http://www.inmetmining.com/generated by Q4Wed, 01 Sep 2010 16:18:00 -0400Copyright Q4 Web Systems. All rights reserved. <p><location value="LU/ca.on.tornto" idsrc="xmltag.org">TORONTO, CANADA</location>--(Marketwire - <chron>Sept. 1, 2010</chron>) - Mr. <person>Jochen Tilk</person>, President and Chief Executive Officer of <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> (TSX:IMN), will be speaking on <chron>Friday, September 10, 2010</chron> at <chron>10:20 a.m. Eastern Time</chron> at the <org>Bank of America Merrill Lynch</org> 16th Annual <org>Canada Mining Conference</org> being held in <location value="LU/ca.on.tornto" idsrc="xmltag.org">Toronto, Ontario</location> at the <location>Sheraton Centre Toronto Hotel</location>. Slides of the presentation will be available on Inmet's website prior to the presentation.</p> <p>About Inmet - Inmet is a Canadian-based global mining company that produces copper, zinc and gold. We have interests in four mining operations in locations around the world: Cayeli, Las Cruces, Pyhasalmi and Ok Tedi. We also have a 100 percent interest in Cobre Panama, a development property in <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama</location>.</p> <p>This press release is also available at <a href="http://www.inmetmining.com">www.inmetmining.com</a>.</p> <pre> FOR FURTHER INFORMATION PLEASE CONTACT: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> <person>Lynda Beesley</person> Assistant Corporate Secretary +1.416.860.3968 <a href="http://www.inmetmining.com">www.inmetmining.com</a> Source: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> </pre> http://www.inmetmining.com/investorsmedia/news/newsdetails/default.aspx?PressReleaseId=b2a02468-f207-4f0d-b6ea-0186af376f01Wed, 01 Sep 2010 16:18:00 -0400<p><location value="LU/ca.on.tornto" idsrc="xmltag.org">TORONTO, CANADA</location>--(Marketwire - <chron>July 27, 2010</chron>) -</p> <p>All amounts in Canadian dollars unless indicated otherwise</p> <p><org value="Toronto:IMN" idsrc="xmltag.org">Inmet</org> (TSX:IMN) announces second quarter earnings.<br></p><pre><a href="http://www.inmetmining.com/Theme/Inmet/files/Q2%202010%20Press%20Release%20final.pdf"><font face=Verdana>View the Related Document (PDF 2.4 MB)</font> </a><br> Second quarter highlights -- Foreign exchange losses reduce earnings Inmet announces second quarter earnings of <money>$0.86</money> per share compared with earnings of <money>$1.37</money> per share in the second quarter of 2009. Our net income this quarter was <money>$39 million</money> lower (<money>$0.69</money> per share) than the same quarter last year because of foreign exchange. We recognized foreign exchanges losses of <money>$21 million</money> this quarter on the repatriation of cash from Cayeli and Pyhasalmi. In the same quarter of 2009, we recognized foreign exchange gains of <money>$18 million</money> mainly from revaluing Las Cruces' US dollar denominated debt under its credit facility. -- Consistent earnings from operations Earnings from operations were <money>$87 million</money> compared to <money>$85 million</money> last year, even though Troilus contributed <money>$10 million</money> less. Higher copper and zinc prices increased our operating earnings by <money>$11 million</money> compared to the same quarter of 2009. -- Strong performance at Cayeli and Pyhasalmi Cayeli milled 295,000 tonnes this quarter, and Pyhasalmi milled 355,000 tonnes. Both operations remain on target to meet their annual throughput objectives. -- Higher zinc production and lower gold production Zinc production was higher this quarter because grades at Cayeli were higher. Gold production was significantly lower because Troilus concluded operations during the quarter. -- Las Cruces progressing on commissioning plan While we have achieved increasing productivity rates, a number of equipment failures and operational issues delayed the ramp-up of the plant and limited our ability to operate continuously. As a result, we produced 6,600 tonnes of copper cathode during the quarter compared to a target of 12,400 tonnes. We believe we have identified the key bottlenecks to production and we continue to take steps to significantly increase our operating reliability. We will continue with the rigorous implementation of the ramp up plan to achieve our goal of full production by the end of the year and we are encouraged by the capability that the plant has demonstrated in recent months. -- Troilus concludes operations After reaching the milestone of producing 2 million ounces of gold on <chron>June 16th</chron>, Troilus concluded 13 years of operations at the end of June after depletion of all remaining surface ore stockpiles. We would like to thank all of the employees of Troilus for their tremendous dedication and contributions as well as the Cree community for its support of this project. Key financial data ---------------------------------------------------------------------------- three months ended June 30 six months ended June 30 2010 2009 change 2010 2009 change ---------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (thousands, except per share amounts) Sales Gross sales $ 215,051 $ 213,042 +1% $ 466,610 $ 452,194 +3% Net income Net income $ 48,436 $ 66,528 -27% $ 128,307 $ 117,855 +9% Net income per share $ 0.86 $ 1.37 -37% $ 2.29 $ 2.43 -6% Cash flow Cash flow provided by operating activities $ 80,289 $ 90,596 -11% $ 171,866 $ 107,693 +60% Cash flow provided by operating activities per share (1) $ 1.43 $ 1.86 -23% $ 3.06 $ 2.22 +38% Capital spending (2) $ 11,014 $ 86,263 -87% $ 32,835 $ 181,122 -82% ---------------------------------------------------------------------------- OPERATING HIGHLIGHTS Production(3) Copper (tonnes) 22,500 19,200 +17% 43,700 39,300 +11% Zinc (tonnes) 20,600 17,500 +18% 39,300 32,800 +20% Gold (ounces) 36,700 50,600 -27% 76,900 129,400 -41% Pyrite (tonnes) 137,700 132,200 +4% 335,200 323,000 +4% Copper cash cost (US $ per pound) (4) $ 0.47 $ 0.52 -10% $ 0.43 $ 0.55 -22% ---------------------------------------------------------------------------- as at June as at December 30 31 FINANCIAL CONDITION 2010 2009 Current ratio 3.9 to 1 4.2 to 1 Gross debt to total equity (5) 1% 1% Net working capital balance (millions) $ 502 $ 609 Cash balance including long-term bonds (millions) $ 757 $ 634 Shareholders' equity (millions) $ 2,269 $ 2,238 ---------------------------------------------------------------------------- (1) Cash flow provided by operating activities divided by average shares outstanding for the period. (2) For the six months ended <chron>June 30, 2010</chron>, this includes capital spending of <money>$41 million</money> at Cobre Panama and <money>$29 million</money> at Las Cruces reduced by positive cash flow from pre-operating costs net of revenues and working capital changes at Las Cruces of <money>$53 million</money>. For the six months ended <chron>June 30, 2009</chron>, this includes <money>$119 million</money> of capital spending at Las Cruces (mainly for construction). (3) Inmet's share. (4) Copper cash cost per pound is a non-GAAP measure - see Supplementary financial information on pages 31 to 33. (5) Gross debt includes long-term debt and the current portion of long-term debt, less the non-recourse note owing from Las Cruces to its non- controlling shareholder. Second quarter press release Where to find it Our financial results 4 Key changes in 2010 4 Understanding our performance 5 Earnings from operations 7 Corporate costs 11 Results of our operations 13 Cayeli 14 Las Cruces 16 Pyhasalmi 17 Troilus 20 Ok Tedi 22 Status of our development project 24 Cobre Panama 24 Managing our liquidity 25 Financial condition 28 Accounting changes 29 Supplementary financial information 31 </pre> <p>In this press release, Inmet means <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> and we, us and our mean Inmet and/or its subsidiaries and joint ventures. This quarter refers to the three months ended <chron>June 30, 2010</chron>. Revised objective is as of <chron>July 27, 2010</chron>.</p> <p>Forward looking information</p> <p>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.</p> <p>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.</p><pre>Our financial results ---------------------------------------------------------------------------- three months ended June 30 six months ended June 30 (thousands, except per share amounts) 2010 2009 change 2010 2009 change ---------------------------------------------------------------------------- EARNINGS FROM OPERATIONS (1) Cayeli $ 24,472 $ 22,185 +10% $ 61,568 $ 37,086 +66% Pyhasalmi 22,309 11,783 +89% 45,166 18,326 +146% Troilus 6,252 16,032 -61% 17,299 70,516 -75% Ok Tedi 33,905 35,530 -5% 74,873 53,115 +41% Other (69) (508) -86% (1,011) (992) +2% ---------------------------------------------------------------------------- 86,869 85,022 +2% 197,895 178,051 +11% ---------------------------------------------------------------------------- DEVELOPMENT AND EXPLORATION Corporate development and exploration (2,524) (2,727) -7% (5,303) (5,959) -11% ---------------------------------------------------------------------------- CORPORATE COSTS General and administration (6,288) (4,785) +31% (11,798) (8,909) +32% Investment and other income (18,370) 16,466 -212% (18,448) 5,263 -451% Asset impairment - - - - (6,419) -100% Stand-by costs - - - (6,753) - +100% Interest expense (421) (493) -15% (873) (985) -11% Income and capital taxes (15,249) (24,177) -37% (35,394) (43,192) -18% Non-controlling not interest 4,419 (2,778) -259% 8,981 5 meaningful ---------------------------------------------------------------------------- (35,909) (15,767) +128% (64,285) (54,237) +19% ---------------------------------------------------------------------------- Net income $ 48,436 $ 66,528 -27% $128,307 $117,855 +9% ---------------------------------------------------------------------------- Basic net income per share $ 0.86 $ 1.37 -37% $ 2.29 $ 2.43 -6% ---------------------------------------------------------------------------- Diluted net income per share $ 0.86 $ 1.36 -37% $ 2.28 $ 2.42 -6% ---------------------------------------------------------------------------- Weighted average shares outstanding 56,107 48,712 +15% 56,107 48,498 +16% ---------------------------------------------------------------------------- (1) Gross sales less smelter processing charges and freight, cost of sales, depreciation and provisions for mine reclamation. Key changes in 2010 ---------------------------------------------------------------------------- three months six months ended June ended June see (millions) 30 30 page ---------------------------------------------------------------------------- EARNINGS FROM OPERATIONS Sales Higher copper and zinc prices denominated in Canadian dollars $ 11 $ 67 7 Higher (lower) sales volumes (3) 1 Costs (Higher) lower smelter processing charges and freight 3 (1) 9 Lower operating costs, including costs that vary with income and cash flows 4 9 10 Lower operating earnings at Troilus (10) (53) 8 Other (3) (3) ---------------------------------------------------------------------------- Higher earnings from operations, compared to 2009 $ 2 $ 20 CORPORATE COSTS Foreign exchange changes (39) (31) 11 Asset impairment in 2009 - 6 11 Lower income taxes 9 8 Non-controlling interest change 7 9 Stand-by costs - (6) 11 Other 3 4 ---------------------------------------------------------------------------- Higher (lower) net income, compared to 2009 ($18) $ 10 ---------------------------------------------------------------------------- </pre> <p>Understanding our performance</p> <p>Metal prices</p> <p>The table below shows the average metal prices we realized in US dollars and Canadian dollars (the prices we realize include finalization adjustments - see Gross sales on page 7).</p><pre>---------------------------------------------------------------------------- three months ended June 30 six months ended June 30 2010 2009 change 2010 2009 change ---------------------------------------------------------------------------- US dollar metal prices Copper (per pound) $ 2.86 $ 2.22 +29% $ 3.12 $ 2.14 +46% Zinc (per pound) $ 0.81 $ 0.69 +17% $ 0.91 $ 0.60 +52% Gold (per ounce) $ 1,208 $ 900 +34% $ 1,140 $ 932 +22% ---------------------------------------------------------------------------- Canadian dollar metal prices Copper (per pound) $ 2.94 $ 2.60 +13% $ 3.23 $ 2.58 +25% Zinc (per pound) $ 0.83 $ 0.81 +2% $ 0.94 $ 0.72 +31% Gold (per ounce) $ 1,242 $ 1,050 +18% $ 1,179 $ 1,124 +5% ---------------------------------------------------------------------------- </pre> <p>Copper</p> <p>Copper prices declined steadily this quarter, following the volatility of the first quarter of 2010. London Metals Exchange (LME) cash prices went down to US <money>$2.88</money> per pound on <chron>July 1</chron> - a drop of 19 percent from the peak of US <money>$3.57</money> per pound at the beginning of the quarter. However, we believe that downward potential in the third quarter is limited by the strong supply side fundamentals and increasing consumption in industrialized countries. LME inventories dropped by 12 percent (63,000 tonnes) during the quarter, reflecting the pick-up in demand from countries other than <location value="LC/cn;LB/eas" idsrc="xmltag.org">China</location>, as well as the continued strength in Chinese imports.</p> <p>Zinc</p> <p>Zinc has performed poorly during the first half of the year, and prices have been volatile. It is believed that high prices in 2009 encouraged zinc supply and resulted in a surplus of refined zinc in 2010, as the continuing rise in exchange stocks in the last six months has demonstrated. LME zinc stocks increased to 616,000 tonnes from 489,000 tonnes in January. The price of zinc followed other metals and fell to US <money>$0.72</money> per pound - the lowest it has been since <chron>July 2009</chron>.</p> <p>Gold</p> <p>This quarter, the price of gold rose for the seventh consecutive quarter - the best performance in the last two and a half years. Prices have risen by 11 percent since the beginning of April - a period in which all base metals and other precious metals were significantly down - and on <chron>June 28</chron>, hit an all-time high of US <money>$1,259</money> per ounce.</p> <p>Pyrite</p> <p>Sulphur and pyrite prices were down during the second quarter. In the first quarter of the year, sulphur prices had risen because demand for fertilizer was expected to be strong, and data indicated that production would be low. The price of sulphur is expected to continue to go down in the second half of the year because the seasonally high consumption period in <location value="LC/cn;LB/eas" idsrc="xmltag.org">China</location> is finished.</p> <p>Exchange rates</p> <p>Exchange rates affect our revenue and earnings. The table below shows the average exchange rates we realized this quarter and for the year to June compared to 2009.</p><pre>---------------------------------------------------------------------------- three months ended June 30 six months ended June 30 2010 2009 change 2010 2009 change ---------------------------------------------------------------------------- Exchange rates 1 US$ to C$ $ 1.03 $ 1.17 -12% $ 1.03 $ 1.21 -15% 1 euro to C$ $ 1.31 $ 1.59 -18% $ 1.37 $ 1.61 -15% 1 euro to US$ $ 1.28 $ 1.36 -6% $ 1.33 $ 1.33 - ---------------------------------------------------------------------------- </pre> <p>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 12 percent relative to the US dollar, and 18 percent relative to the euro.</p><pre>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 in <location value="LC/ca;LB/nam" idsrc="xmltag.org">Canada</location> -- translate US dollar sales at Troilus to Canadian dollars. </pre> <p>Treatment charges down for copper</p> <p>Treatment charges are one component of smelter processing charges. We also pay smelters for content losses and price participation.</p> <p>The table below shows the average charges we realized this quarter and year to date. We finalized our contract terms with zinc smelters this quarter. While treatment charges for zinc concentrates are higher than last year, price participation is lower. Results this quarter include adjustments we've made to first quarter charges, which were at 2009 rates.</p><pre>---------------------------------------------------------------------------- three months ended June 30 six months ended June 30 (US$) 2010 2009 change 2010 2009 change ---------------------------------------------------------------------------- Treatment charges Copper (per dry metric tonne of concentrate) US $52 US $66 -21% US $56 US $67 -16% Zinc (per dry metric tonne of concentrate) US $284 US $131 +117% US $247 US $192 +29% ---------------------------------------------------------------------------- Price participation Copper (per pound) US $0.01 US $0.03 -67% US $0.01 US $0.03 -67% Zinc (per pound) US ($0.11) US $0.05 -320% US ($0.02) US $0.01 -300% ---------------------------------------------------------------------------- Freight charges Copper (per dry metric tonne of concentrate) US $67 US $34 +97% US $68 US $30 +127% Zinc (per dry metric tonne of concentrate) US $35 US $28 +25% US $32 US $26 +23% ---------------------------------------------------------------------------- </pre> <p>Statutory tax rates remain consistent</p> <p>The table below shows the statutory tax rates for each of our taxable operating mines.</p><pre>---------------------------------------------------------------------------- 2010 2009 Change ---------------------------------------------------------------------------- Statutory tax rates Cayeli 24% 24% - Pyhasalmi 26% 26% - Ok Tedi 37% 37% - Las Cruces 30% 30% - ---------------------------------------------------------------------------- Earnings from operations Earnings from operations include: ---------------------------------------------------------------------------- three months ended June 30 six months ended June 30 (thousands) 2010 2009 change 2010 2009 change ---------------------------------------------------------------------------- Gross sales $215,051 $213,042 +1% $ 466,610 $ 452,194 +3% Smelter processing charges and freight (36,794) (40,589) -9% (81,123) (81,129) - Cost of sales: Direct production costs (67,507) (71,935) -6% (139,059) (150,354) -8% Inventory changes (2,825) 2,222 +227% (10,400) (1,673) +522% Provisions for mine rehabilitation and other non- cash charges (2,105) (4,114) -49% (3,958) (11,704) -66% Depreciation (18,951) (13,604) +39% (34,175) (29,283) +17% ---------------------------------------------------------------------------- Earnings from operations $ 86,869 $ 85,022 +2% $ 197,895 $ 178,051 +11% ---------------------------------------------------------------------------- Gross sales were marginally higher ---------------------------------------------------------------------------- three months ended June 30 six months ended June 30 (thousands) 2010 2009 change 2010 2009 change ---------------------------------------------------------------------------- Gross sales by operation Cayeli $ 68,026 $ 63,711 +7% $ 150,432 $ 123,732 +22% Pyhasalmi 44,006 43,001 +2% 95,446 76,982 +24% Troilus 27,723 37,407 -26% 62,177 124,397 -50% Ok Tedi (1) 75,296 68,923 +9% 158,555 127,083 +25% ---------------------------------------------------------------------------- $ 215,051 $ 213,042 +1% $ 466,610 $ 452,194 +3% ---------------------------------------------------------------------------- Gross sales by metal Copper $ 111,329 $ 105,260 +6% $ 253,927 $ 209,999 +21% Zinc 39,598 33,028 +20% 86,271 60,052 +44% Gold 50,520 55,711 -9% 99,860 148,725 -33% Other 13,604 19,043 -29% 26,552 33,418 -20% ---------------------------------------------------------------------------- $ 215,051 $ 213,042 +1% $ 466,610 $ 452,194 +3% ---------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's sales. Key components of the change in sales: higher copper prices, lower sales volumes at Troilus ---------------------------------------------------------------------------- three months six months (millions) ended June 30 ended June 30 ---------------------------------------------------------------------------- Higher copper prices, denominated in Canadian dollars $ 10 $ 48 Higher zinc prices, denominated in Canadian dollars 1 20 Higher gold prices, denominated in Canadian dollars 3 4 Changes in other metal prices (4) (8) Lower gross sales from Troilus (10) (62) Higher sales volumes at our other mines 2 12 ---------------------------------------------------------------------------- Higher gross sales, compared to 2009 $ 2 $ 14 ---------------------------------------------------------------------------- </pre> <p>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).</p> <p>In the second quarter, we recorded <money>$9 million</money> in negative finalization adjustments from first quarter sales.</p><pre>At the end of this quarter, the following sales had not been settled: -- 23 million pounds of copper provisionally priced at US <money>$2.95</money> per pound -- 10 million pounds of zinc provisionally priced at US <money>$0.81</money> per pound. </pre> <p>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 it. We expect these sales to settle in the following months:</p><pre>---------------------------------------------------------------------------- (millions of pounds) copper zinc ---------------------------------------------------------------------------- July 2010 16 10 August 2010 3 - September 2010 3 - December 2010 1 - ---------------------------------------------------------------------------- Unsettled sales at June 30, 2010 23 10 ---------------------------------------------------------------------------- </pre> <p>Lower gold sales volumes this year - Troilus concluded processing low-grade stockpiled ore</p> <p>Our sales volumes are directly affected by the amount of production from our mines, and our ability to ship to our customers.</p><pre>---------------------------------------------------------------------------- three months ended June 30 six months ended June 30 2010 2009 change 2010 2009 change ---------------------------------------------------------------------------- Sales volumes Copper (tonnes) 21,800 18,300 +19% 43,300 36,800 +18% Zinc (tonnes) 21,600 18,600 +16% 41,300 37,300 +11% Gold (ounces) 40,000 52,500 -24% 83,400 131,900 -37% Pyrite (tonnes) 108,300 121,000 -10% 199,100 197,000 +1% ---------------------------------------------------------------------------- Production ---------------------------------------------------------------------------- three months ended six months ended June revised June 30 30 objective Inmet's share(1) 2010 2009 change 2010 2009 change 2010 ---------------------------------------------------------------------------- Copper (tonnes) Cayeli 7,100 7,500 -5% 14,200 14,600 -3% 30,500 Las Cruces cathode 4,600 - +100% 7,800 - +100% 25,000 Las Cruces copper contained in ore - - - - - - 12,300 Pyhasalmi 4,000 3,700 +8% 6,900 7,300 -5% 13,400 Troilus 700 1,100 -36% 2,000 3,900 -49% 2,000 Ok Tedi 6,100 6,900 -12% 12,800 13,500 -5% 29,300(2) ---------------------------------------------------------------------------- 22,500 19,200 +17% 43,700 39,300 +11% 112,500 ---------------------------------------------------------------------------- Zinc (tonnes) Cayeli 15,000 11,800 +27% 26,500 23,600 +12% 51,700 Pyhasalmi 5,600 5,700 -2% 12,800 9,200 +39% 31,300 ---------------------------------------------------------------------------- 20,600 17,500 +18% 39,300 32,800 +20% 83,000 ---------------------------------------------------------------------------- Gold (ounces) Troilus 18,600 26,700 -30% 37,900 84,800 -55% 37,900 Ok Tedi 18,100 23,900 -24% 39,000 44,600 -13% 102,600(2) ---------------------------------------------------------------------------- 36,700 50,600 -27% 76,900 129,400 -41% 140,500 ---------------------------------------------------------------------------- Pyrite (tonnes) Pyhasalmi 137,700 132,200 +4% 335,200 323,000 +4% 420,000 ---------------------------------------------------------------------------- (1) Inmet's share represents 100 percent for Cayeli, Pyhasalmi and Troilus, 18 percent for Ok Tedi and 70 percent for Las Cruces. (2) This production objective is subject to the possible exchange of our 18 percent equity interest in Ok Tedi for a 5 percent net smelter return royalty, which is expected to occur in the third quarter of 2010. </pre> <p>Copper production this quarter and year to June was higher than 2009 because of new production at Las Cruces, offset somewhat by lower production at Ok Tedi as a result of the labour disruption.</p> <p>Zinc production was up mainly because zinc grades and recoveries at Cayeli were higher.</p> <p>Gold production was down because grades were lower at Troilus (as production was drawn from the last of its low grade stockpiles) and at Ok Tedi because of a labour disruption and lower grades.</p> <p>2010 outlook for sales</p> <p>We use our production objectives to estimate our sales target, except for copper contained in ore at Las Cruces that we intend to ship directly to smelters that may get shipped in 2011. We expect copper and zinc sales volumes this year to be higher than 2009 because we expect production to be higher. We expect gold sales volumes to be lower than 2009 because production ended at Troilus at the end of the second quarter of 2010.</p> <p>We expect copper production to be about 33 percent higher than 2009 because of the incremental production at Las Cruces. We will begin recognizing Las Cruces' results in operating earnings as of <chron>July 1, 2010</chron>. We estimate our 70 percent share of 2010 production at Las Cruces to include 25,000 tonnes of copper cathode, and 12,300 tonnes of copper contained in ore that we intend to ship directly to smelters. We do not have the permits we need to ship the ore yet and therefore we have excluded this ore from our sales target, but we have begun mining and stockpiling it in anticipation of receiving the permits. We expect zinc production to increase because we plan to mine higher zinc grades at Pyhasalmi in 2010.</p> <p>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. The overall outlook for copper demand is broadly positive in 2010 and copper is the most favoured base metal because of its strong fundamentals.</p><pre>Lower smelter processing charges and freight for the quarter ---------------------------------------------------------------------------- three months ended June 30 six months ended June 30 (thousands) 2010 2009 change 2010 2009 change ---------------------------------------------------------------------------- Smelter processing charges and freight by operation Cayeli $ 18,590 $ 18,438 +1% $38,695 $ 37,514 +3% Pyhasalmi 8,550 12,326 -31% 20,055 21,317 -6% Troilus 1,563 2,458 -36% 4,321 8,718 -50% Ok Tedi (1) 8,091 7,367 +10% 18,052 13,580 +33% ---------------------------------------------------------------------------- $ 36,794 $ 40,589 -9% $81,123 $ 81,129 - ---------------------------------------------------------------------------- Smelter processing charges and freight by metal Copper $ 15,660 $ 19,827 -21% $34,745 $ 38,343 -9% Zinc 15,504 11,780 +32% 35,978 26,968 +33% Other 5,630 8,982 -37% 10,400 15,818 -34% ---------------------------------------------------------------------------- $ 36,794 $ 40,589 -9% $81,123 $ 81,129 - ---------------------------------------------------------------------------- Smelter processing charges by type and freight Copper treatment and refining charges $ 5,532 $ 8,882 -38% $12,377 $ 18,575 -33% Zinc treatment charges 12,794 5,602 +128% 20,863 17,281 +21% Copper price participation 410 1,275 -68% 1,120 2,738 -59% Zinc price participation (5,351) 2,407 -322% (1,438) 739 -295% Content losses 12,302 10,660 +15% 26,936 21,400 +26% Freight 10,095 9,724 +4% 18,559 16,386 +13% Other 1,012 2,039 -50% 2,706 4,010 -33% ---------------------------------------------------------------------------- $ 36,794 $ 40,589 -9% $81,123 $ 81,129 - ---------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's smelter processing charges and freight. </pre> <p>Our copper treatment and refining charges were lower than they were in 2009 because we have more favourable terms with smelters. Total zinc processing charges including price participation were higher than last year mainly because sales volumes were higher. Content losses were higher because metal prices are higher than they were last year.</p> <p>2010 outlook for smelter processing charges and freight</p> <p>We expect costs for copper treatment and refining to be lower in 2010 based on agreements we have signed with our customers. We sell approximately 90 percent of our copper concentrate under long-term contracts. We are estimating annual treatment costs of US <money>$50</money> per dry metric tonne in 2010. We also expect price participation to be minimal.</p> <p>We expect the zinc concentrate market to be dictated by zinc price levels and demand from <location value="LC/cn;LB/eas" idsrc="xmltag.org">China</location>. We expect zinc processing charges to be lower than they were in 2009.</p> <p>In 2010, Las Cruces may sell high grade crushed ore to smelters and incur smelter processing charges. We expect the cost to smelt and refine the ore to be higher than it is at our other operations, because copper grades in crushed ore are lower than they are in concentrates, and the level of impurities is higher.</p> <p>Las Cruces sells its copper cathode production directly to buyers in the Spanish and Mediterranean markets.</p> <p>We expect our ocean freight costs to be about 20 percent higher than they were in 2009 because of the expected recovery in global trade and associated shipping demand.</p> <p>Direct production costs and cost of sales slightly lower than last year</p><pre>---------------------------------------------------------------------------- three months ended June 30 six months ended June 30 (thousands) 2010 2009 change 2010 2009 change ---------------------------------------------------------------------------- Direct production costs by operation Cayeli $ 21,273 $ 19,834 +7% $ 43,009 $ 40,306 +7% Pyhasalmi 12,853 15,711 -18% 27,831 31,365 -11% Troilus 11,814 13,816 -14% 23,905 32,422 -26% Ok Tedi (1) 21,567 22,574 -4% 44,314 46,261 -4% ---------------------------------------------------------------------------- Total direct production costs 67,507 71,935 -6% 139,059 150,354 -8% Inventory changes 2,825 (2,222) +227% 10,400 1,673 +522% Reclamation, accretion and other non-cash expenses 2,105 4,114 -49% 3,958 11,704 -66% ---------------------------------------------------------------------------- Total cost of sales $ 72,437 $ 73,827 -2% $ 153,417 $ 163,731 -6% ---------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's direct production costs. </pre> <p>Direct production costs are lower in the quarter and year to date than they were in 2009, mainly because we finished mining at Troilus in <chron>April 2009</chron> and at Pyhasalmi because of a stronger Canadian dollar relative to the euro.</p> <p>2010 outlook for cost of sales</p> <p>Our budget for 2010 assumes our costs will be similar to 2009 in local currency terms. Consolidated direct production costs should be higher because production costs at Las Cruces will no longer be capitalized as of <chron>July 1, 2010</chron>, somewhat offset by lower Canadian dollar costs at Pyhasalmi due to a stronger Canadian dollar relative to the euro.</p><pre>Certain variable costs may continue to affect our earnings, depending on metal prices: -- royalties at Cayeli are affected by its net income -- variable employee compensation costs at Ok Tedi are affected by its cash flows -- royalties at Las Cruces are affected by its net sales. Depreciation higher this quarter ---------------------------------------------------------------------------- three months ended June 30 six months ended June 30 (thousands) 2010 2009 change 2010 2009 change ---------------------------------------------------------------------------- Depreciation by operation Cayeli $ 3,246 $ 3,373 -4% $ 6,470 $ 6,846 -5% Pyhasalmi 1,903 2,162 -12% 3,712 4,764 -22% Troilus 5,623 3,301 +70% 10,002 6,720 +49% Ok Tedi 8,179 4,768 +72% 13,991 10,953 +28% ---------------------------------------------------------------------------- $ 18,951 $ 13,604 +39% $ 34,175 $ 29,283 +17% ---------------------------------------------------------------------------- </pre> <p>Depreciation at Troilus and Ok Tedi was significantly higher this quarter and year to June because we increased their assets related to asset retirement obligations at the end of 2009. We also began amortizing the cost of underwater storage pits Ok Tedi uses to store sulphur concentrate the tailings management plant produces.</p> <p>2010 outlook for depreciation</p> <p>We expect depreciation to be higher in 2010 because we will begin to depreciate Las Cruces' operating assets starting <chron>July 1</chron>.</p> <p>Corporate costs</p> <p>Corporate costs include general and administration costs, taxes, interest and other income.</p> <p>Investment and other income (expense)</p><pre>---------------------------------------------------------------------------- three months ended six months ended June June 30 30 (thousands) 2010 2009 2010 2009 ---------------------------------------------------------------------------- Interest income $ 1,760 $ 701 $ 3,357 $ 2,743 Foreign exchange gain (loss) (20,738) 18,196 (23,153) 8,098 Dividend and royalty income 1,175 385 1,889 685 Mark to market on Ok Tedi copper forward contracts - (1,007) - (2,426) Other (567) (1,809) (541) (3,837) ---------------------------------------------------------------------------- ($18,370) $ 16,466 ($18,448) $ 5,263 ---------------------------------------------------------------------------- </pre> <p>Foreign exchange gain (loss)</p><pre>We have a foreign exchange gain or loss when we: -- revalue certain foreign denominated assets and liabilities -- distribute funds from our self-sustaining operations and recognize the foreign exchange we previously deferred on our original investment and on funds as they accumulated. Our foreign exchange gains (losses) are from: ---------------------------------------------------------------------------- three months ended June six months ended June 30 30 (thousands) 2010 2009 2010 2009 ---------------------------------------------------------------------------- Translation of Las Cruces' US dollar- denominated bank credit facility $ - $ 15,273 $ - $ 3,808 Translation of foreign - denominated cash held at corporate 202 149 (569) (1,446) Translation of other - monetary assets and liabilities 381 (1,138) 72 1,824 Reduction in our net investments (21,321) 3,912 (22,656) 3,912 ---------------------------------------------------------------------------- ($20,738) $ 18,196 ($23,153) $ 8,098 ---------------------------------------------------------------------------- </pre> <p>We recognized foreign exchanges losses of <money>$21 million</money> this quarter on the repatriation of cash from Cayeli and Pyhasalmi. In the same quarter of 2009, we recognized a total foreign exchange gain of <money>$18 million</money> mainly from revaluing Las Cruces' US dollar denominated debt under its credit facility.</p> <p>2010 outlook for investment and other income</p> <p>Investment and other income is affected by our cash and held to maturity investment balances, and by interest rates and exchange rates. For the remainder of the year, we expect to repatriate funds only from Ok Tedi. Because Ok Tedi distributes its earnings more frequently, the effect of repatriation is normally not significant.</p> <p>Stand-by costs</p> <p>In the first quarter of 2010, we could not mine ore at Las Cruces because of the water levels in the pit. We expensed <money>$6.8 million</money> in water plant operating and maintenance costs because they did not relate to production activities.</p> <p>Asset impairment</p><pre>We made a decision in 2008 not to proceed with the Cerattepe project. All work ceased on the project and we took a <money>$34 million</money> charge to write down the assets to its net realizable value. In the first quarter of 2009, we took an additional impairment charge of <money>$6 million</money>, as well as a <money>$6 million</money> tax recovery (reflected in income taxes), to adjust to current net realizable value. Income tax expense (recovery) ---------------------------------------------------------------------------- three months ended June 30 six months ended June 30 (thousands) 2010 2009 change 2010 2009 change ---------------------------------------------------------------------------- Cayeli $ 4,953 $ 2,212 +124% $ 12,406 $ 1,631 +661% Pyhasalmi 4,911 1,870 +163% 9,926 2,305 +331% Ok Tedi 11,054 12,469 -11% 27,589 19,009 +45% Las Cruces (7,067) 4,302 +264% (14,530) 267 -5,542% Troilus and corporate 1,316 3,199 -59% (161) 19,730 -101% ---------------------------------------------------------------------------- $ 15,167 $ 24,052 -37% $ 35,230 $ 42,942 -18% ---------------------------------------------------------------------------- Consolidated effective tax rate 24% 27% -3% 22% 27% -5% ---------------------------------------------------------------------------- </pre> <p>Our tax expense changes as our earnings change.</p> <p>The consolidated effective tax rate went down by 5 percent compared to 2009 mainly because 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 as there is no corresponding tax expense on the foreign exchange gain.</p> <p>2010 outlook for income tax expense</p> <p>We expect statutory tax rates at our operations in 2010 to remain the same as they were in 2009 unless a statutory tax rate change is enacted.</p> <p>Results of our operations</p> <p>2010 estimates</p> <p>Our financial review by operation includes estimates for our 2010 operating earnings and operating cash flows. We used our 2010 objectives for production and cost per tonne of ore milled to build these estimates, along with the following assumptions for the remaining six months of the year:</p><pre>---------------------------------------------------------------------------- Copper price US $3.00 per pound Zinc price US $0.80 per pound Gold price US $1,100 per ounce Copper treatment cost US $50 per tonne for contracts and US $29 per tonne for spot sales Zinc treatment cost US $265 per tonne (basis US $2,500 per tonne) and US $135 per tonne for spot sales US $ to C$ exchange rate $1.05 euro to C$ exchange rate $1.29 Working capital Assume no changes for the year ---------------------------------------------------------------------------- Cayeli ----------------------------------------------------------------- three months ended June 30 2010 2009 change ----------------------------------------------------------------- Tonnes of ore milled (000's) 295 296 - Tonnes of ore milled per day 3,200 3,300 - ----------------------------------------------------------------- Grades (percent) copper 3.2 3.2 - zinc 7.0 5.9 +19% ----------------------------------------------------------------- Mill recoveries (percent) copper 76 80 -5% zinc 73 68 +7% ----------------------------------------------------------------- Production (tonnes) copper 7,100 7,500 -5% zinc 15,000 11,800 +27% ----------------------------------------------------------------- Cost per tonne of ore milled (C$) $72 $67 +7% ----------------------------------------------------------------- --------------------------------------------------------------------------- six months ended June 30 objective 2010 2009 change 2010 --------------------------------------------------------------------------- Tonnes of ore milled (000's) 584 561 +4% 1,200 Tonnes of ore milled per day 3,200 3,100 +4% 3,300 --------------------------------------------------------------------------- Grades (percent) copper 3.2 3.3 -3% 3.3 zinc 6.3 6.0 +5% 6.1 --------------------------------------------------------------------------- Mill recoveries (percent) copper 77 79 -3% 78 zinc 72 70 +3% 70 --------------------------------------------------------------------------- Production (tonnes) copper 14,200 14,600 -3% 30,500 zinc 26,500 23,600 +12% 51,700 --------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $74 $72 +3% $72 --------------------------------------------------------------------------- </pre> <p>Production results on target</p> <p>Production at Cayeli was strong this quarter, and in line with its annual 1.2 million tonne objective. Cayeli set several new records for milling this quarter including: best monthly feed rate (153 dry tonnes per hour), best daily tonnage processed (3,789 tonnes), and highest daily concentrate tonnes produced (1,042 tonnes).</p> <p>Copper production was lower for the quarter and year to date compared to 2009 mainly due to lower recoveries because of variation in ore types. Zinc production was significantly higher than 2009 because grades and recoveries were higher.</p> <p>There were four falls of ground during the quarter, and we continue to focus on ground support and rehabilitation. Additionally, we have significantly reduced the underground backfill void.</p> <p>2010 outlook for production</p> <p>Production levels should remain at 1.2 million tonnes in 2010, and we expect copper and zinc grades should be at 3.3 percent for copper and 6.1 percent for zinc.