TORONTO, CANADA--(Marketwire - July 25, 2011) -

All amounts in Canadian dollars unless indicated otherwise

Inmet (TSX:IMN) announces second quarter net income from continuing operations of $56 million compared to $51 million in the second quarter of 2010.

Second quarter highlights

• Earnings from operations up from last year but impacted by shipping delays
  Earnings from operations were $88 million compared to $67 million in the second quarter of last year because of higher metal prices and the inclusion of earnings from Las Cruces. Earnings were impacted by copper sales volumes lagging production volumes by a combined 3,000 tonnes at Çayeli and Pyhäsalmi due to shipment timing. These shipping delays reduced earnings from operations by approximately $17 million.

Inmet Board approval for development decision on Cobre Panama

On July 25, 2011, the Board of Directors of Inmet approved the development of Cobre Panama as described in the final FEED study of March, 2010 after completing a comprehensive review and risk assessment. This approval is conditional on the achievement of the following project milestones:

• approval of the project Environmental and Social Impact Assessment (ESIA) by Autoridad Nacional del Ambiente (ANAM), the Panamanian environmental regulator
• securing of all material permits and approvals required to be issued by relevant Panamanian authorities for construction and development of the mine and process plant
• completion of basic engineering and related update of capital and operating project cost estimates
• Board satisfaction regarding the ability to finance development of the project.

As a result of the development decision, KPMC, under an amended option agreement we have agreed to with it, must make its election on whether to exercise its option to acquire a 20 percent interest in Minera Panama by the later of 60 days after the date of this release or the date that is seven days after we have publicly announced ANAM's approval of the ESIA.

• Cobre Panama partnership process
  This quarter, we commenced a process to engage potential new partners in Cobre Panama. At this point, multiple interested parties have executed confidentiality agreements with us and are engaged at various stages of due diligence on the project.

• Las Cruces completes shutdown and achieves weekly copper production record
  Las Cruces produced 8,500 tonnes of copper cathode this quarter, following production of 8,100 tonnes in the first quarter. The scheduled maintenance shutdown ran 16 days, and the plant started up on schedule, achieving record throughput above 80 percent soon after start-up and record weekly production of 1,340 tonnes of cathode copper. Within two weeks after start-up, a support structure of the new grinding thickener failed due to a faulty weld causing a subsequent shut-down for repair. Production was halted for seven days to empty, repair and re-fill the thickener before it resumed. We are extremely disappointed about the poor performance of our technology provider and are in discussions with it about rectifying the situation. We look forward to the coming months and expect to reach production design capacity this year, as all critical components of the operation have performed on a sustained basis at close to their design capacity or better.

• Temasek converts subscription receipts
  On May 17, 2011, a subsidiary of Temasek Holdings (Private) Ltd. exchanged its subscription receipts for 7.78 million Inmet common shares and we received cash of approximately $500 million, with a resulting 13 percent increase in our outstanding common shares. Although the dilution resulting from this transaction has reduced, and will reduce, earnings per share in the short-term, it is strategically significant because it provides access to additional financing resources for the construction of Cobre Panama.

• Las Cruces 2011 production objective reduced to between 42,000 and 45,000 tonnes of cathode copper
  We are reducing our cathode copper production objective from 50,200 tonnes to between 42,000 and 45,000 tonnes for the year to reflect the actual performance for the first half of the year and the impact of the failure of the new grinding thickener in July.

• Çayeli 2011 zinc production guidance reduced to 45,700 tonnes
  Additionally, we have revised our zinc grade objective to be 5.6 percent, compared to our previous target 5.9 percent because of mine sequence changes and updates to expected stope grades. We have therefore reduced our zinc objective from 48,600 tonnes to 45,700 tonnes to reflect this in addition to lower recoveries.

In this press release, Inmet means Inmet Mining Corporation and we, us and our mean Inmet and/or its subsidiaries and joint ventures. This quarterrefers to the three months ended June 30, 2011. Revised objective is as of July 25, 2011.

Adoption of International Financial Reporting Standards

We have prepared our second quarter 2011 consolidated financial statements and other financial information according to International Financial Reporting Standards, and restated our 2010 comparative financial statements and other financial information following our IFRS accounting policies. See Adoption of International Financial Reporting Standards on page 28 for more information.

Forward looking information

Securities regulators encourage companies to disclose forward-looking information to help investors understand a company's future prospects. This press release contains statements about our future financial condition, results of operations and business.

These are "forward-looking" because we have used what we know and expect today to make a statement about the future. Forward-looking statements usually include words such as may, expect, anticipate, believe or other similar words. We believe the expectations reflected in these forward-looking statements are reasonable. However, actual events and results could be substantially different because of the risks and uncertainties associated with our business or events that happen after the date of this press release. You should not place undue reliance on forward-looking statements. As a general policy, we do not update forward-looking statements except as required by securities laws and regulations.

Understanding our performance

Metal prices

The table below shows the average metal prices we realized in US dollars and Canadian dollars, this quarter and year to date compared to 2010. The prices we realize include finalization adjustments – see Gross sales on page 8.

