Inmet Mining Corporation
TSX : IMN

Inmet Mining Corporation

February 10, 2009 08:50 ET

Inmet Announces a Fourth Quarter Loss of $0.67 Per Share Following a $0.71 Per Share Write Down of Cerattepe and Lower Metal Prices




TORONTO, ONTARIO--(Marketwire - Feb. 10, 2009) - Inmet Mining Corporation (TSX:IMN)

All amounts in Canadian dollars unless indicated otherwise

Highlights

- Fourth quarter loss

The loss in the fourth quarter was due primarily to a significant
decline in the price of copper and zinc, and an asset impairment
charge. Lower copper and zinc prices reduced sales by $92 million
compared to the fourth quarter of 2007. Of that, $58 million is for
finalization adjustments on our third quarter sales. We took a $34
million impairment charge on the value of our investment in Cerattepe
because we decided to not move the project forward.

- Realized copper price

Because of finalization adjustments recorded in the fourth quarter of
US$0.92 per pound, we realized a copper price of US$0.50 per pound.

- Operating cash flow

Operating cash flow this quarter was $31 million or $0.64 per common
share compared to $76 million or $1.58 per share in the fourth
quarter of 2007.

- Production

Copper production this quarter was similar to 2007. Zinc production
was lower and gold production was higher.

- Las Cruces receives support from the water authority to resume
mining - now awaiting final go-ahead from the mining authority

In January 2009, the water authority recommended that the provincial
mining authority allow Las Cruces to resume mining in the pit after
it reduces the water level in its holding ponds. Las Cruces now
expects to resume mining at the beginning of March. Plant
commissioning is well underway and first copper production is
expected in April.

- 100% ownership in Petaquilla

We acquired 100 percent ownership of the Petaquilla project as of
December 31. Field activities to prepare the new mineral resource
statement, complete the front-end engineering and design work and
file the Environmental and Social Impact Assessment are progressing
as planned.

Key financial data
-------------------------------------------------------------------------
three months ended December 31
2008 2007 change
-------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(thousands, except per share amounts)

Sales
Gross sales $139,626 $224,773 -38%

Net income
Net income ($32,514) $63,645 -151%
Net income per share ($0.67) $1.32 -151%

Cash flow
Cash flow provided by
operating activities $30,992 $76,325 -59%
Cash flow provided by
operating activities per share(1) $0.64 $1.58 -59%

Capital spending $133,979 $93,889 +43%

OPERATING HIGHLIGHTS
Production(2)
Copper (tonnes) 21,100 21,700 -3%
Zinc (tonnes) 19,600 26,000 -25%
Gold (ounces) 64,600 57,200 +13%

Cash costs(3)
Copper (US $ per pound) $0.50 $0.29 +72%
Gold (US $ per ounce) $460 $552 -17%
-------------------------------------------------------------------------

-------------------------------------------------------------------------
year ended December 31
2008 2007 change
-------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(thousands, except per share amounts)

Sales
Gross sales $944,865 $1,103,698 -14%

Net income
Net income $216,922 $417,609 -48%
Net income per share $4.49 $8.65 -48%

Cash flow
Cash flow provided by
operating activities $324,505 $427,351 -24%
Cash flow provided by
operating activities per share(1) $6.72 $8.85 -24%

Capital spending $460,792 $345,892 +33%

OPERATING HIGHLIGHTS
Production(2)
Copper (tonnes) 80,500 79,300 +2%
Zinc (tonnes) 75,400 85,100 -11%
Gold (ounces) 244,100 223,300 +9%

Cash costs(3)
Copper (US $ per pound) $0.52 $0.20 +160%
Gold (US $ per ounce) $417 $421 -1%
-------------------------------------------------------------------------

-------------------------------
as at as at
December 31 December 31
FINANCIAL CONDITION 2008 2007
-------------------------------
Current ratio 2.4 to 1 5.6 to 1
Gross debt to total equity(4) 19% 13%
Net working capital balance (millions) $475 $855
Cash balance (millions) $573 $841
Shareholders' equity (millions) $1,868 $1,392
-------------------------------------------------------------------------
(1) Calculated as cash flow provided by operating activities divided by
average shares outstanding for the respective period.
(2) Inmet's share.
(3) Cash cost per pound of copper and cash cost per ounce of gold are
non-GAAP measures - see Supplementary financial information on pages
33, 34 and 35.
(4) Gross debt includes long-term debt and current portion of long-term
debt less the non-recourse note owing from Las Cruces to its non-
controlling shareholder.

Current market environment

There was a general weakening in the global economic environment in the
fourth quarter, and a significant decline in base metal prices.
These market conditions will have some impact on our overall financial
position. However, based on the strength of our financial position entering
into this downturn, together with our relatively low operating costs:
- we do not expect there to be any impact on our ability to meet
expected production levels as a result of market conditions
- we should be able to maintain capital expenditures at our current
operations and for the development of Las Cruces
- we should be able to continue to pursue our growth objectives by
advancing the Petaquilla project and considering other opportunities
as they arise.

We will continually monitor the metal and financial markets, our financial
performance and resources and our capital spending to make sure we maintain
the financial strength we need in these volatile and uncertain markets.

Fourth quarter press release

Where to find it

Our financial results................................ 4
Key changes in 2008.................................. 4
Understanding our performance........................ 5
Earnings from operations........................... 7
Corporate costs.................................... 12
Results of our operations............................ 13
Cayeli............................................. 14
Pyhasalmi.......................................... 16
Troilus............................................ 18
Ok Tedi............................................ 20
Status of our development projects................... 22
Las Cruces......................................... 22
Petaquilla......................................... 24
Managing our liquidity............................... 26
Financial condition.................................. 29
Accounting changes................................... 31
Supplementary financial information.................. 33
Quarterly review..................................... 36
Consolidated financial statements.................... 37

In this press release, Inmet means Inmet Mining Corporation and we, us
and our mean Inmet and/or its subsidiaries and joint ventures. This quarter
refers to the three months ended December 31, 2008.

