjusted earnings of $19.2 million of $0.20 per share for the three months ended March 31, 2012.

. At March 31, 2013, the company had a cash on-hand of approximately $8.7 million, but after taking into account the concentrate receivable received for the last shipment of the quarter which occurred on March 31, 2013, cash on-hand would increase to about $23.3 million.

The company had working capital of approximately $10.1 million as compared to working capital of $10.7 million at the end of the last quarter. On the hedging front, I’d like to remind everyone on the line today that we have no commodity hedging in place and are extremely attractive debt [financing capacity] as well.

In addition, during the period, the company was required to adopt new accounting policy referred to as IFRIC 20, stripping cost in the production phase of service mine. IFRIC 20 was applied in accordance with the transitional provisions outlined for stripping costs incurred after January 1, 2012 and resulted in an increase in the capitalization of stripping costs on the balance sheet of $3.1 million for the first quarter of 2013 and a corresponding increase in profit on the income statement.

I would like to direct people to Note 3 of the financial statements for three months ended March 31, 2013 for additional information. I’d now like to open the lines up for questions that people may have.

Hi good morning everybody. Am I reading you right when you say that the capacity of both the contractor material and also the new drilling blasting pattern can produce of 10,000 tonnes of material per day?

No, that’s not quite true. With regard to the blasting, we’re blasting all of the ore feed to the mill now.

But in addition to that, we’re also producing about 10,000 tonnes a day of pre-crushed ore feeding the SAG mill. So we’re combining both to try and get a blend that would be about 35% to 40% minus 1-inch material.

Okay. So on a daily basis, how much material is feeding the SAG mill from the contactor crushed ore and the new drilling blasting pattern?

Whatever the mill will take; 35,000 tonnes a day is our target.

Okay. And also, could you remind me, what working debts are you incurring when processing just Pit 3 ore without the new crush size versus when you're processing a contractor crushed ore and the new drilling blasting pattern ores?

Approximately 23.

For both materials?

It doesn’t matter. They're all the same material.

What we do, just so you understand it, in the mine we mine both Pit 3 and Pit 2, and wherever we encounter ore, we increase our powder factor and we're using up to 0.6 kilograms per tonne at the present time. So we're doing a high-energy blast, okay, on all ore.

Part of that ore goes directly to the primary crusher and also part of it goes to a stockpile where it's taken and put through the contract crusher to crush it down the minus 2-inch. That portion of it goes also through the primary crusher.

So that we see the combination of ore directly from the mine and 10,000 tonne a day from contract crusher.

Okay. Thanks a lot.

That's it for me.

Thank you.

Yes. Thanks, guys.

Firstly, on the plans for the secondary crusher, it sounds like you're already there. Just wondering if the joint venture Mitsubishi, are they already there as well?

And is there any sort of details you can give us around that? Just I guess it seems like it's the details around the timing for the financing to be able to finance this from cash flow or from other sources as opposed to necessarily the actual decision to put it in.

If I get down to the question in terms of the details, yes, we've had the feasibilities done by an engineering firm and then we had the capital costs reviewed by the people who are construction managers during the construction of the facility. But also we went and visited the [Zinco] mine where, in Malartic, where they've installed the Rafter 2000 pre-crush facility.

And we've I think got to the point where we're very comfortable with the design, we're very comfortable with the load aspects of it, and we've got detailed quotes on all the equipment. And so we're doing the preliminary work and working out all the details at this time.

And we're looking at a decision sometime midyear. With regard to our partner, they're on-side with it.

We've gone through it. They've sent technical people from Japan to go through the process and what's required.

So technically I think we're all on-side with it. And as you mentioned too is question as to work out all the financial details, with no equity.

Thanks for that detail. Just a question back into the previous question.

Can you remind me what's the extra cost that you think you're -- is going to be incurred for the high-intensity blasting and the crushing of the 10,000 tonnes, either sort of on a per-pound or even the aggregate of what you think is going to happen over the next sort of months and quarter.

Yeah. The costs are probably in the order of a few hundred thousand a month.

So if we get back to tonnage, it really doesn’t affect our cost per tonne milled.

Right. Bringing down the cash cost.

Pardon me?

Sorry. So it would bring -- obviously then bring down the cash costs as you get to production.

That's true.

And so I guess my final set of questions, with respect to the cash cost. I mean last year you had provided guidance I guess on a net cash cost onside of $1.25 to $1.30.