</p><pre>Financial review Higher earnings for the year because copper and zinc prices were higher ---------------------------------------------------------------------------- (millions of Canadian dollars unless otherwise three months six months revised stated) ended June 30 ended June 30 objective 2010 2009 2010 2009 2010 ---------------------------------------------------------------------------- Sales analysis Copper sales (tonnes) 5,600 6,800 12,100 13,300 30,500 Zinc sales (tonnes) 16,600 12,700 28,900 27,500 51,700 ------------------------------------------------ Gross copper sales $ 35 $ 36 $ 85 $ 73 $ 214 Gross zinc sales 30 23 59 44 101 Other metal sales 3 5 6 7 14 ------------------------------------------------ Gross sales 68 64 150 124 329 Smelter processing charges and freight (18) (19) (38) (38) (77) ---------------------------------------------------------------------------- Net sales $ 50 $ 45 $ 112 $ 86 $ 252 ---------------------------------------------------------------------------- Cost analysis Tonnes of ore milled (thousands) 295 296 584 561 1,200 Direct production costs ($ per tonne) $ 72 $ 67 $ 74 $ 72 $ 72 ---------------------------------------------------------------------------- Direct production costs $ 21 $ 20 $ 43 $ 40 $ 86 Change in inventory - (1) (1) - - Depreciation and other non- cash costs 5 4 8 9 18 ---------------------------------------------------------------------------- Operating costs $ 26 $ 23 $ 50 $ 49 $ 104 ---------------------------------------------------------------------------- Operating earnings $ 24 $ 22 $ 62 $ 37 $ 148 ---------------------------------------------------------------------------- Operating cash flow $ 24 $ 24 $ 53 $ 15 $ 128 ---------------------------------------------------------------------------- </pre> <p>The objective for 2010 uses the assumptions listed on page 13.</p> <p>The table below shows what contributed to the change in operating earnings and operating cash flow between 2010 and 2009.</p><pre>---------------------------------------------------------------------------- three months ended six months ended (millions) June 30 June 30 ---------------------------------------------------------------------------- Higher metal prices, denominated in Canadian dollars $ 4 $ 31 Lower sales volumes (2) (4) (Higher) lower smelter processing charges 2 (1) Higher operating costs (1) (3) Other (1) 2 ---------------------------------------------------------------------------- Higher operating earnings, compared to 2009 $ 2 $ 25 Change in tax expense because of change in taxable income (3) (5) Changes in working capital (see note 2 on page 44) - 19 Other 1 (1) ---------------------------------------------------------------------------- Higher operating cash flow, compared to 2009 $ - $ 38 ---------------------------------------------------------------------------- Capital spending expected to be lower due to timing ---------------------------------------------------------------------------- three months ended June revised 30 six months ended June 30 objective 2010 2009 change 2010 2009 change 2010 ---------------------------------------------------------------------------- Capital spending $ 3,100 $ 3,000 +3% $ 4,900 $ 6,600 -26% $ 19,000 ---------------------------------------------------------------------------- </pre> <p>2010 outlook for capital spending</p> <p>We expect to spend <money>$19 million</money> in 2010 on mobile equipment, site water control, stope stability, additional mill upgrades and development. The second phase of the headframe realignment project is underway and should be completed in the third quarter. This will bring the headframe back to its design configuration. We have established a monitoring and correction program to ensure the facility remains stable for the remaining life of the mine. At the same time, we will implement several geotechnical recommendations to curtail surface instability.</p><pre>Las Cruces ---------------------------------------------------------------------- three months ended June 30 (100 percent) 2010 2009 change ---------------------------------------------------------------------- Tonnes of ore processed (000's) 111,000 - +100% Tonnes of unprocessed ore (000's) - - - ---------------------------------------------------------------------- Copper grades (percent) cathode 7.2 - +100% unprocessed ore - - - ---------------------------------------------------------------------- Plant recoveries (percent) 84 - +100% ---------------------------------------------------------------------- Copper production (tonnes) cathode 6,600 - +100% unprocessed ore - - - ---------------------------------------------------------------------- Cost per tonne of ore processed (subsequent to July 1, 2010) (C$) - - - ---------------------------------------------------------------------- ---------------------------------------------------------------------------- revised six months ended June 30 objective (100 percent) 2010 2009 change 2010 ---------------------------------------------------------------------------- Tonnes of ore processed (000's) 188,000 - +100% 566,000 Tonnes of unprocessed ore (000's) - - - 128,000 ---------------------------------------------------------------------------- Copper grades (percent) cathode 7.0 - +100% 7.2 unprocessed ore - - - 13.7 ---------------------------------------------------------------------------- Plant recoveries (percent) 84 - +100% 89 ---------------------------------------------------------------------------- Copper production (tonnes) cathode 11,100 - +100% 35,700 unprocessed ore - - - 17,600 ---------------------------------------------------------------------------- Cost per tonne of ore processed (subsequent to July 1, 2010) (C$) - - - $ 135 ---------------------------------------------------------------------------- </pre> <p>Fatality at Las Cruces</p> <p>On <chron>May 25, 2010</chron>, a contractor at Las Cruces suffered fatal injuries in a workplace accident. As a result, Las Cruces commissioned an independent investigation to determine the cause of this tragic accident and to recommend and implement measures to minimize the potential for this kind of accident from happening again. Las Cruces remains committed to pursuing all measures necessary to provide its workers and contractors with a safe working environment.</p> <p><org>Progress</org> update</p> <p>During the second quarter, cathode production has improved by approximately 44 percent compared to the previous quarter and the plant demonstrated during consecutive running days its ability to reach the currently available plant capacity. However, a number of equipment failures and operational issues delayed the ramp-up of the plant and limited our ability to operate continuously. As a result, we produced 6,600 tonnes of copper cathode during the second quarter as compared to a target of 12,400 tonnes. This represents approximately 37 percent of design capacity (72,000 tonnes of copper cathode per year) or 55 percent of available capacity. Available capacity reflects the temporary constraint of having only two of the three leach residue filters available as one is dedicated to the neutralization plant. Installation of the new neutralization filter is on track and the necessary additional filtration capacity should be available by the end of July. Excluding the impact of production days lost due to mechanical failures, we produced at approximately 46 percent of design capacity for the quarter or 69 percent of available capacity. During the quarter, we achieved production for single days nearing 100 percent of design capacity and for extended periods we operated at over 60 percent of design capacity.</p> <p>In May, production ran very well as we produced at an average daily rate of 104 tonnes of copper cathode or 52 percent of design capacity and 78 percent of available capacity while operating 28 days during the month. This encouraged us to believe we were moving towards commercial production rates by the end of the second quarter.</p> <p>We experienced a set-back during June because of unexpected non-corrosion related equipment failures mostly related to the grinding and leach thickeners causing 10 days of lost production time.</p> <p>After one year since the start up of the plant, we have confirmed the exceptional quality of a high grade ore body, a sound leaching and electrowinning process and that we have completed or initiated the necessary technical improvements to the plant to improve reliability. We believe that our ramp up pattern is typical of hydrometallurgical plants and other complex processes and that the critical step to achieving full production at this point is to improve reliability and operational uptime.</p> <p>2010 outlook</p> <p>In July, we have continued to focus on increasing available plant capacity and reducing the causes of equipment failures and downtime as we identified these to be the root causes of our ramp up challenges. The most important steps are:</p><pre>-- installed an additional pressure filter and completed commissioning of the filter to increase capacity and remove a significant bottleneck to throughput -- adding permanent water treatment capacity which will be commissioned in the third quarter. This will allow for a more consistent discharge into the aquifer and maintain water balance throughout the process -- completing phase two of the Dewatering and Reinjection System which will reduce the quantity of water flowing into the pit and the resulting water treatment load in both the plant and water treatment facility -- adding a large surge tank between leaching and filtration to further smooth out the leaching operation toward the end of this year -- applying a disciplined and systematic problem solving process to identify and address root causes of downtime. </pre> <p>We believe we have identified the key bottlenecks to production. All of these steps and improvements should significantly add to our operating reliability. July month to date has demonstrated further signs of improvement and we have returned to production rates similar to those in May, with total copper cathode production of 2,300 tonnes as of <chron>July 25</chron>.</p> <p>We believe there will be continuing challenges in the ramping up process and we are encouraged by the improved capability of our operating teams to address those as they have demonstrated in recent months. We will continue with the rigorous implementation of the ramp up plan to achieve our goal of full production by the end of the year. We require a period of continuous operation to accurately predict the timing of achieving our performance but believe a range for our 70 percent share of production of 20,000 to 30,000 tonnes of copper cathode is achievable.</p> <p>We have begun mining high grade ore and stockpiling it in preparation for shipping to smelters. We have not yet received the necessary permit from the regulators to move the material off-site and cannot determine when this will occur.</p> <p>Taking all factors into account, we believe it is appropriate to cease capitalizing Las Cruces' pre-operating costs net of sales and to begin recognizing these results in operating earnings and operating cash flow in our consolidated statements. This will be done as of <chron>July 1, 2010</chron>.</p> <p>The table below shows estimated earnings and cash flow for 100 percent of Las Cruces using production estimates and the estimates on page 13.</p><pre>---------------------------------------------------------------------------- revised objective (millions of Canadian dollars unless otherwise stated) 2010 ---------------------------------------------------------------------------- Sales analysis ---------------------------------------------------------------------------- Copper cathode sales subsequent to July 1, 2010 (tonnes) 24,800 ---------------------------------------------------------------------------- Gross copper sales $ 173 (1) Smelter processing charges and freight (1) ---------------------------------------------------------------------------- Net sales $ 172 ---------------------------------------------------------------------------- Cost analysis Tonnes of ore processed subsequent to <chron>July 1, 2010</chron> (thousands) 378 Direct production costs ($ per tonne) $ 135 ---------------------------------------------------------------------------- Direct production costs $ 51 Depreciation and other non-cash costs 31 ---------------------------------------------------------------------------- Operating costs $ 82 ---------------------------------------------------------------------------- Operating earnings $ 90 ---------------------------------------------------------------------------- Operating cash flow $ 98 ---------------------------------------------------------------------------- (1) excludes copper contained in ore that we intend to ship directly to smelters Capital spending ---------------------------------------------------------------------------- (100 percent and millions of Canadian three months ended June six months ended June revised dollars) 30 30 objective 2010 2009 change 2010 2009 change 2010 ---------------------------------------------------------------------------- Capital $ 19 $ 45 -58% $ 29 $ 98 -70% $ 97 Pre-operating costs capitalized, net of sales, working capital and other (40) 9 -544% (53) 21 -352% (36) ---------------------------------------------------------------------------- Capital spending ($21) $ 54 -139% ($24) $ 119 -120% $ 61 ---------------------------------------------------------------------------- </pre> <p>In 2010, capital spending was mainly for the permanent water treatment plant and mine development. In 2009 it was mainly for construction capital.</p> <p>2010 outlook for capital spending</p> <p>We expect to spend <money>$97 million</money> on capital in 2010. This includes <money>$33 million</money> on a water treatment plant and other water management projects, <money>$18 million</money> for mine development and <money>$21 million</money> for plant improvements.</p><pre> Pyhasalmi ------------------------------------------------------------------- three months ended June 30 2010 2009 change ------------------------------------------------------------------- Tonnes of ore milled (000's) 355 355 - Tonnes of ore milled per day 3,900 3,900 - ------------------------------------------------------------------- Grades (percent) copper 1.2 1.1 +9% zinc 1.8 1.8 - sulphur 45 42 +7% ------------------------------------------------------------------- Mill recoveries (percent) copper 96 96 - zinc 88 88 - ------------------------------------------------------------------- Production (tonnes) copper 4,000 3,700 +8% zinc 5,600 5,700 -2% pyrite 137,700 132,200 +4% ------------------------------------------------------------------- Cost per tonne of ore milled (C$) $ 36 $ 44 -25% ------------------------------------------------------------------- ---------------------------------------------------------------------------- six months ended June 30 objective 2010 2009 change 2010 ---------------------------------------------------------------------------- Tonnes of ore milled (000's) 700 704 -1% 1,370 Tonnes of ore milled per day 3,900 3,900 -1% 3,750 ---------------------------------------------------------------------------- Grades (percent) copper 1.0 1.1 -9% 1.0 zinc 2.0 1.5 +33% 2.5 sulphur 44 43 +2% 42 ---------------------------------------------------------------------------- Mill recoveries (percent) copper 96 95 +1% 94 zinc 90 87 +3% 90 ---------------------------------------------------------------------------- Production (tonnes) copper 6,900 7,300 -5% 13,400 zinc 12,800 9,200 +39% 31,300 pyrite 335,200 323,000 +4% 420,000 ---------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $ 40 $ 45 -11% $ 36 ---------------------------------------------------------------------------- </pre> <p>Higher copper grades increase copper production</p> <p>Pyhasalmi processed at an annualized rate of 1.4 million tonnes this quarter, maintaining its strong production record.</p> <p>In the second quarter, copper production was higher than last year because grades were higher, while zinc production was consistent with last year. Year to date, zinc grades and production were significantly higher than 2009 because we mined several zinc rich stopes on the periphery of the ore body in the first quarter of 2010.</p> <p>We are making several technological improvements, using electronic detonators to improve blasting fragmentation and reduce wall damage, and automating full fan longhole drilling to increase productivity.</p> <p>Cost per tonne of ore milled was significantly lower than last year mainly because the value of the Canadian dollar increased relative to the euro.</p> <p>2010 outlook for production and costs</p> <p>Pyhasalmi expects to mine 1.4 million tonnes of 1 percent copper and 2.5 percent zinc in 2010, to produce 13,400 tonnes of copper and 31,300 tonnes of zinc.</p> <p>Pyrite sales enhance Pyhasalmi's financial performance and we have been in discussions with companies in <location value="LC/fi;LB/neur" idsrc="xmltag.org">Finland</location> and <location value="LC/cn;LB/eas" idsrc="xmltag.org">China</location> to secure sales of over 500,000 tonnes of pyrite per year.</p><pre>Financial review Higher earnings because of higher metal prices and lower Canadian dollar production costs ---------------------------------------------------------------------------- (millions of Canadian three months six months ended revised dollars unless ended June 30 June 30 objective otherwise stated) 2010 2009 2010 2009 2010 ---------------------------------------------------------------------------- Sales analysis Copper sales (tonnes) 3,600 3,500 6,800 7,100 13,400 Zinc sales (tonnes) 5,000 5,900 12,400 9,800 31,300 Pyrite sales (tonnes) 108,300 121,000 199,100 197,000 420,000 ---------------------------------------------------- Gross copper sales $ 26 $ 20 $ 52 $ 37 $ 98 Gross zinc sales 9 11 27 17 63 Other metal sales 8 12 16 23 36 ---------------------------------------------------- Gross sales 43 43 95 77 197 Smelter processing charges and freight (8) (12) (20) (21) (45) ---------------------------------------------------------------------------- Net sales $ 35 $ 31 $ 75 $ 56 $ 152 ---------------------------------------------------------------------------- Cost analysis Tonnes of ore milled (thousands) 355 355 700 704 1,370 Direct production costs ($ per tonne) $ 36 $ 44 $ 40 $ 45 $ 36 ---------------------------------------------------------------------------- Direct production costs $ 13 $ 16 $ 28 $ 31 $ 49 Change in inventory (2) - (2) - - Depreciation and other non-cash costs 2 3 4 7 12 ---------------------------------------------------------------------------- Operating costs $ 13 $ 19 $ 30 $ 38 $ 61 ---------------------------------------------------------------------------- Operating earnings $ 22 $ 12 $ 45 $ 18 $ 91 ---------------------------------------------------------------------------- Operating cash flow $ 13 $ 23 $ 28 $ 21 $ 77 ---------------------------------------------------------------------------- </pre> <p>The objective for 2010 uses the assumptions listed on page 13.</p> <p>The table below shows what contributed to the change in operating earnings and operating cash flow between 2010 and 2009.</p><pre>---------------------------------------------------------------------------- three months six months ended June ended June (millions) 30 30 ---------------------------------------------------------------------------- Higher metal prices, denominated in Canadian dollars $ 3 $ 16 Higher (lower) sales volumes (1) 2 Lower smelting processing and freight charges 3 2 Lower operating costs 5 6 Other - 1 ---------------------------------------------------------------------------- Higher operating earnings, compared to 2009 $ 10 $ 27 Change in tax expense because of change in earnings (4) (9) Changes in working capital (see note 2 on page 44) (18) (15) Other 2 4 ---------------------------------------------------------------------------- Higher (lower) operating cash flow, compared to 2009 ($10) $ 7 ---------------------------------------------------------------------------- Capital spending lower than expected due to timing ---------------------------------------------------------------------------- three months ended June six months ended June revised 30 30 objective 2010 2009 change 2010 2009 change 2010 ---------------------------------------------------------------------------- Capital spending $ 2,000 $ 3,000 -30% $ 2,500 $ 3,800 -34% $ 5,000 ---------------------------------------------------------------------------- </pre> <p>2010 outlook for capital spending</p> <p>Capital spending in 2010 is mainly to replace mobile equipment and the secondary cone crusher.</p><pre>Troilus three months ended June 30 ------------------------------------------------------------------- 2010 2009 change ------------------------------------------------------------------- Tonnes of ore milled (000's) 1,364 1,542 -12% Tonnes of ore milled per day 15,000 16,900 -12% ------------------------------------------------------------------- Strip ratio - - - ------------------------------------------------------------------- Grades gold (grams/tonne) 0.52 0.65 -20% copper (percent) 0.06 0.08 -25% ------------------------------------------------------------------- Mill recoveries (percent) Gold 81 83 -2% Copper 87 88 -1% ------------------------------------------------------------------- Production gold (ounces) 18,600 26,700 -30% copper (tonnes) 700 1,100 -36% ------------------------------------------------------------------- Cost per tonne of ore milled (C$) $9 $9 - ------------------------------------------------------------------- six months ended June revised 30 objective ---------------------------------------------------------------------------- 2010 2009 change 2010 ---------------------------------------------------------------------------- Tonnes of ore milled (000's) 2,783 3,019 -8% 2,783 Tonnes of ore milled per day 15,500 16,700 -8% 15,500 ---------------------------------------------------------------------------- Strip ratio - 0.1 -100% - ---------------------------------------------------------------------------- Grades gold (grams/tonne) 0.52 1.03 -50% 0.52 copper (percent) 0.08 0.14 -43% 0.08 ---------------------------------------------------------------------------- Mill recoveries (percent) Gold 81 84 -4% 81 Copper 89 93 -4% 89 ---------------------------------------------------------------------------- Production gold (ounces) 37,900 84,800 -55% 37,900 copper (tonnes) 2,000 3,900 -49% 2,000 ---------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $9 $11 -18% $9 ---------------------------------------------------------------------------- </pre> <p>Troilus successfully concludes operations shortly after 2 million ounces of gold produced</p> <p>Troilus continued to process ore from its low-grade stockpile after it finished mining the 87 pit in <chron>April 2009</chron>. This lowered gold grades and production compared to 2009, and reduced the cost per tonne of ore milled.</p> <p>Ore stockpiles were frozen well into May requiring drilling and blasting and therefore affected mill throughput. Troilus reached the milestone of producing 2 million ounces of gold on <chron>June 16</chron> and ceased milling operations at the end of June due to the depletion of all surface ore stockpiles.</p> <p>Production was at a record high in the first two months of 2009 because of the high grade of the ore mined from the bottom of the main 87 pit.</p> <p>2010 outlook</p> <p>Troilus had 5,600 ounces of gold and 50 tonnes of copper in inventory at <chron>June 30, 2010</chron>, which it will sell in the third quarter.</p> <p>A small group of workers remains onsite to oversee closure activities and we are proceeding with asset sales.</p><pre>Financial review Lower volumes sold reduces earnings ---------------------------------------------------------------------------- (millions of Canadian dollars unless otherwise three months ended six months ended revised stated) June 30 June 30 objective 2010 2009 2010 2009 2010 ---------------------------------------------------------------------------- Sales analysis Gold sales (ounces) 18,100 28,200 39,300 88,300 44,900 Copper sales (tonnes) 800 1,100 2,200 4,000 2,200 -------------------------------------------------------- Gross gold sales $ 23 $ 29 $ 46 $ 99 $ 52 Gross copper sales 4 8 15 24 16 Other metal sales 1 - 1 1 1 -------------------------------------------------------- Gross sales 28 37 62 124 69 Smelter processing charges and freight (2) (2) (4) (8) (5) ---------------------------------------------------------------------------- Net sales $ 26 $ 35 $ 58 $ 116 $ 64 ---------------------------------------------------------------------------- Cost analysis Tonnes of ore milled (thousands) 1,364 1,542 2,783 3,019 2,783 Direct production costs ($ per tonne) $ 9 $ 9 $ 9 $ 11 $ 9 ---------------------------------------------------------------------------- Direct production costs $ 12 $ 14 $ 24 $ 33 $ 24 Change in inventory 2 - 5 2 9 Depreciation and other non-cash costs 6 5 12 10 14 ---------------------------------------------------------------------------- Operating costs $ 20 $ 19 $ 41 $ 45 $ 47 ---------------------------------------------------------------------------- Operating earnings $ 6 $ 16 $ 17 $ 71 $ 17 ---------------------------------------------------------------------------- Operating cash flow $ 18 $ 29 $ 37 $ 78 $ 34 ---------------------------------------------------------------------------- </pre> <p>The objective for 2010 uses the assumptions listed on page 13.</p> <p>The table below shows what contributed to the change in operating earnings and operating cash flow between 2010 and 2009.</p><pre>---------------------------------------------------------------------------- three months six months ended June ended June (millions) 30 30 ---------------------------------------------------------------------------- Higher gold price denominated in Canadian dollars $ 4 $ 2 Lower sales volumes (14) (65) Lower operating costs 2 9 Other (2) - ---------------------------------------------------------------------------- Lower operating earnings, compared to 2009 ($10) ($54) Changes in working capital (see note 2 on page 44) (4) 9 Change in depreciation 2 3 Other 1 1 ---------------------------------------------------------------------------- Lower operating cash flow, compared to 2009 ($11) ($41) ---------------------------------------------------------------------------- Ok Tedi ----------------------------------------------------------------- three months ended June 30 (100 percent) 2010 2009 change ----------------------------------------------------------------- Tonnes of ore milled (000's) 4,900 5,400 -9% Tonnes of ore milled per day 53,800 59,300 -9% ----------------------------------------------------------------- Strip ratio 1.4 1.9 -26% ----------------------------------------------------------------- Grades copper (percent) 0.8 0.8 - gold (grams/tonne) 0.9 1.1 -18% ----------------------------------------------------------------- Mill recoveries (percent) copper 84 86 -2% gold 69 71 -3% ----------------------------------------------------------------- Production copper (tonnes) 33,800 38,200 -12% gold (ounces) 100,600 132,800 -24% ----------------------------------------------------------------- Cost per tonne of ore milled (C$) $24 $23 +4% ----------------------------------------------------------------- --------------------------------------------------------------------------- revised six months ended June 30 objective (100 percent) 2010 2009 change 2010 --------------------------------------------------------------------------- Tonnes of ore milled (000's) 10,500 10,500 - 23,900 Tonnes of ore milled per day 58,300 58,300 - 65,000 --------------------------------------------------------------------------- Strip ratio 1.4 1.7 -18% 1.2 --------------------------------------------------------------------------- Grades copper (percent) 0.8 0.8 - 0.8 gold (grams/tonne) 0.9 1.1 -18% 1.1 --------------------------------------------------------------------------- Mill recoveries (percent) copper 86 86 - 85 gold 70 68 +3% 66 --------------------------------------------------------------------------- Production copper (tonnes) 71,000 75,100 -5% 163,000 gold (ounces) 217,000 248,000 -13% 570,000 --------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $23 $24 -4% $22 --------------------------------------------------------------------------- </pre> <p>Production lower due to illegal strike action</p> <p>Copper and gold production this quarter and for the year to June were significantly lower than planned, and the same quarter in 2009.</p> <p>Production during the quarter was interrupted by an illegal work stoppage for the first 17 days of April. Members of the <org>Ok Tedi Mining and Allied Workers Union</org> (OTMAWU) took action over concerns about distributions under an employee retention bonus arrangement that is not part of Ok Tedi's industrial agreement with the OTMAWU.</p> <p>Gold grades were lower in the first six months due to adjustments in the mine plan to avoid processing high sulphur, high gold areas of the mine. Despite the significant redesign and modification of the mine waste management plant, its performance continues to be challenged, requiring control of sulphur by blending the ore in the mine before it goes to the mill. This is being accomplished by mining lower benches that contain more copper and less sulphur and gold. The higher grade gold ore is available to be mined but will not be processed until the mine waste management plant is performing to expectations. A dedicated team of in-house and consulting specialists are working on the plant's technical and operational issues. Ok Tedi is also exploring other alternatives for neutralizing the impact of sulphur.</p> <p>Last year, we entered into a non-binding draft term sheet with <org>PNG Sustainable Development Programme Limited</org>, the 52 percent majority shareholder of Ok Tedi to exchange our 18 percent equity interest in Ok Tedi for a 5 percent net smelter return royalty. During May, the relevant <location value="LC/pg;LB/mel" idsrc="xmltag.org">Papua New Guinea</location> tax legislation was passed. Work is proceeding to finalize definitive documentation and the transaction could close in the third quarter, although there can be no assurance until definitive documentation has been completed and signed by all parties.</p> <p>2010 outlook for production and costs</p> <p>Ok Tedi's labour contract expires on <chron>August 31</chron>. The work stoppage in April added some uncertainty to the outcome of future negotiations. However we remain optimistic that a settlement can be reached without a strike. Ok Tedi was able to complete significant scheduled maintenance work planned for later in the year during the strike action. This, along with other productivity improvements, should allow Ok Tedi to make up most of the production lost in April. Ok Tedi expects to process 23.9 million tonnes of ore in 2010, at a grade of 0.8 percent copper and containing 1.1 grams per tonne of gold. This should produce 163,000 tonnes of copper and 570,000 ounces of gold. To meet its gold production forecast for the year, Ok Tedi needs to successfully operate the mine waste management plant.</p><pre>Financial review Higher earnings year to date due to higher copper and gold prices ---------------------------------------------------------------------------- (millions of Canadian dollars unless otherwise three months six months revised stated) ended June 30 ended June 30 objective 2010 2009 2010 2009 2010 ---------------------------------------------------------------------------- Sales analysis at 18% Copper sales (tonnes) 7,300 6,900 14,600 12,400 29,300 Gold sales (ounces) 21,900 24,400 44,100 43,700 102,600 ------------------------------------------------ Gross copper sales $ 47 $ 41 $ 103 $ 76 $ 204 Gross gold sales 28 27 54 49 126 Other metal sales 1 1 2 2 4 ------------------------------------------------ Gross sales 76 69 159 127 334 Smelter processing charges and freight (8) (7) (18) (14) (40) ---------------------------------------------------------------------------- Net sales $ 68 $ 62 $ 141 $ 113 $ 294 ---------------------------------------------------------------------------- Cost analysis at 18% Tonnes of ore milled (thousands) 881 967 1,881 1,898 4,300 Direct production costs ($ per tonne) $ 24 $ 23 $ 23 $ 24 $ 22 ---------------------------------------------------------------------------- Direct production costs $ 21 $ 23 $ 44 $ 46 $ 95 Change in inventory 3 (1) 7 - - Depreciation and other non- cash costs 10 4 15 14 27 ---------------------------------------------------------------------------- Operating costs $ 34 $ 26 $ 66 $ 60 $ 122 ---------------------------------------------------------------------------- Operating earnings $ 34 $ 36 $ 75 $ 53 $ 172 ---------------------------------------------------------------------------- Operating cash flow $ 41 $ 29 $ 87 $ 15 $ 135 ---------------------------------------------------------------------------- </pre> <p>The objective for 2010 uses the assumptions listed on page 13.</p> <p>The table below shows what contributed to the change in operating earnings and operating cash flow between 2010 and 2009.</p><pre>---------------------------------------------------------------------------- three months six months (millions) ended June 30 ended June 30 ---------------------------------------------------------------------------- Higher copper prices, denominated in Canadian dollars $ - $ 13 Higher gold prices, denominated in Canadian dollars 3 4 Higher sales volumes - 4 Higher smelter processing and freight charges (1) (2) Lower operating costs (1) 6 Higher depreciation (3) (3) ---------------------------------------------------------------------------- Higher (lower) operating earnings, compared to 2009 ($2) $ 22 Change in tax expense because of change in earnings (6) (22) Changes in net working capital (see note 2 on page 44) 16 70 Change in depreciation 3 3 Other 1 (1) ---------------------------------------------------------------------------- Higher operating cash flow, compared to 2009 $ 12 $ 72 ---------------------------------------------------------------------------- </pre> <p>Capital spending</p> <p>In 2010, Ok Tedi spent <money>$47 million</money> (our share is <money>$8 million</money>), mainly on a mining fleet specifically designed for limestone mining and the construction of underwater storage pits for sulphur concentrate produced by the tailings management plant. In 2009, spending was primarily for the pit drainage project.</p><pre>---------------------------------------------------------------------------- three months ended June six months ended June 30 30 objective (18 percent) 2010 2009 change 2010 2009 change 2010 ---------------------------------------------------------------------------- Capital spending $ 4,100 $ 3,300 +24% $ 8,400 $ 6,600 +27% $ 21,000 ---------------------------------------------------------------------------- </pre> <p>2010 outlook for capital spending</p> <p>Spending in 2010 will be on a mining fleet specifically designed for limestone mining, the construction of underwater storage pits for sulphur concentrate produced by the tailings management plant, and earthworks.</p> <p>Status of our development project</p> <p>Cobre Panama</p> <p>Environmental and community affairs</p> <p>We made significant progress in moving the project environmental and social impact assessment (ESIA) study to completion. The ESIA will cover all environmental and social interactions associated with the project, comply with Panamanian requirements, and will conform with the requirements of the <org>International Finance Corporation</org> (IFC) Performance Standards (PS) on social and environmental sustainability. We expect to submit the ESIA to the Panamanian regulatory authorities in the third quarter for their review, comment and approval. We are working closely with the Panamanian authorities to ensure there is coordination to facilitate a timely review process. While the Panamanian authorities review the ESIA, we expect that it will also be reviewed by external financing agencies to ensure compliance with the IFC PS and the Equator Principles. We continue our on-going stakeholder engagement and community development activities to build social license for the project.</p> <p>Engineering</p> <p>Engineering this quarter focused on obtaining additional geotechnical information in advance of basic engineering, and on the Engineering, Procurement and Construction (EPC) procurement process.</p> <p>Geotechnical work, which includes rock and overburden characterization, site-specific seismic analysis and hydrology, is being undertaken at the plant and port sites, the tailings management facility, eastern infrastructure and along the coast road. It will also include seafloor investigations in the port area. At the end of the quarter, the land based program was 60 percent complete and we expect to begin the seafloor drilling in late July. All work is expected to be complete by the fourth quarter.</p> <p>We have put considerable effort into selecting an EPC contractor. We sent out requests for proposal to pre-qualified consortia in April and at the end of June had received proposals. The proposals are under careful review and due diligence by Inmet and our consultants, and we expect a recommendation by mid August.</p> <p>2010 outlook for development</p><pre>In 2010 we plan to: -- submit the ESIA to the Panamanian environmental authorities in the third quarter -- continue our dialogue with stakeholders at the community, regional and national levels, to enhance understanding of the project and its benefits to <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama</location> -- continue to pursue the amendment to <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama's</location> Mineral Resources Code to permit entities in which foreign governmental bodies or authorities have an interest, to hold direct or indirect interests in mining concessions in <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama</location> -- continue to improve site access and infrastructure -- carry out additional drilling for geotechnical and hydrological purposes and to improve our understanding of mineralization not currently included in the project base case -- enter into an agreement with an EPC contractor and start basic engineering -- work with GDF Suez Energy Central America to select an EPC contractor for the development of a 300 megawatt thermal power plant to supply power for the project -- spend <money>$122 million</money> to carry out the work described. </pre> <p>We estimate that approval for the ESIA and permitting to begin construction could take as much as 15 months from the time the ESIA report is submitted. After we receive the approvals, site capture, preparation and construction should take approximately 48 months.</p> <p>We continue to engage with other companies as part of our overall partnering and financing strategy for the project, and will consider reducing our interest in the project. We are also in discussions about other financing options for the project at this time.</p> <p>Managing our liquidity</p> <p>We develop our financing strategy by looking at our long-term capital requirements, and deciding on the optimal mix of cash, future operating cash flow, credit facilities and project financing.</p> <p>Our capital structure includes a liquidity cushion that gives us the flexibility to deal with operational disruptions or general market downturns.</p><pre>---------------------------------------------------------------------------- three months six months ended ended June 30 June 30 (millions) 2010 2009 2010 2009 ---------------------------------------------------------------------------- CASH FROM OPERATING ACTIVITIES Cayeli $ 23 $ 24 $ 53 $ 15 Pyhasalmi 13 23 28 21 Troilus 18 29 37 78 Ok Tedi 41 29 87 15 Las Cruces - - (7) - Corporate development and exploration not incurred by operations (1) (2) (3) (3) General and administration (6) (5) (12) (9) Other (8) (7) (11) (9) ---------------------------------------------------------------------------- 80 91 172 108 ---------------------------------------------------------------------------- CASH FROM INVESTING AND FINANCING Purchase of property, plant and equipment (11) (86) (33) (181) Purchase of long-term investments (117) - (219) - Proceeds from issuance of common shares, net of transaction costs - 334 - 334 Long-term debt repayments - (74) - (83) Funding by non-controlling shareholder - 28 3 44 Subsidies received - 58 - 66 Foreign exchange on cash held in foreign currency (3) (18) (19) (13) Other (2) (5) (2) (13) ---------------------------------------------------------------------------- (133) 237 (270) 154 ---------------------------------------------------------------------------- Increase (decrease) in cash (53) 328 (98) 262 Cash and short-term investments Beginning of period 489 507 534 573 ---------------------------------------------------------------------------- End of period $ 436 $ 835 $ 436 $ 835 ---------------------------------------------------------------------------- OPERATING ACTIVITIES Key components of the change in operating cash flows ---------------------------------------------------------------------------- three months six months ended June ended June (millions) 30 30 ---------------------------------------------------------------------------- Higher earnings from operations (see page 4) $ 2 $ 20 Higher depreciation 5 5 Higher tax expense (11) (28) Stand-by and corporate costs - (7) Changes in working capital (see note 2 on page 44) (8) 73 Other 1 1 ---------------------------------------------------------------------------- Higher (lower) operating cash flow, compared to 2009 ($11) $ 64 ---------------------------------------------------------------------------- </pre> <p>Operating cash flows this quarter were lower than the same quarter last year because we paid more taxes. Year to date, operating cash flows were higher than in 2009 because our operating earnings were higher, and in the first quarter of 2009 there was a large outflow of cash related to working capital, which included <money>$48 million</money> to repay smelters for the excess provisional payments they made in 2008, before copper prices dropped because of the global financial crisis.</p> <p>2010 outlook for cash from operating activities</p> <p>The table below shows expected operating cash flow from our operations, based on our outlook for metal prices and production listed on page 13, and the assumptions in Results of our operations, which starts on page 13.</p><pre>2010 estimated operating cash flow by operation ---------------------------------------------------------------------------- (millions) ---------------------------------------------------------------------------- Cayeli $ 128 Las Cruces 98 Pyhasalmi 77 Troilus 34 Ok Tedi 135 ---------------------------------------------------------------------------- $ 472 ---------------------------------------------------------------------------- INVESTING AND FINANCING Capital spending ---------------------------------------------------------------------------- three months ended six months ended revised June 30 June 30 objective (millions) 2010 2009 2010 2009 2010 ---------------------------------------------------------------------------- Cayeli $ 3 $ 3 $ 5 $ 6 $ 19 Las Cruces (21) 54 (24) 119 61 Pyhasalmi 2 3 3 4 5 Ok Tedi 4 3 8 7 21 Cobre Panama 23 23 41 45 122 ---------------------------------------------------------------------------- $ 11 $ 86 $ 33 $ 181 $ 228 ---------------------------------------------------------------------------- </pre> <p>Please see Results of our operations and Status of our development project for a discussion of actual results and our 2010 objective. Capital spending in 2010 was mainly for work to advance Cobre Panama.</p> <p>Acquisition of long-term investments</p> <p>In 2010, we bought <money>$219 million</money> (<money>$117 million</money> in the second quarter) in medium-term Canadian government and corporate bonds with credit ratings of A to AAA. The bonds mature between <chron>July 2010</chron> and <chron>August 2015</chron> and have a weighted average annual yield of 2.0 percent. This will increase our return on the cash we have set aside for capital spending at Cobre Panama.</p> <p>Proceeds from public offering</p> <p>In the second quarter of 2009, we completed a public offering of 7.825 million common shares of <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining</org>, for aggregate gross proceeds of <money>$348 million</money> (<money>$334 million</money> net of transaction costs).</p> <p>Long-term debt repayments</p> <p>In the first half of 2009, Las Cruces made a scheduled repayment of US <money>$12 million</money> under Tranche A of its credit facility. It also repaid <money>EUR42 million</money> under Tranche B (an amount equal to the subsidies received).</p> <p>2010 outlook for investing and financing</p><pre>We expect capital spending to be <money>$228 million</money> in 2010. The more significant items include: -- <money>$61 million</money> at Las Cruces, including <money>$33 million</money> on a water treatment plant and other water management projects, <money>$18 million</money> for mine development and <money>$21 million</money> for plant improvements, reduced by working capital changes and pre-operating costs capitalized net of sales. -- <money>$122 million</money> for work on the development at Cobre Panama, including basic engineering, advance payments for mill equipment and other costs to advance development -- <money>$10 million</money> at Ok Tedi for the construction of underwater storage pits for sulphur concentrate produced by the tailings management plant. </pre> <p>On <chron>March 31, 2010</chron>, we entered into a subscription agreement with a subsidiary of <org>Temasek Holdings (Private) Limited</org> (<org>Temasek</org>), under which <org>Temasek</org> has agreed to buy 9.26 million subscription receipts for total proceeds of <money>$500 million</money>. We issued the subscription receipts on <chron>April 23, 2010</chron> and the proceeds are being held in escrow. The subscription receipts are exchangeable for an equivalent number of Inmet common shares as long as certain conditions are met on or before <chron>September 30, 2010</chron>, including:</p><pre>-- The coming into effect of legislation passed by the legislative assembly of the <org>Republic</org> of <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama</location> to amend <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama's</location> Mineral Resources Code to permit entities in which foreign governmental bodies or authorities have an interest, to hold direct or indirect interests in mining concessions in <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama</location>. -- Inmet's or Cobre Panama's ability to use or exploit their rights under Cobre Panama's mining concession for the mining project are not impaired in any material way. </pre> <p>If the conditions are met, the subscription receipts will be exchanged for Inmet common shares equal to approximately 14 percent of our outstanding common shares. The proceeds will then be released from escrow and we will use them to fund the development of Cobre Panama and for general corporate purposes. If the conditions are not met, the subscription receipts will automatically terminate and the escrowed funds will be returned to <org>Temasek</org>.</p> <p>Financial condition</p> <p>CASH</p> <p>Our cash and cash equivalents balance at <chron>June 30, 2010</chron> was <money>$436 million</money>. This included cash and money market instruments that mature in 90 days or less, and short-term investments that mature in 91 days to a year.</p> <p>Our policy is to invest excess cash in highly liquid investments of the highest credit quality, and to limit our exposure to individual counterparties to minimize the risk associated with these investments. We base our decisions about the length of maturities on our cash flow requirements, rates of return and other factors.</p> <p>The economic downturn appears to be reversing, but we are still monitoring the potential for a second downturn. We have moved some of our government funds to prime funds and have created a bond portfolio that should provide better yields with little change to our investment risk. At <chron>June 30, 2010</chron>, we held cash and short-term investments in the following:</p><pre>-- AAA rated treasury funds and money market funds managed by leading international fund managers, who are investing in money market and short-term debt securities and fixed income securities issued by leading international financial institutions and their sponsored securitization vehicles. -- Cash, term and overnight deposits with leading Canadian and international financial institutions that are benefiting directly and indirectly from support programs by various governments and central banks. </pre> <p>See note 3 on page 45 in the consolidated financial statements for more details about where our cash is invested.</p> <p>The bond portfolio (Held to maturity investments) totalling <money>$321 million</money>, comprises 13 percent Government of <location value="LC/ca;LB/nam" idsrc="xmltag.org">Canada</location> bonds, 75 percent Provincial Government bonds and 12 percent corporate bonds, and the bonds mature between <chron>July 2010</chron> and <chron>August 2015</chron>.</p><pre>Our restricted cash balance of <money>$108 million</money> as at <chron>June 30, 2010</chron> included: -- <money>$28 million</money> in trust for future reclamation at Ok Tedi -- <money>$16 million</money> of cash collateralized letters of credit for Inmet -- <money>$62 million</money> related to issuing letters of credit to suppliers and the local water authority at Las Cruces, a reclamation bond and for its labour bond to the government -- <money>$2 million</money> for future reclamation at Pyhasalmi. COMMON SHARES ---------------------------------------------------------------------------- Common shares outstanding as of <chron>June 30, 2010</chron> 56,106,759 ---------------------------------------------------------------------------- Deferred share units outstanding as of <chron>June 30, 2010</chron> 100,394 (redeemable on a one-for-one basis for common shares) ---------------------------------------------------------------------------- </pre> <p>Accounting changes</p> <p>Plans on transition to International Financial Reporting Standards (IFRS):</p> <p><org>The Accounting Standards Board</org> has confirmed that International Financial Reporting Standards (IFRS) will replace current Canadian GAAP for financial periods beginning on and after <chron>January 1, 2011</chron>. IFRS is based on a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition, measurement and disclosure.</p> <p>While the adoption of IFRS will not change our business activities, it will result in changes to our reported financial position and net income.</p> <p>We have prepared a comprehensive IFRS convergence plan that addresses the changes in accounting policy, restatement of comparative periods, internal control over financial reporting, modification of existing systems, the training and awareness of staff, and other related items. Senior financial management, who report to and are overseen by Inmet's Audit Committee, are responsible for planning and implementing the conversion.</p> <p>To date, we have made an initial determination of all of our significant accounting policies, prepared sample financial statements and assessed the impacts on our systems and processes. We have identified and put in place a dual reporting solution to maintain our accounting records according to Canadian GAAP and IFRS for our 2010 dual reporting year. We have been working alongside our auditors while drafting our accounting policies, to ensure they agree with our choices, and that we are choosing policies that are consistent with our peers in the industry. Concurrently with documenting our new policies, we have documented the related internal controls. We have prepared a reconciliation of our historical Canadian GAAP balance sheet to IFRS balance sheet as at <chron>January 1, 2010</chron>.</p> <p>We do not expect our key controls to change during and after our transition to IFRS. As a result of our training program and the preparation of a reconciliation to IFRS, we believe that our applicable personnel have obtained an appropriate understanding of IFRS as it applies to our financial reporting.</p> <p>We have noted below the major differences between our current accounting policies under Canadian GAAP and the accounting policies we currently expect to apply when we transition to IFRS, and have provided quantification for the most significant differences as at <chron>January 1, 2010</chron>. We may choose to adopt different IFRS accounting policies, or we may choose to apply them only to certain transactions or circumstances, so our conversion to IFRS may be different from what we are currently expecting.</p> <p>Furthermore, the standard-setting bodies that determine IFRS have significant ongoing projects that could affect the ultimate differences between Canadian GAAP and IFRS, and their impact on our consolidated financial statements. The impact IFRS has in future years will also depend on circumstances at the time. An exposure draft on accounting for joint venture interests (including our investment in Ok Tedi) could have significant effects on our financial statements. We will continue to monitor changes to IFRS and adjust our convergence plan as necessary.</p> <p>Impairment of assets</p><pre>Under Canadian GAAP, we use a two-step approach to impairment testing: -- first comparing asset carrying values with undiscounted future cash flows to determine whether impairment exists -- then measuring any impairment by comparing asset carrying values with fair values (generally assessed using a discounted cash flow valuation process). </pre> <p>IFRS uses a one step approach to test for and measure impairment, and compares asset carrying values directly with the higher of fair value less costs to sell and value in use (which uses discounted future cash flows).</p> <p>This approach will lead to write-downs when carrying values of assets supported under Canadian GAAP on an undiscounted basis are not supported on a discounted basis under IFRS. IFRS also requires a full or partial reversal of previous impairment losses when circumstances have changed and the impairments have been reduced. Impairment losses cannot be reversed under Canadian GAAP.</p> <p>We expect to increase <chron>January 1, 2010</chron> property plant and equipment at Cayeli by approximately <money>$50 million</money> to reverse an impairment charge we recognized for this operation in 1996. The increase is the IFRS carrying amount we would have calculated, net of depreciation, if we had not recognized the original impairment. This will result in a higher ongoing depreciation expense for Cayeli.</p> <p>Business combinations</p> <p>Under Canadian GAAP, mining companies that are acquired in the early development stage often do not constitute a business, and instead are accounted for as an acquisition of assets without any goodwill. The definition of a business under IFRS is broader, and most acquisitions represent business combinations, so goodwill is recognized more frequently.</p> <p>In addition, most identifiable assets, liabilities, non-controlling interests and goodwill acquired in a business combination are recorded at full fair value under IFRS. Under Canadian GAAP, only the ownership percentage acquired is recorded. Non-controlling interests are recognized at book value.</p> <p>Asset retirement obligations</p> <p>Under Canadian GAAP, we use a credit adjusted risk free interest rate and are not required to update the rate when market rates change.</p> <p>Under IFRS, we will measure asset retirement obligations using a risk free interest rate and revalue when market risk free interest rates change. We expect to increase <chron>January 1, 2010</chron> asset retirement obligations by approximately <money>$40 million</money> on transition to IFRS.</p> <p>Revenue</p> <p>Under Canadian GAAP, we recognize revenue when title is legally transferred to the purchaser. For certain shipments at Cayeli, Ok Tedi and Las Cruces, we transfer title when we receive the first provisional payment, which is later than the transfer point for risks and rewards of ownership.</p> <p>Under IFRS, we will recognize revenue when all significant risks and rewards of ownership of our products are transferred to the purchaser. We expect to increase <chron>January 1, 2010</chron> accounts receivable by approximately <money>$25 million</money> and decrease inventories by <money>$6 million</money> on transition to IFRS.</p> <p>Foreign exchange gains and losses</p> <p>Under Canadian GAAP, dividends, including those related to the accumulation of earnings and repayment of intercompany debt, are considered a return on investment, and we recognize the deferred foreign exchange gains or losses on these amounts in investment and other income.</p> <p>Under IFRS, only dividends that represent a return on capital invested in a foreign operation require recognition of previously deferred foreign exchange gains or losses.</p> <p>Future income taxes</p> <p>We will need to recognize the corresponding tax asset or liability based on the resultant differences between the new carrying value of assets and liabilities under IFRS and their associated tax bases.</p> <p>First time adoption of IFRS</p> <p>First time adoption of International Financial Reporting Standards (IFRS 1) lists specific exemptions that we can use when we first adopt IFRS. The most significant exemptions we expect to apply are as follows:</p><pre>-- Business combinations - for business combinations that occurred before the transition date, we can choose to restate all of them under IFRS, restate all of them after a particular date, or not restate any of them. We expect to use this exemption and not restate any business combinations under IFRS. -- Cumulative translation adjustment - IFRS requires an entity to determine the translation differences in accordance with IFRS from the date a subsidiary was formed or acquired. IFRS 1 allows an entity to consider the cumulative translation differences for all foreign operations to be zero at the date of transition, and to reclassify the previous amount to retained earnings. We expect to use this exemption and reset our cumulative translation adjustment (unrealized losses of <money>$61 million</money>) to zero on transition to IFRS with a corresponding reduction in retained earnings. -- Property, plant and equipment associated with asset retirement obligations - IFRS and Canadian GAAP both require us to recognize a corresponding change in asset retirement obligations in the carrying value of the related property, plant and equipment (where we identify an asset) and depreciate this amount prospectively. The amount under IFRS will be different from the amount determined under Canadian GAAP because of the different way IFRS determines asset retirement obligations. We can use an optional transitional calculation to determine the property, plant and equipment associated with our provision for asset retirement obligations. Under the transitional calculation, we measure the provision at the transition date and discount it to the date the liability first arose. The result becomes the initial asset value. Depreciation is applied to this value. We expect to apply this exemption for certain mines and not determine property, plant and equipment associated with asset retirement obligations retrospectively and anticipate an increase of approximately <money>$10 million</money> to property, plant and equipment. </pre> <p>We currently expect to increase the equity attributable to common shareholders of <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining</org> on our <chron>January 1, 2010</chron> opening balance sheet under IFRS by approximately <money>$50 million</money>, or <money>$0.90</money> per common share, compared to our <chron>December 31, 2009</chron> balance sheet under Canadian GAAP.</p> <p>Supplementary financial information</p> <p>Pages 32 and 33 includes supplementary financial information about cash costs. These measures do not fall into the category of generally accepted accounting principles.</p> <p>We use unit cash cost information as a key performance indicator, both on a segmented and consolidated basis. We have included cash costs as supplementary information because we believe our key stakeholders use these measures as a financial indicator of our profitability and cash flows before the effects of capital investment and financing costs, such as interest.</p> <p>Since cash costs are not recognized measures under Canadian generally accepted accounting principles they should not be considered in isolation of earnings or cash flows. There is also no standard way to calculate cash costs, so they are not a reliable way to compare us to other companies.</p> <p>About Inmet</p> <p>Inmet is a Canadian-based global mining company that produces copper, zinc and gold. We have interests in five mining operations in locations around the world: Cayeli, Las Cruces, Pyhasalmi, Troilus and Ok Tedi. We also have a 100 percent interest in Cobre Panama, a development property in <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama</location>.</p> <p>This press release is also available at <a href="http://www.inmetmining.com">www.inmetmining.com</a></p><pre>Second quarter conference call Will be held on -- <chron>Wednesday, July 28, 2010</chron> -- <chron>8:30 a.m. Eastern Time</chron> -- webcast available at <a href="http://events.digitalmedia.telus.com/inmet/072810/index.php">http://events.digitalmedia.telus.com/inmet/072810/index.php</a> or <a href="http://www.inmetmining.com">www.inmetmining.com</a> You can also dial in by calling -- Local or international: +1.416.695.6623 -- Toll-free within <location value="LB/nam" idsrc="xmltag.org">North America</location>: +1.800.565.0813 Starting <chron>10:00 a.m. (ET) Wednesday, July 28, 2010,</chron> conference call replay will be available -- Local or international: +1.416.695.5800 passcode 6305255 -- Toll-free within <location value="LB/nam" idsrc="xmltag.org">North America</location>: +1.800.408.3053 passcode 6305255 <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Supplementary financial information Cash costs 2010 For the six months ended <chron>June 30</chron> per pound of copper ------------------------------------------------ TOTAL CAYELI PYHASALMI OK TEDI COPPER ---------------------------------------------------------------------------- (US dollars) Direct production costs $ 1.22 $ 1.72 $ 1.36 $ 1.38 Royalties and variable compensation 0.11 - 0.15 0.10 Smelter processing charges and freight 1.37 1.02 0.55 0.99 Metal credits (2.06) (2.55) (1.75) (2.04) ------------------------------------------------ Cash cost $ 0.64 $ 0.19 $ 0.31 $ 0.43 ------------------------------------------------ ------------------------------------------------ 2009 For the six months ended <chron>June 30</chron> per pound of copper ------------------------------------------------ TOTAL CAYELI PYHASALMI OK TEDI COPPER ---------------------------------------------------------------------------- (US dollars) Direct production costs $ 0.98 $ 1.63 $ 1.27 $ 1.23 Royalties and variable compensation 0.07 - 0.01 0.03 Smelter processing charges and freight 1.06 0.74 0.40 0.74 Metal credits (1.28) (1.79) (1.46) (1.45) ------------------------------------------------ Cash cost $ 0.83 $ 0.58 $ 0.22 $ 0.55 ------------------------------------------------ ------------------------------------------------ ---------------------------------------------------------------------------- Reconciliation of cash costs to statements of earnings 2010 For the six months ended <chron>June 30</chron> per pound of copper ------------------------------------------------ (millions of Canadian dollars, except where TOTAL otherwise noted) CAYELI PYHASALMI OK TEDI COPPER ---------------------------------------------------------------------------- GAAP reference page 15 page 19 page 23 Direct production costs $ 43 $ 28 $ 44 $ 115 Smelter processing charges and freight 39 20 18 77 By product sales (65) (43) (56) (164) Adjust smelter processing and freight, and sales to production basis 4 (2) 3 5 ------------------------------------------------ Operating costs net of metal credits $ 21 $ 3 $ 9 $ 33 US $ to C$ exchange rate $ 1.03 $ 1.03 $ 1.03 $ 1.03 Inmet's share of production (000's) 31,300 15,200 28,200 74,700 ------------------------------------------------ Cash cost $ 0.64 $ 0.19 $ 0.31 $ 0.43 ------------------------------------------------ ------------------------------------------------ 2009 For the six months ended <chron>June 30</chron> per pound of copper ------------------------------------------------ (millions of Canadian dollars, except where TOTAL otherwise noted) CAYELI PYHASALMI OK TEDI COPPER ---------------------------------------------------------------------------- GAAP reference page 15 page 19 page 23 Direct production costs $ 40 $ 31 $ 46 $ 117 Smelter processing charges and freight 38 21 14 73 By product sales (50) (40) (51) (141) Adjust smelter processing and freight, and sales to production basis 4 (1) (1) 2 ------------------------------------------------ Operating costs net of metal credits $ 32 $ 11 $ 8 $ 51 US $ to C$ exchange rate $ 1.21 $ 1.21 $ 1.21 $ 1.21 Inmet's share of production (000's) 32,200 16,100 29,800 78,100 ------------------------------------------------ Cash cost $ 0.83 $ 0.58 $ 0.22 $ 0.55 ------------------------------------------------ ------------------------------------------------ <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Supplementary financial information Cash costs 2010 For the three months ended <chron>June 30</chron> per pound of copper ------------------------------------------------- TOTAL CAYELI PYHASALMI OK TEDI COPPER ---------------------------------------------------------------------------- (US dollars) Direct production costs $ 1.25 $ 1.37 $ 1.44 $ 1.35 Royalties and variable compensation 0.08 - 0.15 0.09 Smelter processing charges and freight 1.40 0.73 0.54 0.94 Metal credits (2.10) (1.69) (1.84) (1.91) ------------------------------------------------- Cash cost $ 0.63 $ 0.41 $ 0.29 $ 0.47 ------------------------------------------------- ------------------------------------------------- 2009 For the three months ended <chron>June 30</chron> per pound of copper ------------------------------------------------- TOTAL CAYELI PYHASALMI OK TEDI COPPER ---------------------------------------------------------------------------- (US dollars) Direct production costs $ 0.98 $ 1.65 $ 1.23 $ 1.21 Royalties and variable compensation 0.04 - 0.07 0.04 Smelter processing charges and freight 1.10 0.82 0.39 0.77 Metal credits (1.46) (1.54) (1.53) (1.50) ------------------------------------------------- Cash cost $ 0.66 $ 0.93 $ 0.16 $ 0.52 ------------------------------------------------- ------------------------------------------------- ---------------------------------------------------------------------------- Reconciliation of cash costs to statements of earnings 2010 For the three months ended <chron>June 30</chron> per pound of copper ------------------------------------------------- (millions of Canadian dollars, except where TOTAL otherwise noted) CAYELI PYHASALMI OK TEDI COPPER ---------------------------------------------------------------------------- GAAP reference page 15 page 19 page 23 Direct production costs $21 $ 13 $ 21 $ 12 Smelter processing charges and freight 19 8 8 35 By product sales (32) (17) (29) (78) Adjust smelter processing and freight, and sales to production basis 2 - 4 6 ------------------------------------------------- Operating costs net of metal credits $ 10 $ 4 $ 4 $ 18 US $ to C$ exchange rate $ 1.03 $ 1.03 $ 1.03 $ 1.03 Inmet's share of production (000's) 15,600 8,800 13,500 37,900 ------------------------------------------------- Cash cost $ 0.63 $ 0.41 $ 0.29 $ 0.47 ------------------------------------------------- ------------------------------------------------- 2009 For the three months ended <chron>June 30</chron> per pound of copper ------------------------------------------------- (millions of Canadian dollars, except where TOTAL otherwise note) CAYELI PYHASALMI OK TEDI COPPER ---------------------------------------------------------------------------- GAAP reference page 15 page 19 page 23 Direct production costs $ 20 $ 16 $ 23 $ 59 Smelter processing charges and freight 18 12 7 37 By product sales (27) (22) (28) (77) Adjust smelter processing and freight, and sales to production basis 2 3 1 6 ------------------------------------------------- Operating costs net of metal credits $ 13 $ 9 $ 3 $ 25 US $ to C$ exchange rate $ 1.17 $ 1.17 $ 1.17 $ 1.17 Inmet's share of production (000's) 16,700 8,200 15,200 40,100 ------------------------------------------------- Cash cost $ 0.66 $ 0.93 $ 0.16 $ 0.52 ------------------------------------------------- ------------------------------------------------- <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Quarterly review (unaudited) Latest Four Quarters ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (thousands of Canadian dollars, except per 2010 Second 2010 First 2009 Fourth 2009 Third share amounts) quarter quarter quarter quarter ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- STATEMENTS OF EARNINGS Gross sales $ 215,051 $ 251,559 $ 290,570 $ 241,121 Smelter processing charges and freight (36,794) (44,329) (53,696) (41,607) Cost of sales (72,437) (80,980) (74,995) (72,706) Depreciation (18,951) (15,224) (17,911) (14,558) ---------------------------------------------------- 86,869 111,026 143,968 112,250 Corporate development and exploration (2,524) (2,779) (2,915) (1,963) General and administration (6,288) (5,510) (9,836) (5,147) Investment and other income (expense) (18,370) (78) 280 3,588 Asset impairment - - (3,496) - Stand-by costs - (6,753) - - Interest expense (421) (452) (496) (496) Capital tax expense (82) (82) 69 (744) Income tax expense (15,167) (20,063) (38,668) (39,244) Non-controlling interest 4,419 4,562 857 (6,693) ---------------------------------------------------- Net income 48,436 79,871 $ 89,763 $ 61,551 ---------------------------------------------------- Net income per common share $ 0.86 $ 1.42 $ 1.60 $ 1.10 ---------------------------------------------------- Diluted net income per common share $ 0.86 $ 1.42 $ 1.60 $ 1.09 ---------------------------------------------------- Previous Four Quarters ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (thousands of Canadian 2009 2008 dollars, except per Second 2009 First Fourth 2008 Third share amounts) quarter quarter quarter quarter ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- STATEMENTS OF EARNINGS Gross sales $ 213,042 $ 239,152 $ 139,626 $ 247,495 Smelter processing charges and freight (40,589) (40,540) (32,870) (49,502) Cost of sales (73,827) (89,904) (91,715) (84,948) Depreciation (13,604) (15,679) (14,844) (11,395) ---------------------------------------------------- 85,022 93,029 197 101,650 Corporate development and exploration (2,727) (3,232) (1,971) (3,548) General and administration (4,785) (4,124) (3,289) (3,411) Investment and other income (expense) 16,466 (11,203) 8,057 (5,467) Asset impairment - (6,419) (36,275) - Interest expense (493) (492) (490) (476) Capital tax expense (125) (125) (1,304) (125) Income tax expense (24,052) (18,890) 767 (17,379) Non-controlling interest (2,778) 2,783 1,794 3,813 ---------------------------------------------------- Net income (loss) $ 66,528 $ 51,327 ($32,514) $ 75,057 ---------------------------------------------------- Net income (loss) per common share $ 1.37 $ 1.06 ($0.67) $ 1.55 ---------------------------------------------------- Diluted net income (loss) per common share $ 1.36 $ 1.06 ($0.67) $ 1.55 ---------------------------------------------------- <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Consolidated balance sheets Note December 31 (thousands of Canadian dollars) reference June 30 2010 2009 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (unaudited) Assets Current assets: Cash and short-term investments 3 $ 436,318 $ 533,913 Restricted cash 4 11,905 15,130 Accounts receivable 86,793 129,987 Inventories 78,163 103,108 Current portion of held to maturity investments 6 43,632 9,993 Future income tax asset 8,464 8,466 Assets held for sale 7 9,000 - -------------------------------- 674,275 800,597 Restricted cash 4 96,210 101,589 Property, plant and equipment 1,743,229 1,860,616 Investments in equity securities 5 49,712 42,411 Held to maturity investments 6 277,424 89,891 Future income tax asset 21,006 6,151 Other assets 2,998 2,894 -------------------------------- $ 2,864,854 $ 2,904,149 ---------------------------------------------------------------------------- Liabilities Current liabilities: Accounts payable and accrued liabilities $ 168,077 $ 185,145 Derivatives 1,857 1,543 Future income tax liabilities 2,084 4,612 -------------------------------- 172,018 191,300 Long-term debt 8 181,338 200,026 Asset retirement obligations 142,063 145,038 Derivatives 3,544 3,165 Other liabilities 29,451 32,113 Future income tax liabilities 8,810 16,357 Non-controlling interest 58,926 78,005 -------------------------------- 596,150 666,004 -------------------------------- Commitments 9 Shareholders' equity Share capital 669,952 669,952 Contributed surplus 64,130 63,296 Stock based compensation 6,058 5,170 Retained earnings 1,664,500 1,541,803 Accumulated other comprehensive loss 11 (135,936) (42,076) -------------------------------- 2,268,704 2,238,145 -------------------------------- $ 2,864,854 $ 2,904,149 ---------------------------------------------------------------------------- (see accompanying notes) <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Segmented balance sheets 2010 As at June 30 (unaudited) CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Assets Cash and short-term investments $ 162,495 $ 128,592 $ 52,909 $ - Other current assets 47,875 38,502 43,601 22,791 Restricted cash 16,219 - 1,595 - Property, plant and equipment 833 119,252 56,037 - Investments in equity securities 49,712 - - - Held to maturity investments 277,424 - - - Other non-current assets 1,801 834 - - ------------------------------------------------- $ 556,359 $ 287,180 $ 154,142 $ 22,791 ------------------------------------------------- Liabilities Current liabilities $ 13,942 $ 27,110 $ 14,842 $ 18,482 Long-term debt 15,939 - - - Asset retirement obligations 28,486 9,174 13,612 8,411 Derivatives - - - - Other liabilities 4,588 6,020 - - Future income tax liabilities - - 8,641 - Non-controlling interest - - - - ------------------------------------------------- $ 62,955 $ 42,304 $ 37,095 $ 26,893 ------------------------------------------------- 2010 As at June 30 COBRE (unaudited) OK TEDI LAS CRUCES PANAMA TOTAL --------------------------------------------------------------- ------------ (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Assets Cash and short-term investments $ 48,648 $ 30,078 $ 13,596 $ 436,318 Other current assets 41,085 43,634 469 237,957 Restricted cash 28,014 50,382 - 96,210 Property, plant and equipment 98,615 890,936 577,556 1,743,229 Investments in equity securities - - - 49,712 Held to maturity investments - - - 277,424 Other non-current assets 4,529 16,840 - 24,004 ------------------------------------ ------------ $ 220,891 $1,031,870 $ 591,621 $2,864,854 ------------------------------------ ------------ Liabilities Current liabilities $ 55,255 $ 34,071 $ 8,316 $ 172,018 Long-term debt - 165,399 - 181,338 Asset retirement obligations 40,637 41,743 - 142,063 Derivatives 3,544 - - 3,544 Other liabilities 1,916 16,927 - 29,451 Future income tax liabilities - 169 - 8,810 Non-controlling interest - 58,926 - 58,926 ------------------------------------ ------------ $ 101,352 $ 317,235 $ 8,316 $ 596,150 ------------------------------------ ------------ 2009 As at <chron>December 31</chron> CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Assets Cash and short-term investments $ 251,570 $ 158,631 $ 66,314 $ - Other current assets 14,504 42,356 49,882 24,030 Restricted cash 16,492 - 1,854 - Property, plant and equipment 920 119,669 66,217 19,376 Investments in equity securities 42,411 - - - Held to maturity investments 89,891 - - - Other non-current assets 1,720 248 - - ------------------------------------------------- $ 417,508 $ 320,904 $ 184,267 $ 43,406 ------------------------------------------------- Liabilities Current liabilities $ 22,416 $ 32,348 $ 27,665 $ 19,862 Long-term debt 18,094 - - - Asset retirement obligations 28,606 8,805 15,293 8,497 Derivatives - - - - Other liabilities 4,714 5,541 - - Future income tax liabilities 4,240 2,024 9,897 - Non-controlling interest - - - - ------------------------------------------------- $ 78,070 $ 48,718 $ 52,855 $ 28,359 ------------------------------------------------- 2009 As at <chron>December 31</chron> COBRE OK TEDI LAS CRUCES PANAMA TOTAL --------------------------------------------------------------- ------------ (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Assets Cash and short-term investments $ 36,631 $ 10,039 $ 10,728 $ 533,913 Other current assets 61,943 73,501 468 266,684 Restricted cash 26,365 56,878 - 101,589 Property, plant and equipment 103,693 1,013,490 537,251 1,860,616 Investments in equity securities - - - 42,411 Held to maturity investments - - - 89,891 Other non-current assets 3,523 3,554 - 9,045 ------------------------------------ ------------ $ 232,155 $1,157,462 $ 548,447 $2,904,149 ------------------------------------ ------------ Liabilities Current liabilities $ 48,981 $ 29,173 $ 10,855 $ 191,300 Long-term debt - 181,932 - 200,026 Asset retirement obligations 39,546 44,291 - 145,038 Derivatives 3,165 - - 3,165 Other liabilities 1,839 20,019 - 32,113 Future income tax liabilities - 196 - 16,357 Non-controlling interest - 78,005 - 78,005 ------------------------------------ ------------ $ 93,531 $ 353,616 $ 10,855 $ 666,004 ------------------------------------ ------------ <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Consolidated statements of earnings (unaudited) Three Months Ended Six Months Ended June 30 June 30 (thousands of Canadian dollars except per share Note amounts) reference 2010 2009 2010 2009 ------------------------------------------------------ --------------------- ------------------------------------------------------ --------------------- Gross sales $ 215,051 $ 213,042 $ 466,610 $ 452,194 Smelter processing charges and freight (36,794) (40,589) (81,123) (81,129) Cost of sales (72,437) (73,827) (153,417) (163,731) Depreciation (18,951) (13,604) (34,175) (29,283) ------------------------------------------------------ --------------------- 86,869 85,022 197,895 178,051 Corporate development and exploration (2,524) (2,727) (5,303) (5,959) General and administration (6,288) (4,785) (11,798) (8,909) Investment and other income (expense) 12 (18,370) 16,466 (18,448) 5,263 Asset impairment - - - (6,419) Stand-by costs - - (6,753) - Interest expense (421) (493) (873) (985) Capital tax expense (82) (125) (164) (250) Income tax expense 13 (15,167) (24,052) (35,230) (42,942) Non-controlling interest 4,419 (2,778) 8,981 5 ------------------------------------------------------ --------------------- Net income $ 48,436 $ 66,528 $ 128,307 $ 117,855 ------------------------------------------------------ --------------------- Basic net income per common share 14 $ 0.86 $ 1.37 $ 2.29 $ 2.43 ------------------------------------------------------ --------------------- Diluted net income per common share 14 $ 0.86 $ 1.36 $ 2.28 $ 2.42 ------------------------------------------------------ --------------------- Weighted average shares outstanding (000's) 56,107 48,712 56,107 48,498 ------------------------------------------------------ --------------------- (see accompanying notes) <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Segmented statements of earnings (unaudited) 2010 For the six months ended <chron>June 30</chron> CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Gross sales $ - $ 150,432 $ 95,446 $ 62,177 Smelter processing charges and freight - (38,695) (20,055) (4,321) Cost of sales (1,011) (43,699) (26,513) (30,555) Depreciation - (6,470) (3,712) (10,002) -------------------------------------------------- (1,011) 61,568 45,166 17,299 Corporate development and exploration (3,247) (78) (1,978) - General and administration (11,798) - - - Investment and other income (expense) (18,765) (7) - 164 Stand-by costs - - - - Interest expense (873) - - - Capital tax expense (164) - - - Income tax (expense) recovery 161 (12,406) (9,926) - Non-controlling interest - - - - -------------------------------------------------- Net income ($35,697) $ 49,077 $ 33,262 $ 17,463 -------------------------------------------------- -------------------------------------------------- 2010 For the six months ended <chron>June 30</chron> COBRE OK TEDI LAS CRUCES PANAMA TOTAL --------------------------------------------------------------- ------------ (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Gross sales $ 158,555 $ - $ - $ 466,610 Smelter processing charges and freight (18,052) - - (81,123) Cost of sales (51,639) - - (153,417) Depreciation (13,991) - - (34,175) ------------------------------------- ------------ 74,873 - - 197,895 Corporate development and exploration - - - (5,303) General and administration - - - (11,798) Investment and other income (expense) (18) 178 - (18,448) Stand-by costs - (6,753) - (6,753) Interest expense - - - (873) Capital tax expense - - - (164) Income tax (expense) recovery (27,589) 14,530 - (35,230) Non-controlling interest - 8,981 - 8,981 ------------------------------------- ------------ Net income $ 47,266 $ 