Forward looking information

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

Our financial results
-------------------------------------------------------------------------
three months ended December 31
(thousands, except per share amounts) 2008 2007 change
-------------------------------------------------------------------------

EARNINGS FROM OPERATIONS(1)

Cayeli $(8,438) $36,138 -123%
Pyhasalmi 7,812 28,149 -72%
Troilus 3,695 345 +971%
Ok Tedi (2,385) 28,441 -108%
Other (487) (491) -1%
-------------------------------------------------------------------------
197 92,582 -100%
-------------------------------------------------------------------------
DEVELOPMENT AND EXPLORATION
Corporate development and exploration (1,971) (3,510) -44%
-------------------------------------------------------------------------

CORPORATE COSTS
General and administration (3,289) (12,622) -74%
Investment and other income 8,057 5,968 +35%
Asset impairment (36,275) - -
Interest expense (490) (407) +20%
Income and capital taxes (537) (18,339) -97%
Non-controlling interest 1,794 (27) -6744%
-------------------------------------------------------------------------
(30,740) (25,427) 21%
-------------------------------------------------------------------------
Net income (loss) $(32,514) $63,645 -151%
-------------------------------------------------------------------------
Basic net income (loss) per share $(0.67) $1.32 -151%
-------------------------------------------------------------------------
Diluted net income (loss) per share $(0.67) $1.32 -151%
-------------------------------------------------------------------------
Weighted average shares outstanding 48,282 48,282 -
-------------------------------------------------------------------------

-------------------------------------------------------------------------
year ended December 31
(thousands, except per share amounts) 2008 2007 change
-------------------------------------------------------------------------

EARNINGS FROM OPERATIONS(1)

Cayeli $122,483 $223,892 -45%
Pyhasalmi 92,698 138,582 -33%
Troilus 26,328 9,828 +168%
Ok Tedi 135,163 182,774 -26%
Other (1,951) (1,953) -
-------------------------------------------------------------------------
374,721 553,123 -32%
-------------------------------------------------------------------------
DEVELOPMENT AND EXPLORATION
Corporate development and exploration (10,620) (9,083) +17%
-------------------------------------------------------------------------
CORPORATE COSTS
General and administration (13,138) (20,298) -35%
Investment and other income 5,986 36,454 -84%
Asset impairment (36,275) - -
Interest expense (1,884) (1,693) +11%
Income and capital taxes (107,368) (140,694) -24%
Non-controlling interest 5,500 (200) -2850%
-------------------------------------------------------------------------
(147,179) (126,431) +16%
-------------------------------------------------------------------------
Net income (loss) $216,922 $417,609 -48%
-------------------------------------------------------------------------
Basic net income (loss) per share $4.49 $8.65 -48%
-------------------------------------------------------------------------
Diluted net income (loss) per share $4.48 $8.64 -48%
-------------------------------------------------------------------------
Weighted average shares outstanding 48,282 48,279 -
-------------------------------------------------------------------------
(1) Gross sales less smelter processing charges and freight, cost of
sales, depreciation and provisions for mine reclamation.


Key changes in 2008
-------------------------------------------------------------------------
three months year
ended ended see
(millions) December 31 December 31 page
-------------------------------------------------------------------------
EARNINGS FROM OPERATIONS
Sales
Lower copper and zinc prices
denominated in Canadian dollars $(92) $(194) 8
Higher gold prices
denominated in Canadian dollars 12 34 8
Higher pyrite demand
(higher sales net of costs) 7 28 8
Lower sales volumes (5) (23) 9
Costs
Lower smelter processing charges 4 30 10
Higher operating costs, including costs
that vary with income and cash flows (10) (41) 11
Higher depreciation (5) (8) 11
Other (3) (4)
-------------------------------------------------------------------------
Decrease in earnings from operations,
compared to 2007 (92) (178)

CORPORATE COSTS
Lower income tax expense 19 34 13
Gain on sale of Wolfden in 2007 - (12) 12
Asset impairment (36) (36) 13
Higher foreign exchange losses (3) (20) 12
Lower general and administration costs 9 7
Other 7 4
-------------------------------------------------------------------------
Decrease in net income, compared to 2007 $(96) $(201)
-------------------------------------------------------------------------

Understanding our performance

Metal prices

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).

-------------------------------------------------------------------------
three months ended December 31
2008 2007 change
-------------------------------------------------------------------------
US dollar metal prices Copper
(per pound) US $0.50 US $2.75 -82%
Zinc (per pound) US $0.46 US $1.10 -58%
Gold (per ounce) US $714 US $664 +8%
-------------------------------------------------------------------------
Canadian dollar metal prices Copper
(per pound) C $0.61 C $2.70 -77%
Zinc (per pound) C $0.56 C $1.08 -48%
Gold (per ounce) C $866 C $651 +33%
-------------------------------------------------------------------------

-------------------------------------------------------------------------
year ended December 31
2008 2007 change
-------------------------------------------------------------------------
US dollar metal prices Copper
(per pound) US $2.70 US $3.22 -16%
Zinc (per pound) US $0.84 US $1.39 -40%
Gold (per ounce) US $732 US $594 +23%
-------------------------------------------------------------------------
Canadian dollar metal prices Copper
(per pound) C $2.88 C $3.45 -17%
Zinc (per pound) C $0.90 C $1.49 -40%
Gold (per ounce) C $ 781 C $636 +23%
-------------------------------------------------------------------------

Commodity prices this year were very strong until August, when demand
collapsed across almost every market.
Copper started the year at US $3.02 per pound and peaked in July at over
US $4.00. By September 30, the copper price was back down to US $2.90 per
pound and by December 31 had dropped to US $1.32, its lowest level since 2005.
The copper market also went from being under-supplied to a surplus with an
apparent weakness in end-use markets like construction and transportation.
Zinc prices fell from a price of US $1.08 per pound at the end of 2007 to
a low of US $0.47 per pound in the second half of 2008. It was among the first
base metals to be affected by deteriorating conditions in the global economy
and the collapse in demand. There were also a significant number of mine
production cuts and closures in the second half of the year.
Gold was one of the few commodities to close higher this year than it had
in 2007, with a 5 percent gain. In the first half of the year, gold prices
were as high as US $1,000 per ounce. Amid the wave of investment liquidation
and the strengthening of the US dollar in the fourth quarter, the price
dropped by as much as 20 percent.
The price of sulphur, which is closely linked to pyrite prices, was
strong throughout most of 2008. In September demand for sulphur came to a halt
and prices dropped from $800 per ton to a low of $35 per ton in December.

Exchange rates

Exchange rates affect revenue and earnings. The table below shows the
average exchange rates we realized.

-------------------------------------------------------------------------
three months ended December 31 year ended December 31
2008 2007 change 2008 2007 change
-------------------------------------------------------------------------
Exchange rates
1 US$ to C$ $1.21 $0.98 23% $1.07 $1.07 -
1 euro to C$ $1.60 $1.42 13% $1.56 $1.46 7%
1 euro to US$ $1.32 $1.45 -9% $1.47 $1.37 7%
-------------------------------------------------------------------------

US dollars
----------

Sales are affected by the conversion of US dollar revenue to Canadian
dollars. Foreign exchange was not a factor when looking at variances in sales
between years because the US to Canadian exchange rate was consistent between
these periods. The fourth quarter, however, saw a sharp rise in exchange rates
relative to the US dollar.
Net income was $51 million less for the year and $28 million more for the
quarter because of fluctuations in the value of the US dollar relative to the
Canadian dollar.
Changes to the US to Canadian dollar exchange rate and US dollar to euro
exchange rate affect our net income in four ways:

- US dollar sales translated to Canadian dollar
- Cayeli and Ok Tedi record all costs in US dollars which we translate
to Canadian dollars
- we recognize deferred foreign exchange gains or losses when we
repatriate cash from Cayeli and Ok Tedi (we record this in Investment
and other income). Foreign exchange losses for the year include the
recognition of a deferred foreign exchange loss of $25 million ($1
million gain in the fourth quarter) when we repatriated cash from
Cayeli and Ok Tedi.
- we revalue foreign currency balances such as the US dollar debt in
Las Cruces (recorded in Investment and other income). Pre-tax net
income this quarter and year was down $12 million and $25 million,
respectively, because we recognized a foreign exchange loss on the
translation of the Las Cruces US dollar credit facility.

Euros
-----

Net income was lower between periods because costs we incurred in euros
were higher when we converted them to Canadian dollars.
We recorded foreign exchange gains of $8 million for 2008 ($4 million for
the quarter) when we revalued euro denominated cash and short-term intergroup
receivables. This was the result of a large change in the value of the euro
relative to the Canadian dollar for the quarter. We also recognized deferred
foreign exchange gains of $6 million when we repatriated cash from Pyhasalmi
in the second quarter. We recorded both of these in Investment and other
income.

Treatment charges down for copper and up for zinc

Treatment charges are one component of smelter processing charges. We
also pay smelters for content losses and price participation.
The table below shows the average charges we realized this quarter and
year to date.

-------------------------------------------------------------------------
three months ended December 31 year ended December 31
2008 2007 change 2008 2007 change
-------------------------------------------------------------------------
Treatment charges
Copper (per
dry metric
tonne of
concentrate) $64 $66 -3% $50 $63 -21%
Zinc (per
dry metric
tonne of
concentrate) $379 $290 +31% $318 $274 +16%
-------------------------------------------------------------------------
Price participation
Copper
(per pound) $0.02 $0.04 -50% $0.04 $0.08 -50%
Zinc (per
pound)(1) ($0.08) ($0.05) +60% ($0.02) $0.01 -300%
-------------------------------------------------------------------------
Freight charges
Copper (per
dry metric
tonne of
concentrate) $37 $58 -36% $48 $50 -4%
Zinc (per
dry metric
tonne of
concentrate) $32 $38 -16% $37 $33 +12%
-------------------------------------------------------------------------
(1) Zinc price participation is based on a zinc price of US $2,000 per
tonne in 2008 and US $3,500 per tonne in 2007.

Copper treatment charges were lower this quarter and for 2008 than they
were in 2007 because we had better contract terms with smelters. While zinc
treatment charges were higher than 2007, zinc price participation was down
significantly in 2008.

Statutory tax rates down slightly

The table below shows the statutory tax rates for each of our taxable
operating mines.

-------------------------------------------------------------------------
2008 2007 change
-------------------------------------------------------------------------
Statutory tax rates
Cayeli 24% 27% -3%
Pyhasalmi 26% 26% -
Ok Tedi 37% 37% -
Las Cruces 30% 30% -
-------------------------------------------------------------------------

Cayeli's tax rate is lower because the withholding tax rate was reduced
from 8 percent to 5 percent.

EARNINGS FROM OPERATIONS

Earnings from operations include the following:

-------------------------------------------------------------------------
three months ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Gross sales $139,626 $224,773 -38%
Smelter processing charges (32,870) (43,902) -25%
Cost of sales:
Direct production costs (86,935) (79,588) +9%
Inventory changes (30) 2,239 -101%
Provisions for mine rehabilitation
and other non-cash charges (4,750) (1,460) +225%
Depreciation (14,844) (9,480) +57%
-------------------------------------------------------------------------
Earnings from operations $197 $92,582 -100%
-------------------------------------------------------------------------

-------------------------------------------------------------------------
year ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Gross sales $944,865 $1,103,698 -14%
Smelter processing charges (179,738) (206,478) -13%
Cost of sales:
Direct production costs (331,173) (295,896) +12%
Inventory changes 3,345 (3,264) -202%
Provisions for mine rehabilitation
and other non-cash charges (17,974) (9,264) +94%
Depreciation (44,604) (35,673) +25%
-------------------------------------------------------------------------
Earnings from operations $374,721 $553,123 -32%
-------------------------------------------------------------------------

Gross sales were lower this year mainly because the price of copper and
zinc was down

-------------------------------------------------------------------------
three months ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Gross sales by operation
Cayeli $27,481 $81,088 -66%
Pyhasalmi 37,273 58,672 -36%
Troilus 36,391 27,317 +33%
Ok Tedi(1) 38,481 57,696 -33%
-------------------------------------------------------------------------
$139,626 $224,773 -38%
-------------------------------------------------------------------------
Gross sales by metal
Copper $46,367 $120,705 -62%
Zinc 20,110 53,246 -62%
Gold 54,720 38,313 +43%
Other 18,429 12,509 +47%
-------------------------------------------------------------------------
$139,626 $224,773 -38%
-------------------------------------------------------------------------

-------------------------------------------------------------------------
year ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Gross sales by operation
Cayeli $305,190 $418,694 -27%
Pyhasalmi 221,124 260,246 -15%
Troilus 141,251 108,378 +30%
Ok Tedi(1) 277,300 316,380 -12%
-------------------------------------------------------------------------
$944,865 $1,103,698 -14%
-------------------------------------------------------------------------
Gross sales by metal
Copper $511,037 $627,424 -19%
Zinc 150,216 280,713 -46%
Gold 189,379 150,228 +26%
Other 94,233 45,333 +108%
-------------------------------------------------------------------------
$944,865 $1,103,698 -14%
-------------------------------------------------------------------------
(1) Our 18 percent share of Ok Tedi's sales.

Key components of the change in sales: copper and zinc prices down, gold
prices up, pyrite sales up

-------------------------------------------------------------------------
three months year
ended ended
(millions) December 31 December 31
-------------------------------------------------------------------------
Lower copper prices, denominated in Canadian
dollars $(83) $(106)
Lower zinc prices, denominated in Canadian
dollars (9) (95)
Higher gold prices, denominated in Canadian
dollars 12 34
Higher pyrite prices, denominated in Canadian
dollars 9 38
Changes in other metal prices - 8
Lower sales volumes (14) (38)
-------------------------------------------------------------------------
Decrease in gross sales, compared to 2007 $(85) $(159)
-------------------------------------------------------------------------

We record sales using the metal price we receive for sales that settle
during the reporting period. For sales that have not been 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 we receive by adjusting our gross
sales in the period we settle the sale (finalization adjustment).
We recorded $58 million in negative finalization adjustments in the
fourth quarter.

At the end of 2008, the following sales had not been settled:
- 40 million pounds of copper provisionally priced at US $1.39 per pound
- 16 million pounds of zinc provisionally priced at US $0.54 per pound.

The finalization adjustment we record for these sales will depend on the
actual price when the sale settles, which can be from one to five months after
we initially record it. We expect the December 31, 2008 unsettled sales to
settle in the following months:

----------------------------------------------------
(millions of pounds) copper zinc
----------------------------------------------------
January 2009 11 11
February 2009 8 5
March 2009 11 -
April and May 2009 10 -
----------------------------------------------------
Unsettled sales at December 31, 2008 40 16
----------------------------------------------------

Zinc sales volumes down in the quarter - lower production and delayed
shipments

-------------------------------------------------------------------------
three months ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Sales volumes
Copper (tonnes) 22,500 21,000 +7%
Zinc (tonnes) 13,600 24,400 -44%
Gold (ounces) 63,700 57,900 +10%
Pyrite (tonnes) 66,000 132,600 -50%
-------------------------------------------------------------------------

-------------------------------------------------------------------------
year ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Sales volumes
Copper (tonnes) 81,700 82,900 -1%
Zinc (tonnes) 76,100 87,200 -13%
Gold (ounces) 241,800 234,200 +3%
Pyrite (tonnes) 557,700 508,900 +10%
-------------------------------------------------------------------------

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

Production
-------------------------------------------------------------------------
three months ended December 31
Inmet's share(1) 2008 2007 change
-------------------------------------------------------------------------
Copper (tonnes)
Ok Tedi 7,300 8,700 -16%
Cayeli 8,400 9,100 -8%
Pyhasalmi 3,400 3,300 +3%
Las Cruces - - -
Troilus 2,000 600 +233%
-------------------------------------------------------------------------
21,100 21,700 -3%
-------------------------------------------------------------------------
Zinc (tonnes)
Cayeli 12,800 13,600 -6%
Pyhasalmi 6,800 12,400 -45%
-------------------------------------------------------------------------
19,600 26,000 -25%
-------------------------------------------------------------------------
Gold (ounces)
Troilus 40,500 33,700 +20%
Ok Tedi 24,100 23,500 +3%
-------------------------------------------------------------------------
64,600 57,200 +13%
-------------------------------------------------------------------------
Pyrite (tonnes)
Pyhasalmi 81,700 182,000 -55%
-------------------------------------------------------------------------


------------------------------------------------------------ ------------
year ended December 31 objective
Inmet's share(1) 2008 2007 change 2009
------------------------------------------------------------ ------------
Copper (tonnes)
Ok Tedi 28,800 30,400 -5% 31,600
Cayeli 32,700 32,500 +1% 36,800
Pyhasalmi 13,300 13,600 -2% 13,000
Las Cruces - - - 38,200
Troilus 5,700 2,800 +104% 6,000
------------------------------------------------------------ ------------
80,500 79,300 2% 125,600
------------------------------------------------------------ ------------
Zinc (tonnes)
Cayeli 47,600 46,200 +3% 56,400
Pyhasalmi 27,800 38,900 -29% 22,600
------------------------------------------------------------ ------------
75,400 85,100 -11% 79,000
------------------------------------------------------------ ------------
Gold (ounces)
Troilus 151,300 138,400 +9% 132,200
Ok Tedi 92,800 84,900 +9% 109,400
------------------------------------------------------------ ------------
244,100 223,300 +9% 241,600
------------------------------------------------------------ ------------
Pyrite (tonnes)
Pyhasalmi 565,000 486,000 +16% 510,000
------------------------------------------------------------ ------------
(1) Inmet's share represents 100 percent for Cayeli, Pyhasalmi and
Troilus, 18 percent for Ok Tedi and 70 percent for Las Cruces.


This quarter:
- zinc production was lower than 2007 mainly because zinc grades at
Pyhasalmi were lower
- gold production was higher than 2007 because grades were higher
- pyrite production was lower than 2007 because demand was lower.

Zinc production for the year was down from 2007 because zinc grades were
lower. Gold production was higher because gold grades were higher.

2009 outlook for sales

Our outlook for sales ties directly to our production outlook. We expect
copper and zinc sales volumes in 2009 to be higher because of our higher
production expectations, including new production at Las Cruces.
We have set a higher copper production target for 2009 because production
should start at Las Cruces and we expect higher throughput at Cayeli and Ok
Tedi. We expect to mine lower zinc grades at Pyhasalmi in 2009. Estimated
production for our 70 percent share of Las Cruces includes 26,000 tonnes of
copper cathode and 12,200 tonnes of ore that, depending on market conditions,
we will ship directly to smelters.
Our gold target for 2009 is consistent with our 2008 results. We expect
more production from Ok Tedi because of higher throughput, but lower
production from Troilus when it starts to produce gold from its lower grade
stockpiles.
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. According to analysts' consensus forecasts, copper
and zinc are the two metals investors believe are best positioned for a
rebound in demand. With the current volatility in the markets it is even more
difficult to forecast metal prices. We do not know the effect various
government planned stimulus packages and interest rate cuts will have on the
worldwide economy. As part of our strategy, we will focus on maximizing the
efficiency of our operations to ensure that we remain highly competitive in
this economic environment.

Lower smelter processing charges for the quarter and year

-------------------------------------------------------------------------
three months ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Smelter processing charges and
freight by operation
Cayeli $13,279 $19,756 -33%
Pyhasalmi 9,615 15,384 -38%
Troilus 3,904 1,798 +117%
Ok Tedi(1) 6,072 6,964 -13%
-------------------------------------------------------------------------
$32,870 $43,902 -25%
-------------------------------------------------------------------------
Smelter processing charges and
freight by metal
Copper $17,655 $19,910 -11%
Zinc 12,069 20,682 -42%
Other 3,146 3,310 -5%
-------------------------------------------------------------------------
$32,870 $43,902 -25%
-------------------------------------------------------------------------
Smelter processing charges by
type and freight
Copper treatment and refining
charges $8,524 $8,092 +5%
Zinc treatment charges 10,228 13,444 -24%
Copper price participation 1,229 1,918 -36%
Zinc price participation (2,355) (2,535) -7%
Content losses 6,778 14,788 -54%
Other 950 139 +583%
Freight 7,516 8,056 -7%
-------------------------------------------------------------------------
$32,870 $43,902 -25%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Smelter processing charges and
freight by operation
Cayeli $78,400 $94,700 -17%
Pyhasalmi 56,954 62,081 -8%
Troilus 11,053 7,989 +38%
Ok Tedi(1) 33,331 41,708 -20%
-------------------------------------------------------------------------
$179,738 $206,478 -13%
-------------------------------------------------------------------------
Smelter processing charges and
freight by metal
Copper $79,792 $97,071 -18%
Zinc 74,071 97,141 -24%
Other 25,875 12,266 +111%
-------------------------------------------------------------------------
$179,738 $206,478 -13%
-------------------------------------------------------------------------
Smelter processing charges by
type and freight
Copper treatment and refining
charges $24,625 $32,414 -24%
Zinc treatment charges 47,030 46,058 +2%
Copper price participation 7,025 13,763 -49%
Zinc price participation (3,170) 2,529 -225%
Content losses 50,530 74,112 -32%
Other 6,600 5,394 +22%
Freight 47,098 32,208 +46%
-------------------------------------------------------------------------
$179,738 $206,478 -13%
-------------------------------------------------------------------------
(1) Our 18 percent share of Ok Tedi's smelter processing charges and
freight.

Copper treatment and refining charges were lower in 2008 compared to 2007
because of more favourable contract terms with smelters. Zinc treatment
charges were higher, but lower prices significantly reduced zinc price
participation charges. For the quarter, zinc treatment charges also reflect
lower volumes sold. Freight charges were higher for the year because Pyhasalmi
increased their shipments of pyrite and freight rates increased as a result of
rising demand and fuel prices.

2009 outlook for smelter processing charges and freight

We expect copper treatment and refining costs to increase in 2009
following recently announced benchmark settlements between major mining
companies and smelters.
We sell approximately 90 percent of our copper concentrate under
long-term contracts. We are estimating long-term treatment costs of US $75 per
dry metric tonne and spot treatment costs of about US $85 per dry metric tonne
in 2009. We also expect there will continue to be no price participation.
In the fourth quarter of 2008, smelters joined mines in cutting
production, to respond to the decline in demand for refined zinc, and to
falling prices. We expect mine production in 2009 to be below smelting
requirements, and believe that a balanced or deficit concentrate market could
evolve. We therefore expect zinc processing charges to be lower in 2009,
potentially by as much as 35 percent.
We expect to see zinc treatment charges in 2009 of about US $200 per dry
metric tonne. Price participation is expected to continue for zinc
concentrates. This should be approximately US $0.10 per dry metric tonne for
zinc prices greater than US $1,200 per tonne (US $0.54 per pound), and (US
$0.07) per dry metric tonne for zinc prices less than US $1,200 per tonne.
We expect production to begin at Las Cruces in 2009, and, depending on
market conditions, it may sell crushed ore to smelters and incur smelter
processing charges. The costs associated with smelting this material are
expected to be higher than at our other operations because of the higher level
of impurities in this ore.
We now expect copper cathode production to start in April 2009. This will
be sold directly to buyers, bypassing the smelters and eliminating smelter and
refining treatment charges.
We expect our ocean freight costs to be about 20 percent lower than they
were in 2008 because of a general slowdown in global economic activity.

Direct production costs and cost of sales were higher than last year

-------------------------------------------------------------------------
three months ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------

Direct production costs by operation
Cayeli $21,161 $23,913 -12%
Pyhasalmi 15,597 13,589 +15%
Troilus 22,628 21,173 +7%
Ok Tedi(1) 27,549 20,913 +32%
-------------------------------------------------------------------------
Total direct production costs 86,935 79,588 +9%
Inventory changes 30 (2,239) -101%
Reclamation, accretion and other
non-cash expenses 4,750 1,460 +225%
-------------------------------------------------------------------------
Total cost of sales $91,715 $78,809 +16%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Direct production costs by operation
Cayeli $89,761 $86,978 +3%
Pyhasalmi 59,642 50,043 +19%
Troilus 88,707 77,643 +14%
Ok Tedi(1) 93,063 81,232 +15%
-------------------------------------------------------------------------
Total direct production costs 331,173 295,896 +12%
Inventory changes (3,345) 3,264 -202%
Reclamation, accretion and other
non-cash expenses 17,974 9,264 +94%
-------------------------------------------------------------------------
Total cost of sales $345,802 $308,424 +12%
-------------------------------------------------------------------------
(1) Our 18 percent share of Ok Tedi's direct production costs.


Key reasons for the increase in direct production costs

-------------------------------------------------------------------------
three months year
ended ended
(millions) December 31 December 31
-------------------------------------------------------------------------
Volume $(1) $(6)
Labour costs 1 11
Consumables 1 16
Energy 5 13
Costs that vary with income and cash flow (3) (1)
Other 4 2
-------------------------------------------------------------------------
Increase in direct production costs,
compared to 2007 $7 $35
-------------------------------------------------------------------------

Depreciation was higher than last year

-------------------------------------------------------------------------
three months ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Depreciation by operation
Cayeli $3,150 $2,635 +20%
Pyhasalmi 2,502 1,881 +33%
Troilus 2,954 2,620 +13%
Ok Tedi 6,238 2,344 +166%
-------------------------------------------------------------------------
$14,844 $9,480 +57%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Depreciation by operation
Cayeli $11,448 $8,857 +29%
Pyhasalmi 9,227 8,439 +9%
Troilus 9,239 10,120 -9%
Ok Tedi 14,690 8,257 +78%
-------------------------------------------------------------------------
$44,604 $35,673 +25%
-------------------------------------------------------------------------

Depreciation in 2008 included a full year of phase 2 shaft development at
Cayeli, while 2007 included only four months. Ok Tedi's depreciation increased
because depreciation started in October 2008 after the mine waste tailings
project was complete. This project is being depreciated over Ok Tedi's
remaining five year life. In addition, most operations have higher
depreciation because they have replaced mine equipment and increased other
sustaining capital over the last few years.

2009 outlook for depreciation

We expect depreciation to be about $85 million for 2009. This is higher
than 2008 because we expect Las Cruces to begin production, and Ok Tedi will
depreciate the mine waste tailings project for the full year. Of this amount,
Las Cruces will be about $20 million, assuming we capitalize pre-production
for two months after first copper is produced.

CORPORATE COSTS

Corporate costs include general and administration costs, taxes and
interest. We also record income from investments in this category, as well as
income we receive from other transactions.

Investment and other income was lower in the year because of foreign
exchange losses

-------------------------------------------------------------------------
three months ended December 31 year ended December 31
(thousands) 2008 2007 2008 2007
-------------------------------------------------------------------------
Interest income $6,188 $9,703 $28,182 $32,647
Dividend income
and royalty 1,825 1,677 4,979 5,748
Foreign exchange
loss (5,607) (2,969) (33,875) (14,519)
Sale of Wolfden - - - 11,730
Other 5,651 (2,443) 6,700 848
-------------------------------------------------------------------------
$8,057 $5,968 $5,986 $36,454
-------------------------------------------------------------------------

Foreign exchange loss
We have a foreign exchange gain or loss when:
- 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 gains (losses) in 2008 and 2007 are a result of the
following:

-------------------------------------------------------------------------
three months ended December 31 year ended December 31
(millions) 2008 2007 2008 2007
-------------------------------------------------------------------------
Revaluation of
US dollar
denominated debt
at Las Cruces $(12) $- $(25) $-
Distribution of
funds from
subsidiaries 1 (2) (19) (5)
Revaluation of
euro denominated
cash held in
Canada 4 (1) 5 (6)
Revaluation of
short-term
foreign inter-
group loans and
other monetary
items 1 - 5 (3)
-------------------------------------------------------------------------
$(6) $(3) $(34) $(14)
-------------------------------------------------------------------------

Sale of Wolfden
In May 2007 we sold our 13.5 million common shares of Wolfden Resources
Inc. to Zinifex Canadian Enterprises Inc. for $51 million or $3.81 per share,
and recorded a gain of $12 million.

2009 outlook for investment and other income

Investment and other income is affected by cash balances, 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 strength or weakness of the Canadian dollar relative to
when we initially invested in the operations or the rate at which funds were
accumulated. The amount of the gain or loss, if any, will depend on the amount
distributed and foreign exchange rates at the time of distribution.
We plan to repatriate approximately US $80 million in cash from Cayeli
and (euro)20 million from Pyhasalmi in the first half of 2009. This excess
cash was accumulated at 2008 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 that significant.
At December 31, 2008, we held (euro)30 million in Canada that could be
affected by foreign exchange gains or losses.

Asset impairment charges to reflect our write down in Cerattepe

On March 26, 2008 we received notice from the Rize Administrative Court
of its decision to grant an injunction against the Cerattepe property. The
injunction prevented us from doing any further development work on the
project. We appealed the injunction and on October 24, 2008 the Court ruled to
cancel our operating licences. We have joined with the Turkish Ministry of
Energy and Natural Resources in a further appeal to the Turkish Administrative
Supreme Court. We continue to believe that the applications to cancel the
operating licences are without merit. Nonetheless, we have decided that we
will not proceed with the project, regardless of the decision on the appeal.
All work has ceased on the project and we took a $34 million charge to write
down the assets to net realizable value.
The remaining $2 million asset impairment reflects the write down of
material and supplies at Troilus.

Income tax expense was lower in the quarter because of lower earnings

-------------------------------------------------------------------------
three months ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Cayeli $(1,991) $5,956 -133%
Pyhasalmi 948 6,200 -85%
Ok Tedi (545) 10,822 -105%
Las Cruces (6,049) 32 -19003%
Corporate 8,174 (4,671) +275%
-------------------------------------------------------------------------
$537 $18,339 -97%
-------------------------------------------------------------------------

-------------------------------------------------------------------------
year ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Cayeli $32,216 $46,445 -31%
Pyhasalmi 19,814 30,911 -36%
Ok Tedi 49,779 65,745 -24%
Las Cruces (11,050) 286 -3964%
Corporate 16,609 (2,693) -717%
-------------------------------------------------------------------------
$107,368 $140,694 -24%
-------------------------------------------------------------------------

Our tax expense changes as our earnings change. Cayeli's effective tax
rate was 5 percent this quarter and 38 percent for the year. This is different
from the statutory rate of 24 percent mainly because the asset impairment
charge for Cerattepe is not tax-deductible, and there were foreign exchange
gains in the Turkish lira tax accounts. At Las Cruces, we recorded a tax
recovery related to foreign exchange losses from the translation of its US
dollar denominated debt. We also reduced its future income tax liability by $2
million, reflecting Spain's 30 percent statutory tax rate. The tax expense at
Corporate is a provision for Quebec mining duties and a reduction in its
future income tax asset to reflect Troilus' earnings.

2009 outlook for income tax expense

We are not expecting any further changes in statutory tax rates at our
operations in 2009. We expect to expense approximately $9 million in Quebec
mining duties in 2009, depending on Troilus' 2009 net income.

Results of our operations

2009 estimates

We have included estimates for our 2009 operating earnings and operating
cash flows in our financial review by operation. In deriving our estimates we
used our 2009 objectives for production and cost per tonne of ore milled, as
well as the following assumptions:

-------------------------------------------------------------------------
Copper price US $1.50 per pound
Zinc price US $0.50 per pound
Gold price US $850 per ounce
Copper treatment cost US $75 per tonne
Zinc treatment cost US $200 per tonne (basis US $1,200 per tonne)
US $ to C$ exchange rate $1.25
euro to C$ exchange rate $1.50
Working capital Assume no changes
-------------------------------------------------------------------------


CAYELI
-------------------------------------------------------------------------
three months ended December 31
-------------------------------------------------------------------------
2008 2007 change
-------------------------------------------------------------------------
Tonnes of ore
milled (000's) 292 277 +5%
Tonnes of ore
milled per day 3,200 3,000 +5%
-------------------------------------------------------------------------
Grades (percent) copper 3.7 4.2 -12%
zinc 6.2 6.8 -9%
-------------------------------------------------------------------------
Mill recoveries
(percent) copper 77 79 -3%
zinc 70 72 -3%
-------------------------------------------------------------------------
Production
(tonnes) copper 8,400 9,100 -8%
zinc 12,800 13,600 -6%
-------------------------------------------------------------------------
Cost per tonne
of ore milled (C$) $72 $86 -16%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
-------------------------------------------------------------------------
2008 2007 change 2009
-------------------------------------------------------------------------
Tonnes of ore
milled (000's) 1,109 1,046 +6% 1,200
Tonnes of ore
milled per day 3,040 2,900 +6% 3,300
-------------------------------------------------------------------------
Grades (percent) copper 3.7 3.8 -3% 3.8
zinc 6.1 6.2 -2% 6.5
-------------------------------------------------------------------------
Mill recoveries
(percent) copper 80 81 -1% 80
zinc 71 71 - 72
-------------------------------------------------------------------------
Production
(tonnes) copper 32,700 32,500 +1% 36,800
zinc 47,600 46,200 +3% 56,400
-------------------------------------------------------------------------
Cost per tonne
of ore milled (C$) $81 $83 -2% $81
-------------------------------------------------------------------------

Production goals surpassed targets

Cayeli successfully increased the annual output of the mine to 1.1
million tonnes in 2008, including 292,000 tonnes during the fourth quarter of
the year. Production grades and metallurgical performance for the year were as
expected and in line with 2007 production results. We completed all critical
stope development for the year, giving us access to the lower mining areas.
In the quarter and in comparison to the 2007 fourth quarter, higher
throughput only partially offset the impacts of lower copper and zinc grades
and lower metallurgical recoveries. As a result copper and zinc production
were below prior year fourth quarter levels.
The ore pass system and the new cemented rockfill system improved
operational performance in 2008, allowing production and development to
proceed uninterrupted. The two parallel raise systems will permit us to
develop a program of inspection and repair to ensure their continued
reliability.
Operating costs for the year 2008 were higher than 2007 because inflation
in Turkey raised labour costs, local electricity rates rose, and commodity
prices were higher worldwide. On a unit basis, however, operating costs were
lower because mill throughput was higher. In the quarter, a significant
devaluation of the Turkish lira reduced labour costs, and lower earnings
reduced the royalty charge.