Copper

Copper prices on the London Metals Exchange (LME) averaged US $4.14 per pound this quarter, a decrease of 8 percent from the first quarter of 2011 and a 29 percent increase over the second quarter of 2010.

Zinc

Zinc prices on the LME averaged US $1.02 per pound this quarter, slightly lower than last quarter's average price of US $1.09 per pound and a 9 percent increase over the second quarter of 2010.

Pyrite

Prices for sulphur stabilized during the second quarter and we expect to realize similar prices for the remainder of the year.

Exchange rates

Exchange rates affect our revenue and earnings. The table below shows the average exchange rates we realized this quarter and year to date compared to 2010.

Our sales are affected by the conversion of US dollar revenue to Canadian dollars. Compared to the same quarter last year, the value of the Canadian dollar appreciated 6 percent relative to the US dollar and depreciated 6 percent relative to the euro.

Our earnings are affected by changes in foreign currency exchange rates when we:

• translate the results of our operations from their functional currency (US dollars or euros) to Canadian dollars
• revalue US dollars and euros that we hold in cash and long-term bonds at Corporate.

Treatment charges down for zinc

Treatment charges are one component of smelter processing charges. We also pay smelters for content losses and price participation.

The table below shows the average charges we realized this quarter and year to date. We finalized our terms with zinc smelters this quarter, agreeing on treatment charges for zinc concentrates that are lower than last year, reflecting a tightening zinc concentrate market. Results this quarter include adjustments we've made to first quarter charges, which were at 2010 rates.

We record sales that settle during the reporting period using the metal price on the day they settle. For sales that have not settled, we use an estimate based on the month we expect the sale to settle and the forward price of the metal at the end of the reporting period. We recognize the difference between our estimate and the final price by adjusting our gross sales in the period when we settle the sale (finalization adjustment).

This quarter, we recorded $3 million in negative finalization adjustments from first quarter sales.

At the end of this quarter, the following sales had not been settled:

• 20 million pounds of copper provisionally priced at US $4.28 per pound
• 12 million pounds of zinc provisionally priced at US $1.07 per pound.

The finalization adjustment we record for these sales will depend on the actual price we receive when they settle, which can be up to five months from the time we initially record the sales. We expect these sales to settle in the following months:

Significantly higher pyrite sales volumes, no gold sales volumes

Our sales volumes are directly affected by the amount of production from our mines and our ability to ship to our customers.

• Copper production volumes were up this quarter and year to date mainly because of production at Las Cruces. Copper sales volumes were lower than production volumes this quarter mainly because of the timing of shipments to our customers at Çayeli and Pyhäsalmi.
• Zinc sales volumes were slightly higher than 2010 due to the timing of shipments.
• There was no gold production or sales volumes because Troilus stopped operating in June 2010 and we sold our interest in Ok Tedi in January 2011.
• Pyhäsalmi's pyrite sales volumes were higher than in 2010 because of higher customer demand in Europe and China.

2011 outlook for sales

We use our production objectives to estimate our sales target.

• We expect copper production in 2011 to be 87,700 tonnes. Copper production at Las Cruces should be more than 50 percent higher than it was in 2010 as the operation ramps up to its nameplate capacity of 72,000 tonnes of copper cathode, and because we increased our ownership from 70 percent to 100 percent in December 2010. We have revised our cathode copper production objective from 50,200 tonnes to between 42,000 and 45,000 tonnes for the year to reflect the actual performance for the first half of the year and the impact of the failure of the new grinding thickener in July.
• We expect 2011 zinc sales and production volumes to be slightly lower than 2010 volumes because of lower grades and recoveries at Çayeli. We have revised our zinc grade objective to be 5.6 percent, compared to our previous target 5.9 percent because of mine sequence changes and updates to expected stope grades. We have therefore reduced our zinc objective from 48,600 tonnes to 45,700 tonnes to reflect this in addition to lower recoveries.
• We do not expect any gold sales in 2011.
• Pyhäsalmi expects to produce and sell 800,000 tonnes of pyrite in 2011. It signed a five year sales contract in March 2011 with a customer in the Far East for up to 400,000 tonnes of pyrite per year, and now has long term agreements covering sales of up to 760,000 tonnes annually.

Our Canadian dollar sales revenues are affected by the US dollar denominated metal price we receive, and the exchange rate between the US dollar and Canadian dollar.

Our copper treatment and refining charges were lower than they were in 2010 because Troilus stopped operating in June 2010. Zinc treatment charges were lower than last year because our terms with smelters were lower.

2011 outlook for smelter processing charges and freight

We expect costs for copper treatment and refining to be higher in 2011 based on agreements we signed recently with customers. We sell approximately 90 percent of our copper concentrate under long-term contracts.

Spot smelter processing charges continue to be significantly higher than they were in 2010, because the earthquake in Japan in March caused stoppages in copper smelter production, lowering short-term demand for copper concentrates. This should settle in the third quarter and we expect spot processing charges to normalize.

We expect copper price participation to be minimal.