16,936 $ - $ 128,307 ------------------------------------- ------------ ------------------------------------- ------------ 2009 For the six months ended <chron>June 30</chron> CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Gross sales $ - $ 123,732 $ 76,982 $ 124,397 Smelter processing charges and freight - (37,514) (21,317) (8,718) Cost of sales (992) (42,286) (32,575) (38,443) Depreciation - (6,846) (4,764) (6,720) -------------------------------------------------- (992) 37,086 18,326 70,516 Corporate development and exploration (3,374) (901) (1,684) - General and administration (8,909) - - - Investment and other income (expense) 6,420 1,070 (422) 361 Asset impairment charges - (6,419) - - Interest expense (985) - - - Capital tax expense (250) - - - Income tax expense (19,730) (1,631) (2,305) - Non-controlling interest - - - - -------------------------------------------------- Net income ($27,820) $ 29,205 $ 13,915 $ 70,877 -------------------------------------------------- -------------------------------------------------- 2009 For the six months ended <chron>June 30</chron> COBRE OK TEDI LAS CRUCES PANAMA TOTAL --------------------------------------------------------------- ------------ (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Gross sales $ 127,083 $ - $ - $ 452,194 Smelter processing charges and freight (13,580) - - (81,129) Cost of sales (49,435) - - (163,731) Depreciation (10,953) - - (29,283) ------------------------------------- ------------ 53,115 - - 178,051 Corporate development and exploration - - - (5,959) General and administration - - - (8,909) Investment and other income (expense) (2,486) 320 - 5,263 Asset impairment charges - - - (6,419) Interest expense - - - (985) Capital tax expense - - - (250) Income tax expense (19,009) (267) - (42,942) Non-controlling interest - 5 - 5 ------------------------------------- ------------ Net income $ 31,620 $ 58 $ - $ 117,855 ------------------------------------- ------------ ------------------------------------- ------------ <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Segmented statements of earnings (unaudited) 2010 For the three months ended <chron>June 30</chron> CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Gross sales $ - $ 68,026 $ 44,006 $ 27,723 Smelter processing charges and freight - (18,590) (8,550) (1,563) Cost of sales (69) (21,718) (11,244) (14,285) Depreciation - (3,246) (1,903) (5,623) -------------------------------------------------- (69) 24,472 22,309 6,252 Corporate development and exploration (1,369) (12) (1,143) - General and administration (6,288) - - - Investment and other income (expense) (18,690) (106) - 294 Interest expense (421) - - - Capital tax expense (82) - - - Income tax (expense) recovery (1,316) (4,953) (4,911) - Non-controlling interest - - - - -------------------------------------------------- Net income ($28,235) $ 19,401 $ 16,255 $ 6,546 -------------------------------------------------- 2010 For the three months ended <chron>June 30</chron> COBRE OK TEDI LAS CRUCES PANAMA TOTAL --------------------------------------------------------------- ------------ (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Gross sales $ 75,296 $ - $ - $ 215,051 Smelter processing charges and freight (8,091) - - (36,794) Cost of sales (25,121) - - (72,437) Depreciation (8,179) - - (18,951) ------------------------------------- ------------ 33,905 - - 86,869 Corporate development and exploration - - - (2,524) General and administration - - - (6,288) Investment and other income (expense) (90) 222 - (18,370) Interest expense - - - (421) Capital tax expense - - - (82) Income tax (expense) recovery (11,054) 7,067 - (15,167) Non-controlling interest - 4,419 - 4,419 ------------------------------------- ------------ Net income $ 22,761 $ 11,708 $ - $ 48,436 ------------------------------------- ------------ </pre><pre> 2009 For the three months ended <chron>June 30</chron> CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Gross sales $ - $ 63,711 $ 43,001 $ 37,407 Smelter processing charges and freight - (18,438) (12,326) (2,458) Cost of sales (508) (19,715) (16,730) (15,616) Depreciation - (3,373) (2,162) (3,301) -------------------------------------------------- (508) 22,185 11,783 16,032 Corporate development and exploration (1,526) (407) (794) - General and administration (4,785) - - - Investment and other income (expense) 5,969 (1,797) (422) 77 Interest expense (493) - - - Capital tax expense (125) - - - Income tax expense (3,199) (2,212) (1,870) - Non-controlling interest - - - - -------------------------------------------------- Net income ($4,667) $ 17,769 $ 8,697 $ 16,109 -------------------------------------------------- 2009 For the three months ended <chron>June 30</chron> COBRE OK TEDI LAS CRUCES PANAMA TOTAL --------------------------------------------------------------- ------------ (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Gross sales $ 68,923 $ - $ - $ 213,042 Smelter processing charges and freight (7,367) - - (40,589) Cost of sales (21,258) - - (73,827) Depreciation (4,768) - - (13,604) ------------------------------------- ------------ 35,530 - - 85,022 Corporate development and exploration - - - (2,727) General and administration - - - (4,785) Investment and other income (expense) (1,114) 13,753 - 16,466 Interest expense - - - (493) Capital tax expense - - - (125) Income tax expense (12,469) (4,302) - (24,052) Non-controlling interest - (2,778) - (2,778) ------------------------------------- ------------ Net income $ 21,947 $ 6,673 $ - $ 66,528 ------------------------------------- ------------ <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Consolidated statements of cash flows (unaudited) Three Months Ended Six Months Ended June June 30 30 (thousands of Note 2010 2009 2010 2009 Canadian dollars) reference ----------------------------------------------------- ---------------------- ----------------------------------------------------- ---------------------- Cash provided by (used in) operating activities (1) Net income $ 48,436 $ 66,528 $ 128,307 $ 117,855 Add (deduct) items not affecting cash: Depreciation 18,951 13,604 34,175 29,283 Future income tax (6,578) 13,552 (23,963) 11,319 Accretion expense on asset retirement obligations 1,222 1,208 2,527 2,475 Non-controlling interest (4,359) 2,778 (8,981) (5) Asset impairment - - - 6,419 Foreign exchange loss (gain) 20,927 (19,788) 22,961 (8,848) Other 511 5,114 1,246 7,610 Settlement of asset retirement obligations (948) (2,309) (1,521) (2,756) Net change in non- cash working capital 2 2,127 9,909 17,115 (55,659) ---------------------- ---------------------- 80,289 90,596 171,866 107,693 ---------------------- ---------------------- Cash provided by (used in) investing activities Purchase of property, plant and equipment (11,014) (86,263) (32,835) (181,122) Purchase of long- term investments 6 (116,718) - (219,098) - Sale of short-term investments - (47,682) 26,996 (45,251) Funding received under Cobre Panama option agreement 4,069 - 6,208 - ---------------------- ---------------------- (123,663) (133,945) (218,729) (226,373) ---------------------- ---------------------- Cash provided by (used in) financing activities Long-term debt repayments - (74,174) - (82,502) Issuance of common shares - 334,284 - 334,284 Funding by non- controlling shareholder 40 28,269 2,835 43,941 Financial assurance deposits 325 700 (354) (8,740) Dividends paid on common shares (5,610) (4,828) (5,610) (4,828) Subsidies received - 57,600 360 66,209 Other (1,023) (45) (1,510) (90) ---------------------- ---------------------- (6,268) 341,806 (4,279) 348,274 ---------------------- ---------------------- Foreign exchange change on cash heldin foreign currency (3,320) (18,400) (19,457) (12,900) ---------------------- ---------------------- Increase (decrease) in cash (52,962) 280,057 (70,599) 216,694 Cash: Beginning of period 489,280 473,696 506,917 537,059 ---------------------- ---------------------- End of period 436,318 753,753 436,318 753,753 Short-term investments - 80,925 - 80,925 ---------------------- ---------------------- Cash and short-term investments $ 436,318 $ 834,678 $ 436,318 $ 834,678 ----------------------------------------------------- ---------------------- (see accompanying notes) (1) Supplementary cash flow information: Cash interest paid $ - $ 5,170 $ 600 $ 9,895 Cash taxes paid $ 54,206 $ 4,792 $ 74,037 $ 10,640 ----------------------------------------------------- ---------------------- </pre><pre> <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Segmented statements of cash flows (unaudited) 2010 For the six months ended <chron>June 30</chron> CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Cash provided by (used in) operating activities Before net change in non-cash working capital ($16,706) $ 54,090 $ 37,713 $ 28,696 Net change in non-cash working capital (9,829) (646) (9,995) 8,248 --------------------------------------------------- (26,535) 53,444 27,718 36,944 --------------------------------------------------- Cash provided by (used in) investing activities Purchase of property, plant and equipment (88) (4,882) (2,521) - Purchase of long-term investments (219,098) - - - Sale of short-term investments 26,996 - - - Funding received-Cobre Panama option agreement - - - - --------------------------------------------------- (192,190) (4,882) (2,521) - --------------------------------------------------- --------------------------------------------------- Cash provided by (used in) financing activities (5,428) - - - --------------------------------------------------- Foreign exchange change on cash held in foreign currency - (2,590) (14,596) - --------------------------------------------------- Intergroup funding (distributions) 162,074 (76,011) (24,006) (36,944) --------------------------------------------------- Increase (decrease) in cash (62,079) (30,039) (13,405) - Cash: Beginning of period 224,574 158,631 66,314 - --------------------------------------------------- End of period 162,495 128,592 52,909 - Short-term investments - - - - --------------------------------------------------- Cash and short-term investments $ 162,495 $ 128,592 $ 52,909 $ - --------------------------------------------------- 2010 For the six months ended <chron>June 30</chron> COBRE OK TEDI LAS CRUCES PANAMA TOTAL --------------------------------------------------------------- ------------ (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Cash provided by (used in) operating activities Before net change in non-cash working capital $ 57,711 ($6,753) $ - $ 154,751 Net change in non-cash working capital 29,337 - - 17,115 -------------------------------------- ------------ 87,048 (6,753) - 171,866 -------------------------------------- ------------ Cash provided by (used in) investing activities Purchase of property, plant and equipment (8,405) 24,321 (41,260) (32,835) Purchase of long-term investments - - - (219,098) Sale of short-term investments - - - 26,996 Funding received-Cobre Panama option agreement - - 6,208 6,208 -------------------------------------- ------------ (8,405) 24,321 (35,052) (218,729) -------------------------------------- ------------ -------------------------------------- ------------ Cash provided by (used in) financing activities (645) 1,794 - (4,279) -------------------------------------- ------------ Foreign exchange change on cash held in foreign currency 392 (3,042) 379 (19,457) -------------------------------------- ------------ Intergroup funding (distributions) (66,373) 3,719 37,541 - -------------------------------------- ------------ Increase (decrease) in cash 12,017 20,039 2,868 (70,599) Cash: Beginning of period 36,631 10,039 10,728 506,917 -------------------------------------- ------------ End of period 48,648 30,078 13,596 436,318 Short-term investments - - - - -------------------------------------- ------------ Cash and short-term investments $ 48,648 $ 30,078 $ 13,596 $ 436,318 -------------------------------------- ------------ </pre><pre> 2009 For the six months ended <chron>June 30</chron> CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Cash provided by (used in) operating activities Before net change in non-cash working capital ($21,139) $ 34,967 $ 15,368 $ 78,859 Net change in non-cash working capital 79 (19,786) 5,873 (1,173) --------------------------------------------------- (21,060) 15,181 21,241 77,686 --------------------------------------------------- Cash provided by (used in) investing activities Purchase of property, plant and equipment (261) (6,555) (3,778) - Purchase of short-term investments (45,251) - - - --------------------------------------------------- (45,512) (6,555) (3,778) - --------------------------------------------------- --------------------------------------------------- Cash provided by (used in) financing activities 329,264 - - - --------------------------------------------------- Foreign exchange change on cash held in foreign currency - (10,675) (1,652) - --------------------------------------------------- Intergroup funding (distributions) 7,067 (90,167) 12,955 (77,686) --------------------------------------------------- Increase (decrease) in cash 269,759 (92,216) 28,766 - Cash: Beginning of period 205,564 192,881 65,976 - --------------------------------------------------- End of period 475,323 100,665 94,742 - Short-term investments 80,925 - - - --------------------------------------------------- Cash and short-term investments $ 556,248 $ 100,665 $ 94,742 $ - --------------------------------------------------- 2009 For the six months ended <chron>June 30</chron> COBRE OK TEDI LAS CRUCES PANAMA TOTAL --------------------------------------------------------------- ------------ (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Cash provided by (used in) operating activities Before net change in non-cash working capital $ 55,297 $ - $ - $ 163,352 Net change in non-cash working capital (40,652) - - (55,659) -------------------------------------- ------------ 14,645 - - 107,693 -------------------------------------- ------------ Cash provided by (used in) investing activities Purchase of property, plant and equipment (6,590) (118,550) (45,388) (181,122) Purchase of short-term investments - - - (45,251) -------------------------------------- ------------ (6,590) (118,550) (45,388) (226,373) -------------------------------------- ------------ -------------------------------------- ------------ Cash provided by (used in) financing activities (749) 19,759 - 348,274 -------------------------------------- ------------ Foreign exchange change on cash held in foreign currency (1,951) 1,371 7 (12,900) -------------------------------------- ------------ Intergroup funding (distributions) (105) 98,743 49,193 - -------------------------------------- ------------ Increase (decrease) in cash 5,250 1,323 3,812 216,694 Cash: Beginning of period 37,547 33,981 1,110 537,059 -------------------------------------- ------------ End of period 42,797 35,304 4,922 753,753 Short-term investments - - - 80,925 -------------------------------------- ------------ Cash and short-term investments $ 42,797 $ 35,304 $ 4,922 $ 834,678 -------------------------------------- ------------ <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Segmented statements of cash flows (unaudited) 2010 For the three months ended <chron>June 30</chron> CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Cash provided by (used in) operating activities Before net change in non-cash working capital ($8,552) $ 23,357 $ 18,430 $ 12,899 Net change in non-cash working capital (6,575) 343 (5,729) 5,518 --------------------------------------------------- (15,127) 23,700 12,701 18,417 --------------------------------------------------- Cash provided by (used in) investing activities Purchase of property, plant and equipment (80) (3,063) (2,064) - Purchase of long-term investments (116,718) - - - Funding received-Cobre Panama option agreement - - - - --------------------------------------------------- (116,798) (3,063) (2,064) - --------------------------------------------------- --------------------------------------------------- Cash provided by (used in) financing activities (5,373) - - - --------------------------------------------------- Foreign exchange change on cash held in foreign currency - 3,436 (8,204) - --------------------------------------------------- Intergroup funding (distributions) 127,564 (75,992) (19,884) (18,417) --------------------------------------------------- Increase (decrease) in cash (9,734) (51,919) (17,451) - Cash: Beginning of period 172,229 180,511 70,360 - --------------------------------------------------- End of period 162,495 128,592 52,909 - Short-term investments - - - - --------------------------------------------------- Cash and short-term investments $ 162,495 $ 128,592 $ 52,909 $ - --------------------------------------------------- --------------------------------------------------- 2010 For the three months ended <chron>June 30</chron> COBRE OK TEDI LAS CRUCES PANAMA TOTAL --------------------------------------------------------------- ------------ (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Cash provided by (used in) operating activities Before net change in non-cash working capital $ 32,028 $ - $ - $ 78,162 Net change in non-cash working capital 8,570 - - 2,127 -------------------------------------- ------------ 40,598 - - 80,289 -------------------------------------- ------------ Cash provided by (used in) investing activities Purchase of property, plant and equipment (4,125) 21,669 (23,351) (11,014) Purchase of long-term investments - - - (116,718) Funding received-Cobre Panama option agreement - - 4,069 4,069 -------------------------------------- ------------ (4,125) 21,669 (19,282) (123,663) -------------------------------------- ------------ -------------------------------------- ------------ Cash provided by (used in) financing activities 3 (898) - (6,268) -------------------------------------- ------------ Foreign exchange change on cash held in foreign currency 2,572 (1,707) 583 (3,320) -------------------------------------- ------------ Intergroup funding (distributions) (33,207) (456) 20,392 - -------------------------------------- ------------ Increase (decrease) in cash 5,841 18,608 1,693 (52,962) Cash: Beginning of period 42,807 11,470 11,903 489,280 -------------------------------------- ------------ End of period 48,648 30,078 13,596 436,318 Short-term investments - - - - -------------------------------------- ------------ Cash and short-term investments $ 48,648 $ 30,078 $ 13,596 $ 436,318 -------------------------------------- ------------ -------------------------------------- ------------ 2009 For the three months ended <chron>June 30</chron> CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian (Turkey) (Finland) (Canada) dollars) Cash provided by (used in) operating activities Before net change in non-cash working capital ($7,607) $ 23,370 $ 9,708 $ 19,143 Net change in non-cash working capital (6,900) 757 13,319 9,817 --------------------------------------------------- (14,507) 24,127 23,027 28,960 --------------------------------------------------- Cash provided by (used in) investing activities Purchase of property, plant and equipment (445) (2,988) (3,006) - Purchase of short-term investments (47,682) - - - --------------------------------------------------- (48,127) (2,988) (3,006) - --------------------------------------------------- --------------------------------------------------- Cash provided by (used in) financing activities 329,374 - - - --------------------------------------------------- Foreign exchange change on cash held in foreign currency - (17,356) (509) - --------------------------------------------------- Intergroup funding (distributions) 14,696 (90,562) 17,107 (28,960) --------------------------------------------------- Increase (decrease) in cash 281,436 (86,779) 36,619 - Cash: Beginning of period 193,887 187,444 58,123 - --------------------------------------------------- End of period 475,323 100,665 94,742 - Short-term investments 80,925 - - - --------------------------------------------------- Cash and short-term investments $ 556,248 $ 100,665 $ 94,742 $ - --------------------------------------------------- --------------------------------------------------- 2009 For the three months ended <chron>June 30</chron> COBRE OK TEDI LAS CRUCES PANAMA TOTAL --------------------------------------------------------------- ------------ (thousands of Canadian (Papua New (Spain) (Panama) dollars) Guinea) Cash provided by (used in) operating activities Before net change in non-cash working capital $ 36,073 $ - $ - $ 80,687 Net change in non-cash working capital (7,084) - - 9,909 -------------------------------------- ------------ 28,989 - - 90,596 -------------------------------------- ------------ Cash provided by (used in) investing activities Purchase of property, plant and equipment (3,269) (53,999) (22,556) (86,263) Purchase of short-term investments - - - (47,682) -------------------------------------- ------------ (3,269) (53,999) (22,556) (133,945) -------------------------------------- ------------ -------------------------------------- ------------ Cash provided by (used in) financing activities 24 12,408 - 341,806 -------------------------------------- ------------ Foreign exchange change on cash held in foreign currency (3,037) 3,039 (537) (18,400) -------------------------------------- ------------ Intergroup funding (distributions) (299) 64,149 23,869 - -------------------------------------- ------------ Increase (decrease) in cash 22,408 25,597 776 280,057 Cash: Beginning of period 20,389 9,707 4,146 473,696 -------------------------------------- ------------ End of period 42,797 35,304 4,922 753,753 Short-term investments - - - 80,925 -------------------------------------- ------------ Cash and short-term investments $ 42,797 $ 35,304 $ 4,922 $ 834,678 -------------------------------------- ------------ -------------------------------------- ------------ <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Consolidated statements of retained earnings (unaudited) Three Months Ended June Six Months Ended June 30 30 (thousands of Canadian dollars) 2010 2009 2010 2009 --------------------------------------------------- ------------------------ --------------------------------------------------- ------------------------ Retained earnings, beginning of period $1,621,674 $1,334,401 $1,541,803 $1,283,074 Net income 48,436 66,528 128,307 117,855 Dividends on common shares (5,610) (4,828) (5,610) (4,828) --------------------------------------------------- ------------------------ Retained earnings, end of period $1,664,500 $1,396,101 $1,664,500 $1,396,101 --------------------------------------------------- ------------------------ (see accompanying notes) Consolidated statements of comprehensive income (loss) (unaudited) Three Months Ended Six Months Ended June June 30 30 (thousands of Note Canadian dollars) reference 2010 2009 2010 2009 ----------------------------------------------------- ---------------------- Net income $ 48,436 $ 66,528 $ 128,307 $ 117,855 ---------------------- ---------------------- Other comprehensive income (loss) for the period : Changes in fair value of gold forward sales contracts (1,019) (344) (801) (1,105) Changes in fair value of interest rate swap contracts - 3,244 - 4,984 Changes in fair value of investments 7,128 5,781 7,300 9,401 Currency translation adjustments 34,342 (98,622) (77,511) (71,577) Reclassification to net income of gains/losses realized: Amortization of gain on foreign exchange forward contracts - (1,523) - (3,031) Foreign exchange loss on reduction of net investment in self-sustaining foreign operations 12 (21,321) (3,912) (22,656) (3,912) Income tax expense related to other comprehensive income 15 (732) (2,098) (192) (3,137) ---------------------- --------------------- 18,398 (97,474) (93,860) (68,377) ---------------------- ---------------------- Comprehensive income (loss) $ 66,834 ($30,946) $ 34,447 $ 49,478 ----------------------------------------------------- ---------------------- (see accompanying notes) <org value="Toronto:IMN" idsrc="xmltag.org">INMET MINING CORPORATION</org> Notes to the consolidated financial statements 1. Significant accounting policies </pre> <p>Our interim consolidated financial statements do not include all of the disclosure required for annual financial statements under generally accepted accounting principles (GAAP). These statements do, however, follow the same accounting policies and methods of application used in our most recent annual consolidated financial statements. You should read our interim statements in conjunction with our annual statements, which you can find in our 2009 Annual Report.</p> <p>These statements have been approved by Inmet's board of directors and have been reviewed by our external auditors.</p><pre>2. Statement of cash flows The following tables show the components of our net change in non-cash working capital by segment. For the six months ended <chron>June 30, 2010</chron> ---------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ---------------------------------------------------------------------------- Accounts receivable ($678) $ 8,267 $ 1,150 $ 3,734 $13,901 $ 26,374 Inventories - (677) (1,549) 6,602 7,748 12,124 Accounts payable and accrued liabilities 1,907 (4,276) (5,569) (2,088) 2,154 (7,872) Taxes (11,055) (4,026) (4,027) - 6,179 (12,929) Other (3) 66 - - (645) (582) ---------------------------------------------------------------------------- (9,829) ($646) ($9,995) $ 8,248 $29,337 $ 17,115 ---------------------------------------------------------------------------- For the six months ended <chron>June 30, 2009</chron> ---------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ---------------------------------------------------------------------------- Accounts receivable $ 66 ($15,678) ($6,203) ($495) ($48,400) ($70,710) Inventories - 219 390 3,938 (12) 4,535 Accounts payable and accrued liabilities (2,871) (5,522) 1,257 (4,616) 382 (11,370) Taxes 5,342 1,172 10,429 - 7,671 24,614 Other (2,458) 23 - - (293) (2,728) ---------------------------------------------------------------------------- $ 79 ($19,786) $ 5,873 ($1,173) ($40,652) ($55,659) ---------------------------------------------------------------------------- For the three months ended <chron>June 30, 2010</chron> ---------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ---------------------------------------------------------------------------- Accounts receivable ($83) $ 8,663 $ 225 $ 3,476 $ 14,163 $ 26,444 Inventories - (513) (2,131) 2,450 4,361 4,167 Accounts payable and accrued liabilities 5,138 (5,218) 970 (408) 435 917 Taxes (11,631) (2,578) (4,793) - (9,803) (28,805) Other 1 (11) - - (586) (596) ---------------------------------------------------------------------------- ($6,575) $ 343 ($5,729) $ 5,518 $ 8,570 $ 2,127 ---------------------------------------------------------------------------- For the three months ended <chron>June 30, 2009</chron> ---------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ---------------------------------------------------------------------------- Accounts receivable $ 214 $ 8,839 ($7,323) $13,290 ($8,967) $ 6,053 Inventories - (999) 797 998 (1,400) (604) Accounts payable and accrued liabilities (2,137) (3,671) 1,478 (6,162) 1,801 (8,691) Taxes (2,530) (3,381) 18,367 - 2,467 14,923 Other (2,447) (31) - 1,691 (985) (1,772) ---------------------------------------------------------------------------- ($6,900) $ 757 $ 13,319 $ 9,817 ($7,084) $ 9,909 ---------------------------------------------------------------------------- 3. Cash and short-term investments ---------------------------------------------------------------------------- (thousands) June 30 2010 December 31 2009 ---------------------------------------------------------------------------- Cash: Liquidity funds $ 161,429 $ 205,190 Bankers' acceptances 34,125 92,200 Money market funds 29,571 19,951 Term deposits 64,684 40,140 Overnight deposits 24,639 54,435 Bank deposits 121,870 95,001 ------------------------------------- 436,318 506,917 Short-term investments: Corporate - 26,996 ---------------------------------------------------------------------------- Total cash and short-term investments 436,318 $ 533,913 ---------------------------------------------------------------------------- </pre><pre>4. Restricted cash ---------------------------------------------------------------------------- (thousands) June 30 2010 December 31 2009 ---------------------------------------------------------------------------- Collateralized cash for letter of credit facility - Inmet Mining $ 16,219 $ 16,492 In trust for Ok Tedi reclamation 28,014 26,365 Collateralized cash for letters of credit - Las Cruces 62,287 72,008 Collateralized cash for Pyhasalmi reclamation 1,595 1,854 ---------------------------------------------------------------------------- 108,115 116,719 Less current portion: Collateralized cash for letters of credit - Las Cruces (11,905) (15,130) ---------------------------------------------------------------------------- $ 96,210 $ 101,589 ---------------------------------------------------------------------------- 5. Investments in equity securities ---------------------------------------------------------------------------- (thousands) June 30 2010 December 31 2009 ---------------------------------------------------------------------------- Available-for-sale equity securities: <org>Premier Gold Mines Ltd</org> (9.5 million shares) $ 47,628 $ 39,501 Other 2,084 2,910 ---------------------------------------------------------------------------- $ 49,712 $ 42,411 ---------------------------------------------------------------------------- 6. Held to maturity investments </pre> <p>We invested an additional <money>$219 million</money> in long-term Canadian and Provincial government bonds with credit ratings of A to AAA. The bonds mature between <chron>July 2010</chron> and <chron>August 2015</chron> and have a weighted average annual yield to maturity of 2.0 percent. We have designated these bonds as held to maturity, measuring them initially at fair value and subsequently at amortized cost.</p><pre>7. Assets held for sale </pre> <p>During the second quarter, Troilus concluded operations after the depletion of all surface ore stockpiles. We have begun to sell the remaining plant and equipment with a total carrying value as at <chron>June 30, 2010</chron> of <money>$9 million</money>, which we expect will occur within the next 12 months.</p><pre>8. Long-term debt ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- June 30, 2010 December 31, 2009 ---------------------------------------------------------------------------- (thousands) Promissory note $ 15,939 $ 18,094 Loans from non-controlling shareholder 165,399 181,932 ---------------------------------------------------------------------------- $ 181,338 $ 200,026 ---------------------------------------------------------------------------- </pre> <p>Loans from non-controlling shareholder</p> <p>Las Cruces received intercompany loan advances of <money>EUR6.4 million</money> in 2010 and <money>EUR40 million</money> in 2009. These loans bear interest at EURIBOR plus 6.1 percent and are due to be repaid on <chron>February 25, 2020</chron>. The non-controlling portion of these loans, <money>EUR127.1 million</money>, was reflected in long-term debt at <chron>June 30, 2010</chron>. Loans from non-controlling shareholders approximate fair value because the loans accrue interest at prevailing market rates.</p><pre>9. Commitments </pre> <p>Capital commitments</p> <p>Our operations have the following capital commitments as at <chron>June 30, 2010</chron>:</p><pre>-- Ok Tedi committed approximately <money>$90.6 million</money> (our proportionate share is <money>$16.3 million</money>) mainly for mobile equipment and the construction of underwater storage pits for sulphur concentrate produced by the mine waste tailings plant. -- Las Cruces committed <money>$25.9 million</money> primarily for the purchase of a permanent water treatment plant. -- Cobre Panama committed <money>$126.3 million</money> for the design and supply of two SAG mills, four ball mills and the related gearless drives. 10. Subscription agreement with <org>Temasek Holdings</org> </pre> <p>On <chron>March 31, 2010</chron>, we entered into a subscription agreement with a subsidiary of <org>Temasek Holdings (Private) Limited</org> (<org>Temasek</org>), under which <org>Temasek</org> has agreed to buy 9.26 million subscription receipts for total proceeds of <money>$500 million</money>. We issued the subscription receipts on <chron>April 23, 2010</chron> and the proceeds are being held in escrow. The subscription receipts are exchangeable for an equivalent number of Inmet common shares as long as certain conditions are met on or before <chron>September 30, 2010</chron>, including:</p><pre>-- The coming into effect of legislation passed by the legislative assembly of the <org>Republic</org> of <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama</location> to amend <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama's</location> Mineral Resources Code to permit entities in which foreign governmental bodies or authorities have an interest, to hold direct or indirect interests in mining concessions in <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama</location>. -- Inmet's or Cobre Panama's ability to use or exploit their rights under Cobre Panama's mining concession for the mining project are not impaired in any material way. </pre> <p>If the conditions are met, the subscription receipts will be exchanged for Inmet common shares equal to approximately 14 percent of our outstanding common shares. The proceeds will then be released from escrow and we will use them to fund the development of Cobre Panama and for general corporate purposes. If the conditions are not met, the subscription receipts will automatically terminate and the escrowed funds will be returned to <org>Temasek</org>.</p><pre>11. Accumulated other comprehensive loss (AOCL) The table below shows the components of the beginning and ending balances of AOCL. ---------------------------------------------------------------------------- (thousands) ---------------------------------------------------------------------------- Unrealized losses on gold forward sales contracts (net of tax of $2,015) ($4,701) Unrealized gains on investments (net of tax of $4,788) 23,794 Currency translation adjustment (61,169) ---------------------------------------------------------------------------- AOCL, December 31, 2009 ($42,076) Other comprehensive loss for the six months ending June 30, 2010 (93,860) ---------------------------------------------------------------------------- AOCL, June 30, 2010 ($135,936) ---------------------------------------------------------------------------- AOCL <chron>June 30, 2010</chron> comprises: Unrealized losses on gold forward sales contracts (net of tax $2,255) ($5,262) Unrealized gains on investments (net of tax of $5,220) 30,662 Currency translation adjustment (161,336) ---------------------------------------------------------------------------- AOCL, June 30, 2010 ($135,936) ---------------------------------------------------------------------------- The table below shows the breakdown of the currency translation adjustments included in AOCL. ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (thousands) June 30, 2010 December 31, 2009 ---------------------------------------------------------------------------- Pyhasalmi (euro functional currency) ($26,514) ($5,308) Las Cruces (euro functional currency) (113,274) (8,793) Cayeli (US dollar functional currency) (5,119) (20,901) Ok Tedi (US dollar functional currency) (11,922) (13,751) Cobre Panama (US dollar functional currency) (4,507) (12,416) ---------------------------------------------------------------------------- ($161,336) ($61,169) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- </pre> <p>The Canadian dollar to US dollar exchange rate was <money>$1.06</money> at <chron>June 30, 2010</chron> and <money>$1.05</money> at <chron>December 31, 2009</chron>. The Canadian dollar to euro exchange rate was <money>$1.30</money> at <chron>June 30, 2010</chron> and <money>$1.50</money> at <chron>December 31, 2009</chron>.</p><pre>12. Investment and other income </pre> <p>Investment and other income are summarized as follows:</p><pre>---------------------------------------------------------------------------- Three months ended June Six months ended June 30 30 (thousands) 2010 2009 2010 2009 ---------------------------------------------------------------------------- Interest income $ 1,760 $ 701 $ 3,357 $ 2,743 Foreign exchange gain (loss) (20,738) 18,196 (23,153) 8,098 Dividend and royalty income 1,175 385 1,889 685 Mark to market on Ok Tedi copper forward contracts - (1,007) - (2,426) Other (567) (1,809) (541) (3,837) ---------------------------------------------------------------------------- ($18,370) $ 16,466 ($18,448) $ 5,263 ---------------------------------------------------------------------------- </pre> <p>Foreign exchange</p> <p>For transactions with foreign currencies we use the exchange rates in effect:</p><pre>-- at period-end for monetary assets and liabilities -- on the date of the transaction for non-monetary assets and liabilities -- on the date of the transaction for income and expenses Foreign exchange gain (loss) is a result of: ---------------------------------------------------------------------------- Three months ended June Six months ended June 30 30 (thousands) 2010 2009 2010 2009 ---------------------------------------------------------------------------- Translation of Las Cruces' US dollar-denominated bank credit facility $ - $ 15,273 $ - $ 3,808 Translation of foreign - denominated cash held at corporate 202 149 (569) (1,446) Translation of other- monetary assets and liabilities 381 (1,138) 72 1,824 Reduction in our net investments (21,321) 3,912 (22,656) 3,912 ---------------------------------------------------------------------------- ($20,738) $ 18,196 ($23,153) $ 8,098 ---------------------------------------------------------------------------- 13. Income tax expense For the six months ended <chron>June 30, 2010</chron> ---------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Ok Tedi Las Cruces Total ---------------------------------------------------------------------------- Current income taxes $ 2,743 $ 15,180 $ 9,887 $ 31,383 $ - $ 59,193 Future income taxes (2,904) (2,774) 39 (3,794) (14,530) (23,963) ---------------------------------------------------------------------------- ($161) $ 12,406 $ 9,926 $ 27,589 ($14,530) $ 35,230 ---------------------------------------------------------------------------- For the six months ended <chron>June 30, 2009</chron> ---------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Ok Tedi Las Cruces Total ---------------------------------------------------------------------------- Current income taxes $ 10,164 $ 10,606 $ 1,758 $ 9,095 $ - $ 31,623 Future income taxes 9,566 (8,975) 547 9,914 267 11,319 ---------------------------------------------------------------------------- $ 19,730 $ 1,631 $ 2,305 $ 19,009 $ 267 $ 42,942 ---------------------------------------------------------------------------- For the three months ended <chron>June 30, 2010</chron> ---------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Ok Tedi Las Cruces Total ---------------------------------------------------------------------------- Current income taxes $ 1,582 $ 5,374 $ 4,945 $ 9,844 $ - $ 21,745 Future income taxes (266) (421) (34) 1,210 (7,067) (6,578) ---------------------------------------------------------------------------- $ 1,316 $ 4,953 $ 4,911 $ 11,054 ($7,067) $ 15,167 ---------------------------------------------------------------------------- For the three months ended <chron>June 30, 2009</chron> ---------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Ok Tedi Las Cruces Total ---------------------------------------------------------------------------- Current income taxes $ 2,509 $ 2,800 $ 1,330 $ 3,861 $ - $ 10,500 Future income taxes 690 (588) 540 8,608 4,302 13,552 ---------------------------------------------------------------------------- $ 3,199 $ 2,212 $ 1,870 $ 12,469 $ 4,302 $ 24,052 ---------------------------------------------------------------------------- 14. Net income per share ---------------------------------------------------------------------------- Three months ended June Six months ended June 30 30 (thousands) 2010 2009 2010 2009 ---------------------------------------------------------------------------- Net income available to common shareholders $ 48,436 $ 66,528 $ 128,307 $ 117,855 ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- (thousands) ---------------------------------------------------------------------------- Weighted average common shares outstanding 56,107 48,712 56,107 48,498 Plus incremental shares from assumed conversions: Deferred share units 100 83 100 83 Long term incentive plan units 43 43 43 43 ---------------------------------------------------------------------------- Diluted weighted average common shares outstanding 56,250 48,838 56,250 48,624 ---------------------------------------------------------------------------- (Canadian dollars per share) ---------------------------------------------------------------------------- Basic net income per common share $ 0.86 $ 1.37 $ 2.29 $ 2.43 Dilutive effect from assumed conversions of deferred share units and long term incentive plan units per common share - ($0.01) ($0.01) ($0.01) ---------------------------------------------------------------------------- Diluted net income per common share $ 0.86 $ 1.36 $ 2.28 $ 2.42 ---------------------------------------------------------------------------- </pre><pre>15. Income taxes recovery (expense) included in other comprehensive income ---------------------------------------------------------------------------- Three months ended June Six months ended June 30 30 (thousands) 2010 2009 2010 2009 ---------------------------------------------------------------------------- Changes in fair value of gold forward sales contracts $ 305 $ 104 $ 240 $ 331 Changes in fair value of interest rate swap contracts - (1,233) - (1,893) Changes in fair value of investments (1,037) (969) (432) (1,575) ---------------------------------------------------------------------------- ($732) ($2,098) ($192) ($3,137) ---------------------------------------------------------------------------- </pre><pre>FOR FURTHER INFORMATION PLEASE CONTACT: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> <person>Jochen Tilk</person> President and Chief Executive Officer +1.416.860.3972 <a href="http://www.inmetmining.com">www.inmetmining.com</a> Source: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> </pre>http://www.inmetmining.com/investorsmedia/news/newsdetails/default.aspx?PressReleaseId=57bf6bb2-6775-4f7c-be4a-66f3946fcf3eTue, 27 Jul 2010 08:41:00 -0400 <p><location value="LU/ca.on.tornto" idsrc="xmltag.org">TORONTO, CANADA</location>--(Marketwire - <chron>July 22, 2010</chron>) - <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> (TSX:IMN) announced its preliminary production results for the three and six months ended <chron>June 30, 2010</chron> and provided a progress update for the ramp up of production at Las Cruces.</p> <pre>Preliminary production results for three and six months ended <chron>June 30, 2010</chron></pre> <p>Production at our established operations is on track for achievement of our previously stated estimates for 2010. At Las Cruces, copper production in the second quarter of 2010 was below our expectations as further explained in the section below (see <org>Progress</org> at Las Cruces).</p> <pre> ---------------------------------------------------------------------------- three months six months revised ended June ended June objective Inmet's share(1) 30, 2010 30, 2010 2010(3) ---------------------------------------------------------------------------- Copper (tonnes) Cayeli 7,100 14,200 30,500 Las Cruces cathode 4,600 7,800 25,000 Las Cruces copper contained in ore - - 12,300 Pyhasalmi 4,000 6,900 13,400 Troilus 700 2,000 2,000 Ok Tedi(2) 6,100 12,800 29,300 ---------------------------------------------------------------------------- 22,500 43,700 112,500 ---------------------------------------------------------------------------- Zinc (tonnes) Cayeli 15,000 26,500 51,700 Pyhasalmi 5,600 12,800 31,300 ---------------------------------------------------------------------------- 20,600 39,300 83,000 ---------------------------------------------------------------------------- Gold (ounces) Troilus 18,600 37,900 37,900 Ok Tedi(2) 18,100 39,000 102,600 ---------------------------------------------------------------------------- 36,700 76,900 140,500 ---------------------------------------------------------------------------- (1) Inmet's share represents 100 percent for Cayeli, Pyhasalmi and Troilus, 18 percent for Ok Tedi and 70 percent for Las Cruces. (2) This production objective is based on a full year of production and is subject to change based on the possible exchange of our 18 percent equity interest in Ok Tedi for a 5 percent net smelter return royalty which is expected to occur in the third quarter of 2010. (3) We revised our objective for copper cathode at Las Cruces from 36,400 tonnes to between 20,000 and 30,000 tonnes (see Looking ahead for details). We also revised Troilus' copper and gold objectives from 2,100 tonnes to 2,000 tonnes and 36,400 ounces to 37,900 ounces respectively to reflect actual production results as Troilus concluded operations at the end of the second quarter. </pre> <p><org>Progress</org> at Las Cruces</p> <p>During the second quarter, cathode production has improved by approximately 44 percent compared to the previous quarter and the plant demonstrated during consecutive running days its ability to reach the currently available plant capacity. However, a number of equipment failures and operational issues delayed the ramp-up of the plant and limited our ability to operate continuously. As a result, we produced 6,600 tonnes of copper cathode during the second quarter as compared to a target of 12,400 tonnes. This represents approximately 37 percent of design capacity (72,000 tonnes of copper cathode per year) or 55 percent of available capacity. Available capacity reflects the temporary constraint of having only two of the three leach residue filters available as one is dedicated to the neutralization plant. Installation of the new neutralization filter is on track and the necessary additional filtration capacity should be available by the end of July. Excluding the impact of production days lost due to mechanical failures, we produced at approximately 46 percent of design capacity for the quarter or 69 percent of available capacity. During the quarter, we achieved production for single days nearing 100 percent of design capacity and for extended periods we operated at over 60 percent of design capacity.</p> <p>In May, production ran very well as we produced at an average daily rate of 104 tonnes of copper cathode or 52 percent of design capacity and 78 percent of available capacity while operating 28 days during the month. This encouraged us to believe we were moving towards commercial production rates by the end of the second quarter.</p> <p>We experienced a set-back during June because of unexpected non-corrosion related equipment failures mostly related to the grinding and leach thickeners causing 10 days of lost production time.</p> <p>After one year since the start up of the plant, we have confirmed the exceptional quality of a high grade ore body, a sound leaching and electrowinning process and that we have completed or initiated the necessary technical improvements to the plant to improve reliability. We believe that our ramp up pattern is typical of hydrometallurgical plants and other complex processes and that the critical step to achieving full production at this point is to improve reliability and operational uptime.</p> <p>Looking ahead</p> <p>In July, we have continued to focus on increasing available plant capacity and reducing the causes of equipment failures and downtime as we identified these to be the root causes of our ramp up challenges. The most important steps are:</p> <pre> -- installed an additional pressure filter and completed commissioning of the filter to increase capacity and remove a significant bottleneck to throughput -- adding permanent water treatment capacity which will be commissioned in the third quarter. This will allow for a more consistent discharge into the aquifer and maintain water balance throughout the process -- completing phase two of the Dewatering and Reinjection System which will reduce the quantity of water flowing into the pit and the resulting water treatment load in both the plant and water treatment facility -- adding a large surge tank between leaching and filtration to further smooth out the leaching operation toward the end of this year -- applying a disciplined and systematic problem solving process to identify and address root causes of downtime. </pre> <p>We believe we have identified the key bottlenecks to production. All of these steps and improvements should significantly add to our operating reliability. July month to date has demonstrated further signs of improvement and we have returned to production rates similar to those in May.</p> <p>We believe there will be continuing challenges in the ramping up process and we are encouraged by the improved capability of our operating teams to address those as they have demonstrated in recent months. We will continue with the rigorous implementation of the ramp up plan to achieve our goal of full production by the end of the year. We require a period of continuous operation to accurately predict the timing of achieving our performance but believe a range for our 70 percent share of production of 20,000 to 30,000 tonnes of copper cathode is achievable.</p> <p>We have begun mining high grade ore and stockpiling it in preparation for shipping to smelters. We have not yet received the necessary permit from the regulators to move the material off-site and cannot determine when this will occur.</p> <p>Taking all factors into account, we believe it is appropriate to cease capitalizing Las Cruces' pre-operating costs net of sales and to begin recognizing these results in operating earnings and operating cash flow in our consolidated statements. This will be done as of <chron>July 1, 2010</chron>.</p> <p>Webcast Conference Call - Las Cruces Update Conference Call</p> <p>On <chron>Friday, July 23, 2010</chron> at <chron>8:30 a.m. Eastern Time</chron>, Inmet will hold a live webcast conference call and slide presentation as a follow-up to this press release. The call will be hosted by <person>Jochen Tilk</person>, President and Chief Executive Officer.</p> <p>You are cordially invited to listen to the audio webcast through:</p> <p><a href="http://events.digitalmedia.telus.com/inmet/072210/index.php">http://events.digitalmedia.telus.com/inmet/072210/index.php</a> or at <a href="http://www.inmetmining.com">www.inmetmining.com</a>.</p> <p>After the broadcast, an archive of the webcast can be accessed from both websites.</p> <p>You can also dial in by calling</p> <pre> -- Local or international: +1 416-340-2216 -- Toll-free within <location value="LB/nam" idsrc="xmltag.org">North America</location>: +1 866-226-1792 </pre> <p>Forward looking information</p> <p>Securities regulators encourage companies to disclose forward-looking information to help investors understand a company's future prospects. This press release contains forward-looking information. 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, and believe or other similar words. Capital and operating cost estimates are forward-looking statements, and are based on assumptions that we believe to be reasonable. However, actual events and results could be substantially different because of the risks and uncertainties associated with our respective business or events that happen after the date of this press release. You should not place undue reliance on forward-looking statements.</p> <p>About Inmet</p> <p>Inmet is a Canadian-based global mining company that produces copper, zinc and gold. We have interests in five mining operations in locations around the world: Cayeli, Las Cruces, Pyhasalmi, Troilus and Ok Tedi. We also have a 100 percent interest in Cobre Panama, a development property in <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama</location>.</p> <p>This press release is also available at <a href="http://www.inmetmining.com">www.inmetmining.com</a>.</p> <pre> FOR FURTHER INFORMATION PLEASE CONTACT: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> <person>Jochen Tilk</person> President and Chief Executive Officer (416) 860-3972 <a href="http://www.inmetmining.com">www.inmetmining.com</a> Source: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> </pre> http://www.inmetmining.com/investorsmedia/news/newsdetails/default.aspx?PressReleaseId=36522803-c211-4371-8f5a-9d54d59941ccThu, 22 Jul 2010 17:20:00 -0400 <p><location value="LU/ca.on.tornto" idsrc="xmltag.org">TORONTO, CANADA</location>--(Marketwire - <chron>July 13, 2010</chron>) - <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> (TSX:IMN) will be releasing its second quarter results on <chron>Tuesday, July 27, 2010</chron> and then will conduct a live audio webcast of its conference call discussing those results on <chron>Wednesday, July 28, 2010</chron> at <chron>8:30 a.m. Eastern Time</chron>. The call will be hosted by <person>Jochen Tilk</person>, President and Chief Executive Officer.</p> <p>You are cordially invited to listen to the audio webcast through either: <a href="http://events.digitalmedia.telus.com/inmet/072810/index.php">http://events.digitalmedia.telus.com/inmet/072810/index.php</a> or <a href="http://www.inmetmining.com">www.inmetmining.com</a>. After the broadcast, an archive of the webcast will be available on both websites.</p> <p>Interested persons who are unable to connect to the webcast can listen to the conference call by dialing +1 416-695-6623 (local/international) or toll-free +1 800-565-0813 (<location value="LB/nam" idsrc="xmltag.org">North America</location> only).</p> <p>For your information a conference replay will be available beginning <chron>Wednesday, July 28, 2010</chron> at <chron>10:00 a.m. Eastern Time</chron> and will run until <chron>Wednesday, August 11, 2010</chron> at <chron>midnight Eastern Time</chron>. The dial-in numbers for the replay are +1 416-695-5800 (local/international) or toll-free +1 800-408-3053 (<location value="LB/nam" idsrc="xmltag.org">North America</location> only). Each dial-in number is to be followed by passcode: 6305255.</p> <p>About Inmet - Inmet is a Canadian-based global mining company that produces copper, zinc and gold. We have interests in five mining operations in locations around the world: Cayeli, Las Cruces, Pyhasalmi, Troilus and Ok Tedi. We also have a 100 percent interest in Cobre Panama, a development property in <location value="LC/pa;LB/cam" idsrc="xmltag.org">Panama</location>.</p> <p>This press release is also available at <a href="http://www.inmetmining.com">www.inmetmining.com</a>.</p> <pre> FOR FURTHER INFORMATION PLEASE CONTACT: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> <person>Lynda Beesley</person> Assistant Corporate Secretary 1-416-860-3968 <a href="http://www.inmetmining.com">www.inmetmining.com</a> Source: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> </pre> http://www.inmetmining.com/investorsmedia/news/newsdetails/default.aspx?PressReleaseId=21a0eb04-5bab-40c5-9d61-b5d081ac971fTue, 13 Jul 2010 10:51:00 -0400 <p><location value="LU/ca.on.tornto" idsrc="xmltag.org">TORONTO, CANADA</location>--(Marketwire - <chron>June 14, 2010</chron>) - <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> ("Inmet") (TSX:IMN) is pleased to announce that <person>John Clappison</person>, the former managing partner of the <location value="LU/ca.on.tornto" idsrc="xmltag.org">Greater Toronto Area</location> office of <org>PricewaterhouseCoopers LLP</org>, has accepted an invitation to join its Board of Directors. Mr. Clappison's appointment is effective today.</p> <p>Mr. Clappison is a Chartered Accountant, a Fellow of the <org>Institute of Chartered Accountants of Ontario</org> and worked with <org>PricewaterhouseCoopers LLP</org> (or its predecessor firm) for 37 years. Since early 2006, he has served as a director of <org>Cameco Corporation</org>, <org>Canadian Real Estate Investment Trust</org>, <org>Rogers Communications Inc.</org> and <org>Sun Life Financial Inc.</org></p> <p>Mr. Clappison is also actively involved with the <org>Canadian Foundation for Facial Plastic and Reconstructive Surgery</org>, <org>Shaw Festival Theatre Endowment Foundation</org> and <org>The Corporation of Massey Hall and Roy Thomson Hall Endowment Foundation</org>.</p> <p><person>David R. Beatty</person>, Chairman of Inmet, commented, "We are delighted to welcome John to Inmet's Board of Directors. His business and financial expertise will complement and strengthen our Board as we move forward with the execution of our strategic plan."</p> <p>About Inmet</p> <p>Inmet is a Canadian-based global mining company that produces copper, zinc and gold. We have interests in five mining operations in locations around the world: Cayeli, Las Cruces, Pyhasalmi, Troilus and Ok Tedi. We also have a 100 percent interest in Cobre Panama, a development property in <location value="LC/pa" idsrc="xmltag.org">Panama</location>.</p> <p>This press release is also available at <a href="http://www.inmetmining.com">www.inmetmining.com</a>.</p> <pre> FOR FURTHER INFORMATION PLEASE CONTACT: For media enquiries, please contact: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> <person>Lynda Beesley</person> Assistant Corporate Secretary +1.416.860.3968 Source: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> </pre> http://www.inmetmining.com/investorsmedia/news/newsdetails/default.aspx?PressReleaseId=2c50b4e8-849f-4185-aeb4-f1c4fe1126c3Mon, 14 Jun 2010 17:30:00 -0400 <p><location value="LU/ca.on.tornto" idsrc="xmltag.org">TORONTO, CANADA</location>--(Marketwire - <chron>June 1, 2010</chron>) - Mr. <person>Jochen Tilk</person>, President and Chief Executive Officer of <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> (TSX:IMN), will be speaking on <chron>Tuesday, June 8, 2010</chron> at <chron>3:35 p.m. Eastern Time</chron> at the <org>RBC Capital Markets'</org> 4th Annual <org>Global Mining &amp; Materials Conference</org> being held in <location value="LU/ca.on.tornto" idsrc="xmltag.org">Toronto, Ontario</location> at the <location>Le Meridien King Edward Hotel</location>. You are cordially invited to listen to the webcast at <a href="http://www.wsw.com/webcast/rbc120/inmet">http://www.wsw.com/webcast/rbc120/inmet</a>. Slides of the presentation will be available on Inmet's website prior to the presentation.</p> <p>About Inmet - Inmet is a Canadian-based global mining company that produces copper, zinc and gold. We have interests in five mining operations in locations around the world: Cayeli, Las Cruces, Pyhasalmi, Troilus and Ok Tedi. We also have a 100 percent interest in Cobre Panama, a development property in <location value="LC/pa" idsrc="xmltag.org">Panama</location>.</p> <p>This press release is also available at <a href="http://www.inmetmining.com">www.inmetmining.com</a>.</p> <pre> FOR FURTHER INFORMATION PLEASE CONTACT: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> <person>Lynda Beesley</person> Assistant Corporate Secretary +1.416.860.3968 Source: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> </pre> http://www.inmetmining.com/investorsmedia/news/newsdetails/default.aspx?PressReleaseId=bcf36204-1140-4f9a-8bd8-72d45c1c425aTue, 01 Jun 2010 13:45:00 -0400 <p><location value="LU/ca.on.tornto" idsrc="xmltag.org">TORONTO, ONTARIO</location>--(Marketwire - <chron>May 28, 2010</chron>) - <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> ("Inmet") (TSX:IMN) is saddened today to announce the passing of <person>Ismael Perez Bernal</person>, one of three workers involved in a workplace accident at Las Cruces on <chron>May 25</chron>. Mr. <person>Perez Bernal</person> was employed by Elimco, contractor to Las Cruces.</p> <p>"We are deeply saddened by this terrible loss and our thoughts are with Mr. <person>Perez Bernal's</person> family", said <person>Jochen Tilk</person>, Inmet's President and Chief Executive Officer. "We will provide whatever support we can to help them through this very difficult time."</p> <p>Inmet also extends its best wishes for a full and speedy recovery to the two workers who were injured in the accident.</p> <p>About Inmet</p> <p>Inmet is a Canadian-based global mining company that produces copper, zinc and gold. We have interests in five mining operations in locations around the world: Cayeli, Las Cruces, Pyhasalmi, Troilus and Ok Tedi. We also have a 100 percent interest in Cobre Panama, a development property in <location value="LC/pa" idsrc="xmltag.org">Panama</location>.</p> <p>This press release is also available at <a href="http://www.inmetmining.com">www.inmetmining.com</a>.</p> <pre> FOR FURTHER INFORMATION PLEASE CONTACT: For media enquiries, please contact: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> <person>Jochen Tilk</person>, President and Chief Executive Officer (416) 860-3972 <a href="http://www.inmetmining.com">www.inmetmining.com</a> Source: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> </pre> http://www.inmetmining.com/investorsmedia/news/newsdetails/default.aspx?PressReleaseId=26032b3f-abb2-48ab-b9b2-60a5ba3b0108Fri, 28 May 2010 17:30:00 -0400 <p><location value="LU/ca.on.tornto" idsrc="xmltag.org">TORONTO, ONTARIO</location>--(Marketwire - <chron>May 5, 2010</chron>) - <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> ("Inmet") (TSX:IMN) announced today that it has filed a National Instrument 43-101 compliant technical report on its Cobre Panama project on the Canadian Securities Administrators' System for Electronic Document Analysis and Retrieval (SEDAR).</p> <p>Inmet has also filed a revised annual information form (AIF) on SEDAR that updates disclosure on the Cobre Panama project and Inmet's mineral reserves and resources to reflect information contained in the Cobre Panama technical report.</p> <p>The Cobre Panama technical report and the revised AIF are also available on Inmet's website at <a href="http://www.inmetmining.com">www.inmetmining.com</a>.</p> <p>About Inmet</p> <p>Inmet is a Canadian-based global mining company that produces copper, zinc and gold. We have interests in five mining operations in locations around the world: Cayeli, Las Cruces, Pyhasalmi, Troilus and Ok Tedi. We also have a 100 percent interest in Cobre Panama, a development property in <location value="LC/pa" idsrc="xmltag.org">Panama</location>.</p> <p>This press release is also available at <a href="http://www.inmetmining.com">www.inmetmining.com</a>.</p> <pre> FOR FURTHER INFORMATION PLEASE CONTACT: For media enquiries, please contact: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> <person>Steve Astritis</person> Vice President, General Counsel and Secretary (416) 860-3977 Source: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> </pre> http://www.inmetmining.com/investorsmedia/news/newsdetails/default.aspx?PressReleaseId=e2838750-0de1-4dda-a6c8-9567d585e144Wed, 05 May 2010 15:53:00 -0400 <p><location value="LU/ca.on.tornto" idsrc="xmltag.org">TORONTO, CANADA</location>--(Marketwire - <chron>May 3, 2010</chron>) - Mr. <person>Jochen Tilk</person>, President and Chief Executive Officer of <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> (TSX:IMN), will be speaking on <chron>Wednesday, May 12, 2010</chron> at <chron>1:30 p.m. Eastern Time</chron> at the <org>Bank of America Merrill Lynch</org> 2010 <org>Global Metals and Mining Conference</org> being held in <location value="LU/us.fl.miami" idsrc="xmltag.org">Miami, Florida</location> at The Fairmont Turnberry Isle &amp; Resort. You are cordially invited to listen to the webcast at <a href="https://www.veracast.com/webcasts/bas/metals2010/id17610150.cfm">https://www.veracast.com/webcasts/bas/metals2010/id17610150.cfm</a>. Slides of the presentation will be available on Inmet's website prior to the presentation.</p> <p>About Inmet - Inmet is a Canadian-based global mining company that produces copper, zinc and gold. We have interests in five mining operations in locations around the world: Cayeli, Las Cruces, Pyhasalmi, Troilus and Ok Tedi. We also have a 100 percent interest in Cobre Panama, a development property in <location value="LC/pa" idsrc="xmltag.org">Panama</location>.</p> <p>This press release is also available at <a href="http://www.inmetmining.com">www.inmetmining.com</a>.</p> <pre> FOR FURTHER INFORMATION PLEASE CONTACT: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> <person>Lynda Beesley</person> Assistant Corporate Secretary +1.416.860.3968 Source: <org value="Toronto:IMN" idsrc="xmltag.org">Inmet Mining Corporation</org> </pre> http://www.inmetmining.com/investorsmedia/news/newsdetails/default.aspx?PressReleaseId=80cf4861-92f0-4bf4-b62b-1bbdb4f5689bMon, 03 May 2010 11:50:00 -0400<p><location idsrc="xmltag.org" value="LU/ca.on.tornto"><a id=_ctrl0__ctl39_hrefDownload href="http://www.inmetmining.com/Theme/Inmet/files/pdf/2010_Q1%20Press%20Release.pdf">Download this Press Release&nbsp;(PDF 696 KB)</a><br><br>TORONTO, CANADA</location>--(Marketwire - <chron>April 27, 2010</chron>) -</p> <p>All amounts in Canadian dollars unless indicated otherwise</p> <p><org idsrc="xmltag.org" value="Toronto:IMN">Inmet</org> (TSX:IMN) Announces First Quarter Earnings of <money>$1.42</money> Per Share Compared With Earnings of <money>$1.06</money> Per Share in the First Quarter of 2009.</p> <p>First quarter highlights</p><pre>-- Higher metal prices Higher copper and zinc prices increased sales by <money>$55 million</money> compared to<br> the same quarter of 2009. In 2009, prices were negatively impacted by<br> the global financial crisis.<br><br>-- Improvement in operating cash flow<br> Operating earnings were higher this quarter compared to the first<br> quarter of 2009, and outflows of working capital were lower. In the<br> first quarter of 2009, we had to return <money>$48 million</money> to smelters for<br> finalization adjustments for shipments made in 2008.<br><br>-- Higher zinc production and lower gold production<br> Zinc production was higher because grades at Pyhasalmi were higher.<br> Production of gold was significantly less as Troilus continued to wind<br> down operations, drawing all of its feed from its low grade stockpile.<br> Troilus is expected to process the last ore from stockpiles in June.<br><br>-- Higher earnings from operations<br> Earnings from our operations were <money>$111 million</money> compared to <money>$93 million</money> last year. This was a 19 percent increase despite Troilus contributing <money>$43 million</money> less.<br><br>-- Las Cruces progressing on commissioning plan<br> Las Cruces produced 4,500 tonnes of copper in the quarter, which was<br> less than our targets for cathode production in the first quarter. Metal<br> recoveries and cathode quality have been excellent. We successfully<br> completed a planned 15 day shut down on <chron>March 30</chron> to improve plant<br> reliability, however, exceptional rainfalls in Andalucia meant we could<br> not access the open pit for ore until <chron>April 22</chron>, which was about one<br> month later than we had originally planned. In the mean time the plant<br> had been processing low quality ore with high sand and clay content that<br> had been stockpiled in the early stages of mining. With ore haulage from<br> the pit now resumed, we will proceed with our commissioning plan.<br> Although we are encouraged by the improvements in the plant and<br> confident that we are on the right track, we require a period of<br> continuous operation with representative ore from the pit to accurately<br> predict the timing of achieving our performance targets.<br><br>-- Significantly increased mineral reserves and resources at Cobre Panama<br> On <chron>March 31, 2010</chron>, we announced the results of the front end engineering<br> and design (FEED) study for Cobre Panama. The study showed a significant<br> increase in mineral reserves and resources making Cobre Panama one of<br> the largest undeveloped copper porphyry deposits in the world. Design<br> parameters of the project have also improved considerably due to<br> extensive environmental, social and engineering work and, the project's<br> output and size have been expanded by 25 percent. Substantial progress<br> has also been made in advancing our financing strategy. LS-Nikko<br> confirmed it would retain its 20 percent equity option interest and we<br> continue meeting with other potential partners for the project.<br><br>-- We issued 9.3 million subscription receipts for gross proceeds of <money>$500<br> million</money> On <chron>March 31, 2010</chron>, we entered into a subscription agreement with a<br> subsidiary of <org>Temasek Holdings (Private) Limited</org> (<org>Temasek</org>), under which<br> <org>Temasek</org> has agreed to buy 9.26 million subscription receipts,<br> exchangeable on a one-for-one basis for Inmet common shares, for total<br> proceeds of <money>$500 million</money>. We issued the subscription receipts on <chron>April<br> 23, 2010</chron> and the proceeds are being held in escrow until certain<br> conditions relating to the share exchange are met.<br><br><br><br>Key financial data<br>----------------------------------------------------------------------------<br> three months ended March 31<br> 2010 2009 change<br>----------------------------------------------------------------------------<br>FINANCIAL HIGHLIGHTS<br>(thousands, except per share<br> amounts)<br><br>Sales<br>Gross sales $ 251,559 $ 239,152 +5%<br><br>Net income<br>Net income $ 79,871 $ 51,327 +56%<br>Net income per share $ 1.42 $ 1.06 +34%<br><br>Cash flow<br>Cash flow provided by operating<br> activities $ 91,577 $ 17,097 +436%<br>Cash flow provided by operating<br> activities per share (1) $ 1.63 $ 0.35 +366%<br><br>Capital spending (2) $ 21,821 $ 94,859 -77%<br>----------------------------------------------------------------------------<br>OPERATING HIGHLIGHTS<br>Production(3)<br> Copper (tonnes) 21,200 20,000 +6%<br> Zinc (tonnes) 18,700 15,300 +22%<br> Gold (ounces) 40,200 78,800 -49%<br> Pyrite (tonnes) 197,500 190,800 +4%<br><br>Copper cash cost (US $ per pound)<br> (4) $ 0.39 $ 0.56 -30%<br>----------------------------------------------------------------------------<br><br> as at March 31 as at December 31<br>FINANCIAL CONDITION 2010 2009<br>Current ratio 4.0 to 1 4.2 to 1<br>Gross debt to total equity (5) 1% 1%<br>Net working capital balance<br> (millions) $ 558 $ 609<br>Cash balance including long and<br> short-term bonds (millions) $ 693 $ 634<br>Shareholders' equity (millions) $ 2,207 $ 2,238<br>--------------------------------------------------------------------------<br>(1) Calculated as cash flow provided by operating activities divided by<br>average shares outstanding for the period.<br>(2) Includes <money>$18 million</money> of capital spending at Cobre Panama for the quarter<br>ended <chron>March 31, 2010</chron> and <money>$65 million</money> of capital spending at Las Cruces<br>(mainly for construction) for the quarter ended <chron>March 31, 2009</chron>.<br>(3) Inmet's share.<br>(4) Copper cash cost per pound is a non-GAAP measure - see Supplementary<br>financial information on pages 32 and 34.<br>(5) Gross debt includes long-term debt and the current portion of long-term<br>debt, less the non-recourse note owing from Las Cruces to its non-<br>controlling shareholder.<br><br><br>First quarter press release<br><br>Where to find it<br><br>Our financial results 4<br>Key changes in 2010 4<br>Understanding our performance 5<br> Earnings from operations 7<br> Corporate costs 11<br>Results of our operations 13<br> Cayeli 14<br> Las Cruces 16<br> Pyhasalmi 17<br> Troilus 20<br> Ok Tedi 22<br>Status of our development project 24<br> Cobre Panama 24<br>Managing our liquidity 27<br>Financial condition 30<br>Accounting changes 31<br>Supplementary financial information 32<br><br></pre> <p>In this press release, Inmet means <org idsrc="xmltag.org" value="Toronto:IMN">Inmet Mining Corporation</org> and we, us and our mean Inmet and/or its subsidiaries and joint ventures. This quarter refers to the three months ended <chron>March 31, 2010</chron>.</p> <p>Forward looking information</p> <p>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.</p><pre>These are "forward-looking" because we have used what we know and expect today to make a statement <br>about the future. Forward-looking statements usually include words such as may, expect, anticipate,<br>&nbsp;believe or other similar words. We believe the expectations reflected in these forward-looking <br>statements are reasonable. However, actual events and results could be substantially different <br>because of the risks and uncertainties associated with our business or events that happen after <br>the date of this press release. You should not place undue reliance on forward-looking statements. <br>As a general policy, we do not update forward-looking statements except as required by securities <br>laws and regulations. Our financial results ---------------------------------------------------------------------------- three months ended March 31 (thousands, except per share amounts) 2010 2009 change ---------------------------------------------------------------------------- EARNINGS FROM OPERATIONS (1) Cayeli $ 37,096 $ 14,901 +149% Pyhasalmi 22,857 6,543 +249% Troilus 11,047 54,484 -80% Ok Tedi 40,968 17,585 +133% Other (942) (484) +95% ---------------------------------------------------------------------------- 111,026 93,029 +19% ---------------------------------------------------------------------------- DEVELOPMENT AND EXPLORATION Corporate development and exploration (2,779) (3,232) -14% ---------------------------------------------------------------------------- CORPORATE COSTS General and administration (5,510) (4,124) +34% Investment and other income (78) (11,203) -99% Asset impairment - (6,419) -100% Stand-by costs (6,753) - +100% Interest expense (452) (492) -8% Income and capital taxes (20,145) (19,015) +6% Non-controlling interest 4,562 2,783 +64% ---------------------------------------------------------------------------- (28,376) (38,470) -26% ---------------------------------------------------------------------------- Net income $ 79,871 $ 51,327 +56% ---------------------------------------------------------------------------- Basic and diluted net income per share $ 1.42 $ 1.06 +34% ---------------------------------------------------------------------------- Weighted average shares outstanding 56,107 48,282 +16% ---------------------------------------------------------------------------- 1. Gross sales less smelter processing charges and freight, cost of sales, depreciation and provisions for mine reclamation. Key changes in 2010 ---------------------------------------------------------------------------- (millions) three months ended March 31 see page ---------------------------------------------------------------------------- EARNINGS FROM OPERATIONS Sales Higher copper and zinc prices denominated in Canadian dollars $ 55 7 Higher gold and other prices 6 7 Costs Higher smelter processing charges and freight (4) 9 Lower operating costs, including costs that vary with income and cash flows 5 10 Lower operating earnings at Troilus (43) 8 Other (1) ---------------------------------------------------------------------------- Higher earnings from operations, compared to 2009 18 CORPORATE COSTS Foreign exchange changes 8 11 Asset impairment in 2009 6 11 Stand-by costs (7) 11 Other 4 ---------------------------------------------------------------------------- Higher net income, compared to 2009 $ 29 ---------------------------------------------------------------------------- <br></pre> <p>Understanding our performance</p> <p>Metal prices</p> <p>The table below shows the average metal prices we realized in US dollars and Canadian dollars (the prices we realize include finalization adjustments - see Gross sales on page 7).</p><pre>---------------------------------------------------------------------------- three months ended March 31 2010 2009 change ---------------------------------------------------------------------------- US dollar metal prices Copper (per pound) US $3.38 US $2.01 +68% Zinc (per pound) US $1.03 US $0.52 +98% Gold (per ounce) US $1,076 US $922 +17% ---------------------------------------------------------------------------- Canadian dollar metal prices Copper (per pound) C $3.52 C $2.50 +41% Zinc (per pound) C $1.07 C $0.65 +65% Gold (per ounce) C $1,120 C $1,147 -2% ---------------------------------------------------------------------------- </pre> <p>Copper</p> <p>Copper prices rose 9 percent this quarter, to US <money>$3.39</money> per pound, while stocks at London Metals Exchange (LME) warehouses went down and Chinese copper imports were strong.</p> <p>Copper prices were volatile during the quarter as large hedge funds moved in and out of the market. Copper had a remarkable rebound at the LME in March, after a sharp fall in the first week of February in response to the weakening of the euro against the US dollar. Over the rest of the quarter, as macro and copper market news improved market sentiment, LME prices regained the ground they had lost.</p> <p>Zinc</p> <p>The price of zinc followed other commodities in January and February, responding to uncertainties in the financial markets. After falling 22 percent in February to a low of US <money>$0.91</money> per pound, LME prices recovered to US <money>$1.07</money> per pound. In the past 12 months, LME zinc stocks have climbed by 60 percent and, at 550,000 tonnes at the end of the quarter, were at their highest level since <chron>August 2005</chron>.</p> <p>Gold</p> <p>The price of gold moved with fluctuations in the value of the US dollar during the quarter, ranging in price from US <money>$1,055</money> to US <money>$1,155</money> an ounce - indicating a fair degree of volatility. While gold price movements over the first two months highlighted a continuing connection to movements in real interest rates, much of the more recent fall was in response to a stronger US dollar, which rose more than 6 percent relative to the euro.</p> <p>Pyrite</p> <p>Sulphur and pyrite markets have picked up and prices have been rising. By the end of the quarter, spot sulphur prices were up threefold from the beginning of 2010. This could have a significant positive impact on pyrite prices in the second half of the year.</p> <p>Exchange rates</p> <p>Exchange rates affect our revenue and earnings. The table below shows the average exchange rates we realized this quarter and in the first quarter of 2009.</p><pre>---------------------------------------------------------------------------- three months ended March 31 2010 2009 change ---------------------------------------------------------------------------- Exchange rates 1 US$ to C$ $ 1.04 $ 1.24 -16% 1 euro to C$ $ 1.44 $ 1.62 -11% 1 euro to US$ $ 1.39 $ 1.31 +6% ---------------------------------------------------------------------------- </pre> <p>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 increased by 16 percent relative to the US dollar, and 11 percent relative to the euro.</p><pre>Changes in foreign currency exchange rates affect our earnings as follows:</pre><pre>-- translation of US dollar and euro functional currency operations to Canadian dollars -- revaluation of US dollar and euro cash held in <location idsrc="xmltag.org" value="LC/ca">Canada</location> -- translation of US dollar sales at Troilus to Canadian dollars. </pre> <p>Treatment charges down for copper</p> <p>Treatment charges are one component of smelter processing charges. We also pay smelters for content losses and price participation.</p> <p>The table below shows the average charges we realized this quarter. Zinc contracts for 2010 and 2009 were not finalized in the first quarter of the respective years and therefore the average charges represent the contract prices from each prior year. Adjustments to contracts will be reflected in the second quarter.</p><pre>---------------------------------------------------------------------------- three months ended March 31 (US$) 2010 2009 change ---------------------------------------------------------------------------- Treatment charges Copper (per dry metric tonne of concentrate) US$57 US$68 -16% Zinc (per dry metric tonne of concentrate) US$203 US$248 -18% ---------------------------------------------------------------------------- Price participation Copper (per pound) US$0.02 US$0.02 - Zinc (per pound) US$0.09 (US$0.03) +400% ---------------------------------------------------------------------------- Freight charges Copper (per dry metric tonne of concentrate) US$66 US$26 +154% Zinc (per dry metric tonne of concentrate) US$29 US$23 +26% ---------------------------------------------------------------------------- </pre> <p>Statutory tax rates remain consistent</p> <p>The table below shows the statutory tax rates for each of our taxable operating mines.