Just wondering, one, with respect to the deferred stripping now, was that considered in that cash cost or not? And then on an equivalent basis, that would in fact lower.

And then just what your thoughts on that guidance now given that you are doing the extra blasting, crushing and what you've achieved in Q1?

I'll answer part of that and I'll let Rod answer the tough part that relates to the accounting aspects. With regard to our cost at the site, our costs are -- appear to be very steady.

And I think for the quarter we're within 1.6% of our plan. That's in total property costs.

So the costs don't vary that significantly, although last month we -- or last quarter we did have a failure of the final drive of one of our shovels. But even at that for the quarter, as I say, we were within 1.6% of our plan.

So I'll let Rod answer the tough questions.

Hi, Mark. Yeah, when we gave our guidance, that did not take into account IFRIC 20.

And so you would see a slight reduction in your total costs onsite on a per-pound basis. And if you look at what that magnitude was for this quarter, I think if we back-calculate it out, it was about $0.20 per pound, if you take a look at the $3.1 million that was put to stripping.

Yeah, I got the similar number, about 23 odd cents. And then just a final one question for me, I guess probably better offline, but are you -- or do you plan on giving guidance on maybe the portion of waste material that -- of the stripping that will be capitalized under this as opposed to what will actually go through the P&L and associated with just sort of the period?

I guess if you look at the strip ratio for the quarter, it turned out to be about 2.4 to 1.

Right.

And life of mine strip ratio is 2 to 1. So you can see that it really didn't have that big of an effect on us this quarter.

And all mining companies are going to be faced with this and companies that have the significantly higher stripping in particular period are going to have to adjust to their life of mine average.

Right. So really it's just that I guess this quarter will be in that 0.4, adjusting it down the life of mine --

Yeah, down to 0.2, that's right, approximately, yeah. Yeah, that's right.

Great. Thanks guys.

Yeah. Thanks, Mike.

Great. Thanks very much guys.

I'm just wondering if you can maybe comment on [inaudible] on maybe where the non-availability and utilization is at since sort of, you know, call it Q2 to date?

Q2 to date?

Yeah.

April -- yeah. I think April we had -- yeah, April was about the same as our average, just a little below, 84, 85.

Okay.

Yeah. And I think we started our [signing] now, at least one thing is that what's happening, Stefan, is that I would say last year probably 75% of our downtime was unplanned.

This year so far are in, since the end of January anyway, about 75% of our downtime is planned. So we are planning our shutdowns and we're getting most of our work done.

So, some very little breakdown.

Okay. And when you are -- actually right, days at the mills are actually turning -- you know, the utilization number is pretty high or is it [inaudible] Q1 sort of suggested that it may have been a bit lower?

The what number? Sorry.

Just in terms of utilization as opposed to availability. So on the day that you are running, are you running, you know, close to 35,000 tonnes a day or you're sort of backing off right now?

Well it varies substantially depending on what the feed is and, you know, will vary from typically 1,200 tonne an hour to 1,700 tonne an hour, depending on the amount of minus 1-inch material and the feed of the SAG mill. The mill itself handles it well at 38,000, 40,000 tonne a day.

But the site mill is really the bottleneck and this is the need for the pre-crushing.

Got you. Okay, perfect.

Just I guess one last question, just on -- going back to the sort of the guidance that you provided back in December. I mean right now we're sort of seeing that with the formal guidance number at 80 million pounds of copper this year.

Is that something you're sort of really for now comfortable with still or do you think we'll see a revision to that at some point?

That's still our plan. We don't see any reason to change the guidance at this time.

But we recognize that we do have some make-up and we've gone over that in detail with people at the mines. And our belief still is that if this crushing works out as well as we think it will, there's a potential for catch-up.

Okay, great. Thanks very much guys.

Hi. Was just wondering if you could put a bit more color around your thinking on the secondary crushing implementation.

When you call it a long-term plan, you know, what kind of timeline are you thinking when you differentiate long term and near term?

Well, I think what we recognize is that we can't get our tonnage without [finer] feed to the SAG mill. So we've done the test in March where we did a 70,000-tonne sample that was crushed to minus 2-inch, and that worked very well.

It went through the mill with no problem at all, well above our design capacity of 35,000-tonne a day. After we finished that, we then did a test with some high-energy blast material from Pit 3, and that also worked well and allowed us to achieve our capacity.

So what we've done is we've implemented for the short term to do both. So we are using the high-energy blast to get the fine, but also we are -- upped our capacity for the pre-crush from 5,000 to 10,000.

We had a contract or we have the same contractor in there and they had facility to do both 5,000 tonnes a day of pre-crush. And he's brought in a bigger secondary crusher and now do 10,000 tonnes a day.

So this we're expecting will help. And when I say that, the 10,000-tonne day, just started really about a week ago.

So this is our short-term plan. When I talk about long-term plan, I think that's pretty obvious to us that for the long term we have to have more security in the supply of a finer product.

And for that we're looking at the secondary crusher and we're looking at that sometime -- a decision sometime midyear on that. And that would take us approximately 12 months to install.

Right. Okay.

Sorry, go on.

But in the meantime we'll continue to use high-energy blasting and the contract crusher to get it through. Until the secondary crushers.

The go-forward decision then I guess would include how you're going to finance it?

Correct.

Okay. Okay.

And then I guess just on the comment where with the measures you have in place in the short term, the MD&A says that you can achieve over 35,000 tonnes per day. I'm just wondering, do you expect to see those kinds of numbers on a sustained basis at all or is that more an instantaneous measure that you can get there for brief periods of time?

Well, I guess number one, we are dependent on the contractor and his performance. But we are also getting into build up a stockpile of the finer material so that we can get a consistent feed to the mill.

If we go with contractor just directly, then we do run into some difficulties in terms of ups and downs. But with the stockpile, we think we can have the buffer there that will give us a steady feed.

Okay. Thanks, Jim.

Thanks.

Yeah, good morning. Thanks.

Most of my questions have been asked. But just one question back to the crusher, not the crusher decision but the crusher timing decision and on financing.

You'd indicated you would like to do it with obviously internal cash flow. What cash balance would you like to see before you make the development decision on the crusher?

Midyear decision, curious to know where you'd like to be on the other working capital and cash balance.

I'm going to let Rod answer that one.

Thanks, Steve. Well, I guess one of the things Jim talked about in the study we looked at was a burn rate of buildup similar to, you know, we did when we built the mine.

So you don't need the whole 35 million right at the start. You would find that, you know, majority of the money you're going to need probably, you know, four months down or five months down into build.

So I think we'd be comfortable with, you know, right now we've got about 25 million, if we can get that up to in the 35 million, 40 million, I think we'd be comfortable starting the program.

I guess I can add to that too, Steve. So far we haven't met our 20 million pounds a month -- or per quarter.

And after 20 million pounds per quarter we see us having the cash to do that.

Got it. All right.

So, you know, you'd indicated you're still seeing sort of 1,200 tonne per hour to 1,700-tonne per hour variability in throughput rates. Obviously at 1,700-tonne an hour, that's going to get to the sort of 35,000-tonne a day with availability that you're seeing.

It looks like it's a real push to get to that guidance for the year based on that. Are you expecting the 10,000-tonne a day pre-crushed to really give you the boost to 1,700 on a pretty stable basis?

I guess -- definitely that's our target, is the 1,700-tonne an hour, and, you know, with 10,000-tonne a day feed and also getting to our 92% operating [time].

Right. All right.

That's actually it for me guys. Thanks a lot.

Good morning, gentlemen. Just have a couple of questions on the cost breakdown.

Could you provide us with a cost breakdown on your mining costs on a per-tonne basis for mining, building and G&A?

Cost per tonne mining, John, for the quarter was about $1.59 per tonne mined. And that was about 8% higher than plan.

And one of the reasons there is that we were planning in the order of 175,000-tonne a day; we averaged about 172,000-tonne a day. So the denominator was a little low, which resulted in a little higher cost.

And also I think I mentioned earlier that the final drive on our number one shovel had to be rebuilt, and that was a bit of a slag for us for the quarter. But anyway, to answer your question, $1.59.

What is moving cost?

Per-tonne, mined, eh?

Yeah. No, but actually tonnes through the mill, how much was it to process -- process cost per tonne?

Are you talking about the mining or?

The milling.

The milling? Milling was up.

It was about $6.8 per tonne milled, which was about -- up about the same proportion as the decrease in tonnes milled.

Okay. So that's just the scaling factors again.

And just to finish that off --

Dollars per month are on, it's just a question of the unit cost.

And then the G&A, just to close that off, would be?

Yeah, I think I mentioned earlier, John, that the total site cost in the $43 million range for the quarter were 1.6% within budget.

Okay. Very good.

Now I just want to talk about the deferred stripping because my understanding of it is it's got to do with the amounts that -- it's not just being above life of mine but moving tonnes of waste that actually provide access to future ore. So it's more closely matched to, you know, the production effort.

I was wondering if you, you know, what do you expect to be capitalizing over the course of 2013? Is there a number -- dollar figure for that or?

Don't have it. I don’t have a dollar figure for that right now, John.

But ours, because ours is closely -- it's considered essentially one segment and I think what you're referring to is some mines will give -- divide their pit into a number of different segments and say, okay, moving this ore material, moving this waste material releases this or over here, so we're going to match that up with this ore. We've taken a little bit easier approach where it's very closely matched to a life of mine strip because we're doing a series of pushbacks everywhere.

So there's a bit of an advantage there and we've already got a lot of it moved, right?

So it doesn’t change much from pit to pit as well. Is that's what I'm inferring from that?

Well, it depends on what's happening in what pit. When you start, you know, for example, when we go to start our next stage pushback in Pit 3 on the left side, you've got a bit aways to go through before you get down there.

So that will -- you'll see an increase in strip ratio when we enter that area and so there'll be a little bit higher adjustment as a result of this IFRIC 20 that we're forced to do.

Okay. That makes --

John, just one other thing I'll add. The numbers I gave you were not accounting numbers, they're cash numbers from the site.

They're cash numbers per tonne from the site and -- okay. That's fair enough.

So, yeah, okay, that's per-tonne moved. That's fair enough.

Yeah. But Jim's point, I think another point he made I think that's significant is for the quarter, our total cost for the quarter, we're about 1.6% over budget, so, very, very close.

Like our monthly costs are very, very predictable. And it's just, you know, the denominator and the unit getting through that you see the variation.

Okay. So now my final question, and it's a biggie, if we're going to put this crusher in, your throughput is going to go up, your old feasibility mine plan is completely out the door, so I was just wondering, are you going to give us a broad-ranging update with new feasibility, new mine plan?

Is that something we can expect before you make this final decision?

Well, I think you're aware, John, I mean the whole is a dynamic program and we've recently been reviewing our -- both our resource and reserves in terms of the block models and trying to get the best reconciliation we can with regard to the predictions and what we're mining in. And so we're working on it continuously.

As to whether or not we're going to do another feasibility study, I don’t think so. You know, I think our goal now is to maximize our tonnage and get as much copper out as we can.

It'll be year-to-year basis.

So are we -- are you going to do a reserve update at some point?

I guess we'll have to at some point. But for right now, John, we have a five-year plan, we have a 10-year plan, and we're doing exploration continuously.

Like last year we did a fair amount of drilling which really outlined a lot of material outside our super pit. So I think as long as things are fairly dynamic, we're probably not going to put out an awful lot on it.

So I could interpret for that you'll be kind of mining 0.35% copper for the next two years or so?

Yeah, I'd say 0.35 to 0.4.

Okay. Thank you.

That's all for me.

Good morning everyone.

Good morning.

My first couple of questions are really just to clarify some earlier statements. Just wanted to make sure I understood the timing on a couple of things.

First of all, you mentioned the shovel being down for a period of time. And I think you'd said it was in April.

But it sounded also at another plant, like it might have been during 1Q. Just wanted to be sure I have the timing right on that.

Yeah, the shovel [final drive] was rebuilt in March, Adam.

Okay.

So that's in March. That's a March cost to us.

And that was one of the reasons you saw -- there's two reasons why your mining cost dropped. It was in total dollars I'm talking.

There's a little bit on the extra high-energy blasting that we started late march and your [final drive].

And I noticed that the tonnes mined in addition to the one had in the stockpile movement, it looked like they were down about 6% quarter over quarter. Is that due to that shovel outage late in the quarter as well?

Probably if anything, it's due to we've had a number of people off on short-term disability. It's not related to mine accidents but related to snowmobile accidents.

And so we've had a bit of a shortfall on truck drivers recently during the winter months.

Pardon? The other thing I wanted to inquire about on the timing was the pre-crushing.

You said that you've gone from 5,000 tonnes per day to 10,000 tonnes per day with contractor pre-crushing. And that was in May that you've done that.

And then -- so that for the full month of April you're doing at about 5,000 tonnes per day?

Correct. And actually there was an interruption there also because they were rebuilding their portable crusher and putting in the new crusher to take it up to the 10,000-tonne per day range.

Okay. And that sort of leads into my next question.

I mean you guys have given a pretty good disclosure about the variation in the throughput during 1Q. But I'm very curious to know what the throughput has been like during the month of April and the first two weeks of May here.

You guys did give us a little bit of clarity about the availability, but I was curious about the throughput.

Throughput, particularly in May, has suffered. And the reason it suffered is that it -- we didn't have the pre-crushed material for the full month.

As I said, they had the 5,000-tonne a day crusher down while they converted it to 10,000-tonne a day for the last couple of weeks. So it's really just caught up the last week and been performing.

The production in April, the capacity, was about 34,000-tonne per operating day versus 38,000 planned.

Okay, that's helpful. Moving on, I was also curious about the G&A expense during the quarter.

It was about $1.7 million. It's about double what it was in the previous quarter and about 45% over and above what you guys typically have.

Just wondered if there's some special items included in G&A this quarter and what that might be going forward.

Yeah, the -- it was a little bit higher this quarter. There were some salary additions this quarter as well as some yearly bonuses pay-downs this.

So that's sort of a little one-off item.

What would you expect it to be on a go-forward basis or a quarterly run rate?

Quarterly run would be fairly similar to what you saw annualized last year. And we don't see a lot of change there.

And if you look at our annualized G&A from the December financials, Adam, it was running about $4.2 million a year.

Okay. And actually I remember I just have one more question regarding throughput.

Taking a look back at 1Q, the throughput -- so your availability improved quarter over quarter but throughput was down about 15% from 34,000 tonnes per day to 29,000 tonnes per day on the days you actually were operating. Was that just due to encountering more hard ore or higher Pit 3 blend in the quarter versus 4Q?

The question -- I'm sorry, I didn't quite understand that.

Yeah, I'm just wondering why the throughput decreased. On the days you were up and running, why the throughput was lower by about 15% quarter over quarter in 1Q.

I think in the -- you're talking about the fourth quarter, right? Last year?

Yeah, I'm talking -- so in 1Q your tonnes per day milled was 29,000 and in 4Q I think it was about 34,000. Now your availability was higher in 1Q but the throughput was down.

Right, right. Yeah.

And the latter part of last year, actually starting in August, we went in to Pit 2, if you remember. And when we did go into Pit 2 we were in upper zones and we were getting some excellent tonnage through there.

And then as we went deeper into Pit 2, it got harder and harder. And I think that probably is one of the reasons for it.

Also I think in Q1 we did a little more work in Pit 3 whereas in Q4 of last year, the latter part of last year, I would say 75%, 80% of our material was coming from Pit 2, and then this year we're probably closer to maybe 60%, and also we're down quite a few benches in Pit 2.

How are you expecting the portion of the blend from Pit 2 versus Pit 3 to vary throughout the remainder of the year relative to say what you've done in the first quarter?

I think it's going to be about 60% Pit 2. And it's going to vary from time to time.

You know, on Pit 3 we're doing a pushback. And so as the end of the year, latter part of the year, will be more into Pit 3 and higher-grade material as we go deeper.

But Pit 2 material will continue also, but it will be a little more from Pit 3 at the latter part of the year.

All right. One last question for me.

Sorry about that. So we've -- Pit 2 ore has gotten harder as you've been going deeper.

What kind of change in the grinding have you seen as you've gone from the higher benches to the lower ones?

I don’t know if it's the work index as much as the amount of fine. When we were in the upper zones of Pit 2, it was -- we did encounter some oxidation, and so the ore broke up very easily.

Then it's a little more complicated in the sense that there are areas in Pit 2 and Pit 3 where we have a lot of [L bite and horn cell] in pockets. And when we hit those pockets, the ore is -- the work index doesn’t change substantially but the ore is much tougher and it doesn’t break.

And so in the SAG mill, the SAG mill becomes ineffective, you know, to sum it. I mean you have to break the sort of 4, 5-inch particles with the crusher to get them down.

And when we get in those areas and we don't have any pre-crush or high-energy blast, the tonnage goes down.

All right, thanks. That's it for me.

Good morning, gentlemen. Solid quarter from you guys.

Just, most of my questions have already been answer, just a couple of things here. In terms of the -- assuming the secondary crushers are approved, in terms of early benefits you foresee, it seems that the benefits you'll start achieving from second quarter 2014, is that correct?

Yes. Yes.

Okay. And in terms of IFRIC changes, accounting changes, what -- is there going to be revision to cash cost guidance of $1.80 to $2 per pound with this change?

No. We haven't considered that at this stage, Garnet.

We're looking at, you know, because our, as I said in the first quarter here, our strip ratio was very close to mine average, it didn't have that significant of an effect on it.

Right.

But we certainly will look at that in the future.

Okay. And then I guess lastly, in terms of financing of the secondary crusher that's approved, would there be consideration to -- and is there flexibility to -- some debt deferral in terms of your current [read-in] and schedule, particularly the 50% cash [sweep]?

I mean any new capital expenditure of this magnitude we would need our bank's approval for. So they're going to be intimately involved in it and they'll see the benefits of, as Jim has pointed out, the additional tonnage and more copper production.

So I think it's in everyone's interest to move it forward at the right time and as soon as we can. So with respect to, you know, what the bank may or may not do, that's speculation at this stage.

Right. So is part of this business case an opportunity to actually fast-track the processing of the low-grade ore big stockpile as well with the new crushed?

Is it -- more of a mine question, but I would say, no, it is not. I think it's more of a case that it allows you to process any ore on the site equally because it's going to be crushed down to minus 2-inch.

And so I think that gives more flexibility.

Okay. Thank you.

Hi guys. Most of my questions have been answered.

But I guess the last one I do have is on the deferred cost again. About 20-odd cents that you guys had on the quarter on a per-pound basis, how much of that would have been expensed in your cash costs on the old method?

You have to say a majority of it, but it's a little more complicated than that, Chris. You actually have to run the numbers because we also have a low-grade stockpile, some of those costs would have been captured in the low-grade stockpile.

But what's happened now, we've had our low-grades stockpile costs go down a little bit in terms of dollars going there, and it goes to deferred stripping in a greater quantity. So I think not all of those costs will go over but a majority of that $0.20 would have been there.

Okay. Okay.

And then in terms of your capital costs for the rest of 2013, can you just remind what number would have been?

The capital costs that we gave guidance for this year was about $3.5 million for the year. And we haven't given updated guidance for the balance of the year.

So that number is still a valid number. And as I pointed out in that earlier question, you know, the secondary crusher expenditure of $35 million will be a non-budgeted item that we need everybody's approval on including the banks.

Okay. Okay, thanks.

Sorry again to get back into this but I just had one question just to make sure I understand it. If you put the secondary crusher in, what do you expect will be the uptick on the throughput on that plant with secondary crushing fully in there and you're getting the 2-inch.

You're just going to meet design or are you going to exceed 35?

Well, I guess, John, to answer that is when we did the test, we were able to run quite comfortably at 1,700-tonne, 1,800-tonne an hour range. And I believe that (FL Smith) would be giving us a warranty of 1,800.

So it would give you 1,800 tonnes an hour. Okay.

I think if you look at what happened to the [Zinco], they -- I think they reported something like a 36% in tonnage.

Okay. And so now -- now the question I got, I guess the crushing -- so, have you done any additional crushings?

I mean you're using a different kind of crusher in the pit than you would be using that [FL Smith] stone crusher. So have you done any further work on that -- are you comfortable that you'll get that rate out of that?

Yeah, we -- when we did the engineering on this, firm that did the engineering for us, they looked at a number of alternatives and in fact I guess [Newmont] at their Phoenix mine, they put in some [Raptor 1100]. But we look -- we currently operate, our [temple] crushers are 900, [Raptor 900].

And we looked at the 1100, the 1300 and then the 2000. And it appears that we could get by with the 1300 but the price difference in going to the 2000 isn't that significant.

And when you look at it for the long term, we feel that it's best to go with the bigger crusher. And that would be the same crushers that they put in at [Zinco] -- [Sysco].

[Sysco] [inaudible]. So that would be unit, what, three or four?

It would -- yeah. That's right, it would be number three.

Number three. Okay.

[inaudible] they're looking at more.

No, I was wondering like -- there's not too many -- like they were some of the first installations on those crushers, so I guess, would you still be fairly early in the installation of that particular unit?

Yeah. What we did, John, is we [Sysco] were very, very helpful in accommodating and we took maintenance, engineering and our new vice president and myself, we all visited there.

And they were extremely helpful in going through some of the difficulties they saw with the crusher and some of the modifications that were made and also [FL Smith] were there and they also advised us of the changes and what was required to get a reliable product. So we've done a fair amount of due diligence on that.

Perfect. Thank you.

Well, thank you very much everyone for joining us for our 2013 first quarter earnings conference call. And as usual, Jim and I are always open if you have questions, you can call directly.

Thank you very much. Bye-bye.

Thank you. Bye.