We expect total zinc smelter processing charges, including price participation, to be lower than in 2010 because of a tightening zinc concentrate market and our long-term contracts reflect this.

We expect our ocean freight costs to be similar to 2010.

Las Cruces sells its copper cathode production directly to buyers in the Spanish and Mediterranean markets and therefore does not incur smelter processing charges and has relatively low freight costs.

Direct production costs

Direct production costs are higher this year, mainly because we began recognizing operating results at Las Cruces in our consolidated income statement effective July 1, 2010, partly offset by the closure of Troilus mid-year in 2010. At Çayeli, consumables, ground control and royalty costs were higher as anticipated in our guidance. Pyhäsalmi realized higher consumable, electricity and ground support costs this quarter than the second quarter of 2010.

Inventory changes

Copper inventories at Çayeli and Pyhäsalmi increased this quarter end by a combined 3,000 tonnes because of the timing of shipments.

2011 outlook for cost of sales (excluding depreciation)

We expect consolidated direct production costs to be higher in 2011 because we will recognize a full year of production costs in the income statement for Las Cruces. This will be somewhat offset by the closure of Troilus.

Our budget for 2011 assumes our costs at Pyhäsalmi will be similar to 2010 and higher at Çayeli. Costs at Las Cruces will rise to reflect increased production, but should decrease significantly per pound of copper produced as this operation continues to ramp up to full production.

Certain variable costs may continue to affect our earnings, depending on metal prices:

• royalties at Çayeli are affected by its net income
• royalties at Las Cruces are affected by its net sales.

Depreciation was higher this quarter and year to date mainly because Las Cruces began to depreciate its operating assets in the income statement on July 1, 2010. There was no depreciation at Troilus in 2011 because it stopped operating in June 2010.

2011 outlook for depreciation

We expect depreciation to be higher in 2011 mainly because we will recognize Las Cruces' operating results in earnings for the entire year. This will be offset somewhat by the closure of Troilus.

Corporate costs

Corporate costs include corporate development and exploration, general and administration costs, taxes, interest and other income.

Corporate development and exploration

Costs year to date are approximately $13 million higher than 2010. In the first quarter, we incurred approximately $6 million of expenses from work related to the arrangement agreement to merge with Lundin Mining Corporation. We and Lundin Mining Corporation agreed to mutually terminate our arrangement agreement on March 29, 2011. All of the costs incurred in connection with the proposed merger were expensed and classified ascorporate development and exploration in the consolidated statement of earnings. In addition, we incurred $2 million in expenditures in the first quarter to drill the Balboa deposit at Cobre Panama. Work on Balboa continued in the second quarter and we began capitalizing drilling and evaluation costs for this deposit based on the positive results to date. See Status of development project – Cobre Panama on page 22 for more information. Increased costs compared to 2010 also reflect our higher budget for 2011 to explore for world class deposits.

Interest income

Interest income was higher this quarter and year to date compared to last year because our long-term bond portfolio provided higher yields and because our cash and long-term bond balances were higher.

Foreign exchange losses

We have foreign exchange gains or losses when we revalue certain foreign denominated assets and liabilities.

Our foreign exchange losses were from:

We continue to hold the proceeds we received from the sale of our equity interest in Ok Tedi in US dollars, and plan to use this money to fund our US dollar denominated capital program at Cobre Panama. In the first quarter, we recognized total foreign exchange losses of $9.5 million on these funds because the US dollar depreciated in value relative to the Canadian dollar.

2011 outlook for investment and other income

Investment and other income is affected by cash and held to maturity investments, and by interest rates and exchange rates.

Stand-by costs

In the first quarter of 2010, we could not mine ore at Las Cruces because of the water levels in the pit. We expensed $6.8 million in operating and maintenance costs for the water purification plant because they did not relate to production activities. We recognized these expenses as stand-by costs because we were not yet at commercial production.

Our tax expense changes as our earnings change.

The consolidated effective tax rate increased this quarter and year to date compared to last year, mainly because in 2010 Las Cruces recognized a tax recovery on a foreign exchange loss from its intercompany US dollar denominated debt. The foreign exchange eliminates on consolidation, but the tax recovery does not, since there is no corresponding tax expense on the foreign exchange gain.

2011 outlook for income tax expense

We expect statutory tax rates at our operations to remain the same as they were in 2010 unless a statutory tax rate change is enacted.

Discontinued operation

We sold our 18 percent equity interest in Ok Tedi in January 2011, and have reported our results relating to Ok Tedi as discontinued operations retroactively. After-tax income of $83 million in 2011 includes net earnings of $17 million in January, before the sale, and a gain on sale of $66 million net of withholding taxes. We paid Papua New Guinea withholding taxes of $28 million on the sale. We did not pay any Canadian taxes, and we expect to reduce our tax-effected Canadian tax loss pools by about $2 million.

Results of our operations

2011 estimates

Our financial review by operation includes estimates for our 2011 operating earnings and operating cash flows. We used our 2011 objectives for production and cost per tonne of ore milled to build these estimates, as well as the following assumptions for the remaining six months of the year: