Teck Cominco Limited
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Teck Cominco Limited

October 30, 2006 18:13 ET

Teck Cominco Reports Net Earnings of $504 Million in the Third Quarter

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 30, 2006) - Don Lindsay, President and CEO said, "Third quarter earnings were $504 million, up from $405 million a year ago. We did ship all of our Red Dog concentrates during the 2006 shipping season, however poor weather conditions delayed the loading of vessels and the timing of shipments resulting in the shifting of some of Red Dog's sales from the third quarter into the fourth quarter of this year and the first quarter of 2007. Year-to-date net earnings were $1.6 billion, almost double the net earnings of $835 million in the first nine months of 2005."

Highlights and Significant Items

- Unaudited net earnings were $504 million or $2.34 per share in the third quarter, up from $405 million or $2.00 per share in the third quarter of 2005 due to higher metal prices despite significantly lower zinc sales at the Red Dog mine compared with a year ago.

- Year-to-date net earnings were $1.6 billion, almost double the net earnings of $835 million in the first nine months of 2005.

- Cash flow from operations, before changes to non-cash working capital items, was $629 million in thhe third quarter compared with $476 million in the same period of 2005.

- Earnings before interest, taxes, depreciation and amortization (EBITDA) were $874 million in the third quarter compared with $611 million a year ago.

- The company's bid for all of the outstanding shares of Inco Limited expired on August 16, 2006 when the minimum tender condition was not satisfied. The company expects to record a pre-tax gain of $135 million in the fourth quarter with net proceeds of approximately $430 million on the sale of its Inco shares after repayment of the Inco exchangeable debentures.

- A five-year collective agreement was ratified by the unionized employees of the Highland Valley Copper mine on October 13, 2006.

- Cash (including temporary investments) increased by $243 million in the third quarter and totalled $3.8 billion at the end of September.

Management's Discussion and Analysis of Financial Position and Results of Operations

This discussion and analysis of financial condition and results of operations of Teck Cominco Limited is prepared as at October 30, 2006, and should be read in conjunction with the unaudited consolidated financial statements of Teck Cominco Limited and the notes thereto for the three and nine months ended September 30, 2006 and with the audited consolidated financial statements of Teck Cominco Limited and the notes thereto for the year ended December 31, 2005. In this discussion, unless the context otherwise dictates, a reference to Teck Cominco or the company refers to Teck Cominco Limited and its subsidiaries including Teck Cominco Metals Ltd. and a reference to Teck Cominco Metals refers to Teck Cominco Metals Ltd. and its subsidiaries. Additional information relating to the company, including the company's annual information form, is available on SEDAR at www.sedar.com.

This discussion and analysis contains forward-looking statements. Please refer to the cautionary language on page 15.

Earnings

Unaudited net earnings in the third quarter were $504 million or $2.34 per share, up from net earnings of $405 million or $2.00 per share in the third quarter of 2005.

The higher earnings in the third quarter were due mainly to higher copper and zinc prices, partially offset by significantly lower zinc sales from Red Dog and a lower realized coal price. Average LME cash prices for copper and zinc were US$3.48 and US$1.53 per pound respectively in the quarter, up significantly from US$1.70 and US$0.59 per pound respectively in the third quarter of 2005. Realized coal prices averaged US$109 per tonne in the third quarter of 2006 compared with US$118 per tonne a year ago. A lower Canadian/U.S. dollar exchange rate of 1.12 in the third quarter compared with 1.20 a year ago also partially offset the higher copper and zinc prices.

Red Dog's zinc sales and operating profit were significantly lower than anticipated in the third quarter due to poor weather conditions that delayed concentrate shipments. Red Dog's zinc sales in the third quarter were 80,000 tonnes lower than a year ago. Based on the average zinc price of the third quarter of US$1.53 per pound, this represents approximately $82 million in net earnings being deferred to the following two quarters.

Third quarter earnings were also adversely affected by certain accounting provisions relating to the Antamina operations. The original project debt was refinanced in September resulting in the write-off of the unamortized amount of deferred financing costs of $31 million on an after-tax basis (Teck Cominco's share - $7 million). In addition, the mine made an accrual of $57 million (Teck Cominco's share - $13 million) for extraordinary social contributions for the nine months of 2006 pending the finalization of an agreement with the Government of Peru.

Operating profit of $876 million in the third quarter increased by $326 million from $550 million in the same period last year, due to strong performance at the copper and zinc mine operations resulting from high metal prices. As well, Trail posted a strong performance and recorded an operating profit of $101 million compared with $31 million in the third quarter of 2005. Partially offsetting these strong performances were significantly lower zinc sales volumes from Red Dog, a lower realized coal price and a weaker U.S. dollar. Metal prices rose slightly in the third quarter resulting in final pricing revenues of $18 million, compared with $25 million in the third quarter of 2005.

Compared with the second quarter of 2006, operating profit in the third quarter decreased slightly despite higher zinc sales volumes at Red Dog. The main reason for the decrease in operating profit was the lower final pricing revenues of $18 million received in the third quarter when copper and zinc prices stayed relatively constant, compared with $107 million received in the second quarter when metal prices moved up significantly.

Year-to-date net earnings were $1.6 billion, almost double the net earnings of $835 million in the same period of 2005 despite significantly lower zinc sales. The higher earnings were due to significantly higher commodity prices, partially offset by a weaker U.S. dollar.

Cash Flow from Operations

Cash flow from operations, before changes to non-cash working capital items, was $629 million in the third quarter compared with $476 million in the third quarter of 2005 due mainly to higher profits from copper and zinc operations.

Cash flow from operations, after non-cash working capital changes, was $752 million compared with $383 million in the third quarter of 2005. Net change in non-cash working capital items of $123 million was due mainly to the timing between the accrual and payment of current taxes.

Cash flow before changes to non-cash working capital items was $1.8 billion for the nine months ended September 30, 2006 compared with $1.1 billion in 2005.

Revenues

Revenues are affected by sales volumes, commodity prices and currency exchange rates. Comparative data for production and sales as well as revenues are presented in the tables on pages 5 and 6. Average commodity prices and Canadian/U.S. dollar exchange rate are presented in the table below.



AVERAGE METAL PRICES AND EXCHANGE RATE
--------------------------------------

Third Quarter Nine months ended Sep. 30
-------------------------- -------------------------
2006 2005 % Change 2006 2005 % Change

Copper (LME Cash -
US$/pound) 3.48 1.70 +105% 3.00 1.57 +91%
Zinc (LME Cash -
US$/pound) 1.53 0.59 +159% 1.35 0.59 +129%
Lead (LME Cash -
US$/pound) 0.54 0.40 +35% 0.53 0.43 +23%
Gold (LME PM fix -
US$/ounce) 622 439 +42% 602 431 +40%
Molybdenum (realized -
US$/pound) 24 23 +4% 22 28 -21%
Coal (realized -
US$/tonne) 109 118 -8% 115 92 +25%
Cdn/U.S. exchange
rate (Bank of Canada) 1.12 1.20 -7% 1.13 1.22 -7%


Revenues from operations were $1.6 billion in the third quarter of 2006 compared with $1.1 billion in the same period a year ago. The increase over 2005 was due mainly to significantly higher prices for copper and zinc, partly offset by lower zinc sales volumes from Red Dog.

Sales of metal in concentrates are recognized in revenues when title transfers and the rights and obligations of ownership pass to the customer, which usually occurs upon shipment. However, final pricing may not be determined until a subsequent date, which often occurs in the following quarter. Accordingly, revenue in a quarter includes provisional prices for sales occurring in the quarter and final pricing adjustments from sales that occurred in previous periods. These final pricing adjustments result in additional revenues in a rising price environment and reductions to revenue in a declining price environment. Any favourable or unfavourable adjustments to revenues recognized by the company as a result of price changes will be reduced by the price participation deductions provided in the smelting and refining agreements.

At June 30, 2006, the end of the previous quarter, outstanding receivables included 158 million pounds of copper provisionally valued at US$3.37 per pound and 74 million pounds of zinc provisionally valued at US$1.48 per pound. During the third quarter, 136 million pounds of copper included in the June 30, 2006 receivables were settled at an average final price of US$3.48 per pound and 74 million pounds of zinc were settled at an average final price of US$1.52 per pound.

At September 30, 2006, outstanding receivables included 174 million pounds of copper provisionally priced at US$3.43 per pound and 140 million pounds of zinc provisionally valued at US$1.52 per pound. The majority of these receivables (sales) will be final-priced in the fourth quarter.



PRODUCTION AND SALES (Note 1)
-----------------------------

Production Sales
------------------------- ------------------------
Third Year Third Year
Quarter to Date Quarter to Date
2006 2005 2006 2005 2006 2005 2006 2005
------------------------------------------------------------------------

TRAIL METAL OPERATIONS (Note 2)

Refined Zinc -
Thousand tonnes 72 13 219 156 71 33 220 169

Refined Lead -
Thousand tonnes 23 5 68 47 22 7 66 46

Surplus Power -
GW.h - - - - 245 581 785 1,076

MINE OPERATIONS
(Note 3)

Zinc - Thousand
tonnes
Red Dog 155 156 424 426 117 197 290 359
Antamina 10 12 26 38 11 11 25 37
Pend Oreille 9 13 29 36 9 13 29 36
Louvicourt - - - 3 - - - 3
--------------------------------------------------------------------
174 181 479 503 137 221 344 435

Copper - Thousand
tonnes
Highland Valley
Copper 43 47 121 126 47 39 133 133
Antamina 20 20 63 61 22 21 61 62
Louvicourt - - - 4 - - - 4
--------------------------------------------------------------------
63 67 184 191 69 60 194 199

Lead - Thousand
tonnes
Red Dog 33 29 91 73 53 56 58 58
Pend Oreille 1 3 4 6 1 3 4 6
--------------------------------------------------------------------
34 32 95 79 54 59 62 64

Molybdenum -
Thousand pounds
Highland Valley
Copper 977 1,276 3,176 4,872 910 1,659 2,918 5,292
Antamina 1,057 842 2,777 2,199 814 790 2,760 2,523
--------------------------------------------------------------------
2,034 2,118 5,953 7,071 1,724 2,449 5,678 7,815

Gold - Thousand
ounces
Hemlo 49 58 154 179 52 61 157 182
Pogo (Note 4) 18 - 40 - 18 - 35 -
Other 3 4 9 12 3 2 8 10
--------------------------------------------------------------------
70 62 203 191 73 63 200 192

Coal - Thousand
tonnes
Elk Valley
Coal
(Note 5) 2,006 2,356 6,490 7,556 2,358 2,463 6,683 7,110


Notes:
(1) The table presents the company's share of production and sales
volumes.
(2) Refined zinc and lead production in the third quarter of 2005 was
affected by a shutdown of metal operations caused by a strike.
(3) Production and sales volumes of base metal mines refer to metals
contained in concentrate.
(4) Pogo operations have not reached commercial production levels and the
results from operations are not included in the company's earnings.
(5) Results of the Elk Valley Coal Partnership represent the company's
40% direct interest in the Partnership commencing April 1, 2006, 39%
from April 1, 2005 to March 31, 2006 and 38% from April 1, 2004 to
March 31, 2005.


REVENUES, DEPRECIATION AND OPERATING PROFIT
-------------------------------------------

QUARTER ENDED SEPTEMBER 30
--------------------------

Depreciation Operating
Revenues and Amortization Profit (Note 1)
-------------- ---------------- --------------
Third Quarter Third Quarter Third Quarter
($ in millions) 2006 2005 2006 2005 2006 2005
-------------------------------------------------------------------------
Zinc
Trail (including
power sales) $ 443 $ 152 $ 12 $ 6 $ 101 $ 31
Red Dog 327 241 16 22 216 106
Pend Oreille 22 14 3 4 9 1
Inter-segment sales
and other (97) (11) - - 8 (5)
----------------------------------------------------------------------
695 396 31 32 334 133

Copper
Highland Valley Copper 391 233 13 15 287 144
Antamina 215 129 9 9 155 87
Louvicourt - 1 - - - 1
----------------------------------------------------------------------
606 363 22 24 442 232

Gold
Hemlo 37 33 6 5 2 3

Coal
Elk Valley Coal
(Note 2) 294 358 10 10 98 182
------------------------------------------------------------------------
TOTAL $1,632 $1,150 $ 69 $ 71 $ 876 $ 550
------------------------------------------------------------------------
------------------------------------------------------------------------


NINE MONTHS ENDED SEPTEMBER 30
------------------------------

Depreciation Operating
Revenues and Amortization Profit (Note 1)
-------------- ---------------- --------------
Year to Date Year to Date Year to Date
($ in millions) 2006 2005 2006 2005 2006 2005
------------------------------------------------------------------------
Zinc
Trail (including
power sales) $1,257 $ 686 $ 35 $ 28 $ 284 $ 90
Red Dog 689 380 34 36 456 158
Pend Oreille 69 40 11 13 31 -
Inter-segment sales
and other (280) (81) - 1 (5) (5)
----------------------------------------------------------------------
1,735 1,025 80 78 766 243

Copper
Highland Valley Copper 1,111 731 34 51 818 423
Antamina 601 362 24 28 456 237
Louvicourt - 21 - 3 - 12
----------------------------------------------------------------------
1,712 1,114 58 82 1,274 672

Gold
Hemlo 111 98 18 16 10 8

Coal
Elk Valley Coal
(Note 2) 893 835 27 25 344 353
------------------------------------------------------------------------
TOTAL $4,451 $3,072 $ 183 $ 201 $2,394 $1,276
------------------------------------------------------------------------
------------------------------------------------------------------------

Notes:
(1) Depreciation and amortization are deducted in calculating operating
profit.
(2) Results of the Elk Valley Coal Partnership represent the company's
40% direct interest in the Partnership commencing April 1, 2006,
39% from April 1, 2005 to March 31, 2006 and 38% from April 1,
2004 to March 31, 2005.


Operations

Trail Smelter and Refineries (100%)

Three months ended Nine months ended
Sep. 30 Sep. 30
------------------- ------------------
100% 2006 2005 2006 2005
----

Zinc production (000's tonnes) 71.8 13.2 219.0 156.0
Lead production (000's tonnes) 23.2 4.9 67.8 47.3
Zinc sales (000's tonnes) 70.7 32.4 219.6 168.9
Lead sales (000's tonnes) 21.9 7.4 66.2 46.1
Surplus power sold (GW.h) 245 581 785 1,076
Power price (US$/megawatt hr) 53 62 42 54
Operating profit ($ millions)
- Metal operations 92 (5) 261 35
- Power sales 9 36 23 55


Refined zinc and lead production of 71,800 tonnes and 23,200 tonnes were at normal levels in the third quarter. Production and sales in the third quarter of 2005 were affected by a shutdown of metal operations caused by a strike during most of the quarter.

Specialty metals continue to contribute favourably to Trail's results, with indium production increasing to 13,600 kilograms in the third quarter compared with 3,000 kilograms a year ago and 12,500 kilograms in the preceding second quarter of 2006.

Operating profit from metal operations was $92 million in the third quarter compared with a small operating loss last year. The higher operating profit was due mainly to higher zinc prices, while the 2005 operating results were negatively affected by reduced sales volumes and care and maintenance costs during the shutdown.

Operating profit from surplus power sales in the third quarter was $9 million compared with $36 million last year. The lower profits reflect the significantly higher power sales volumes in 2005 as a result of the shutdown of metal operations during the strike period.

The installation of the fourth power generator at Waneta dam and the replacement of substations and other infrastructure is continuing as planned with completion expected by year-end.



Red Dog (100%)

Three months ended Nine months ended
Sep. 30 Sep. 30
------------------- ------------------
100% 2006 2005 2006 2005
----

Tonnes milled (000's) 891 872 2,430 2,324
Zinc grade (%) 20.5 20.8 20.9 21.5
Lead grade (%) 6.1 5.7 6.2 5.3
Zinc recovery (%) 84.9 85.7 83.7 85.4
Lead recovery (%) 60.5 58.4 60.1 59.3
Zinc production (000's tonnes) 155.3 155.6 423.9 426.4
Zinc sales (000's tonnes) 117.2 197.4 290.4 359.2
Lead production (000's tonnes) 32.9 28.8 90.5 73.2
Lead sales (000's tonnes) 52.9 56.0 57.5 57.8
Operating profit ($ millions) 216 106 456 158


Zinc production at Red Dog in the third quarter was similar to last year, as higher mill throughput was mainly offset by lower ore grades in the quarter.

Zinc sales of 117,200 tonnes in the third quarter were lower than normal levels and were 80,000 tonnes lower than the same period a year ago. Significantly lower zinc sales volumes were caused by heavy ice conditions, which delayed the start of the shipping season, and subsequent poor weather conditions which further delayed loading and shipments.

Despite significantly lower zinc sales volumes, operating profit doubled to $216 million compared with a year ago as a result of higher zinc prices.

The shipping season began on July 15, 2006 and was completed on October 24, 2006 with a total of 1,022,000 tonnes of zinc concentrate and 228,000 tonnes of lead concentrate shipped from the mine. Metals available for sale from October 1, 2006 to the beginning of the shipping season in 2007 are 472,000 tonnes of zinc in concentrate and 62,000 tonnes of lead in concentrate. While zinc and lead sales volumes in the fourth quarter are expected to be significantly higher than the first two quarters of 2007, actual sales volumes will ultimately depend on the timing of vessel arrivals and when customers take delivery of the concentrates.

Pursuant to a royalty agreement with NANA Regional Corporation Inc. (NANA), the company pays NANA an annual advance royalty equal to the greater of 4.5% of Red Dog mine's net smelter return or $1 million. After the company recovers certain capital expenditures including an interest factor, the company will pay to NANA a 25% net proceeds of production royalty from the Red Dog mine, increasing in 5% increments every fifth year to a maximum of 50%. Advance royalties previously paid will be recoverable against the 25% royalty on net proceeds of production. As at September 30, 2006, the amount of unrecovered capital expenditures including interest was US$280 million and the cumulative amount of advance royalties paid was US$140 million. The company estimates that the payment of the 25% royalty would commence in the first quarter of 2008 based on the average realized zinc and lead prices in the first nine months of 2006. The actual date on which the royalty becomes payable will be affected by a number of factors, including zinc and lead prices, capital expenditures and the cumulative amount of advance royalty payments.



Antamina (22.5%)

Three months ended Nine months ended
Sep. 30 Sep. 30
--------------------- --------------------
100% 2006 2005 2006 2005
----

Tonnes milled (000's) 7,581 7,367 22,326 21,996
Copper grade (%) 1.21 1.28 1.37 1.34
Zinc grade (%) 0.87 1.04 0.78 1.09
Copper recovery (%) 89.6 90.1 90.3 89.7
Zinc recovery (%) 90.6 81.5 86.0 83.1
Copper production
(000's tonnes) 88.9 86.6 279.5 270.3
Copper sales (000's tonnes) 104.5 94.2 276.8 274.8
Zinc production (000's tonnes) 47.4 55.2 117.8 169.2
Zinc sales (000's tonnes) 49.6 46.2 109.9 162.8
Molybdenum production
(000's pounds) 4,699 3,742 12,341 9,772
Molybdenum sales
(000's pounds) 3,619 3,515 12,267 11,215
Company's share of operating
profit ($ millions) 155 87 456 237


Copper production of 88,900 tonnes was 3% higher than the same period last year due mainly to additional ore milled in the quarter. Copper-only ore accounted for 78% of mill throughput in the quarter compared with 63% in the third quarter of 2005. The increase in copper-only ore has resulted in higher molybdenum production compared with a year ago. In the fourth quarter, the mining plan calls for the processing of 81% of copper-only ore.

Copper and zinc sales in the third quarter were slightly higher than a year ago at 104,500 tonnes and 49,600 tonnes, respectively. The company took title to approximately 5,000 tonnes of Antamina copper concentrates in late September that will be resold to certain customers. These shipments will be recognized as sales in the fourth quarter.

Compania Minera Antamina, along with other mining companies with mining stability agreements, is finalizing an agreement with the Government of Peru with respect to proposed extraordinary social contributions in lieu of new mining royalties. The proposal calls for 3.75% of after-tax net income to be contributed to funds to be established for social spending in areas affected by mine development. Contributions are expected to be made effective January 1, 2006 and the company's 22.5% share of the proposed contributions for the nine months amounting to $13 million was accrued in the third quarter. Legislation to impose new mining royalties is still under debate in the Peruvian Congress, although it is expected that those royalties will not apply to companies with mining stability agreements provided that the proposed arrangements for extraordinary contributions are finalized.

The company's share of operating profit in the third quarter was $155 million compared with $87 million in the same period last year. The higher operating profit was due mainly to significantly higher copper and zinc prices, partially offset by the accrual of social contributions and the provision for the net profits royalty.

The collective agreement at the Antamina mine expired July 24, 2006 and negotiations for a new agreement are ongoing.

As part of the purchase consideration, the company's interest in Antamina is subject to a net profits royalty which is equivalent to 7.4% of the company's share of project cash flow after recovery of capital costs and an interest factor. The net profits royalty has become payable beginning in 2006 and third quarter royalty expense was $12 million.



Highland Valley Copper (97.5%)

Three months ended Nine months ended
Sep. 30 Sep. 30
--------------------- --------------------
100% 2006 2005 2006 2005
----

Tonnes milled (000's) 11,461 13,079 33,961 37,139
Copper grade (%) 0.411 0.408 0.399 0.392
Copper recovery (%) 91.7 89.1 91.2 88.6
Copper production
(000's tonnes) 44.0 47.6 124.5 128.7
Copper sales (000's tonnes) 48.0 40.8 136.7 136.8
Molybdenum production
(000's pounds) 1,002 1,308 3,258 4,997
Molybdenum sales
(000's pounds) 933 1,701 2,993 5,427
Operating profit ($ millions) 287 144 818 423


Mill throughput at Highland Valley Copper in the third quarter was 12% lower than last year primarily due to the harder ore from Valley and Highmont pits, a fire in the pebble crusher building in mid-September and the orderly shutdown of the mill three days prior to the quarter end in anticipation of a potential strike. As a result of the lower throughput, copper production declined to 44,000 tonnes in the third quarter compared with 47,600 tonnes last year.

Copper sales in the third quarter were 18% higher than a year ago and 9% higher than production due to the timing of shipments. Copper sales volumes on a year-to-date basis are the same as last year. Molybdenum revenues, after realization charges and final pricing adjustments, were $27 million in the quarter compared with $47 million last year. The 45% reduction in sales volumes was caused by lower production due to lower ore grades.

Operating profit was $287 million in the third quarter compared with $144 million in the same period a year ago due to significantly higher copper prices and sales volumes.

The Highland Valley Copper mine and its unionized workers reached a collective agreement on October 1, 2006, which was ratified on October 13, 2006 and covers a five-year period to September 30, 2011.

The Valley east pit wall push-back is progressing on plan and mass excavation for the relocation of the in-pit crusher and conveyor is nearing completion. Higher molybdenum prices continued to facilitate the inclusion of Highmont ore which is expected to further extend the mine life and improve copper production during the 2008-2009 transition period. Approximately 13 million tonnes of Valley east wall pre-stripping will be mined in the current year, with 33 million tonnes planned in 2007 and 44 million tonnes in 2008.



Hemlo Gold Mines (50%)

Three months ended Nine months ended
Sep. 30 Sep. 30
--------------------- --------------------
100% 2006 2005 2006 2005
----

Tonnes milled (000's) 827 842 2,473 2,626
Grade (g/tonne) 3.9 4.6 4.1 4.5
Mill recovery (%) 95.3 94.0 94.2 93.9
Production (000's ozs) 99 118 308 359
Sales (000's ozs) 103 122 313 364
Cash operating cost per
ounce (US$) 481 330 455 321
Company's share of operating
profit ($ millions) 2 3 10 8


Gold production of 99,000 ounces was 16% lower than the third quarter last year due to continuing poor ground conditions that restricted mining activities in the quarter. Cash operating costs increased to US$481 (C$540) per ounce in the third quarter compared with US$330 (C$396) per ounce a year ago due to increased mining costs, the effect of the lower production and a weaker U.S. dollar.

The realized gold price in the third quarter was US$622 per ounce compared with US$439 per ounce a year ago. The higher gold price was offset by higher operating costs and lower production resulting in operating profits of $2 million in the third quarter compared with $3 million last year.



Elk Valley Coal Partnership (40%)

Three months ended Nine months ended
Sep. 30 Sep. 30
--------------------- --------------------
100% 2006 2005 2006 2005
----

Coal production
(000's tonnes) 5,014 6,042 16,372 19,545
Coal sales (000's tonnes) 5,896 6,316 16,838 18,378
Average sale price (US$/tonne) 109 118 115 92
Average sale price (Cdn$/tonne) 125 147 134 117
Cost of product sold
(Cdn$/tonne) 44 38 41 33
Transportation
(Cdn$/tonne) 36 36 37 35
Company's share of operating
profit ($ millions)(i) 98 182 344 353

(i) Results of the Elk Valley Coal Partnership represent the company's
40% direct interest in the Partnership commencing April 1, 2006, 39%
from April 1, 2005 to March 31, 2006 and 38% from April 1, 2004 to
March 31, 2005.


Coal production in the third quarter at Elk Valley Coal decreased by 1.0 million tonnes compared with the same period last year as production has been curtailed to match revised sale volume expectations. The unit cost of product sold increased 16% to $44 per tonne compared with a year ago due to continuing higher mining input costs, lower production levels, longer haul distances and higher strip ratios.

Coal sales volumes were 7% lower than the same period last year as some customers reduced their requirements for hard coking coal by substituting lower quality coals. The average coal price of US$109 per tonne declined from US$118 per tonne last year reflecting the lower 2006 coal year contract prices. Coal sales volumes are expected to range between 22 and 23 million tonnes in the 2006 calendar year.

The company's 40% share of operating profit was $98 million compared with $182 million due to a lower realized coal price, higher mine operating costs and lower sales volumes.

Elk Valley Coal has entered into the early stage of volume and price negotiations for the coal year commencing April 1, 2007. High prices for hard coking coal have resulted in integrated steel mills substituting some hard coking coal with lower quality coals. New sources of supply of hard coking coal from competitors in Australia and Canada are expected to continue to come on line in the next two or three years. Infrastructure constraints in Australia are being mitigated and additional capacity is being added to port and rail facilities.

Costs and Expenses

Interest expense of $24 million in the third quarter was higher than the $13 million recorded in the third quarter of 2005 mainly as a result of the US$1.0 billion bond issue completed in September 2005.

Net other income of $20 million in the third quarter included $46 million of interest income and $11 million of investment income from the company's holding of Fording Canadian Coal Trust units. Partly offsetting these amounts was the write-off of $18 million in previously capitalized transaction costs relating to the Inco bid which was terminated on August 16, 2006. The transaction costs are related to the company's bid for Inco and the estimated pre-tax gain of $135 million on the disposition of the Inco shares will be recorded in the fourth quarter.

Income and resource taxes on pre-tax earnings of $816 million were $321 million or 39%. This composite tax rate was higher than the Canadian statutory rate of 34% due in part to the effect of provincial mineral taxes in Canada, partially offset by resource and depletion allowances in Canada and the United States. In the third quarter, the company also incurred a higher proportion of costs which are non-deductible or deductible at reduced rates. The combined impact of these items resulted in the higher composite tax rate for the quarter.

Financial Position and Liquidity

Cash flow from operations, before changes to non-cash working capital items, was $629 million in the third quarter compared with $476 million in the same period of 2005 with higher profits from copper and zinc operations. Cash flow after non-cash working capital changes was $752 million compared with $383 million in the third quarter of 2005. Major components of the net change in non-cash working capital items of $123 million was due mainly to the timing between the accrual and payment of current taxes.

Capital expenditures in the third quarter were $121 million of which $36 million was on sustaining capital expenditures, $25 million was for mining development projects. Development expenditures included $6 million for the Pogo gold project, $6 million for Trail power facilities upgrade and $5 million for the Highland Valley Copper mine life extension. The company invested $60 million on the Fort Hills oil sands project and the acquisition of oil sands leases in the third quarter, and made an advance of $45 million to UTS Energy Corporation in relation to the acquisition of oil sands leases.

During the third quarter, a portion of the Inco exchangeable debentures were presented for exchange and the company exercised its option to satisfy the exchange obligation with cash rather than Inco shares. The company paid $117 million for these debentures in the third quarter, representing a face value of $65 million or 26% of the total Inco exchangeable debentures. The balance of the debentures is expected to be presented for exchange in the fourth quarter for an estimated cash outlay of $340 million.

In the fourth quarter, the company has tendered all of its Inco shares to CVRD, which will generate cash proceeds of $770 million. Of this amount, approximately $340 million will be used to settle the outstanding Inco exchangeable debentures, resulting in a net increase in cash of $430 million. These two transactions are expected to result in a net pre-tax gain of $135 million that will be recorded in the fourth quarter of this year.

In September 2006, the remaining Antamina project debt of US$411 million (Teck Cominco's share - US$93 million) was refinanced on a non-recourse basis with a syndicated five-year revolving term bank facility with a bullet repayment due at maturity. The facility is extendible annually with the concurrence of the participating banks.

Total cash and temporary investments increased by $243 million in the quarter to $3.8 billion at September 30, 2006. Total long-term debt was $1.4 billion excluding the Inco exchangeable debentures and the debt to total debt plus equity ratio was 20% at September 30, 2006. Following the Antamina refinancing, the company has no debt due within the next five years.

The company also has bank credit facilities aggregating $1.0 billion. Unused credit lines under these facilities amounted to $886 million at September 30, 2006.

Corporate Development

The Pogo gold mine continued to improve operating performance in the third quarter. The plant was operating at 70% of design capacity before a recent electrical incident temporarily suspended operations. Mill throughput is still limited by tailings filtration capacity and bottlenecks with the paste backfill system. The operating team is focusing on further improvements to mill throughput as well as improving mill recovery, which averaged 85% for the third quarter. A third pressure filter to improve filtration capacity is expected to be commissioned in December 2006. Construction has also started on modifications to the filtered tailings handling system to help paste backfilling and will be completed in the first quarter of 2007. The mill had a two-week shutdown in September to facilitate these two construction projects, which are estimated to cost US$21 million. On October 19, a construction accident severely damaged electrical systems at the mine site, resulting in a total loss of electrical power. Temporary power has been re-established using portable generators. Maintenance activities and construction projects recommenced on October 22 and underground mining resumed on October 28. Ore is being stockpiled on surface until mill operations can resume. Repairs and replacement of damaged switch gear and transformers are ongoing. Mill operations are not expected to resume before late December. Despite the interruption of production, unless unexpected difficulties are encountered in electrical system repairs, commercial production is expected to be reached in April 2007 following completion of the filter plant projects. Operating income or loss is being capitalized as part of the development costs until commercial production is achieved. The company's share of operating loss capitalized in the third quarter was $2 million.

The restart of the Lennard Shelf zinc operations, a 50/50 joint venture with Xstrata Plc, is progressing on schedule. The management team is in place and recruitment of operating personnel has started. Refurbishment of the mill, shipping facility, camp and other site infrastructure is well underway. The underground mining contractor was mobilized in late July. The contractor has completed rehabilitation of the existing workings and has started underground development to access mining areas. Mill start-up is anticipated in January 2007 with the first shipment of zinc concentrate expected near the end of the first quarter in 2007. The Pillara mine has an anticipated mine life of four years at an annual production rate of 70,000 to 80,000 tonnes per year of zinc in concentrate.

At Highland Valley Copper, a detailed production plan with capital and manpower estimates to assess the economic viability of a push-back of the Valley west pit wall to extend the mine life to 2019 and a feasibility study for the implementation of a copper refinery based on the company's proprietary CESL hydrometallurgical technology are ongoing and expected to be completed in the fourth quarter of 2006. The synergistic value of the combined mine and refinery will be evaluated to determine the final economics of the combined project.

Development work is ongoing at the Morelos project in Mexico, including resource drilling, baseline data collection and site investigation leading to a prefeasibility study, expected to be completed in the second quarter of 2007. The 25,000 metre in-fill drill program was 68% complete at the end of the quarter and resource modeling is underway. Engineering work includes metallurgical testing for process design and for sizing and selecting equipment. Contacts have been established with the government agencies responsible for water and power. It has been confirmed that adequate power is available from the power lines crossing the site. A water study has been commenced to confirm the availability of subsurface water. Mill, infrastructure and tailings impoundment sites were selected and a site geotechnical investigation was carried out. Baseline environmental studies are also being conducted.

The Fort Hills Energy Limited Partnership (Teck Cominco 15%) will complete the design basis memorandum and preliminary cost estimate in the first half of 2007. The upgrader environmental impact assessment is expected to be submitted to the Alberta Energy and Utilities Board in late 2006 or early 2007. The Fort Hills project team will utilize Teck Cominco's mining expertise to perform mass excavation and site grading construction requirements.

The company continues to advance a number of exploration and development projects. At Carrapateena in Australia, diamond drilling and ground geophysical surveys are being carried out, with an additional 25,000 metres of drilling expected to be completed before the year-end. At the Santa Fe project in Brazil, a scoping study is underway to determine the preliminary economic status of several nickel laterite prospects. A preliminary resource estimate and the scoping study are expected to be completed in the fourth quarter. An extensive drilling program is also underway at the Agi Dagi gold property in Turkey.

Outlook

Except as discussed above in relation to specific operations, there are no significant changes expected in operating plans or production rates at the company's operations for the balance of 2006.

The company expects strong zinc sales in the fourth quarter as most shipments from Red Dog delayed in the third quarter will be brought into sales in the fourth quarter.

The company reported record profits in the first three quarters in 2006 due mainly to significantly higher commodity prices. Current prices for copper and zinc remain significantly higher than the year-to-date averages and net earnings in the fourth quarter will remain strong should these metal prices stay at the current levels. Coal price in the fourth quarter is expected to be similar to the third quarter average price of US$109 per tonne (C$125 per tonne).

Any strengthening of the Canadian dollar relative to the U.S. dollar has a negative impact on the company's earnings as the prices of the company's products are denominated in U.S. dollars and a significant portion of the company's operating costs are Canadian dollar based.

The company's capital expenditures are estimated to be $120 million in the fourth quarter. Total capital expenditures for 2006 are estimated to be approximately $450 million, including $200 million of sustaining capital expenditures at the company's operations and $250 million on development projects. The majority of the development costs will be spent on the Highland Valley Copper mine life extension and the Fort Hills oil sands project.

The company expects to add significantly to its cash balances during the fourth quarter as a result of strong cash flow from operations, the seasonally higher sales at Red Dog and the anticipated disposition of its investment in Inco.

Contingencies

Upper Columbia River Basin (Lake Roosevelt)

On November 11, 2004, the District Court for Eastern Washington State denied a motion by Teck Cominco Metals Ltd. ("TCML") to dismiss, for want of jurisdiction, a citizen's suit brought by two members of the Confederated Tribes of the Colville Reservation (the "Tribes") supported by the State of Washington. The citizen's suit was brought pursuant to Section 310(a)(i) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to enforce a unilateral administrative order issued by the US Environmental Protection Agency (EPA) on December 11, 2003 (the "UAO") purporting to require TCML to conduct a remedial investigation and feasibility study with respect to metal contamination in the sediments of the Upper Columbia River and Lake Roosevelt. On February 14, 2005, the Federal Court of Appeals for the 9th Circuit granted TCML's petition for permission to appeal that decision and the District Court entered a stay of proceedings (the "Stay") pending a final decision on the appeal. In September 2005, the District Court lifted the Stay to allow the State of Washington and the Tribes to add the Tribes as an additional plaintiff and to file amended complaints adding the State's and the Tribes' claims for natural resource damages and cost recovery under CERCLA. On September 29, 2005, the individual plaintiffs also served notice of their intention to file suit under the US Resource Conservation and Recovery Act ("RCRA") seeking injunctive relief and costs.

On July 3, 2006, the 9th Circuit affirmed the District Court's denial of TCML's motion to dismiss the citizen's suit. On July 17, 2006, TCML petitioned the 9th Circuit for rehearing in accordance with the court's procedures.

On June 2, 2006, TCML and its US affiliate, Teck Cominco American Incorporated ("TCAI") entered into a Settlement Agreement (the "Agreement") with the EPA and the United States under which TCAI will pay for and conduct a remedial investigation and feasibility study (the "Studies") that, while not carried out under an administrative or judicial order, will be consistent with the US National Contingency Plan. TCAI agreed to provide US$1.1 million in annual funding to the EPA to facilitate the full participation of the Tribes, the State and the US Department of Interior and TCML guaranteed TCAI's performance of the Agreement. TCAI has placed US$20 million in escrow as financial assurance of its obligations under the Agreement. Contemporaneously with the execution of the Agreement, the EPA withdrew the UAO. The recent decision of the 9th Circuit will not affect the Agreement.

There can be no assurance that the agreement to conduct and fund the Studies and the withdrawal of the UAO will be sufficient to resolve the matter or that TCML or its affiliates will not be faced with further liability in relation to this matter. Until the studies are completed, it is not possible to estimate the extent and cost, if any, of remediation that may be required.

Competition Investigation

TCML, as the marketing agent for HVC, responded to an Order issued in May 2003 pursuant to the Competition Act to produce documents relevant to the marketing of custom copper concentrates. The order was part of an industry-wide investigation involving major copper concentrate producers commenced in Canada, the US and Europe. The United States, European and Canadian competition regulators have now all decided not to proceed with their investigations and have closed their files. There are now no ongoing investigations related to this matter.

Tax Provision

On June 1, 2006 the company completed a series of transactions culminating in the redemption of $112 million principal amount of exchangeable debentures due 2024 and recorded a tax benefit of $124 million arising from these transactions directly to retained earnings. A recent Supreme Court of Canada decision has cast some doubt on the availability of this tax benefit. On the basis of the company's analysis of the decision to date, it has continued to record the tax benefit arising from these transactions in its accounts.

Adoption of New Accounting Standards, Change in Accounting Policies and

Restatement

Restatement of Cash Balance

To conform with current period presentation, cash and cash equivalents on the December 31, 2005 balance sheet has been restated to remove money market instruments with original maturity in excess of three months from the date of acquisition from cash and cash equivalents and present them under the balance sheet heading temporary investments. As a result, net changes in temporary investments are now shown on the cash flow statement as an investing activity. Comparative cash flow statements for the three and nine months ended September 30, 2005 have also been restated to reflect a net decline in temporary investments.

Deferred Stripping

Effective January 1, 2006, the company adopted CICA Emerging Issues Committee Abstract 160 (EIC-160) "Stripping Costs Incurred in the Production Phase of a Mining Operation". EIC-160 requires stripping costs to be accounted for as variable production costs to be included in the costs of inventory produced, unless the stripping activity can be shown to be a betterment of the mineral property, in which case the stripping costs would be capitalized. Betterment occurs when stripping activity increases future output of the mine by providing access to additional sources of reserves. Capitalized stripping costs are to be amortized on a unit of production basis over the proven and probable reserves to which they relate.

The prospective application of this standard permits the existing deferred stripping costs incurred in the production phase to be viewed as the opening balance of capitalized stripping costs and amortized on a unit of production basis over the remaining life of the mine. As at January 1, 2006, the opening balance of capitalized stripping costs was $52 million, which will be amortized over the respective remaining life of mines. In respect of the mine expansion at Highland Valley Copper, which is considered to be a betterment of the property, the accumulated deferred stripping cost as at September 30, 2006 was $19 million.

Mineral Properties Costs

Effective January 1, 2006, the company amended its accounting policy on the treatment of costs for the acquisition, exploration and evaluation of mineral properties as follows:

Acquisition, exploration and evaluation costs are charged to earnings in the year in which they are incurred, except where these costs relate to specific properties for which resources as defined under National Policy Statement 43-101 exist and it is expected that the expenditure can be recovered by future exploitation or sale, in which case they are deferred. In limited circumstances, significant costs of acquiring mineral properties are capitalized when it is expected the expenditure will be recovered by future exploitation or sale.

Previously, the company capitalized acquisition, exploration and evaluation costs only when economically recoverable reserves as shown by economic studies were believed to exist. This change has been applied retroactively, but did not have any effect on reported earnings or retained earnings.

Financial Instruments

In the third quarter of 2006, the company's commodity price and foreign exchange hedging activities increased the company's revenues by $15 million. The unrealized mark-to-market loss on hedging positions totalled $28 million as at September 30, 2006.



Quarterly Earnings and Cash Flow

($ in millions,
except per share data) 2006 2005
-------------------- --------------------------
Q3 Q2 Q1 Q4 Q3 Q2 Q1

Revenues 1,632 1,546 1,273 1,343 1,150 994 928
Operating profit 876 894 624 686 550 407 319
Net earnings 504 613 448 510 405 225 205
Earnings per share $2.34 $2.95 $2.19 $2.50 $2.00 $1.11 $1.01
Cash flow from continuing
operations (before
changes to working
capital items) 629 669 461 555 476 332 286


($ in millions,
except per share data) 2004
---------------------------
Q4 Q3 Q2 Q1

Revenues 1,051 925 777 675
Operating profit 384 325 215 171
Net earnings 285 120 116 96
Earnings per share $1.42 $0.62 $0.60 $0.51
Cash flow from continuing
operations (before
changes to working
capital items) 403 329 197 180


Outstanding Share Data

As at October 24, 2006 there were 210,840,382 Class B subordinate voting shares and 4,673,453 Class A common shares outstanding. In addition, there were 2,447,760 director and employee stock options outstanding with exercise prices ranging between $6.39 and $66.40 per share. More information on these instruments and the terms of their conversion is set out in Note 16 of the company's 2005 year-end financial statements.

Cautionary Statement on Forward-Looking Information

This press release contains certain forward-looking information. This forward-looking information, principally under the heading "Outlook", but also elsewhere in this press release, includes estimates, forecasts, and statements as to management's expectations with respect to, among other things, the size and quality of the company's mineral reserves and mineral resources, future trends for the company, the outcome and consequences of the company's offer for Inco, the impact of the Peruvian royalty legislation, progress in development of mineral properties, future production and sales volumes, capital and mine production costs, demand and market outlook for commodities, future commodity prices and treatment and refining charges, the outcome of legal proceedings involving the company, and the financial results of the company. This forward-looking information involves numerous assumptions, risks and uncertainties and actual results may vary materially.

Factors that may cause actual results to vary materially include, but are not limited to, changes in commodity and power prices, changes in interest and currency exchange rates, acts of foreign governments and the outcome of legal proceedings, inaccurate geological and metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources), unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications or expectations, cost escalation, unavailability of materials and equipment, government action or delays in the receipt of government approvals, industrial disturbances or other job action, adverse weather conditions and unanticipated events related to health, safety and environmental matters), political risk, social unrest, and changes in general economic conditions or conditions in the financial markets.

Statements concerning future production costs or volumes, and the sensitivity of the company's earnings to changes in commodity prices and exchange rates are based on numerous assumptions of management regarding operating matters, including that new collective bargaining agreements are entered into at certain operations without labour disruption, that demand for products develops as anticipated, that operating and capital plans will not be disrupted by issues such as mechanical failure, unavailability of parts and supplies, labour disturbances, interruption in transportation or utilities, adverse weather conditions and that there are no material unanticipated variations in the cost of energy or supplies.

Webcast

Teck Cominco will host an Investor Conference Call to discuss its Q3/2006 financial results on Tuesday, October 31, 2006 at 11 AM Eastern/8 AM Pacific time. A live audio webcast of the conference call, together with supporting presentation slides, will be available at the company's website at www.teckcominco.com. The webcast is also available at www.newswire.ca and www.q1234.com. The webcast will be archived at www.teckcominco.com.




Teck Cominco Limited
Consolidated Statements of Earnings
(Unaudited)
------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
(in millions of dollars,
except per share data) 2006 2005 2006 2005
------------------------------------------------------------------------
Note 1(b) Note 1(b)

Revenues $ 1,632 $ 1,150 $ 4,451 $ 3,072
Operating expenses (687) (529) (1,874) (1,595)
Depreciation and
amortization (69) (71) (183) (201)
------------------------------------------------------------------------
Operating profit 876 550 2,394 1,276

Other expenses
General and
administrative (28) (21) (68) (51)
Interest on long-term
debt (24) (13) (75) (39)
Exploration (22) (31) (44) (50)
Research and development (6) (3) (16) (11)
Other income (Note 5) 20 56 193 106
----------------------------------------------------------------------
816 538 2,384 1,231
Provision for income and
resource taxes (321) (133) (841) (396)
------------------------------------------------------------------------
Net earnings from
continuing operations 495 405 1,543 835

Net earnings from
discontinued operation
(Note 12(b)) 9 - 22 -
------------------------------------------------------------------------
Net earnings $ 504 $ 405 $ 1,565 $ 835
------------------------------------------------------------------------
------------------------------------------------------------------------
Basic earnings per share $ 2.34 $ 2.00 $ 7.48 $ 4.12
Basic earnings per share
from continuing
operations $ 2.30 $ 2.00 $ 7.37 $ 4.12
Diluted earnings per share $ 2.32 $ 1.88 $ 7.21 $ 3.88
Diluted earnings per share
from continuing
operations $ 2.28 $ 1.88 $ 7.11 $ 3.88

Weighted average shares
outstanding (millions) 215.4 202.7 208.9 202.2
Shares outstanding at end
of period (millions) 215.5 203.0 215.5 203.0

The accompanying notes are an integral part of these financial statements.


Teck Cominco Limited
Consolidated Statements of Cash Flow
(Unaudited)
------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
(in millions of dollars) 2006 2005 2006 2005
------------------------------------------------------------------------
Note 1(b), Note 1(b),
2(c) 2(c)
Operating activities
Net earnings from
continuing operations $ 495 $ 405 $ 1,543 $ 835
Items not affecting cash:
Depreciation and
amortization 69 71 183 201
Future income and
resource taxes 47 31 77 111
Gain on sale of
investments and
assets - (21) (76) (57)
Other 18 (10) 32 4
----------------------------------------------------------------------
629 476 1,759 1,094
Net change in non-cash
working capital items 123 (93) (36) (95)
----------------------------------------------------------------------
752 383 1,723 999
Financing activities
Issuance of long-term debt 103 1,157 123 1,157
Repayment of long-term
debt (118) (48) (329) (94)
Issuance of Class B
subordinate voting shares 3 7 9 23
Dividends paid (215) - (296) (81)
Exchangeable debentures (117) - (125) (2)
----------------------------------------------------------------------
(344) 1,116 (618) 1,003
Investing activities
Decrease (increase) in
temporary investments 206 (22) 842 (388)
Property, plant and
equipment (61) (91) (197) (226)
Investment in oil sands
properties (60) - (134) -
Investments and advances (45) (192) (77) (199)
Proceeds from sale of
investments and assets 1 26 120 81
----------------------------------------------------------------------
41 (279) 554 (732)
Effect of exchange rate on
cash held in U.S. dollars - (43) (78) (40)
------------------------------------------------------------------------
Increase in cash and cash
equivalents 449 1,177 1,581 1,230

Cash and cash equivalents
at beginning of period 3,230 928 2,098 875
------------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 3,679 $ 2,105 $ 3,679 $ 2,105
------------------------------------------------------------------------
------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.


Teck Cominco Limited
Consolidated Balance Sheets
(Unaudited)
------------------------------------------------------------------------
September 30 December 31
(in millions of dollars) 2006 2005
------------------------------------------------------------------------
Note 1(b),
2(c)
ASSETS
Current assets
Cash and cash equivalents $ 3,679 $ 2,098
Temporary investments 144 986
Investment in Inco (Note 3(b)) 488 -
Accounts and settlements receivable 590 531
Inventories 870 668
----------------------------------------------------------------------
5,771 4,283

Investments 281 666

Property, plant and equipment 3,503 3,516

Other assets 341 344
------------------------------------------------------------------------
$ 9,896 $ 8,809
------------------------------------------------------------------------
------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Dividends payable $ - $ 81
Accounts payable and accrued liabilities 533 442
Inco exchangeable debentures (Note 3(b)) 183 -
Current portion of long-term debt - 213
Current income and resource taxes payable 240 261
Current portion of future income and
resource taxes 175 118
----------------------------------------------------------------------
1,131 1,115

Long-term debt 1,447 1,508
Other liabilities (Note 7) 661 667
Future income and resource taxes 867 888
Inco exchangeable debentures (Note 3(b)) - 248
Shareholders' equity (Note 8) 5,790 4,383
------------------------------------------------------------------------
$ 9,896 $ 8,809
------------------------------------------------------------------------
------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.


Teck Cominco Limited
Consolidated Statements of Retained Earnings
(Unaudited)
------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
(in millions of dollars) 2006 2005 2006 2005
------------------------------------------------------------------------
Retained earnings at
beginning of period $ 3,071 $ 1,396 $ 2,228 $ 1,049

Net earnings 504 405 1,565 835
Dividends - - (215) (81)
Interest on exchangeable
debentures, net of taxes - - (3) (2)
------------------------------------------------------------------------
Retained earnings at end
of period $ 3,575 $ 1,801 $ 3,575 $ 1,801
------------------------------------------------------------------------
------------------------------------------------------------------------

The accompanying notes are an integral part of these financial statements.


Teck Cominco Limited

Notes to Consolidated Financial Statements

(Unaudited)

1. BASIS OF PRESENTATION

(a) These interim consolidated financial statements have been prepared in accordance with Canadian GAAP using standards for interim financial statements and do not contain all of the information required for annual financial statements. These statements follow the same accounting policies and methods of application as the most recent annual financial statements. Accordingly, they should be read in conjunction with the most recent annual financial statements of the company.

(b) Certain comparative figures have been reclassified to conform with the presentation adopted for the current period.

2. ADOPTION OF NEW ACCOUNTING STANDARDS AND CHANGE IN ACCOUNTING POLICY AND RESTATEMENT

(a) Deferred stripping

Effective January 1, 2006, the company adopted CICA Emerging Issues Committee Abstract 160 (EIC-160) "Stripping Costs Incurred in the Production Phase of a Mining Operation". EIC-160 requires stripping costs to be accounted for as variable production costs to be included in the costs of inventory produced, unless the stripping activity can be shown to be a betterment of the mineral property, in which case the stripping costs would be capitalized. Betterment occurs when stripping activity increases future output of the mine by providing access to additional sources of reserves. Capitalized stripping costs would be amortized on a unit of production basis over the proven and probable reserves to which they relate.

The prospective application of this standard permits the existing deferred stripping costs incurred in the production phase to be viewed as the opening balance of capitalized stripping costs and amortized on a unit of production basis over the remaining life of the mine. As at January 1, 2006, the opening balance of capitalized stripping costs was $52 million, which will be amortized over the respective remaining life of mines. In respect of the mine expansion at Highland Valley Copper, which is considered to be a betterment of the property, the accumulated deferred stripping cost as at September 30, 2006 was $19 million.

(b) Mineral properties costs

Effective January 1, 2006, the company amended its accounting policy on the treatment of costs for the acquisition, exploration and evaluation of mineral properties as follows:

Acquisition, exploration and evaluation costs are charged to earnings in the year in which they are incurred, except where these costs relate to specific properties for which resources as defined under National Policy Statement 43-101 exist and it is expected that the expenditure can be recovered by future exploitation or sale, in which case they are deferred. In limited circumstances, significant costs of acquiring mineral properties are capitalized when it is expected the expenditure will be recovered by future exploitation or sale.

Previously, the company capitalized acquisition, exploration and evaluation costs only when economically recoverable reserves as shown by economic studies were believed to exist. This change has been applied retroactively, but did not have any effect on reported earnings or retained earnings.

(c) Restatement of cash balance

To conform with current period presentation, cash and cash equivalents on the December 31, 2005 balance sheet has been restated to remove money market instruments with original maturity in excess of three months from the date of acquisition from cash and cash equivalents and present them under the balance sheet heading temporary investments. As a result, net changes in temporary investments are now shown on the cash flow statement as an investing activity. Comparative cash flow statements for the three and nine months ended September 30, 2005 have also been restated to reflect a net decline in temporary investments.