</p><pre>----------------------------------------------- 2010 2009 change ----------------------------------------------- Statutory tax rates Cayeli 24% 24% - Pyhasalmi 26% 26% - Ok Tedi 37% 37% - Las Cruces 30% 30% - ----------------------------------------------- Earnings from operations Earnings from operations include: ---------------------------------------------------------------------------- three months ended March 31 (thousands) 2010 2009 change ---------------------------------------------------------------------------- Gross sales $ 251,559 $ 239,152 +5% Smelter processing charges and freight (44,329) (40,540) +9% Cost of sales: Direct production costs (71,552) (78,419) -9% Inventory changes (7,575) (3,895) +94% Provisions for mine rehabilitation and other non-cash charges (1,853) (7,590) -76% Depreciation (15,224) (15,679) -3% ---------------------------------------------------------------------------- Earnings from operations $ 111,026 $ 93,029 +19% ---------------------------------------------------------------------------- Gross sales were marginally higher ---------------------------------------------------------------------------- three months ended March 31 (thousands) 2010 2009 change ---------------------------------------------------------------------------- Gross sales by operation Cayeli $ 82,406 $ 60,021 +37% Pyhasalmi 51,440 33,981 +51% Troilus 34,454 86,990 -60% Ok Tedi (1) 83,259 58,160 +43% ---------------------------------------------------------------------------- $ 251,559 $ 239,152 +5% ---------------------------------------------------------------------------- Gross sales by metal Copper $ 142,597 $ 104,739 +36% Zinc 46,673 27,024 +73% Gold 49,340 93,014 -47% Other 12,949 14,375 -10% ---------------------------------------------------------------------------- $ 251,559 $ 239,152 +5% ---------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's sales. Key components of the change in sales: copper and zinc prices up, Troilus sales volumes down ---------------------------------------------------------------------------- (millions) three months ended March 31 ---------------------------------------------------------------------------- Higher copper prices, denominated in Canadian dollars $ 37 Higher zinc prices, denominated in Canadian dollars 18 Higher gold prices, denominated in Canadian dollars 6 Changes in other metal prices (4) Lower gross sales from Troilus (52) Higher sales volumes at our other mines 7 ---------------------------------------------------------------------------- Higher gross sales, compared to 2009 $ 12 ---------------------------------------------------------------------------- </pre> <p>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).</p> <p>In the first quarter, we recorded <money>$3 million</money> in negative finalization adjustments from fourth quarter sales.</p> <p>At the end of this quarter, the following sales had not been settled:</p><pre>-- 25 million pounds of copper provisionally priced at US <money>$3.53</money> per pound<br>-- 17 million pounds of zinc provisionally priced at US <money>$1.07</money> per pound.<br><br></pre> <p>The finalization adjustment we record for these sales will depend on the actual price when we receive the final settlement, which can be up to five months from the time we initially record it. We expect these sales to settle in the following months:</p><pre>--------------------------------------------------- (millions of pounds) copper zinc --------------------------------------------------- April 2010 12 11 May 2010 7 6 June 2010 6 - --------------------------------------------------- Unsettled sales at March 31, 2010 25 17 --------------------------------------------------- </pre> <p>Lower gold sales volumes - Troilus processing low-grade stockpiled ore</p> <p>Our sales volumes are directly affected by the amount of production from our mines, and our ability to ship to our customers.</p><pre>------------------------------------------------------- three months ended March 31 2010 2009 change ------------------------------------------------------- Sales volumes Copper (tonnes) 21,500 19,000 +13% Zinc (tonnes) 19,700 18,700 +5% Gold (ounces) 43,400 83,900 -48% Pyrite (tonnes) 90,800 76,000 +19% ------------------------------------------------------- Production ---------------------------------------------------------------------------- three months ended March 31 revised objective Inmet's share (1) 2010 2009 change 2010 ---------------------------------------------------------------------------- Copper (tonnes) Cayeli 7,100 7,000 +1% 30,500 Las Cruces cathode 3,200 - +100% 36,400 Las Cruces copper contained in ore - - - 12,300 Pyhasalmi 2,900 3,600 -19% 13,400 Troilus 1,300 2,800 -54% 2,100 Ok Tedi 6,700 6,600 +2% 29,300 ---------------------------------------------------------------------------- 21,200 20,000 +6% 124,000 ---------------------------------------------------------------------------- Zinc (tonnes) Cayeli 11,500 11,800 -3% 51,700 Pyhasalmi 7,200 3,500 +106% 31,300 ---------------------------------------------------------------------------- 18,700 15,300 +22% 83,000 ---------------------------------------------------------------------------- Gold (ounces) Troilus 19,300 58,100 -67% 36,400 Ok Tedi 20,900 20,700 +1% 102,600 ---------------------------------------------------------------------------- 40,200 78,800 -49% 139,000 ---------------------------------------------------------------------------- Pyrite (tonnes) Pyhasalmi 197,500 190,800 +4% 420,000 ---------------------------------------------------------------------------- (1) Inmet's share represents 100 percent for Cayeli, Pyhasalmi and Troilus, 18 percent for Ok Tedi and 70 percent for Las Cruces. </pre> <p>Copper production this quarter was higher than the same quarter in 2009, because of new production at Las Cruces. This was partly offset by the impact of lower grades at Troilus and Pyhasalmi.</p> <p>Zinc production was up mainly because zinc grades and recoveries at Pyhasalmi were higher.</p> <p>Gold production was down because grades were lower at Troilus (as mining has ceased and production was drawn from its low grade stockpiles).</p> <p>2010 outlook for sales</p> <p>We use our production objectives to estimate our sales target. Compared to 2009, we expect copper and zinc sales volumes in 2010 to be higher because we expect higher production. We expect gold sales volumes to be lower than 2009 because production will end at Troilus mid-year 2010.</p> <p>We expect copper production to be about 50 percent higher in 2010 than 2009 because of the incremental production at Las Cruces. Estimated production for our 70 percent share of Las Cruces includes 36,400 tonnes of copper cathode and 12,300 tonnes of copper contained in ore we intend to ship directly to smelters. While we have not received the necessary permitting requirements to ship the ore, we will mine and stockpile it in anticipation of receiving the necessary permits and shipping. We expect zinc production to increase because we plan to mine higher zinc grades at Pyhasalmi in 2010.</p> <p>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. The overall outlook for copper demand is broadly positive in 2010 and copper is the most favoured base metal because of its strong fundamentals, especially if the recovery of global demand gathers momentum in 2010.</p> <p>Higher smelter processing charges and freight for the quarter</p><pre>---------------------------------------------------------------------------- three months ended March 31 (thousands) 2010 2009 change ---------------------------------------------------------------------------- Smelter processing charges and freight by operation Cayeli $ 20,105 $ 19,076 +5% Pyhasalmi 11,505 8,991 +28% Troilus 2,758 6,260 -56% Ok Tedi (1) 9,961 6,213 +60% ---------------------------------------------------------------------------- $ 44,329 $ 40,540 +9% ---------------------------------------------------------------------------- Smelter processing charges and freight by metal Copper $ 21,349 $ 18,516 +15% Zinc 20,475 15,188 +35% Other 2,505 6,836 -63% ---------------------------------------------------------------------------- $ 44,329 $ 40,540 +9% ---------------------------------------------------------------------------- Smelter processing charges by type and freight Copper treatment and refining charges $ 6,845 $ 9,693 -29% Zinc treatment charges 8,069 11,679 -31% Copper price participation 710 1,463 -51% Zinc price participation 3,913 (1,668) +335% Content losses 14,634 10,743 +36% Freight 8,464 6,662 +27% Other 1,694 1,968 -14% ---------------------------------------------------------------------------- $ 44,329 $ 40,540 +9% ---------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's smelter processing charges and freight. </pre> <p>Copper and zinc treatment and refining charges were lower in 2010 compared to 2009 because of more favourable terms with smelters. Higher price participation charges and content losses, however, increased total zinc charges to above 2009 levels due to higher zinc prices. The 2010 terms for zinc have not yet been finalized.</p> <p>2010 outlook for smelter processing charges and freight</p> <p>We expect costs for copper treatment and refining to be lower in 2010 based on recently signed agreements with our customers. We sell approximately 90 percent of our copper concentrate under long-term contracts. We are estimating annual treatment costs of US <money>$50</money> per dry metric tonne in 2010. We also expect price participation to be minimal.</p> <p>We expect that the zinc concentrate market will be dictated by the sustainability of current zinc price levels, and additional production will be limited by the extent to which Chinese demand rises in 2010. We therefore expect zinc processing charges to decrease below 2009 levels.</p> <p>In 2010, Las Cruces may sell high grade crushed ore to smelters and incur smelter processing charges. We expect the costs for smelting and refining the ore to be higher than at our other operations because copper grades in crushed ore are lower than they are in concentrates, and the level of impurities is higher.</p> <p>Las Cruces' copper cathode production will be sold directly to buyers in the Spanish and Mediterranean markets.</p> <p>We expect our ocean freight costs to be about 20 percent higher than they were in 2009 because of the expected recovery in global trade and associated shipping demand.</p> <p>Direct production costs and cost of sales were lower than last year</p><pre>---------------------------------------------------------------------------- three months ended March 31 (thousands) 2010 2009 change ---------------------------------------------------------------------------- Direct production costs by operation Cayeli $ 21,736 $ 20,472 +6% Pyhasalmi 14,978 15,654 -4% Troilus 12,091 18,606 -35% Ok Tedi (1) 22,747 23,687 -4% ---------------------------------------------------------------------------- Total direct production costs 71,552 78,419 -9% Inventory changes 7,575 3,895 +95% Reclamation, accretion and other non-cash expenses 1,853 7,590 -76% ---------------------------------------------------------------------------- Total cost of sales $ 80,980 $ 89,904 -10% ---------------------------------------------------------------------------- (1) Our 18 percent share of Ok Tedi's direct production costs. </pre> <p>Direct production costs were lower in 2010 than they were in 2009 mainly because we finished mining at Troilus and began to process stockpiled ore in <chron>April 2009</chron>.</p> <p>2010 outlook for cost of sales</p> <p>Our budget for 2010 assumes our costs will be similar to 2009. Consolidated direct production costs should be higher because production costs at Las Cruces will stop being capitalized when it reaches commercial production.</p> <p>Certain variable costs may continue to affect our earnings, depending on metal prices:</p><pre>-- royalties at Cayeli are affected by its net income -- variable employee compensation costs at Ok Tedi are affected by its cash flows -- royalties at Las Cruces are affected by its net sales. Depreciation in line with first quarter of 2009 ------------------------------------------------------------------ three months ended March 31 (thousands) 2010 2009 change ------------------------------------------------------------------ Depreciation by operation Cayeli $ 3,224 $ 3,473 -7% Pyhasalmi 1,809 2,602 -30% Troilus 4,379 3,419 +28% Ok Tedi 5,812 6,185 -6% ------------------------------------------------------------------ $ 15,224 $ 15,679 -3% ------------------------------------------------------------------ </pre> <p>Depreciation at Troilus was significantly higher for the quarter, because we recorded an increase in the asset related to retirement obligations at the end of 2009. Depreciation at Pyhasalmi is lower this quarter because of foreign exchange translation and lower copper production.</p> <p>2010 outlook for depreciation</p> <p>We expect depreciation to be higher in 2010 because we expect Las Cruces to be transitioning to commercial production in the second quarter of 2010. Troilus is expected to process ore until mid-year 2010 and will depreciate its remaining assets to estimated salvage value over this period.</p> <p>Corporate costs</p> <p>Corporate costs include general and administration costs, taxes, interest and other income.</p> <p>Investment and other income (expense)</p><pre>---------------------------------------------------------------------------- three months ended March 31 (thousands) 2010 2009 ---------------------------------------------------------------------------- Interest income $ 1,597 $ 2,042 Foreign exchange loss (2,415) (10,098) Mark to market on Ok Tedi copper forward contracts - (1,419) Other 740 (1,728) ---------------------------------------------------------------------------- $ (78) $ (11,203) ---------------------------------------------------------------------------- </pre> <p>Interest income is lower than last year because market yields were lower.</p> <p>Foreign exchange gain (loss)</p> <p>We have a foreign exchange gain or loss when:</p><pre>-- we revalue certain foreign denominated assets and liabilities -- we distribute funds from our self-sustaining operations and recognize the foreign exchange we previously deferred on our original investment and on funds as they accumulated. Foreign exchange losses were a result of the following: ---------------------------------------------------------------------------- three months ended March 31 (millions) 2010 2009 ---------------------------------------------------------------------------- Revaluation of US dollar denominated debt at Las Cruces $ - $ (11) Distribution of funds from subsidiaries (1) - Revaluation of short-term foreign intergroup loans, cash and other monetary items (1) 1 ---------------------------------------------------------------------------- $ (2) $ (10) ---------------------------------------------------------------------------- </pre> <p>2010 outlook for investment and other income</p> <p>Investment and other income is affected by our cash and held to maturity investment balances, and by interest rates and exchange rates. We plan to continue to repatriate excess cash balances from our foreign operations. This could result in foreign exchange losses or gains depending on the value of the Canadian dollar relative to when we initially invested in the operations, or the rate at which funds were accumulated.</p> <p>We plan to repatriate approximately US <money>$80 million</money> in cash from Cayeli and <money>EUR17 million</money> from Pyhasalmi in the second quarter of 2010. We accumulated this cash at 2009 average exchange rates. The foreign exchange impact will depend on the exchange rate on the day of repatriation. Because Ok Tedi distributes its earnings more frequently, the effect of repatriation is normally not significant.</p> <p>Stand-by costs</p> <p>We could not mine ore at Las Cruces this quarter because of the water levels in the pit. We expensed <money>$6.8 million</money> in water plant operating and maintenance costs because they did not relate to production activities.</p> <p>Asset impairment</p><pre>We made a decision in 2008 not to proceed with the Cerattepe project. All work ceased on the <br>project and we took a <money>$34 million</money> charge to write down the assets to its net realizable value. <br>In the first quarter of 2009, we took an additional impairment charge of <money>$6 million</money>, as well as <br>a <money>$6 million</money> tax recovery (reflected in income taxes), to adjust to current net realizable value.<br><br>Income tax expense<br><br><br><br>----------------------------------------------------------------------------<br> three months ended March 31<br>(thousands) 2010 2009 change<br>----------------------------------------------------------------------------<br>Cayeli $ 7,453 $ (581)<br>Pyhasalmi 5,015 435<br>Ok Tedi 16,535 6,540<br>Las Cruces (7,463) (4,035)<br>Troilus and corporate (1,395) 16,656<br>----------------------------------------------------------------------------<br> $ 20,145 $ 19,015<br>----------------------------------------------------------------------------<br>Consolidated effective tax rate 21% 28% -7%<br>----------------------------------------------------------------------------<br><br></pre> <p>Our tax expense changes as our earnings change.</p> <p>The consolidated effective tax rate went down by 7 percent compared to 2009 mainly because Las Cruces recognized a <money>$5 million</money> tax recovery on a foreign exchange loss from its intercompany US dollar denominated debt. On consolidation the foreign exchange eliminates, but the tax recovery does not as there is no corresponding tax expense on the foreign exchange gain.</p> <p>2010 outlook for income tax expense</p> <p>We expect statutory tax rates at our operations in 2010 to remain the same as they were in 2009 unless a statutory tax rate change is enacted.</p> <p>Results of our operations</p> <p>2010 estimates</p> <p>Our financial review by operation includes estimates for our 2010 operating earnings and operating cash flows. We used our 2010 objectives for production and cost per tonne of ore milled to build these estimates, along with the following assumptions for the year:</p><pre>---------------------------------------------------------------------------- Copper price US $3.00 per pound Zinc price US $1.00 per pound Gold price US $1,000 per ounce Copper treatment cost US $51 per tonne for contracts and US $32 per tonne for spot sales Zinc treatment cost US $205 per tonne (basis US $1,500 per tonne) and US $200 per tonne for spot sales US $ to C$ exchange rate $1.05 euro to C$ exchange rate $1.53 Working capital Assume no changes for the year ---------------------------------------------------------------------------- Cayeli ---------------------------------------------------------------------------- three months ended March 31 objective 2010 2009 change 2010 ---------------------------------------------------------------------------- Tonnes of ore milled (000's) 289 264 +9% 1,200 Tonnes of ore milled per day 3,200 2,900 +9% 3,300 ---------------------------------------------------------------------------- Grades (percent) copper 3.1 3.4 -9% 3.3 zinc 5.6 6.2 -10% 6.1 ---------------------------------------------------------------------------- Mill recoveries (percent) copper 79 78 +1% 78 zinc 72 72 - 70 ---------------------------------------------------------------------------- Production (tonnes) copper 7,100 7,000 +1% 30,500 zinc 11,500 11,800 -3% 51,700 ---------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $ 75 $ 77 -3% $ 72 ---------------------------------------------------------------------------- </pre> <p>Production results on target</p> <p>Production at Cayeli was strong this quarter, in line with its annual 1.2 million tonne objective.</p> <p>Copper and zinc production were consistent with the first quarter of 2009. Copper and zinc grades this quarter were lower than last year, but higher mill throughput compensated for the difference. There were three falls of ground in the quarter, some of which required us to replace higher grade mining areas with lower grade areas, reducing Cayeli's grades this quarter.</p> <p>We have added additional resources to focus on ground support and rehabilitation, and expect this will increase the productivity of the backfilling process and reduce the risk of further falls of ground. We expect grades to increase in the second quarter as we return to our planned mining sequence.</p> <p>2010 outlook for production and costs</p> <p>Production levels should remain at 1.2 million tonnes in 2010, and we expect copper and zinc grades should be at 3.3 percent for copper and 6.1 percent for zinc.</p> <p>The existing five year, deep sea tailings deposition permit expired in <chron>January 2010</chron>. On <chron>April 21, 2010</chron> we were notified that a new five year permit will be issued effective immediately and will be amended to reflect the new legislation once it is passed.</p> <p>Financial review</p> <p>Higher earnings because copper and zinc prices were significantly higher</p><pre>---------------------------------------------------------------------------- three months ended March 31 objective (millions of Canadian dollars unless otherwise stated) 2010 2009 2010 ---------------------------------------------------------------------------- Sales analysis Copper sales (tonnes) 6,500 6,500 30,500 Zinc sales (tonnes) 12,300 14,800 51,700 ----------------------------------------- Gross copper sales $ 50 $ 37 $ 212 Gross zinc sales 29 21 120 Other metal sales 3 2 18 ----------------------------------------- Gross sales 82 60 350 Smelter processing charges and freight (20) (19) (97) ---------------------------------------------------------------------------- Net sales $ 62 $ 41 $ 253 ---------------------------------------------------------------------------- Cost analysis Tonnes of ore milled (thousands) 289 264 1,200 Direct production costs ($ per tonne) $ 75 $ 77 $ 72 ---------------------------------------------------------------------------- Direct production costs $ 22 $ 20 $ 86 Change in inventory - 2 - Depreciation and other non-cash costs 3 4 18 ---------------------------------------------------------------------------- Operating costs $ 25 $ 26 $ 104 ---------------------------------------------------------------------------- Operating earnings $ 37 $ 15 $ 149 ---------------------------------------------------------------------------- Operating cash flow $ 30 ($9) $ 132 ---------------------------------------------------------------------------- </pre> <p>The objective for 2010 uses the assumptions listed on page 13.</p> <p>The table below shows what contributed to the change in operating earnings and operating cash flow between the first quarter of 2010 and 2009.</p><pre>---------------------------------------------------------------------------- (millions) three months ended March 31 ---------------------------------------------------------------------------- Higher metal prices, denominated in Canadian dollars $ 26 Lower sales volumes (1) Higher smelter processing charges (3) ---------------------------------------------------------------------------- Higher operating earnings, compared to 2009 22 Change in tax expense because of change in taxable income (2) Changes in working capital (see note 2 on page 43) 20 Other (1) ---------------------------------------------------------------------------- Higher operating cash flow, compared to 2009 $ 39 ---------------------------------------------------------------------------- Spending lower in the first quarter due to timing ---------------------------------------------------------------------------- three months ended March 31 objective 2010 2009 change 2010 ---------------------------------------------------------------------------- Capital spending $ 1,800 $ 3,600 -50% $ 21,000 ---------------------------------------------------------------------------- </pre> <p>2010 outlook for capital spending</p><pre>We expect to spend <money>$21 million</money> on capital in 2010 for mobile equipment, site water control, <br>stope stability, additional mill upgrades and development. We will complete a second head frame <br>realignment phase in 2010, which will bring the head frame back to its design configuration, and <br>establish a monitoring and correction program to ensure the facility remains viable for the life <br>of the mine. At the same time, we will implement several geotechnical recommendations to curtail <br>surface instability.<br><br>Las Cruces<br><br><br><br>----------------------------------------------------------------------------<br> three months ended March 31 revised<br> objective<br>(100 percent) 2010 2009 change 2010<br>----------------------------------------------------------------------------<br>Tonnes of ore processed (000's) 77,000 - +100% 774,000<br>Tonnes of unprocessed ore (000's) - - - 128,000<br>----------------------------------------------------------------------------<br>Copper grades (percent) cathode 6.9 - +100% 7.4<br> unprocessed<br> ore - - - 13.7<br>----------------------------------------------------------------------------<br>Plant recoveries<br> (percent) 85 - +100% 91<br>----------------------------------------------------------------------------<br>Copper production<br> (tonnes) cathode 4,500 - +100% 52,000<br> unprocessed<br> ore - - - 17,600<br>----------------------------------------------------------------------------<br>Cost per tonne of ore processed<br> (subsequent to commercial<br> production) (C$) - - - $ 145<br>----------------------------------------------------------------------------<br><br></pre> <p>First quarter update</p> <p>Las Cruces produced 4,500 tonnes of copper this quarter.</p> <p>We used a 15-day shut down in March to improve plant reliability and throughput. We were able to address several technical issues during the shut-down, reducing down-time and inefficiencies, and improving plant reliability.</p> <p>In the weeks leading up to the shut down we demonstrated meaningful progress where we leached on average 1,500 tonnes per day (representing about 50 percent capacity) using ore from a surface stockpile. Extraordinary rains in Andalucia delayed our re-entry into the pit by about one month and in early April we depleted our regular grade surface stockpile. The bottom of the stockpile had an unusually high sand and clay content, which caused problems for the grinding thickener and tailings belt filters.</p> <p>We did not meet our targets for cathode production in the first quarter although metal recoveries and cathode quality have been excellent. We are now back mining in the pit and have started hauling ore. It will take a few weeks of production with newly mined ore for us to fully determine how quickly the plant will be able to move to full production capability.</p> <p>2010 outlook</p> <p>On <chron>April 22</chron> the process plant started to receive regular feed from the pit. The newly mined ore from the pit should be more consistent with the average material from the ore body, and plant performance to be more representative. We expect to build up a significant stockpile over the coming months, so that we have at least four months of ore supply to the plant in stockpile inventory by the end of the year. This should allow us to manage the consistency of the mill feed and the reliability and predictability of plant performance.</p> <p>In May we plan on mining high grade ore and stockpiling it in preparation for shipping to smelters in June, but we have not yet received the necessary permit from the regulators to move the ore off-site. If we do not receive the permit in time, we would have to delay shipping. We cannot quantify the impact this could have on 2010 production at this time.</p> <p>We are encouraged by the improvements in the plant and are confident that we are on the right track. We require a period of continuous operation with representative ore from the pit to accurately predict the timing of achieving our performance targets. We remain focused on our production target and have not revised our forecast at this time (except to reduce for the shortfall in the first quarter).</p> <p>The table below shows estimated earnings and cash flow for 100 percent of Las Cruces using production estimates and the estimates on page 13.</p><pre>---------------------------------------------------------------------------- (millions of Canadian dollars unless otherwise stated) objective 2010 ---------------------------------------------------------------------------- Sales analysis ---------------------------------------------------------------------------- Copper sales during commercial production (tonnes) 43,800 -------------- Gross copper sales $ 433 Smelter processing charges and freight (33) ---------------------------------------------------------------------------- Net sales $ 400 ---------------------------------------------------------------------------- Cost analysis Tonnes of ore processed during commercial production (thousands) 639 Direct production costs ($ per tonne) $ 145 ---------------------------------------------------------------------------- Direct production costs $ 93 Other production costs $ 3 ---------------------------------------------------------------------------- Depreciation and other non-cash costs 51 ---------------------------------------------------------------------------- Operating costs $ 147 ---------------------------------------------------------------------------- Operating earnings $ 253 ---------------------------------------------------------------------------- Operating cash flow $ 300 ---------------------------------------------------------------------------- Capital spending ---------------------------------------------------------------------------- (100 percent and millions of revised Canadian dollars) three months ended March 31 objective 2010 2009 change 2010 ---------------------------------------------------------------------------- Capital $ 10 $ 53 -81% $ 106 Pre-operating costs capitalized, net of sales, working capital and other (13) 12 -208% (26) ---------------------------------------------------------------------------- Capital spending $ (3) $ 65 -105% $ 80 ---------------------------------------------------------------------------- </pre> <p>Capital spending in the quarter was mainly for the permanent water treatment plant. In 2009 it was mainly for construction capital.</p> <p>2010 outlook for capital spending</p> <p>We expect to spend <money>$106 million</money> on capital in 2010. This includes <money>$37 million</money> on a water treatment plant and other water management projects, <money>$20 million</money> for mine development and <money>$23 million</money> for plant improvements.</p> <p>Pyhasalmi</p><pre>---------------------------------------------------------------------------- three months ended March 31 objective 2010 2009 change 2010 ---------------------------------------------------------------------------- Tonnes of ore milled (000's) 345 349 -1% 1,370 Tonnes of ore milled per day 3,800 3,900 -1% 3,750 ---------------------------------------------------------------------------- Grades (percent) copper 0.9 1.1 -18% 1.0 zinc 2.3 1.2 +92% 2.5 sulphur 43 44 -2% 42 ---------------------------------------------------------------------------- Mill recoveries (percent) copper 96 95 +1% 94 zinc 91 85 +7% 90 ---------------------------------------------------------------------------- Production (tonnes) copper 2,900 3,600 -19% 13,400 zinc 7,200 3,500 +106% 31,300 pyrite 197,500 190,800 +4% 420,000 ---------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $ 43 $ 45 -4% $ 43 ---------------------------------------------------------------------------- </pre> <p>Higher zinc grades resulted in zinc production doubling</p> <p>Pyhasalmi processed at an annualized rate of 1.4 million tonnes this quarter, maintaining its strong production record.</p> <p>Copper production was lower than last year because grades were lower. Zinc production in the first quarter was significantly higher than the first quarter of 2009 because grades were higher and recoveries improved. Grades were higher because we mined several zinc rich stopes on the periphery of the ore body.</p> <p>Zinc recoveries for the quarter were higher because of improved grades and the new zinc rougher and scavenger cells we installed late in 2009. We need to test the new cells with lower grade ore to confirm their performance capability.</p> <p>The backfill raise system has functioned well, and underground open voids are now less than half of what they were a year ago.</p> <p>2010 outlook for production and costs</p> <p>Pyhasalmi expects to mine 1.4 million tonnes of 1 percent copper and 2.5 percent zinc in 2010, and produce 13,400 tonnes of copper and 31,300 tonnes of zinc.</p> <p>Pyrite sales enhance Pyhasalmi's financial performance and we have been in discussions with companies in <location idsrc="xmltag.org" value="LC/fi">Finland</location> and <location idsrc="xmltag.org" value="LC/cn">China</location> to secure sales of over 500,000 tonnes of pyrite per year.</p> <p>Financial review</p> <p>Higher earnings because of a significant increase in copper and zinc prices</p><pre>---------------------------------------------------------------------------- three months ended March 31 objective (millions of Canadian dollars unless otherwise stated) 2010 2009 2010 ---------------------------------------------------------------------------- Sales analysis Copper sales (tonnes) 3,300 3,700 13,400 Zinc sales (tonnes) 7,400 4,000 31,300 Pyrite sales (tonnes) 90,800 76,000 420,000 ------------------------------------------ Gross copper sales $ 26 $ 17 $ 93 Gross zinc sales 18 6 72 Other metal sales 8 11 26 ------------------------------------------ Gross sales 52 34 191 Smelter processing charges and freight (12) (9) (48) ---------------------------------------------------------------------------- Net sales $ 40 $ 25 $ 143 ---------------------------------------------------------------------------- Cost analysis Tonnes of ore milled (thousands) 345 349 1,370 Direct production costs ($ per tonne) $ 43 $ 45 $ 43 ---------------------------------------------------------------------------- Direct production costs $ 15 $ 16 $ 59 Change in inventory - (1) - Depreciation and other non-cash costs 2 3 11 ---------------------------------------------------------------------------- Operating costs $ 17 $ 18 $ 70 ---------------------------------------------------------------------------- Operating earnings $ 23 $ 7 $ 73 ---------------------------------------------------------------------------- Operating cash flow $ 15 ($2) $ 64 ---------------------------------------------------------------------------- </pre> <p>The objective for 2010 uses the assumptions listed on page 13.</p> <p>The table below shows what contributed to the change in operating earnings and operating cash flow between the first quarter of 2010 and 2009.</p><pre>---------------------------------------------------------------------------- (millions) three months ended March 31 ---------------------------------------------------------------------------- Higher metal prices, denominated in Canadian dollars $ 13 Higher sales volumes 2 Other 1 ---------------------------------------------------------------------------- Higher operating earnings, compared to 2009 16 Change in tax expense because of change in earnings (4) Changes in working capital 3 Other 2 ---------------------------------------------------------------------------- Higher operating cash flow, compared to 2009 $ 17 ---------------------------------------------------------------------------- Capital spending ---------------------------------------------------------------------------- three months ended March 31 objective 2010 2009 change 2010 ---------------------------------------------------------------------------- Capital spending $ 500 $ 800 -38% $ 9,000 ---------------------------------------------------------------------------- </pre> <p>2010 outlook for capital spending</p> <p>Capital spending in 2010 is mainly to replace equipment. We are making several technological improvements, including automating loading and dumping equipment, using electronic detonators to improve blasting fragmentation and reduce wall damage, and automating full fan longhole drilling to increase productivity.</p> <p>Troilus</p><pre>-------------------------------------------------------------------------- three months ended March 31 objective 2010 2009 change 2010 -------------------------------------------------------------------------- Tonnes of ore milled (000's) 1,400 1,500 -7% 3,000 Tonnes of ore milled per day 15,600 16,700 -7% 16,700 -------------------------------------------------------------------------- Strip ratio - 0.1 -100% - -------------------------------------------------------------------------- Grades gold (grams/tonne) 0.52 1.44 -64% 0.49 copper (percent) 0.10 0.20 -50% 0.08 -------------------------------------------------------------------------- Mill recoveries (percent) gold 81 85 -5% 77 copper 90 95 -5% 91 -------------------------------------------------------------------------- Production gold (ounces) 19,300 58,100 -67% 36,400 copper (tonnes) 1,300 2,800 -54% 2,100 -------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $ 9 $ 13 -31% $ 9 -------------------------------------------------------------------------- </pre> <p>Troilus continues to process stockpiled ore</p> <p>Troilus continued to process ore from its low-grade stockpile after completing mining the 87 pit in <chron>April 2009</chron>. This lowered gold grades and production compared to the first quarter of 2009. It has also lowered cost per tonne of ore milled. In 2009, Troilus had record production in the first two months of the year because of the high grade of the ore it mined from the bottom of the main 87 pit.</p> <p>Tonnage throughput this quarter was marginally lower than the first quarter of 2009 because the ore was frozen in certain stockpiles. We introduced drill and blast operations to facilitate ongoing production from the frozen stockpiles.</p> <p>2010 outlook for production and costs</p> <p>We expect to mill 3 million tonnes of stockpiled ore in 2010, at an average grade of 0.5 grams per tonne gold and 0.08 percent copper. This should produce 36,400 ounces of gold and 2,100 tonnes of copper during the first half of the year.</p> <p>Because the stockpiles contain frozen ore, it will be a challenge to deplete all of them at the rate required to keep productivity at an acceptable level. We will finish milling the surface stockpiles by the end of June. A small group of workers will remain after that to oversee closure activities.</p> <p>Financial review</p> <p>Lower volumes sold reduces earnings</p><pre>---------------------------------------------------------------------------- three months ended March 31 objective (millions of Canadian dollars unless otherwise stated) 2010 2009 2010 ---------------------------------------------------------------------------- Sales analysis Gold sales (ounces) 21,200 60,100 43,700 Copper sales (tonnes) 1,400 2,800 2,200 ----------------------------------------- Gross gold sales $ 23 $ 70 $ 46 Gross copper sales 10 16 15 Other metal sales 1 1 1 ----------------------------------------- Gross sales 35 87 62 Smelter processing charges and freight (3) (6) (5) ---------------------------------------------------------------------------- Net sales $ 32 $ 81 $ 57 ---------------------------------------------------------------------------- Cost analysis Tonnes of ore milled (thousands) 1,400 1,500 3,000 Direct production costs ($ per tonne) $ 9 $ 13 $ 9 ---------------------------------------------------------------------------- Direct production costs $ 12 $ 19 $ 27 Change in inventory 4 3 9 Depreciation and other non-cash costs 5 4 11 ---------------------------------------------------------------------------- Operating costs $ 21 $ 26 $ 47 ---------------------------------------------------------------------------- Operating earnings $ 11 $ 55 $ 10 ---------------------------------------------------------------------------- Operating cash flow $ 19 $ 49 $ 10 ---------------------------------------------------------------------------- </pre> <p>The objective for 2010 uses the assumptions listed on page 13.</p> <p>The table below shows what contributed to the change in operating earnings and operating cash flow between the first quarter of 2010 and 2009</p><pre>---------------------------------------------------------------------------- (millions) three months ended March 31 ---------------------------------------------------------------------------- Lower gold price denominated in Canadian dollars $ (2) Higher copper price denominated in Canadian dollars 3 Lower sales volumes (52) Lower smelter processing charges 1 Lower operating costs 7 Other (1) ---------------------------------------------------------------------------- Lower operating earnings, compared to 2009 (44) Changes in working capital (see note 2 on page 43) 14 ---------------------------------------------------------------------------- Lower operating cash flow, compared to 2009 $ (30) ---------------------------------------------------------------------------- Ok Tedi ---------------------------------------------------------------------------- three months ended March revised 31 objective (100 percent) 2010 2009 change 2010 ---------------------------------------------------------------------------- Tonnes of ore milled (000's) 5,600 5,200 +8% 23,900 Tonnes of ore milled per day 62,200 57,800 +8% 65,000 ---------------------------------------------------------------------------- Strip ratio 1.5 1.6 -6% 1.2 ---------------------------------------------------------------------------- Grades copper (percent) 0.8 0.8 - 0.8 gold (grams/tonne) 0.9 1.1 -18% 1.1 ---------------------------------------------------------------------------- Mill recoveries (percent) copper 87 86 +1% 85 gold 71 66 +8% 66 ---------------------------------------------------------------------------- Production copper (tonnes) 37,100 36,900 +1% 163,000 gold (ounces) 116,400 115,100 +1% 570,000 ---------------------------------------------------------------------------- Cost per tonne of ore milled (C$) $ 23 $ 25 -8% $ 23 ---------------------------------------------------------------------------- </pre><pre>Gold production impacted by the performance of mine waste management plant</pre> <p>Mill throughput was higher than the first quarter of 2009, but lower than planned because of the need to control sulphur feed grades to the mill. Sulphur is removed from the mill tailing in the mine waste management plant.