3. INCO EXPIRY OF OFFER AND REDEMPTION OF INCO EXCHANGEABLE DEBENTURES

(a) Expiry of offer to acquire Inco

The company's issuer bid for all of the outstanding shares of Inco Limited expired on August 16, 2006 with insufficient shares tendered to meet the minimum bid requirements. As a result, the company has written off all of the costs related to this transaction, totalling $18 million (Note 5).

(b) Inco exchangeable debentures due 2021

During the quarter, a portion of the company's Inco exchangeable debentures due 2021 were called for redemption by the exchangeable debenture holders. Each $1,000 principal amount of exchangeable debentures is exchangeable at the option of the holder into 20.7 common shares of Inco. The company has exercised its option to satisfy the exchange obligation by cash payment determined with reference to the market value of the Inco common shares at the time of the exchange. Accordingly, the company paid $117 million to satisfy the exchange obligation of $65 million of the principal amount of the exchangeable debentures. The outstanding balance of the Inco exchangeable debentures with a face value of $183 million is expected to be presented for exchange in the fourth quarter.

The Inco exchangeable debentures due 2021 have been previously accounted for as a cash flow hedge of the anticipated disposition of the Inco common shares held by the company and pledged as security for the exchangeable debentures. Accordingly, the $52 million premium on the redemption of the exchangeable debentures is deferred as a cost of the investment in Inco and will be charged against the corresponding gain on the eventual disposition of the Inco common shares.

The company has reclassified both its investments in Inco common shares and the Inco exchangeable debenture as current as both are now expected to be realized within one year.

4. SUPPLEMENTARY CASH FLOW INFORMATION



September 30 December 31
(in millions of dollars) 2006 2005
--------------------------------------------------------------------
Note 2(c)

(a) i) Cash and cash equivalents

Cash $ 11 $ 132
Money market investments with
maturities from the date of
acquisition of 3 months or less 3,668 1,966

--------------------------------------------------------------------
$ 3,679 $ 2,098
--------------------------------------------------------------------
--------------------------------------------------------------------

ii) Temporary investments

Money market investments with
maturities from the date of
acquisition of
3-6 months $ 144 $ 911
6-12 months - 75

--------------------------------------------------------------------
$ 144 $ 986
--------------------------------------------------------------------
--------------------------------------------------------------------



Three months ended Nine months ended
September 30 September 30
(in millions of dollars) 2006 2005 2006 2005
--------------------------------------------------------------------

(b) Income and resource
taxes paid $ 175 $ 42 $ 648 $ 134
Interest paid $ 12 $ 22 $ 72 $ 46


5. OTHER INCOME (EXPENSE)



Three months ended Nine months ended
September 30 September 30
(in millions of dollars) 2006 2005 2006 2005
--------------------------------------------------------------------

Interest and investment income $ 46 $ 11 $ 121 $ 29
Gain on sale of investments
and assets - 5 76 38
Income from Fording Canadian
Coal Trust 11 33 38 51
Gain on dilution of interest
in Elkview mine - 19 - 19
Insurance proceeds - - 6 21
Minority interests (9) (4) (24) (11)
Inco bid costs (Note 3(a)) (18) - (18) -
Asset retirement obligation
expense for closed properties - (7) (6) (11)
Non-hedge derivative losses (3) (10) (1) (25)
Foreign exchange gains 2 9 5 7
Miscellaneous expense (9) - (4) (12)

--------------------------------------------------------------------
$ 20 $ 56 $ 193 $ 106
--------------------------------------------------------------------
--------------------------------------------------------------------


6. EMPLOYEE FUTURE BENEFITS EXPENSE



Three months ended Nine months ended
September 30 September 30
(in millions of dollars) 2006 2005 2006 2005
--------------------------------------------------------------------

Pension plans $ 9 $ 9 $ 27 $ 29
Post-retirement benefit plans 6 5 16 13

--------------------------------------------------------------------
Employee future benefits expense $ 15 $ 14 $ 43 $ 42
--------------------------------------------------------------------
--------------------------------------------------------------------


7. OTHER LIABILITIES



September 30 December 31
(in millions of dollars) 2006 2005
--------------------------------------------------------------------

Asset retirement obligation and other
post-closure costs $ 393 $ 407
Accrued pension and post-retirement benefits 198 206
Minority interests 40 18
Other 30 36

--------------------------------------------------------------------
$ 661 $ 667
--------------------------------------------------------------------
--------------------------------------------------------------------


8. SHAREHOLDERS' EQUITY

(a) Components of shareholders' equity

September 30 December 31
(in millions of dollars) 2006 2005
----------------------------------------------------------------

Share capital $ 2,396 $ 2,155
Contributed surplus 64 61
Retained earnings 3,575 2,228
Cumulative translation adjustment (245) (168)
Exchangeable debentures due 2024 (c) - 107

----------------------------------------------------------------
$ 5,790 $ 4,383
----------------------------------------------------------------
----------------------------------------------------------------



The cumulative translation adjustment represents the net unrealized foreign exchange loss on the translation of the accounts of self-sustaining foreign subsidiaries and any U.S. dollar denominated debt which has been designated as hedges against these investments.

(b) Stock-based compensation

In February 2006, 355,400 share options were granted to employees. These options have an exercise price of $66.40, a term of eight years and vest in equal amounts over three years. The weighted average fair value of Class B subordinate voting share options issued was estimated at $23 per share option at the grant date using the Black-Scholes option-pricing model. The option valuation was based on an average expected option life of five years, a risk-free interest rate of 4.11%, a dividend yield of 1.04% and an expected volatility of 35%.

In the nine months to September 30, 2006, the company issued 131,742 and 109,066 Deferred and Restricted Share Units to employees and directors respectively. Deferred and Restricted Share Units issued in the year vest immediately for directors and vest in three years for employees. Total number of deferred and restricted share units outstanding at the end of the period was 563,280.

The company recorded stock-based compensation expense of $13 million to September 30, 2006 in respect of all outstanding options and share units.

(c) Redemption of exchangeable debentures due 2024

On June 1, 2006 the company completed a series of transactions culminating in the redemption of $112 million principal amount of exchangeable debentures due 2024 which was recorded in shareholders' equity. In the course of these transactions, all outstanding debentures were tendered for exchange and the company issued 11,489,368 Class B subordinate voting shares. Since the debentures form part of the company's shareholders' equity the exchange and the related tax adjustments have no effect on net earnings and are accounted for by adjustments to components of shareholders' equity. The transactions resulted in a net increase in shareholders' equity of $124 million as a result of a tax related adjustment.

A recent Supreme Court of Canada decision has cast some doubt on the availability of this tax benefit. On the basis of the company's analysis of the decision to date, it has continued to record the tax benefit arising from these transactions in its accounts.

9. DERIVATIVES AND FINANCIAL INSTRUMENTS AT SEPTEMBER 30, 2006


Unrealized
Market
Value
Gain
2006 2007 2008 2009 Total (Loss)
--------------------------------------------------------------------
(Cdn$
millions)

Gold (thousands of ozs)
Forward sales contracts - 44 44 43 131
Average price (US$/oz) - 350 350 350 350 $(40)

Forward sales contracts 20 8 - - 28
Average price (C$/oz) 519 520 - - 519 (4)

US dollars (millions)
Forward sales
contracts(a) 32 - - - 32
Average exchange rate 1.41 - - - 1.41 9

Forward sales
contracts(b) 1,218 - - - 1,218
Average exchange rate 1.12 - - - 1.12 6

Zinc (millions of lbs)(c)
Fixed forward purchase
commitments 7 - - - 7
Average price
(US cents/lb) 1.02 - - - 1.02 3

-----
$(26)


Interest Rate Swap

Rate Rate Maturity Unrealized
Principal Amount Swapped Obtained Date Loss
--------------------------------------------------------------------

LIBOR September
US$100 million 7.00% plus 2.14% 2012 (2)

Notes:

(a) Included in the U.S. dollar forward sales contracts of
US$32 million is the company's share of forward sales contracts
held by the Elk Valley Coal Partnership of US$5 million.

(b) From time to time, the company purchases U.S. dollar short-term
money market investments. The company purchases the U.S. dollars
and at the same time sells U.S. dollars forward to match the
maturity of the investment. The unrealized gain or loss on the
U.S. dollar investments is offset by the unrealized gain or loss
on the foreign exchange contracts. The company does not apply
hedge accounting to these as the change in value of the contracts
substantially offsets the change in value of the U.S. dollar
investments. The change in market value of both of these items is
reported in the earnings for the period.

(c) From time to time, certain customers purchase refined zinc at
fixed forward prices from the company's smelter and refinery
operations. The forward purchase commitments for zinc are matched
to these fixed price sales commitments to customers. As the fixed
price sales commitments to customers contain a fixed premium
component, they are not considered to be sufficiently effective
under hedge accounting standards. Accordingly, the company is
unable to apply hedge accounting to zinc forward purchase
commitments and has recognized mark-to-market and realized gains
and losses in other income and expense.



10. CONTINGENCIES

The company considers provisions for all its outstanding and pending legal claims to be adequate. The final outcome with respect to actions outstanding or pending as at September 30, 2006, or with respect to future claims, cannot be predicted with certainty.

(a) Upper Columbia River Basin (Lake Roosevelt)

On November 11, 2004, the District Court for Eastern Washington State denied a motion by TCML to dismiss, for want of jurisdiction, a citizen's suit brought by two members of the Confederated Tribes of the Colville Reservation (the "Tribes") supported by the State of Washington. The citizen's suit was brought pursuant to Section 310(a)(i) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) to enforce a unilateral administrative order issued by the US Environmental Protection Agency (EPA) on December 11, 2003 (the "UAO") purporting to require TCML to conduct a remedial investigation and feasibility study with respect to metal contamination in the sediments of the Upper Columbia River and Lake Roosevelt. On February 14, 2005, the Federal Court of Appeals for the 9th Circuit granted TCML's petition for permission to appeal that decision and the District Court entered a stay of proceedings (the "Stay") pending a final decision on the appeal. In September 2005, the District Court lifted the Stay to allow the State of Washington and the Tribes to add the Tribes as an additional plaintiff and to file amended complaints adding the State's and the Tribes' claims for natural resource damages and cost recovery under CERCLA. On September 29, 2005, the individual plaintiffs also served notice of their intention to file suit under the US Resource Conservation and Recovery Act ("RCRA") seeking injunctive relief and costs.

On July 3, 2006, the 9th Circuit affirmed the District Court's denial of TCML's motion to dismiss the citizen's suit. On July 17, 2006, TCML petitioned the 9th Circuit for rehearing in accordance with the court's procedures.

On June 2, 2006, TCML and its US affiliate, Teck Cominco American Incorporated ("TCAI") entered into a Settlement Agreement (the "Agreement") with the EPA and the United States under which TCAI will pay for and conduct a remedial investigation and feasibility study (the "Studies") that, while not carried out under an administrative or judicial order, will be consistent with the US National Contingency Plan. TCAI agreed to provide US$1.1 million in annual funding to the EPA to facilitate the full participation of the Tribes, the State and the US Department of Interior and TCML guaranteed TCAI's performance of the Agreement. TCAI has placed US$20 million in escrow as financial assurance of its obligations under the Agreement. Contemporaneously with the execution of the Agreement, the EPA withdrew the UAO. The recent decision of the 9th Circuit will not affect the Agreement.

There can be no assurance that the agreement to conduct and fund the Studies and the withdrawal of the UAO will be sufficient to resolve the matter or that TCML or its affiliates will not be faced with further liability in relation to this matter. Until the studies are completed, it is not possible to estimate the extent and cost, if any, of remediation that may be required.

(b) Competition investigation

TCML, as the marketing agent for HVC, responded to an Order issued in May 2003 pursuant to the Competition Act to produce documents relevant to the marketing of custom copper concentrates. The order was part of an industry-wide investigation involving major copper concentrate producers commenced in Canada, the US and Europe. The United States, European and Canadian competition regulators have now all decided not to proceed with their investigations and have closed their files. There are now no ongoing investigations related to this matter.

(c) Mining royalty in Peru

Compania Minera Antamina, in which the company has a 22.5% interest, together with other mining companies in Peru that have mining stability agreements, has entered into negotiations with the Government of Peru aimed at reaching agreement with the government with respect to proposed extraordinary social contributions in lieu of new mining royalties. Although negotiations are ongoing, the government has announced that it has proposed that amounts up to 3.75% of after-tax net income will be contributed by mining companies to funds to be established to administer social spending in areas affected by mine development. Contributions are expected to be made effective January 1, 2006 and the company's 22.5% share of the proposed non-deductible contributions totalled $13 million in the nine months and were accrued in the third quarter.

Legislation to impose new mining royalties is still under debate in the Peruvian legislature, although it is expected that those royalties will not apply to companies with mining stability agreements provided that the proposed arrangements for extraordinary contributions are finalized.

11. SEGMENTED INFORMATION

The company has six reportable segments: zinc-lead smelter and refineries, zinc, copper, gold and coal mines, and corporate and other. Revenue from refined lead, electrical power, fertilizers and specialty metals earned at smelting operations are included in zinc smelter revenue for segmented purposes. All revenue from a mine is included in one segment based upon the principal product of the mine. The corporate segment includes the company's investment, exploration and development activities.


--------------------------------------------------------------------
Three months ended September 30, 2006
------------------------------------------------
Corpor-
Smelter & Zinc Copper Gold Coal ate &
($ in millions) Refineries Mines Mines Mines Mines Other Total
--------------------------------------------------------------------

Segment revenues 443 349 606 37 294 75 1,804
Less inter-segment
revenues - (106) (66) - - - (172)
--------------------------------------------------------------------
Revenues 443 243 540 37 294 75 1,632

Operating profit 101 225 442 2 98 8 876
Interest expense - - (3) - - (21) (24)
Other - - (10) - - (26) (36)
--------------------------------------------------------------------
Earnings before
taxes and
discontinued
operation 101 225 429 2 98 (39) 816

Capital
expenditures 14 16 14 10 3 4 61


--------------------------------------------------------------------
Nine months ended September 30, 2006
------------------------------------------------
Corpor-
Smelter & Zinc Copper Gold Coal ate &
($ in millions) Refineries Mines Mines Mines Mines Other Total
--------------------------------------------------------------------

Segment revenues 1,257 758 1,712 111 893 214 4,945
Less inter-segment
revenues - (305) (187) - - (2) (494)
--------------------------------------------------------------------
Revenues 1,257 453 1,525 111 893 212 4,451

Operating profit 284 487 1,274 10 344 (5) 2,394
Interest expense - - (8) - (1) (66) (75)
Other - - (10) - - 75 65
--------------------------------------------------------------------
Earnings before
taxes and
discontinued
operation 284 487 1,256 10 343 4 2,384

Total assets 1,520 2,052 1,270 383 620 4,051 9,896

Capital
expenditures 37 33 66 36 13 12 197


--------------------------------------------------------------------
Three months ended September 30, 2005
------------------------------------------------
Corpor-
Smelter & Zinc Copper Gold Coal ate &
($ in millions) Refineries Mines Mines Mines Mines Other Total
--------------------------------------------------------------------

Segment revenues 152 255 363 33 358 31 1,192
Less inter-segment
revenues - (36) (5) - - (1) (42)
--------------------------------------------------------------------
Revenues 152 219 358 33 358 30 1,150

Operating profit 31 107 232 3 182 (5) 550
Interest expense - - (4) - - (9) (13)
Other - - - - - 1 1
--------------------------------------------------------------------
Earnings before
taxes and
discontinued
operation 31 107 228 3 182 (13) 538

Capital
expenditures 4 14 12 29 32 - 91


--------------------------------------------------------------------
Nine months ended September 30, 2005
------------------------------------------------
Corpor-
Smelter & Zinc Copper Gold Coal ate &
($ in millions) Refineries Mines Mines Mines Mines Other Total
--------------------------------------------------------------------

Segment revenues 686 420 1,114 98 835 135 3,288
Less inter-segment
revenues - (123) (91) - - (2) (216)
--------------------------------------------------------------------
Revenues 686 297 1,023 98 835 133 3,072

Operating profit 90 158 672 8 353 (5) 1,276
Interest expense - - (11) - - (28) (39)
Other - - - - - (6) (6)
--------------------------------------------------------------------
Earnings before
taxes and
discontinued
operation 90 158 661 8 353 (39) 1,231

Total assets 1,294 1,541 1,152 313 628 3,114 8,042

Capital
expenditures 24 30 21 61 87 3 226

/T/

12. OTHER

(a) Seasonality of sales

Due to ice conditions, the port serving the Red Dog mine is normally only able to ship concentrates from July to October each year. As a result, sales volumes are generally higher in the third and fourth quarter of each year than the first and second quarters.

(b) Discontinued operation

Pursuant to the agreement for sale of the Cajamarquilla zinc refinery completed in December 2004, the company has recorded additional after-tax consideration of $22 million for the nine months ended September 30, 2006 in respect of the annual zinc price participation exceeding US$0.454 per pound. The zinc price participation agreement extends until 2009.

13. SUBSEQUENT EVENT

On October 19, a construction accident severely damaged electrical systems at the Pogo mine site, resulting in a total loss of electrical power. Temporary power has been re-established using portable generators. Maintenance activities and construction projects recommenced on October 22 and underground mining resumed on October 28. Ore is being stockpiled on surface until mill operations can resume. Repairs and replacement of damaged switch gear and transformers are ongoing. Mill operations are not expected to resume before late December. Despite the interruption of production, unless unexpected difficulties are encountered in electrical system repairs, commercial production is expected to be reached in April 2007 following completion of the filter plant projects.

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