</p> <p>Despite the significant redesign and modification of the mine waste management plant, its performance continues to be challenged, requiring control of sulphur by blending the ore in the mine before it goes to the mill. This is being accomplished by mining lower benches that contain more copper and less sulphur and gold. The higher grade gold ore is available to be mined but will not be processed until the mine waste management plant is performing to expectations. The lower bench ore is harder than the ore in the planned mining areas, which has lowered the mill's throughput rate.</p> <p>As a result, copper grades and production were in line with 2009 and plan, while gold grades and production were significantly lower than planned.</p> <p>The mine drainage tunnel completed in late 2009 is operating well, and mining conditions on the bottom benches are excellent. This has given Ok Tedi the opportunity to address the performance of the mine waste management plant, and the lower gold production, without reducing copper output. A dedicated team of in-house and consulting specialists are working on the plant's technical and operational issues.</p> <p>2010 outlook for production and costs</p> <p>On <chron>April 1</chron>, members of the <org>Ok Tedi Mining and Allied Workers Union</org> (OTMAWU) began an illegal work action over concerns about distributions under an employee retention bonus arrangement that is not part of Ok Tedi's industrial agreement with the OTMAWU. As part of the collective bargaining talks that are currently underway to renew the labour agreements, Ok Tedi management has offered to discuss this concern and others that are not covered under the agreement. The action ended and employees returned to work on <chron>April 17, 2010</chron>. Ok Tedi was able to complete significant scheduled maintenance work planned for later in the year during the strike action. This, along with other productivity improvements, should allow Ok Tedi to make up most of the lost production.</p> <p>Ok Tedi expects to process 23.9 million tonnes of ore in 2010, at a grade of 0.8 percent copper and containing 1.1 grams per tonne of gold. This should produce 163,000 tonnes of copper and 570,000 ounces of gold. Successful operation of the mine waste management plant will be required for Ok Tedi to meet its gold production forecast for the year.</p> <p>Financial review</p> <p>Higher earnings due to higher copper and gold prices</p><pre>---------------------------------------------------------------------------- three months ended March 31 objective (millions of Canadian dollars unless otherwise stated) 2010 2009 2010 ---------------------------------------------------------------------------- Sales analysis at 18% Copper sales (tonnes) 7,300 6,000 29,300 Gold sales (ounces) 22,200 23,800 102,600 ------------------------------------------ Gross copper sales $ 56 $ 34 $ 203 Gross gold sales 26 23 108 Other metal sales 1 1 3 ------------------------------------------ Gross sales 83 58 314 Smelter processing charges and freight (10) (6) (31) ---------------------------------------------------------------------------- Net sales $ 73 $ 52 $ 283 ---------------------------------------------------------------------------- Cost analysis at 18% Tonnes of ore milled (thousands) 1,000 932 4,300 Direct production costs ($ per tonne) $ 23 $ 25 $ 23 ---------------------------------------------------------------------------- Direct production costs $ 23 $ 24 $ 99 Change in inventory 4 1 - Depreciation and other non-cash costs 5 9 30 ---------------------------------------------------------------------------- Operating costs $ 32 $ 34 $ 129 ---------------------------------------------------------------------------- Operating earnings $ 41 $ 18 $ 154 ---------------------------------------------------------------------------- Operating cash flow $ 46 ($14) $ 118 ---------------------------------------------------------------------------- </pre> <p>The objective for 2010 uses the assumptions listed on page 13.</p> <p>The table below shows what contributed to the change in operating earnings and operating cash flow between the first quarter of 2010 and 2009.</p><pre>---------------------------------------------------------------------------- (millions) three months ended March 31 ---------------------------------------------------------------------------- Higher copper prices, denominated in Canadian dollars $ 14 Higher gold prices, denominated in Canadian dollars 5 Lower sales volumes (1) Higher smelter processing and freight charges (1) Lower operating costs 6 ---------------------------------------------------------------------------- Higher operating earnings, compared to 2009 23 Change in tax expense because of change in earnings (16) Changes in net working capital (see note 2 on page 43) 54 Other (1) ---------------------------------------------------------------------------- Higher operating cash flow, compared to 2009 $ 60 ---------------------------------------------------------------------------- </pre> <p>Capital spending</p> <p>In 2010, Ok Tedi spent <money>$24 million</money> (our share is <money>$4 million</money>), mainly on a mining fleet specifically designed for limestone mining and the construction of underwater storage pits for sulphur concentrate produced by the tailings management plant. In the first quarter of 2009, spending was primarily for the pit drainage project.</p><pre>---------------------------------------------------------------------------- three months ended March 31 objective (18 percent) 2010 2009 change 2010 ---------------------------------------------------------------------------- Capital spending $ 4,300 $ 3,300 +30% $ 21,000 ---------------------------------------------------------------------------- </pre> <p>2010 outlook for capital spending</p> <p>Capital spending in 2010 will be on a mining fleet specifically designed for limestone mining, the construction of underwater storage pits for sulphur concentrate produced by the tailings management plant, and earthworks.</p> <p>Status of our development project</p> <p>Cobre Panama</p> <p>FEED program</p> <p>On <chron>March 31, 2010</chron>, we announced the results of the front end engineering and design (FEED) study for Cobre Panama, including updated capital cost estimates, operating cost estimates, mineral reserves, and other information.</p> <p>This has resulted in a significant increase in mineral reserves and resources. The table below outlines the mineral reserves and resources by classification:</p><pre>---------------------------------------------------------------------------- Mineral reserves (1) ---------------------------------------------------------------------------- Au Ag million tonnes Cu (%) (grams/tonne) (grams/tonne) Mo (%) ---------------------------------------------------------------------------- Proven 246 0.59 0.14 1.61 0.010 Probable 1,897 0.39 0.06 1.41 0.007 ---------------------------------------------------------------------------- Proven and probable 2,143 0.41 0.07 1.43 0.008 ---------------------------------------------------------------------------- Mineral resources (1) ---------------------------------------------------------------------------- Au Ag million tonnes Cu (%) (grams/tonne) (grams/tonne) Mo (%) ---------------------------------------------------------------------------- Measured 261 0.56 0.13 1.5 0.009 Indicated 3,010 0.34 0.06 1.2 0.006 ---------------------------------------------------------------------------- Measured and indicated 3,271 0.36 0.06 1.3 0.007 ---------------------------------------------------------------------------- Inferred 3,194 0.24 0.04 1.0 0.005 ---------------------------------------------------------------------------- (1) Refer to Mineral reserves and resources footnote on page 26. Reserve estimates are based on the following assumptions: Metal prices Mining costs Copper (Cu): US $2.00 per pound US $1.33 per tonne of material mined Gold (Au): US <money>$750</money> per ounce<br>Silver (Ag): US $12.50 per ounce Milling and general and administrative<br> costs combined<br>Molybdenum (Mo): US $12 per pound US $5.37 per tonne of ore milled<br><br></pre> <p>The current mine plan defines mining operations until 2045, or for 30 years after production begins, and has expanded the project's output and size by 25 percent. Because of the size of the mineral resource, there is potential to extend the mine life beyond 2045. The table below provides a production and cost summary:</p><pre>---------------------------------------------------------------------------- annual average: annual average: total: life of years 2-16 life of mine mine ---------------------------------------------------------------------------- Metal production (in thousands): Copper (tonnes) 289 255 7,641 Gold (ounces) 108 90 2,690 Silver (ounces) 1,544 1,508 45,228 Molybdenum (tonnes) 3.6 3.2 96.5 ---------------------------------------------------------------------------- Grades: Copper (%) 0.47 0.41 Gold (grams/tonne) 0.09 0.07 Silver (grams/tonne) 1.48 1.43 Molybdenum (%) 0.008 0.008 ---------------------------------------------------------------------------- Mill recoveries: Copper (%) 88.6 85.9 Gold (%) 57.5 54.3 Silver (%) 47.3 45.8 Molybdenum (%) 61.9 59.0 ---------------------------------------------------------------------------- Copper cash cost (US$ per pound) 0.78 0.90 ---------------------------------------------------------------------------- </pre> <p>The total capital cost is estimated to be US <money>$4.3 billion</money>, not including escalation, interest, and working capital.</p> <p>Copper cash cost is a non-GAAP measure. It is the sum of operating costs, concentrate freight, treatment and refining charges, net smelter return royalty, non-income taxes, net of by-product credits per pound of recovered copper.</p> <p>Environmental and community affairs</p> <p>We made significant progress to move our environmental and social impact assessment (ESIA) study to completion. Our ESIA will cover all environmental and social interactions associated with the project, comply with Panamanian requirements, and with the requirements of the <org>International Finance Corporation</org> (IFC) Performance Standards (PS) on social and environmental sustainability. We expect to submit the ESIA to the Panamanian regulatory authorities in the second quarter for their review, comment and approval. We are working closely with the Panamanian authorities to ensure there is coordination to facilitate a timely review process. At the same time as the Panamanian authorities are reviewing the documents, we expect the ESIA will be rigorously reviewed by external financing agencies to ensure compliance with the IFC PS and the Equator Principles. We continue our on-going community engagement and community development activities to build social license for the project.</p> <p>Option on 20 percent of Cobre Panama</p> <p>On <chron>March 15, 2010</chron>, LS-Nikko confirmed it would retain its 20 percent option to acquire an equity interest in <org>Minera Panama, S.A.</org>, owner of Cobre Panama. The option agreement, as amended, provided LS-Nikko with the ability to increase its option interest before <chron>March 15, 2010</chron> to 30 percent, to allow for an additional Korean investor. While the results of the technical and business due diligence were positive, LS-Nikko was not able to settle on a satisfactory governance structure by the <chron>March 15</chron> deadline. We decided not to provide a further extension to the option timeline because of other available financing alternatives.</p><pre>2010 outlook for development In 2010 we plan to: -- complete and file an updated National Instrument 43-101 compliant technical report on mineral reserves and resources for the project in May -- submit the ESIA to the Panamanian environmental authorities before the end of the second quarter -- continue our dialogue at the community, regional and national levels, to enhance understanding of the project and its benefits to <location idsrc="xmltag.org" value="LC/pa">Panama</location> -- continue to improve site access and infrastructure -- continue to pursue the amendment to <location idsrc="xmltag.org" value="LC/pa">Panama's</location> Mineral Resources Code to<br> permit entities in which foreign government bodies or authorities have<br> an interest, to hold direct or indirect interests in mining concessions<br> in <location idsrc="xmltag.org" value="LC/pa">Panama</location> -- carry out additional drilling for geotechnical and hydrological purposes and to improve our understanding of mineralization not currently included in the project base case -- enter into an agreement with an engineering, procurement and construction (EPC) contractor and start basic engineering -- work with GDF Suez Energy Central America to select an EPC contractor for the development of a 300 megawatt coal-fired power plant to supply power for the project -- spend <money>$122 million</money> to carry out the work described.<br><br></pre> <p>We are estimating that approval for the ESIA and permitting to begin construction will take approximately 15 months from the time the ESIA report is submitted. After we receive the approvals, site capture, preparation and construction should take approximately 48 months.</p> <p>We continue to engage other companies as part of our overall partnering and financing strategy for the project, and will consider reducing our interest in the project. We are also in discussions about other financing options for the project at this time.</p> <p>Footnote on mineral reserves and resources</p> <p>Mineral resources include mineral reserves. Grades are estimated using ordinary kriging with a nominal block size of 25x25x15 metres. Resources are limited inside a pit shell defined by a copper price of US <money>$2.30</money> per pound, the same operating costs used for reserves, and are tabulated at a cut-off grade of 0.15 percent copper. Mineral resources do not have demonstrated economic viability.</p> <p>Mineral reserves and resources have been prepared in accordance with the definitions and guidelines adopted by the <org>Canadian Institute of Mining</org>, Metallurgy and Petroleum (called the CIM definitions and guidelines), and according to National Instrument 43-101 of the Canadian Securities Administrators.</p> <p>Mineral resources were estimated by <person>Robert Sim</person>, P. Geo., of <org>SIM Geological Inc.</org> and <person>Bruce Davis</person>, Ph.D., Fellow of the AusIMM (FAusIMM), <org>BD Resource Consulting Inc.</org>, both qualified persons under National Instrument 43-101.</p> <p>Mineral reserves were estimated by William Rose, P.E., of <org>WLR Consulting, Inc.</org>, a qualified person under National Instrument 43-101.</p> <p>Managing our liquidity</p> <p>We develop our financing strategy by looking at our long-term capital requirements, and deciding on the optimal mix of cash, future operating cash flow, credit facilities and project financing.</p> <p>Our capital structure includes a liquidity cushion that gives us the flexibility to deal with operational disruptions or general market downturns.</p><pre>---------------------------------------------------------------------------- three months ended March 31 (millions) 2010 2009 ---------------------------------------------------------------------------- CASH FROM OPERATING ACTIVITIES Cayeli $ 30 $ (9) Pyhasalmi 15 (2) Troilus 19 49 Ok Tedi 46 (14) Las Cruces (7) - Corporate development and exploration not incurred by operations (2) (2) General and administration (6) (4) Other (3) (1) ---------------------------------------------------------------------------- 92 17 ---------------------------------------------------------------------------- CASH FROM INVESTING AND FINANCING Purchase of property, plant and equipment (22) (95) Purchase of long-term investments (102) - Long-term debt repayments - (8) Funding by non-controlling shareholder 3 16 Foreign exchange on cash held in foreign currency (16) 6 Other - (2) ---------------------------------------------------------------------------- (137) (83) ---------------------------------------------------------------------------- Decrease in cash (45) (66) Cash and short-term investments Beginning of period 534 573 ---------------------------------------------------------------------------- End of period $ 489 $ 507 ---------------------------------------------------------------------------- </pre> <p>OPERATING ACTIVITIES</p> <p>Key components of the change in operating cash flows</p><pre>---------------------------------------------------------------------------- three months ended (millions) March 31 ---------------------------------------------------------------------------- Higher earnings from operations (see page 4) $ 18 Higher tax expense (16) Stand-by costs (7) Changes in working capital 81 Other (1) ---------------------------------------------------------------------------- Higher operating cash flow, compared to 2009 $ 75 ---------------------------------------------------------------------------- </pre> <p>Operating cash flows were higher this quarter than they were in the first quarter of 2009 because our operating earnings were higher, and in 2009 there was a large outflow of cash related to working capital, which included <money>$48 million</money> to repay smelters for the excess provisional payments they made in 2008, before copper prices dropped as a result of the global financial crisis.</p> <p>2010 outlook for cash from operating activities</p> <p>The table below shows expected operating cash at our operations, based on our outlook for metal prices and production listed on page 13, and the assumptions in Results of our operations, which starts on page 13.</p><pre>2010 estimated operating cash flow by operation ------------------------- (millions) ------------------------- Cayeli $ 132 Las Cruces 300 Pyhasalmi 64 Troilus 10 Ok Tedi 118 ------------------------- $ 624 ------------------------- INVESTING AND FINANCING Capital spending ------------------------------------------------------------------ three months ended March 31 objective (millions) 2010 2009 2010 ------------------------------------------------------------------ Cayeli $ 2 $ 3 $ 21 Las Cruces (3) 65 80 Pyhasalmi 1 1 9 Ok Tedi 4 3 21 Cobre Panama 18 23 122 ------------------------------------------------------------------ $ 22 $ 95 $ 253 ------------------------------------------------------------------ </pre> <p>Please see Results of our operations and Status of our development project for a discussion of actual results and our 2010 objective. Capital spending in the first quarter of 2010 was mainly for work to advance Cobre Panama.</p> <p>Acquisition of long-term investments</p> <p>In 2010, we bought <money>$102 million</money> in medium-term Canadian government and corporate bonds with credit ratings of A to AAA. The bonds mature between <chron>December 2010</chron> and <chron>June 2014</chron> and have a weighted average annual yield of 2.3 percent. This will increase our return on the cash we have set aside for capital spending at Cobre Panama.</p> <p>2010 outlook for investing and financing</p> <p>We expect capital spending to be <money>$253 million</money> in 2010. The more significant items include:</p><pre>-- <money>$80 million</money> at Las Cruces, including <money>$37 million</money> on a water treatment<br> plant and other water management projects, <money>$20 million</money> for mine<br> development and <money>$23 million</money> for plant improvements<br>-- <money>$122 million</money> for work on the development at Cobre Panama, including<br> basic engineering, advance payments for mill equipment and other costs<br> to advance development<br>-- <money>$10 million</money> at Ok Tedi for the construction of underwater storage pits<br> for sulphur concentrate produced by the tailings management plant.<br><br></pre> <p>On <chron>March 31, 2010</chron>, we entered into a subscription agreement with a subsidiary of <org>Temasek Holdings (Private) Limited</org> (<org>Temasek</org>), under which <org>Temasek</org> has agreed to buy 9.26 million subscription receipts for total proceeds of <money>$500 million</money>. We issued the subscription receipts on <chron>April 23, 2010</chron> and the proceeds are being held in escrow. The subscription receipts are exchangeable for an equivalent number of Inmet common shares as long as certain conditions are met on or before <chron>September 30, 2010</chron>, including:</p><pre>-- The coming into effect of legislation passed by the legislative assembly of the <org>Republic</org> of <location idsrc="xmltag.org" value="LC/pa">Panama</location> to amend <location idsrc="xmltag.org" value="LC/pa">Panama's</location> Mineral Resources Code to<br> permit entities in which foreign governmental bodies or authorities have<br> an interest, to hold direct or indirect interests in mining concessions<br> in <location idsrc="xmltag.org" value="LC/pa">Panama</location>.<br>-- Inmet's or Minera Panama's ability to use or exploit their rights under<br> Minera Panama's mining concession for the Cobre Panama mining project<br> are not impaired in any material way.<br><br></pre> <p>If the conditions are met, the subscription receipts will be exchanged for Inmet common shares equal to approximately 14 percent of our outstanding common shares. The proceeds will then be released from escrow and we will use them to fund the development of Cobre Panama and for general corporate purposes. If the conditions are not met, the subscription receipts will automatically terminate and the escrowed funds will be returned to <org>Temasek</org>.</p> <p>Financial condition</p> <p>CASH</p> <p>Our cash and cash equivalents balance at <chron>March 31, 2010</chron> was <money>$489 million</money>. This included cash and money market instruments that mature in 90 days or less, and short-term investments that mature in 91 days to a year.</p> <p>Our policy is to invest excess cash in highly liquid investments of the highest credit quality, and to limit our exposure to individual counterparties to minimize the risk associated with these investments. We base our decisions about the length of maturities on our cash flow requirements, rates of return and other factors.</p> <p>The economic downturn appears to be reversing, but we are still monitoring the potential for a second downturn. We have moved some of our government funds to prime funds and have created a bond portfolio that should provide better yields with little change to our investment risk. At <chron>March 31, 2010</chron>, we held cash and short-term investments in the following:</p><pre>-- AAA rated treasury funds and money market funds managed by leading international fund managers, who are investing in money market and short-term debt securities and fixed income securities issued by leading international financial institutions and their sponsored securitization vehicles. -- Cash, term and overnight deposits with leading Canadian and international financial institutions that are benefiting directly and indirectly from support programs by various governments and central banks. </pre> <p>See note 3 on page 44 in the consolidated financial statements for more details about where our cash is invested.</p> <p>The bond portfolio (Held to maturity investments) totalling <money>$204 million</money>, comprises 20 percent Government of <location idsrc="xmltag.org" value="LC/ca">Canada</location> bonds, 60 percent Provincial Government bonds and 20 percent corporate bonds, and the bonds mature between <chron>December 2010</chron> and <chron>June 2014</chron>.</p> <p>Our restricted cash balance of <money>$110 million</money> as at <chron>March 31, 2010</chron> included:</p><pre>-- <money>$26 million</money> in trust for future reclamation at Ok Tedi<br>-- <money>$17 million</money> of cash collateralized letters of credit for Inmet<br>-- <money>$65 million</money> related to issuing letters of credit to suppliers and the<br> local water authority at Las Cruces, a reclamation bond and for its<br> labour bond to the government<br>-- <money>$2 million</money> for future reclamation at Pyhasalmi.<br><br></pre> <p>COMMON SHARES</p><pre>--------------------------------------------------------------------------- Common shares outstanding as of <chron>March 31, 2010</chron> 56,106,759<br>---------------------------------------------------------------------------<br>Deferred share units outstanding as of <chron>March 31, 2010</chron> (redeemable on a one-for-one basis for common shares) 95,625 --------------------------------------------------------------------------- Dividend declaration The board of directors has declared an eligible dividend of <money>$0.10</money> per common<br>share payable on <chron>June 15, 2010</chron> to common shareholders of record as at <chron>May<br>31, 2010</chron>.<br><br></pre> <p>Accounting changes</p> <p>Plans on transition to International Financial Reporting Standards (IFRS):</p> <p><org>The Accounting Standards Board</org> has confirmed that International Financial Reporting Standards (IFRS) will replace current Canadian GAAP for financial periods beginning on and after <chron>January 1, 2011</chron>. IFRS is based on a conceptual framework similar to Canadian GAAP, but there are significant differences in recognition, measurement and disclosure.</p> <p>The adoption of IFRS will result in changes to our reported financial position and results of operations.</p> <p>We have prepared a comprehensive IFRS convergence plan that addresses the changes in accounting policy, restatement of comparative periods, internal control over financial reporting, modification of existing systems, the training and awareness of staff, and other related business matters. Senior financial management, who report to and are overseen by Inmet's Audit Committee, are responsible for planning and implementing the conversion.</p> <p>To date, we have made an initial determination of all of our significant accounting policies, prepared sample financial statements and assessed the impacts on our systems and processes. We have identified and put in place a dual reporting solution to maintain our accounting records according to Canadian GAAP and IFRS for our 2010 dual reporting year. We have been working alongside our auditors while drafting our accounting policies, to ensure they agree with our choices, and that we are choosing policies that are consistent with our peers in the industry. Concurrently with documenting our new policies, we have documented the related internal controls. We do not expect our key controls to change during and after our transition to IFRS. We have made significant progress towards determining our <chron>January 1, 2010</chron> balance sheet under IFRS and plan to present it to our board of directors in <chron>July 2010</chron>.</p> <p>The major differences between our current accounting policies under Canadian GAAP and the accounting policies we currently expect to apply when we transition to IFRS are set out below.</p> <p>The standard-setting bodies that determine Canadian GAAP and IFRS have significant ongoing projects that could affect the ultimate differences between Canadian GAAP and IFRS, and their impact on our consolidated financial statements. The impact IFRS has in future years will also depend on circumstances at the time. An exposure draft on accounting for joint venture interests (including our investment in Ok Tedi) could have significant effects on our financial statements. We will continue to monitor changes to IFRS and adjust our convergence plan as required.</p> <p>Impairment of assets</p> <p>Under Canadian GAAP, we use a two-step approach to impairment testing:</p><pre>-- first comparing asset carrying values with undiscounted future cash flows to determine whether impairment exists -- then measuring any impairment by comparing asset carrying values with fair values (generally assessed using a discounted cash flow valuation process). </pre> <p>IFRS uses a one step approach to test for and measure impairment, and compares asset carrying values directly with the higher of fair value less costs to sell and value in use (which uses discounted future cash flows).</p> <p>This approach will lead to write-downs when carrying values of assets supported under Canadian GAAP on an undiscounted basis are not supported on a discounted basis under IFRS. IFRS also requires a full or partial reversal of previous impairment losses when circumstances have changed and the impairments have been reduced. Impairment losses cannot be reversed under Canadian GAAP.</p> <p>Business combinations</p> <p>Under Canadian GAAP, mining companies that are acquired in the early development stage often do not constitute a business, and instead are accounted for as an acquisition of assets without any goodwill. The definition of a business under IFRS is broader, and most acquisitions represent business combinations, so goodwill is recognized more frequently.</p> <p>In addition, most identifiable assets, liabilities, non-controlling interests and goodwill acquired in a business combination are recorded at full fair value under IFRS. Under Canadian GAAP, only the ownership percentage acquired is recorded. Non-controlling interests are recognized at book value.</p> <p>Asset retirement obligations</p> <p>Under Canadian GAAP, we use a credit adjusted risk free interest rate and are not required to update the rate when market rates change.</p> <p>Under IFRS, we will measure asset retirement obligations using a risk free interest rate and revalue when market risk free interest rates change.</p> <p>Revenue</p> <p>Under Canadian GAAP, we recognize revenue when title is legally transferred to the purchaser. For certain shipments at Cayeli, Ok Tedi and Las Cruces, we transfer title when we receive the first provisional payment, which is later than the transfer point for risks and rewards of ownership.</p> <p>Under IFRS, we will recognize revenue when all significant risks and rewards of ownership of our products are transferred to the purchaser.</p> <p>Foreign exchange gains and losses</p> <p>Under Canadian GAAP, dividends, including those related to the accumulation of earnings and repayment of intercompany debt, are considered a return on investment, and we recognize the deferred foreign exchange gains or losses on these amounts in investment and other income.</p> <p>Under IFRS, only dividends that represent a return on capital invested in a foreign operation require recognition of previously deferred foreign exchange gains or losses.</p> <p>First time adoption of IFRS</p> <p>First time adoption of International Financial Reporting Standards (IFRS1) lists specific exemptions that we can use when we first adopt IFRS. The most significant exemptions we expect to apply are as follows:</p><pre>-- Business combinations - for business combinations that occurred before the transition date, we can choose to restate all of them under IFRS, restate all of them after a particular date, or not restate any of them. We expect to use this exemption and not restate any business combinations under IFRS. -- Cumulative translation adjustment - IFRS requires an entity to determine the translation differences in accordance with IFRS from the date a subsidiary was formed or acquired. IFRS 1 allows an entity to consider the cumulative translation differences for all foreign operations to be zero at the date of transition, and to reclassify the previous amount to retained earnings. We expect to use this exemption and reset our cumulative translation adjustment to zero on transition to IFRS. -- Property, plant and equipment associated with asset retirement obligations - IFRS and Canadian GAAP both require us to recognize a corresponding change in asset retirement obligations in the carrying value of the related property, plant and equipment (where we identify an asset) and depreciate this amount prospectively. The amount under IFRS will be different from the amount determined under Canadian GAAP because of the different way IFRS determines asset retirement obligations. We can use an optional transitional calculation to determine the property, plant and equipment associated with our provision for asset retirement obligations. Under the transitional calculation, we measure the provision at the transition date and discount it to the date the liability first arose. The result becomes the initial asset value. Depreciation is applied to this value. We expect to apply this exemption for certain mines and not determine property, plant and equipment associated with asset retirement obligations retrospectively. </pre> <p>Supplementary financial information</p> <p>Page 34 includes supplementary financial information about cash costs. These measures do not fall into the category of generally accepted accounting principles.</p> <p>We use unit cash cost information as a key performance indicator, both on a segmented and consolidated basis. We have included cash costs as supplementary information because we believe our key stakeholders use these measures as a financial indicator of our profitability and cash flows before the effects of capital investment and financing costs, such as interest.</p> <p>Since cash costs are not recognized measures under Canadian generally accepted accounting principles they should not be considered in isolation of earnings or cash flows. There is also no standard way to calculate cash costs, so they are not a reliable way to compare us to other companies.</p> <p>About Inmet</p> <p>Inmet is a Canadian-based global mining company that produces copper, zinc and gold. We have interests in five mining operations in locations around the world: Cayeli, Las Cruces, Pyhasalmi, Troilus and Ok Tedi. We also have a 100 percent interest in Cobre Panama, a development property in <location idsrc="xmltag.org" value="LC/pa">Panama</location>.</p> <p>This press release is also available at <a href="http://www.inmetmining.com">www.inmetmining.com</a></p><pre>Annual meeting of shareholders Will be held on -- <chron>Tuesday, April 27, 2010</chron> -- <chron>2:30 p.m. Eastern Time</chron> -- <org>Toronto Board of Trade</org> - Room B, fourth floor, <location>1 First Canadian Place</location>,<br> <location idsrc="xmltag.org" value="LU/ca.on.tornto">Toronto, Ontario, Canada</location> -- webcast available at <a href="http://events.digitalmedia.telus.com/inmet/042710/index.php">http://events.digitalmedia.telus.com/inmet/042710/index.php</a> or<br> <a href="http://www.inmetmining.com">www.inmetmining.com</a> You can also dial in by calling -- Local or international: +1.416.340.8527 -- Toll-free within <location idsrc="xmltag.org" value="LR/nam">North America</location>: +1.888.340.9642<br><br>Starting <chron>5:00 p.m. (ET) Tuesday April 27, 2010,</chron> a replay will be available<br><br>-- Local or international: +1.416.695.5800 passcode 4333888<br>-- Toll-free within <location idsrc="xmltag.org" value="LR/nam">North America</location>: +1.800.408.3053 passcode 4333888<br><br>First quarter conference call<br>Will be held on<br><br>-- <chron>Wednesday, April 28, 2010</chron> -- <chron>8:30 a.m. Eastern Time</chron> -- webcast available at <a href="http://events.digitalmedia.telus.com/inmet/042810/index.php">http://events.digitalmedia.telus.com/inmet/042810/index.php</a> or<br> <a href="http://www.inmetmining.com">www.inmetmining.com</a> You can also dial in by calling -- Local or international: +1.416.695.6623 -- Toll-free within <location idsrc="xmltag.org" value="LR/nam">North America</location>: +1.866.565.0813<br><br>Starting <chron>10:00 a.m. (ET) Wednesday April 28, 2010,</chron> conference call replay<br>will be available<br><br>-- Local or international: +1.416.695.5800 passcode 8078021<br>-- Toll-free within <location idsrc="xmltag.org" value="LR/nam">North America</location>: +1.800.408.3053 passcode 8078021<br><br><org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org> Supplementary financial information Cash costs 2010 For the three months ended <chron>March 31</chron> per pound of copper ------------------------------------------- CAYELI PYHASALMI OK TEDI TOTAL COPPER ---------------------------------------------------------------------------- (US dollars) Direct production costs $ 1.19 $ 2.21 $ 1.30 $ 1.41 Royalties and variable compensation 0.13 - 0.15 0.12 Smelter processing charges and freight 1.35 1.44 0.55 1.05 Metal credits (2.04) (3.79) (1.66) (2.19) ------------------------------------------- Cash cost $ 0.63 ($0.14)$ 0.34 $ 0.39 ------------------------------------------- ------------------------------------------- 2009 For the three months ended March 31 per pound of copper ------------------------------------------- CAYELI PYHASALMI OK TEDI TOTAL COPPER ---------------------------------------------------------------------------- (US dollars) Direct production costs $ 0.97 $ 1.60 $ 1.32 $ 1.24 Royalties and variable compensation 0.09 - (0.05) 0.02 Smelter processing charges and freight 1.02 0.68 0.39 0.71 Metal credits (1.10) (2.04) (1.40) (1.41) ------------------------------------------- Cash cost $ 0.98 $ 0.24 $ 0.26 $ 0.56 ------------------------------------------- ------------------------------------------- ---------------------------------------------------------------------------- Reconciliation of cash costs to statements of earnings 2010 For the three months ended <chron>March 31</chron> per pound of copper ------------------------------------------- (millions of Canadian dollars, except where otherwise noted) CAYELI PYHASALMI OK TEDI TOTAL COPPER ---------------------------------------------------------------------------- GAAP reference page 15 page 19 page 23 Direct production costs $ 22 $ 15 $ 23 $ 60 Smelter processing charges and freight 20 12 10 42 By product sales (33) (26) (27) (86) Adjust smelter processing and freight, and sales to production basis 1 (2) (1) (2) ------------------------------------------- Operating costs net of metal credits $ 10 ($1)$ 5 $ 14 US $ to C$ exchange rate $ 1.04 $ 1.04 $ 1.04 $ 1.04 Inmet's share of production (000's) 15,700 6,400 14,700 36,800 ------------------------------------------- Cash cost $ 0.63 ($0.14)$ 0.34 $ 0.39 ------------------------------------------- ------------------------------------------- 2009 For the three months ended <chron>March 31</chron> per pound of copper ------------------------------------------- (millions of Canadian dollars, except where otherwise noted) CAYELI PYHASALMI OK TEDI TOTAL COPPER ---------------------------------------------------------------------------- GAAP reference page 15 page 19 page 23 Direct production costs $ 20 $ 16 $ 23 $ 59 Smelter processing charges and freight 19 9 6 34 By product sales (23) (17) (24) (64) Adjust smelter processing and freight, and sales to production basis 3 (6) - (3) ------------------------------------------- Operating costs net of metal credits $ 19 $ 2 $ 5 $ 26 US $ to C$ exchange rate $ 1.24 $ 1.24 $ 1.24 $ 1.24 Inmet's share of production (000's) 15,500 7,900 14,600 38,000 ------------------------------------------- Cash cost $ 0.98 $ 0.24 $ 0.26 $ 0.56 ------------------------------------------- <org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org> Quarterly review (unaudited) Latest Four Quarters ---------------------------------------------------------------------------- 2010 2009 2009 2009 First Fourth Third Second quarter quarter quarter quarter (thousands of Canadian dollars, except per share amounts) ---------------------------------------------------------------------------- STATEMENTS OF EARNINGS Gross sales $ 251,559 $ 290,570 $ 241,121 $ 213,042 Smelter processing charges and freight (44,329) (53,696) (41,607) (40,589) Cost of sales (80,980) (74,995) (72,706) (73,827) Depreciation (15,224) (17,911) (14,558) (13,604) -------------------------------------------- 111,026 143,968 112,250 85,022 Corporate development and exploration (2,779) (2,915) (1,963) (2,727) General and administration (5,510) (9,836) (5,147) (4,785) Investment and other income (expense) (78) 280 3,588 16,466 Asset impairment - (3,496) - - Stand-by costs (6,753) - - - Interest expense (452) (496) (496) (493) Capital tax expense (82) 69 (744) (125) Income tax expense (20,063) (38,668) (39,244) (24,052) Non-controlling interest 4,562 857 (6,693) (2,778) -------------------------------------------- Net income 79,871 $ 89,763 $ 61,551 $ 66,528 -------------------------------------------- Net income per common share $ 1.42 $ 1.60 $ 1.10 $ 1.37 -------------------------------------------- Diluted net income per common share $ 1.42 $ 1.60 $ 1.09 $ 1.36 -------------------------------------------- Previous Four Quarters ---------------------------------------------------------------------------- 2009 2008 2008 2008 First Fourth Third Second quarter quarter quarter quarter (thousands of Canadian dollars, except per share amounts) ---------------------------------------------------------------------------- STATEMENTS OF EARNINGS Gross sales $ 239,152 $ 139,626 $ 247,495 $ 281,463 Smelter processing charges and freight (40,540) (32,870) (49,502) (53,209) Cost of sales (89,904) (91,715) (84,948) (89,893) Depreciation (15,679) (14,844) (11,395) (9,195) -------------------------------------------- 93,029 197 101,650 129,166 Corporate development and exploration (3,232) (1,971) (3,548) (2,483) General and administration (4,124) (3,289) (3,411) (2,790) Investment and other income (expense) (11,203) 8,057 (5,467) (11,358) Asset impairment (6,419) (36,275) - - Interest expense (492) (490) (476) (471) Capital tax expense (125) (1,304) (125) (124) Income tax expense (18,890) 767 (17,379) (44,333) Non-controlling interest 2,783 1,794 3,813 98 -------------------------------------------- Net income (loss) $ 51,327 ($32,514) $ 75,057 $ 67,705 -------------------------------------------- Net income (loss) per common share $ 1.06 ($0.67) $ 1.55 $ 1.40 -------------------------------------------- Diluted net income (loss) per common share $ 1.06 ($0.67) $ 1.55 $ 1.40 -------------------------------------------- <org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org> Consolidated balance sheets Note (thousands of Canadian dollars) reference March 31 2010 December 31 2009 ---------------------------------------------------------------------------- (unaudited) Assets Current assets: Cash and short-term investments 3 $ 489,280 $ 533,913 Restricted cash 4 12,225 15,130 Accounts receivable 125,386 129,987 Inventories 80,879 103,108 Current portion of held to maturity investments 6 25,952 9,993 Future income tax asset 9,325 8,466 ----------------------------------- 743,047 800,597 Restricted cash 4 97,975 101,589 Property, plant and equipment 1,750,566 1,860,616 Investments in equity securities 5 42,583 42,411 Held to maturity investments 6 177,812 89,891 Future income tax asset 13,961 6,151 Other assets 2,801 2,894 ----------------------------------- $ 2,828,745 $ 2,904,149 ---------------------------------------------------------------------------- Liabilities Current liabilities: Accounts payable and accrued liabilities $ 182,770 $ 185,145 Derivatives 1,300 1,543 Future income tax liabilities 1,281 4,612 ----------------------------------- 185,351 191,300 Long-term debt 7 187,986 200,026 Asset retirement obligations 139,611 145,038 Derivatives 2,766 3,165 Other liabilities 30,128 32,113 Future income tax liabilities 9,316 16,357 Non-controlling interest 66,758 78,005 ----------------------------------- 621,916 666,004 ----------------------------------- Commitments 8 Shareholders' equity Share capital 669,952 669,952 Contributed surplus 63,709 63,296 Stock based compensation 5,828 5,170 Retained earnings 1,621,674 1,541,803 Accumulated other comprehensive loss 10 (154,334) (42,076) ----------------------------------- 2,206,829 2,238,145 ----------------------------------- $ 2,828,745 $ 2,904,149 ---------------------------------------------------------------------------- (see accompanying notes) <org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org> Segmented balance sheets 2010 As at March 31 (unaudited) CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Assets Cash and short-term investments $ 172,229 $180,511 $ 70,360 $ - Other current assets 30,740 43,156 44,002 19,771 Restricted cash 16,503 - 1,681 - Property, plant and equipment 843 114,136 59,074 14,852 Investments in equity securities 42,583 - - - Held to maturity investments 177,812 - - - Other non-current assets 1,770 349 - - ---------------------------------------------- $ 442,480 $338,152 $ 175,117 $ 34,623 ---------------------------------------------- Liabilities Current liabilities $ 20,641 $ 32,124 $ 19,724 $ 18,535 Long-term debt 16,647 - - - Asset retirement obligations 28,636 8,631 14,154 8,575 Derivatives - - - - Other liabilities 4,664 5,585 - - Future income tax liabilities - - 9,138 - Non-controlling interest - - - - ---------------------------------------------- $ 70,588 $ 46,340 $ 43,016 $ 27,110 ---------------------------------------------- <org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org> Segmented balance sheets 2010 As at March 31 COBRE PANAMA (unaudited) OK TEDI LAS CRUCES TOTAL ---------------------------------------------------------------------------- (Papua (thousands of Canadian New dollars) Guinea) (Spain) (Panama) Assets Cash and short-term investments $ 42,807 $ 11,470 $ 11,903 $ 489,280 Other current assets 57,687 58,034 377 253,767 Restricted cash 26,332 53,459 - 97,975 Property, plant and equipment 97,733 933,951 529,977 1,750,566 Investments in equity securities - - - 42,583 Held to maturity investments - - - 177,812 Other non-current assets 4,269 10,374 - 16,762 ------------------------------------------------ $ 228,828 $ 1,067,288 $542,257 $2,828,745 ------------------------------------------------ Liabilities Current liabilities $ 60,590 $ 28,514 $ 5,223 $ 185,351 Long-term debt - 171,339 - 187,986 Asset retirement obligations 38,498 41,117 - 139,611 Derivatives 2,766 - - 2,766 Other liabilities 1,813 18,066 - 30,128 Future income tax liabilities - 178 - 9,316 Non-controlling interest - 66,758 - 66,758 ------------------------------------------------ $ 103,667 $ 325,972 $ 5,223 $ 621,916 ------------------------------------------------ </pre><pre>2009 As at <chron>December 31</chron> CORPORATE CAYELI PYHASALMI TROILUS ------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Assets Cash and short-term investments $ 251,570 $158,631 $ 66,314 $ - Other current assets 14,504 42,356 49,882 24,030 Restricted cash 16,492 - 1,854 - Property, plant and equipment 920 119,669 66,217 19,376 Investments in equity securities 42,411 - - - Held to maturity investments 89,891 - - - Other non-current assets 1,720 248 - - ---------------------------------------------- $ 417,508 $320,904 $ 184,267 $ 43,406 ---------------------------------------------- Liabilities Current liabilities $ 22,416 $ 32,348 $ 27,665 $ 19,862 Long-term debt 18,094 - - - Asset retirement obligations 28,606 8,805 15,293 8,497 Derivatives - - - - Other liabilities 4,714 5,541 - - Future income tax liabilities 4,240 2,024 9,897 - Non-controlling interest - - - - ---------------------------------------------- $ 78,070 $ 48,718 $ 52,855 $ 28,359 ---------------------------------------------- 2009 As at <chron>December 31</chron> LAS COBRE OK TEDI CRUCES PANAMA TOTAL ---------------------------------------------------------------------------- (Papua (thousands of Canadian New dollars) Guinea) (Spain) (Panama) Assets Cash and short-term investments $ 36,631 $ 10,039 $ 10,728 $ 533,913 Other current assets 61,943 73,501 468 266,684 Restricted cash 26,365 56,878 - 101,589 Property, plant and equipment 103,693 1,013,490 537,251 1,860,616 Investments in equity securities - - - 42,411 Held to maturity investments - - - 89,891 Other non-current assets 3,523 3,554 - 9,045 ------------------------------------------------- $ 232,155 $ 1,157,462 $ 548,447 $ 2,904,149 ------------------------------------------------- Liabilities Current liabilities $ 48,981 $ 29,173 $ 10,855 $ 191,300 Long-term debt - 181,932 - 200,026 Asset retirement obligations 39,546 44,291 - 145,038 Derivatives 3,165 - - 3,165 Other liabilities 1,839 20,019 - 32,113 Future income tax liabilities - 196 - 16,357 Non-controlling interest - 78,005 - 78,005 ------------------------------------------------- $ 93,531 $ 353,616 $ 10,855 $ 666,004 ------------------------------------------------- <org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org> Consolidated statements of earnings (unaudited) Three Months Ended March 31 (thousands of Canadian dollars Note except per share amounts) reference 2010 2009 ---------------------------------------------------------------------------- Gross sales $ 251,559 $ 239,152 Smelter processing charges and freight (44,329) (40,540) Cost of sales (80,980) (89,904) Depreciation (15,224) (15,679) ---------------------------------------------------------------------------- 111,026 93,029 Corporate development and exploration (2,779) (3,232) General and administration (5,510) (4,124) Investment and other income (expense) 11 (78) (11,203) Asset impairment - (6,419) Stand-by costs 15 (6,753) - Interest expense (452) (492) Capital tax expense (82) (125) Income tax expense 12 (20,063) (18,890) Non-controlling interest 4,562 2,783 ---------------------------------------------------------------------------- Net income $ 79,871 $ 51,327 ---------------------------------------------------------------------------- Basic and diluted net income per common share 13 $ 1.42 $ 1.06 ---------------------------------------------------------------------------- Weighted average shares outstanding (000's) 56,107 48,282 ---------------------------------------------------------------------------- (see accompanying notes) <org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org> Segmented statements of earnings (unaudited) 2010 For the three months ended <chron>March 31</chron> CORPORATE CAYELI PYHASALMI TROILUS --------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Gross sales $ - $ 82,406 $ 51,440 $ 34,454 Smelter processing charges and freight - (20,105) (11,505) (2,758) Cost of sales (942) (21,981) (15,269) (16,270) Depreciation - (3,224) (1,809) (4,379) ----------------------------------------------- (942) 37,096 22,857 11,047 Corporate development and exploration (1,878) (66) (835) - General and administration (5,510) - - - Investment and other income (expense) (75) 99 - (130) Stand-by costs - - - - Interest expense (452) - - - Capital tax expense (82) - - - Income tax (expense) recovery 1,477 (7,453) (5,015) - Non-controlling interest - - - - ----------------------------------------------- Net income ($7,462) $ 29,676 $ 17,007 $ 10,917 ----------------------------------------------- <org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org> Segmented statements of earnings (unaudited) 2010 For the three months ended March 31 LAS COBRE OK TEDI CRUCES PANAMA TOTAL --------------------------------------------------------------------------- (Papua (thousands of Canadian New dollars) Guinea) (Spain) (Panama) Gross sales $ 83,259 $ - $ - $ 251,559 Smelter processing charges and freight (9,961) - - (44,329) Cost of sales (26,518) - - (80,980) Depreciation (5,812) - - (15,224) ----------------------------------------------- 40,968 - - 111,026 Corporate development and exploration - - - (2,779) General and administration - - - (5,510) Investment and other income (expense) 72 (44) - (78) Stand-by costs - (6,753) - (6,753) Interest expense - - - (452) Capital tax expense - - - (82) Income tax (expense) recovery (16,535) 7,463 - (20,063) Non-controlling interest - 4,562 - 4,562 ------------------------------------------------ Net income $ 24,505 $ 5,228 $ - $ 79,871 ----------------------------------------------- </pre><pre>2009 For the three months ended <chron>March 31</chron> CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Gross sales $ - $ 60,021 $ 33,981 $ 86,990 Smelter processing charges and freight - (19,076) (8,991) (6,260) Cost of sales (484) (22,571) (15,845) (22,827) Depreciation - (3,473) (2,602) (3,419) ----------------------------------------------- (484) 14,901 6,543 54,484 Corporate development and exploration (1,848) (494) (890) - General and administration (4,124) - - - Investment and other income (expense) 451 2,867 - 284 Asset impairment charges - (6,419) - - Interest expense (492) - - - Capital tax expense (125) - - - Income tax (expense) recovery (16,531) 581 (435) - Non-controlling interest - - - - ----------------------------------------------- Net income ($23,153) $ 11,436 $ 5,218 $ 54,768 ----------------------------------------------- 2009 For the three months ended March 31 LAS COBRE OK TEDI CRUCES PANAMA TOTAL ---------------------------------------------------------------------------- (Papua (thousands of Canadian New dollars) Guinea) (Spain) (Panama) Gross sales $ 58,160 $ - $ - $239,152 Smelter processing charges and freight (6,213) - - (40,540) Cost of sales (28,177) - - (89,904) Depreciation (6,185) - - (15,679) ----------------------------------------------- 17,585 - - 93,029 Corporate development and exploration - - - (3,232) General and administration - - - (4,124) Investment and other income (expense) (1,372) (13,433) - (11,203) Asset impairment charges - - - (6,419) Interest expense - - - (492) Capital tax expense - - - (125) Income tax (expense) recovery (6,540) 4,035 - (18,890) Non-controlling interest - 2,783 - 2,783 ----------------------------------------------- Net income $ 9,673 ($6,615) $ - $ 51,327 ----------------------------------------------- <org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org> Consolidated statements of cash flows (unaudited) Three Months Ended March 31 Note (thousands of Canadian dollars) reference 2010 2009 ---------------------------------------------------------------------------- Cash provided by (used in) operating activities (1) Net income $ 79,871 $ 51,327 Add (deduct) items not affecting cash: Depreciation 15,224 15,679 Future income tax (17,385) (2,233) Accretion expense on asset retirement obligations 1,305 1,267 Non-controlling interest (4,622) (2,783) Asset impairment - 6,419 Foreign exchange loss 2,034 10,940 Other 735 2,496 Settlement of asset retirement obligations (573) (447) Net change in non-cash working capital 2 14,988 (65,568) -------------------------------- 91,577 17,097 -------------------------------- Cash provided by (used in) investing activities Purchase of property, plant and equipment (21,821) (94,859) Purchase of long-term investments 6 (102,380) - Sale of short-term investments 26,996 2,431 Funding received under Cobre Panama option agreement 2,139 - -------------------------------- (95,066) (92,428) -------------------------------- Cash provided by (used in) financing activities Long-term debt repayments - (8,328) Funding by non-controlling shareholder 2,795 15,672 Financial assurance deposits (679) (9,440) Subsidies received 360 8,609 Other (487) (45) -------------------------------- 1,989 6,468 -------------------------------- Foreign exchange change on cash held in foreign currency (16,137) 5,500 -------------------------------- Decrease in cash (17,637) (63,363) Cash: Beginning of period 506,917 537,059 -------------------------------- End of period 489,280 473,696 Short-term investments - 33,243 -------------------------------- Cash and short-term investments $ 489,280 $ 506,939 ---------------------------------------------------------------------------- (see accompanying notes) (1) Supplementary cash flow information: Cash interest paid $ 600 $ 4,725 Cash taxes paid $ 19,831 $ 5,848 ---------------------------------------------------------------------------- <org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org> Segmented statements of cash flows (unaudited) 2010 For the three months ended <chron>March 31</chron> CORPORATE CAYELI PYHASALMI TROILUS --------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Cash provided by (used in) operating activities Before net change in non- cash working capital ($8,154) $ 30,733 $ 19,283 $ 15,797 Net change in non-cash working capital (3,254) (989) (4,266) 2,730 ----------------------------------------------- (11,408) 29,744 15,017 18,527 ----------------------------------------------- Cash provided by (used in) investing activities Purchase of property, plant and equipment (8) (1,819) (457) - Purchase of long-term investments (102,380) - - - Sale of short-term investments 26,996 - - - Funding received-Cobre Panama option agreement - - - - ----------------------------------------------- (75,392) (1,819) (457) - ----------------------------------------------- Cash provided by (used in) financing activities (55) - - - ----------------------------------------------- Foreign exchange change on cashheld in foreign currency - (6,026) (6,392) - ----------------------------------------------- Intergroup funding (distributions) 34,510 (19) (4,122) (18,527) ----------------------------------------------- Increase (decrease) in cash (52,345) 21,880 4,046 - Cash: Beginning of period 224,574 158,631 66,314 - ----------------------------------------------- End of period 172,229 180,511 70,360 - Short-term investments - - - - ----------------------------------------------- Cash and short-term investments $ 172,229 $180,511 $ 70,360 $ - ----------------------------------------------- <org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org> Segmented statements of cash flows (unaudited) 2010 For the three months ended March 31 LAS COBRE OK TEDI CRUCES PANAMA TOTAL ---------------------------------------------------------------------------- (Papua (thousands of Canadian New dollars) Guinea) (Spain) (Panama) Cash provided by (used in) operating activities Before net change in non- cash working capital $ 25,683 ($6,753) $ - $ 76,589 Net change in non-cash working capital 20,767 - - 14,988 ------------------------------------------------ 46,450 (6,753) - 91,577 ------------------------------------------------ Cash provided by (used in) investing activities Purchase of property, plant and equipment (4,280) 2,652 (17,909) (21,821) Purchase of long-term investments - - - (102,380) Sale of short-term investments - - - 26,996 Funding received-Cobre Panama option agreement - - 2,139 2,139 ------------------------------------------------ (4,280) 2,652 (15,770) (95,066) ------------------------------------------------ Cash provided by (used in) financing activities (648) 2,692 - 1,989 ------------------------------------------------ Foreign exchange change on cashheld in foreign currency (2,180) (1,335) (204) (16,137) ------------------------------------------------ Intergroup funding (distributions) (33,166) 4,175 17,149 - ------------------------------------------------ Increase (decrease) in cash 6,176 1,431 1,175 (17,637) Cash: Beginning of period 36,631 10,039 10,728 506,917 ------------------------------------------------ End of period 42,807 11,470 11,903 489,280 Short-term investments - - - - ------------------------------------------------ Cash and short-term investments $ 42,807 $ 11,470 $ 11,903 $ 489,280 ------------------------------------------------ 2009 For the three months ended <chron>March 31</chron> CORPORATE CAYELI PYHASALMI TROILUS ---------------------------------------------------------------------------- (thousands of Canadian dollars) (Turkey) (Finland) (Canada) Cash provided by (used in) operating activities Before net change in non- cash working capital ($13,532) $ 11,597 $ 5,660 $ 59,716 Net change in non-cash working capital 6,979 (20,543) (7,446) (10,990) ----------------------------------------------- (6,553) (8,946) (1,786) 48,726 ----------------------------------------------- Cash provided by (used in) investing activities Purchase of property, plant and equipment 184 (3,567) (772) - Sale of short-term investments 2,431 - - - ----------------------------------------------- 2,615 (3,567) (772) - ----------------------------------------------- Cash provided by (used in) financing activities (110) - - - ----------------------------------------------- Foreign exchange change on cash held in foreign currency - 6,681 (1,143) - ----------------------------------------------- Intergroup funding (distributions) (7,629) 395 (4,152) (48,726) ----------------------------------------------- Increase (decrease) in cash (11,677) (5,437) (7,853) - Cash: Beginning of period 205,564 192,881 65,976 - ----------------------------------------------- End of period 193,887 187,444 58,123 - Short-term investments 33,243 - - - ----------------------------------------------- Cash and short-term investments $ 227,130 $187,444 $ 58,123 $ - ----------------------------------------------- 2009 For the three months ended March 31 LAS COBRE OK TEDI CRUCES PANAMA TOTAL ---------------------------------------------------------------------------- (Papua (thousands of Canadian New dollars) Guinea) (Spain) (Panama) Cash provided by (used in) operating activities Before net change in non- cash working capital $ 19,224 $ - $ - $ 82,665 Net change in non-cash working capital (33,568) - - (65,568) ----------------------------------------------- (14,344) - - 17,097 ----------------------------------------------- Cash provided by (used in) investing activities Purchase of property, plant and equipment (3,321) (64,551) (22,832) (94,859) Sale of short-term investments - - - 2,431 ----------------------------------------------- (3,321) (64,551) (22,832) (92,428) ----------------------------------------------- Cash provided by (used in) financing activities (773) 7,351 - 6,468 ----------------------------------------------- Foreign exchange change on cash held in foreign currency 1,086 (1,668) 544 5,500 ----------------------------------------------- Intergroup funding (distributions) 194 34,594 25,324 - ----------------------------------------------- Increase (decrease) in cash (17,158) (24,274) 3,036 (63,363) Cash: Beginning of period 37,547 33,981 1,110 537,059 ----------------------------------------------- End of period 20,389 9,707 4,146 473,696 Short-term investments - - - 33,243 ----------------------------------------------- Cash and short-term investments $ 20,389 $ 9,707 $ 4,146 $506,939 ----------------------------------------------- <org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org> Consolidated statements of retained earnings (unaudited) Three Months Ended March 31 (thousands of Canadian dollars) 2010 2009 ---------------------------------------------------------------------------- Retained earnings, beginning of period $ 1,541,803 $ 1,283,074 Net income 79,871 51,327 ---------------------------------------------------------------------------- Retained earnings, end of period $ 1,621,674 $ 1,334,401 ---------------------------------------------------------------------------- (see accompanying notes) Consolidated statements of comprehensive income (loss) (unaudited) Three Months Ended March 31 Note (thousands of Canadian dollars) reference 2010 2009 ---------------------------------------------------------------------------- Net income $ 79,871 $ 51,327 -------------------------------- Other comprehensive income (loss) for the period : Changes in fair value of gold forward sales contracts 218 (761) Changes in fair value of interest rate swap contracts - 1,740 Changes in fair value of investments 172 3,620 Currency translation adjustments (113,188) 27,045 Reclassification to net income of gains/losses realized: Amortization of gain on foreign exchange forward contracts - (1,508) Income tax (expense) recovery related to other comprehensive income 14 540 (1,039) -------------------------------- (112,258) 29,097 -------------------------------- Comprehensive income (loss) ($32,387) $ 80,424 ---------------------------------------------------------------------------- (see accompanying notes) </pre> <p><org idsrc="xmltag.org" value="Toronto:IMN">INMET MINING CORPORATION</org></p> <p>Notes to the consolidated financial statements</p><pre>1. Significant accounting policies </pre> <p>Our interim consolidated financial statements do not include all of the disclosure required for annual financial statements under generally accepted accounting principles (GAAP). These statements do, however, follow the same accounting policies and methods of application used in our most recent annual consolidated financial statements. You should read our interim statements in conjunction with our annual statements, which you can find in our 2009 Annual Report.</p> <p>These statements have been approved by Inmet's board of directors and have been reviewed by our external auditors.</p><pre>2. Statement of cash flows </pre> <p>The following tables show the components of our net change in non-cash working capital by segment.</p><pre>For the three months ended <chron>March 31, 2010</chron> ---------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total ---------------------------------------------------------------------------- Accounts receivable ($595) ($396) $ 925 $ 258 ($262) ($70) Inventories - (164) 582 4,152 3,387 7,957 Accounts payable and accrued liabilities (3,231) 942 (6,539) (1,680) 1,719 (8,789) Taxes 576 (1,448) 766 - 15,982 15,876 Other (4) 77 - - (59) 14 ---------------------------------------------------------------------------- ($3,254) ($989) ($4,266) $ 2,730 $ 20,767 $ 14,988 ---------------------------------------------------------------------------- For the three months ended <chron>March 31, 2009</chron> --------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total --------------------------------------------------------------------------- Accounts receivable ($148) ($24,517) $ 1,120 ($13,785) ($39,433) ($76,763) Inventories - 1,218 (407) 2,940 1,388 5,139 Accounts payable and accrued liabilities (734) (1,851) (221) 1,546 (1,419) (2,679) Taxes 7,872 4,553 (7,938) - 5,204 9,691 Other (11) 54 - (1,691) 692 (956) --------------------------------------------------------------------------- $ 6,979 ($20,543) ($7,446) ($10,990) ($33,568) ($65,568) --------------------------------------------------------------------------- </pre> <p>In the first quarter of 2009, Cayeli and Ok Tedi paid approximately <money>$48 million</money> to smelters for finalization adjustments for shipments made in 2008.</p><pre>3. Cash and short-term investments ---------------------------------------------------------------------------- March 31 December 31 (thousands) 2010 2009 ---------------------------------------------------------------------------- Cash: Liquidity funds $ 225,933 $ 205,190 Bankers' acceptances 34,206 92,200 Money market funds 190 19,951 Term deposits 48,344 40,140 Overnight deposits 61,018 54,435 Bank deposits 119,589 95,001 -------------------------- 489,280 506,917 Short-term investments: Corporate - 26,996 ---------------------------------------------------------------------------- Total cash and short-term investments $ 489,280 $ 533,913 ---------------------------------------------------------------------------- 4. Restricted cash ---------------------------------------------------------------------------- March 31 December 31 (thousands) 2010 2009 ---------------------------------------------------------------------------- Collateralized cash for letter of credit facility - Inmet Mining $ 16,503 $ 16,492 In trust for Ok Tedi reclamation 26,332 26,365 Collateralized cash for letters of credit - Las Cruces 65,684 72,008 Collateralized cash for Pyhasalmi reclamation 1,681 1,854 ---------------------------------------------------------------------------- 110,200 116,719 Less current portion: Collateralized cash for letters of credit - Las Cruces (12,225) (15,130) ---------------------------------------------------------------------------- $ 97,975 $ 101,589 ---------------------------------------------------------------------------- 5. Investments in equity securities ----------------------------------------------------------------------- March 31 December 31 (thousands) 2010 2009 ----------------------------------------------------------------------- Available-for-sale equity securities: Premier Gold Mines Ltd (9.5 million shares) $ 40,068 $ 39,501 Other 2,515 2,910 ----------------------------------------------------------------------- $ 42,583 $ 42,411 ----------------------------------------------------------------------- 6. Held to maturity investments </pre> <p>In the first quarter, we purchased <money>$102 million</money> of long-term Canadian government and corporate bonds with credit ratings of A to AAA. The bonds mature between <chron>December 2010</chron> and <chron>June 2014</chron> and have a weighted average annual yield to maturity of 2.3 percent. We have designated these bonds as held to maturity, measuring them initially at fair value and subsequently at amortized cost.</p><pre>7. Long-term debt -------------------------------------------------------------- -------------------------------------------------------------- March 31 December 31 2010 2009 -------------------------------------------------------------- Promissory note $ 16,647 $ 18,094 Loans from non-controlling shareholder 171,339 181,932 -------------------------------------------------------------- $ 187,986 $ 200,026 -------------------------------------------------------------- -------------------------------------------------------------- </pre> <p>Loans from non-controlling shareholder</p> <p>Las Cruces received intercompany loan advances of <money>EUR6.3 million</money> in 2010 and <money>EUR32 million</money> in the first quarter of 2009. These loans bear interest at EURIBOR plus 6.1 percent and are due to be repaid on <chron>February 25, 2020</chron>. The non-controlling portion of these loans, <money>EUR124.9 million</money>, is reflected in long-term debt at <chron>March 31, 2010</chron>. Loans from non-controlling shareholders approximate fair value because the loans accrue interest at prevailing market rates.</p><pre>8. Commitments </pre> <p>Capital commitments</p> <p>Our operations have the following capital commitments as at <chron>March 31, 2010</chron>:</p><pre>-- Ok Tedi committed approximately <money>$86.0 million</money> (our proportionate share<br> is <money>$15.5 million</money>) to capital expenditures mainly for the purchase of<br> mobile equipment and the construction of underwater storage pits for<br> sulphur concentrate produced by the mine waste tailings plant.<br><br>-- Las Cruces committed <money>$30.8 million</money> primarily for the purchase of a<br> permanent water treatment plant.<br><br>-- Cobre Panama committed <money>$133.7 million</money> for the design and supply of two<br> SAG mills, four ball mills and the related gearless drives.<br><br>9. Subscription agreement with <org>Temasek Holdings</org> </pre> <p>On <chron>March 31, 2010</chron>, we entered into a subscription agreement with a subsidiary of <org>Temasek Holdings (Private) Limited</org> (<org>Temasek</org>), under which <org>Temasek</org> has agreed to buy 9.26 million subscription receipts for total proceeds of <money>$500 million</money>. We issued the subscription receipts on <chron>April 23, 2010</chron> and the proceeds are being held in escrow. The subscription receipts are exchangeable for an equivalent number of Inmet common shares as long as certain conditions are met on or before <chron>September 30, 2010</chron>, including:</p><pre>-- The coming into effect of legislation passed by the legislative assembly of the <org>Republic</org> of <location idsrc="xmltag.org" value="LC/pa">Panama</location> to amend <location idsrc="xmltag.org" value="LC/pa">Panama's</location> Mineral Resources Code to<br> permit entities in which foreign governmental bodies or authorities have<br> an interest, to hold direct or indirect interests in mining concessions<br> in <location idsrc="xmltag.org" value="LC/pa">Panama</location>.<br>-- Inmet's or Minera Panama's ability to use or exploit their rights under<br> Minera Panama's mining concession for the Cobre Panama mining project<br> are not impaired in any material way.<br><br></pre> <p>If the conditions are met, the subscription receipts will be exchanged for Inmet common shares equal to approximately 14 percent of our outstanding common shares. The proceeds will then be released from escrow and we will use them to fund the development of Cobre Panama and for general corporate purposes. If the conditions are not met, the subscription receipts will automatically terminate and the escrowed funds will be returned to <org>Temasek</org>.</p><pre>10. Accumulated other comprehensive loss (AOCL) </pre> <p>The table below shows the components of the beginning and ending balances of AOCL.</p><pre>---------------------------------------------------------------------------- (thousands) ---------------------------------------------------------------------------- Unrealized losses on gold forward sales contracts (net of tax of <money>$2,015</money>) <money>($4,701)</money> Unrealized gains on investments (net of tax of <money>$4,788</money>) 23,794<br>Currency translation adjustment (61,169)<br>----------------------------------------------------------------------------<br>AOCL, <chron>December 31, 2009</chron> <money>($42,076)</money> Other comprehensive loss for the three months ending <chron>March 31,<br> 2010</chron> <money>($112,258)</money> ---------------------------------------------------------------------------- AOCL, <chron>March 31, 2010</chron> <money>($154,334)</money> ---------------------------------------------------------------------------- AOCL <chron>March 31, 2010</chron> comprises:<br>Unrealized losses on gold forward sales contracts (net of tax<br> <money>$1,950</money>) <money>($4,548)</money> Unrealized gains on investments (net of tax of <money>$4,183</money>) 24,571<br>Currency translation adjustment (174,357)<br>----------------------------------------------------------------------------<br>AOCL, <chron>March 31, 2010</chron> <money>($154,334)</money> ---------------------------------------------------------------------------- </pre> <p>The table below shows the breakdown of the currency translation adjustments included in AOCL.</p><pre>---------------------------------------------------------------------------- ---------------------------------------------------------------------------- March 31 2010 December 31 2009 ---------------------------------------------------------------------------- Pyhasalmi (euro functional currency) ($19,186) ($5,308) Las Cruces (euro functional currency) (77,239) (8,793) Cayeli (US dollar functional currency) (30,460) (20,901) Ok Tedi (US dollar functional currency) (17,531) (13,751) Cobre Panama (US dollar functional currency) (29,941) (12,416) ---------------------------------------------------------------------------- ($174,357) ($61,169) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- </pre> <p>The Canadian dollar to US dollar exchange rate was <money>$1.02</money> at <chron>March 31, 2010</chron> and <money>$1.05</money> at <chron>December 31, 2009</chron>. The Canadian dollar to euro exchange rate was <money>$1.37</money> at <chron>March 31, 2010</chron> and <money>$1.50</money> at <chron>December 31, 2009</chron>.</p><pre>11. Investment and other income </pre> <p>Investment and other income are summarized as follows:</p><pre>---------------------------------------------------------------------------- Three months ended March 31 (thousands) 2010 2009 ---------------------------------------------------------------------------- Interest income $ 1,597 $ 2,042 Foreign exchange loss (2,415) (10,098) Dividend and royalty income 714 - Mark to market on Ok Tedi copper forward contracts - (1,419) Other 26 (1,728) ---------------------------------------------------------------------------- ($78) ($11,203) ---------------------------------------------------------------------------- </pre> <p>Foreign exchange</p> <p>For transactions with foreign currencies we use the exchange rates in effect:</p><pre>-- at period-end for monetary assets and liabilities -- on the date of the transaction for non-monetary assets and liabilities -- on the date of the transaction for income and expenses </pre> <p>Foreign exchange loss is a result of:</p><pre>---------------------------------------------------------------------------- Three months ended March 31 2010 2009 ---------------------------------------------------------------------------- Translation of Las Cruces' US dollar-denominated bank credit facility $ - ($11,465) Translation of foreign - denominated cash held at corporate (771) (1,595) Distribution of funds from subsidiaries (1,335) - Translation of other-monetary assets and liabilities (309) 2,962 ---------------------------------------------------------------------------- ($2,415) ($10,098) ---------------------------------------------------------------------------- 12. Income tax expense </pre> <p>For the three months ended <chron>March 31, 2010</chron></p><pre>---------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Ok Tedi ---------------------------------------------------------------------------- Current income taxes $ 1,160 $ 9,806 $ 4,942 $ 21,539 Future income taxes (2,637) (2,353) 73 (5,004) ---------------------------------------------------------------------------- ($1,477) $ 7,453 $ 5,015 $ 16,535 ---------------------------------------------------------------------------- ---------------------------------------------------------------------- (thousands) Las Cruces Cobre Panama Total ---------------------------------------------------------------------- Current income taxes $ - $ - $ 37,447 Future income taxes (7,463) - (17,384) ---------------------------------------------------------------------- ($7,463) $ - $ 20,063 ---------------------------------------------------------------------- </pre> <p>For the three months ended <chron>March 31, 2009</chron></p><pre>---------------------------------------------------------------------------- (thousands) Corporate Cayeli Pyhasalmi Ok Tedi ---------------------------------------------------------------------------- Current income taxes $ 7,655 $ 7,806 $ 428 $ 5,234 Future income taxes 8,876 (8,387) 7 1,306 ---------------------------------------------------------------------------- $ 16,531 ($581) $ 435 $ 6,540 ---------------------------------------------------------------------------- ----------------------------------------------------------------------- (thousands) Las Cruces Cobre Panama Total ----------------------------------------------------------------------- Current income taxes $ - $ - $ 21,123 Future income taxes (4,035) - (2,233) ----------------------------------------------------------------------- ($4,035) $ - $ 18,890 ----------------------------------------------------------------------- 13. Net income per share ---------------------------------------------------------------------------- three months ended March 31 (thousands) 2010 2009 ---------------------------------------------------------------------------- Net income available to common shareholders $ 79,871 $ 51,327 ---------------------------------------------------------------------------- --------------------------------------------------------------------- three months ended March 31 (thousands) 2010 2009 --------------------------------------------------------------------- Weighted average common shares outstanding 56,107 48,282 Plus incremental shares from assumed conversions: Deferred share units 96 86 Long term incentive plan units 43 43 --------------------------------------------------------------------- Diluted weighted average common shares outstanding 56,246 48,411 --------------------------------------------------------------------- ---------------------------------------------------------------------------- three months ended March 31 (Canadian dollars per share) 2010 2009 ---------------------------------------------------------------------------- Basic and diluted net income per common share $ 1.42 $ 1.06 ---------------------------------------------------------------------------- 14. Income taxes recovery (expense) included in other comprehensive income ---------------------------------------------------------------------------- Three months ended March 31 (thousands) 2010 2009 ---------------------------------------------------------------------------- Changes in fair value of gold forward sales contracts ($65) $ 227 Changes in fair value of interest rate swap contracts - (660) Changes in fair value of investments 605 (606) ---------------------------------------------------------------------------- $ 540 ($1,039) ---------------------------------------------------------------------------- 15. Stand-by costs </pre> <p>We could not mine ore at Las Cruces this quarter because of the water levels in the pit. We expensed <money>$6.8 million</money> in water plant operating and maintenance costs because they did not relate to production activities.</p><pre>FOR FURTHER INFORMATION PLEASE CONTACT:<br> <org idsrc="xmltag.org" value="Toronto:IMN">Inmet Mining Corporation</org> <person>Jochen Tilk</person> President and Chief Executive Officer +1.416.860.3972 <a href="http://www.inmetmining.com">www.inmetmining.com</a> Source: <org idsrc="xmltag.org" value="Toronto:IMN">Inmet Mining Corporation</org> </pre>http://www.inmetmining.com/investorsmedia/news/newsdetails/default.aspx?PressReleaseId=f8d504a2-0a2d-4341-8a85-12d98344e448Tue, 27 Apr 2010 08:45:00 -0400