2009 outlook for production and costs

Development of the lower mine, improvements in the ore handling system
and the cemented wastefill system - all critical components to higher
production levels - are now in place, and Cayeli remains focused on producing
at a level of 1.2 million tonnes per year through 2012. For 2009, we expect
copper grades to remain at 3.8 percent and zinc grades to rise to 6.5 percent.
The current three-year labour agreement will expire in May 2009 and
negotiations with the union will begin in April. Pay increases historically
have exceeded inflation levels. We will make a strong effort to manage labour
cost escalations to maintain our competiveness.
Royalties also have a significant effect on costs and are variable
depending on earnings. Cost per tonne of ore milled includes a negative $6 per
tonne in royalties in the fourth quarter and $6 per tonne in royalties for the
year. We have estimated that royalties will be $1 per tonne out of our total
2009 objective of $81 per tonne of ore milled, depending on metal prices.

Financial review

Lower earnings this quarter because of a significant decline in copper and
zinc prices

--------------------------------------------------------------- ---------
(millions of
Canadian dollars three months ended year ended
unless otherwise December 31 December 31 Objective
stated) 2008 2007 2008 2007 2009
--------------------------------------------------------------- ---------
Sales analysis
Copper sales (tonnes) 9,100 9,400 32,500 33,600 36,800
Zinc sales (tonnes) 7,200 11,500 48,800 48,200 56,400
------------------------------------ ---------
Gross copper sales $14 $55 $194 $253 $152
Gross zinc sales 11 23 99 155 78
Other metal sales 2 3 12 11 23
------------------------------------ ---------
Gross sales 27 81 305 419 253
Smelter processing charges
and freight (13) (20) (78) (95) (99)
--------------------------------------------------------------- ---------
Net sales $14 $61 $227 $324 $154
--------------------------------------------------------------- ---------
Cost analysis
Tonnes of ore milled (thousands) 292 277 1,109 1,047 1,200
Direct production costs
($ per tonne) $72 $86 $81 $83 $81
--------------------------------------------------------------- ---------
Direct production costs $21 $24 $90 $87 $97
Change in inventory (2) (2) - 1 -
Depreciation and other non-cash
costs 4 3 14 12 18
--------------------------------------------------------------- ---------
Operating costs $23 $25 $104 $100 $115
--------------------------------------------------------------- ---------
Operating earnings (loss) $(8) $36 $123 $224 $39
--------------------------------------------------------------- ---------
Operating cash flow $(7) $51 $82 $215 $51
--------------------------------------------------------------- ---------

The objective for 2009 uses the assumptions laid out on page 13.

The table below shows what contributed to the change in operating earnings
and operating cash flow between 2008 and 2007.

-------------------------------------------------------------------------
three months year
ended ended
(millions) December 31 December 31
-------------------------------------------------------------------------
Lower metal prices, denominated in
Canadian dollars $(43) $(107)
Lower sales volumes from fewer shipments (6) (6)
Lower smelter processing charges 2 17
Lower (higher) operating costs 1 (4)
Lower royalty 2 2
Higher depreciation (1) (3)
-------------------------------------------------------------------------
Lower operating earnings, compared to 2007 (44) (101)
Lower tax expense because earnings were lower 8 9
Lower tax rate 1 4
Changes in working capital (mainly from higher
tax payments) (15) (35)
Other (8) (10)
-------------------------------------------------------------------------
Lower operating cash flow, compared to 2007 $(58) $(133)
-------------------------------------------------------------------------

To spend on sustaining capital for 2009

-------------------------------------------------------------------------
three months ended December 31
2008 2007 change
-------------------------------------------------------------------------
Capital spending $3,600 $2,100 +71%
-------------------------------------------------------------------------

------------------------------------------------------------ ------------
year ended December 31 objective
2008 2007 change 2009
------------------------------------------------------------ ------------
Capital spending $20,300 $17,700 +15% $22,000
------------------------------------------------------------ ------------

We completed the mine infrastructure program in 2008, commissioning the
ore passes, improving the cemented wastefill system, and rehabilitating the
main ventilation intake. We also replaced key equipment, which improved fleet
reliability and overall production performance.

2009 outlook for capital spending

Cayeli expects to spend $22 million in 2009 on mine equipment
replacements, mill upgrades and mine development.

PYHASALMI

-------------------------------------------------------------------------
three months ended December 31
2008 2007 change
-------------------------------------------------------------------------
Tonnes of ore
milled (000's) 356 358 -1%
Tonnes of ore
milled per day 3,870 3,900 -1%
-------------------------------------------------------------------------
Grades (percent) copper 1.0 1.0 -
zinc 2.1 3.8 -45%
sulphur 42 40 +5%
-------------------------------------------------------------------------
Mill recoveries
(percent) copper 96 96 -
zinc 90 92 -2%
-------------------------------------------------------------------------
Production
(tonnes) copper 3,400 3,300 +3%
zinc 6,800 12,400 -45%
pyrite 81,700 182,000 -55%
-------------------------------------------------------------------------
Cost per tonne
of ore milled (C$) $44 $38 +16%
-------------------------------------------------------------------------

------------------------------------------------------------- -----------
year ended December 31 objective
2008 2007 change 2009
------------------------------------------------------------- -----------
Tonnes of ore
milled (000's) 1,406 1,377 +2% 1,370
Tonnes of ore
milled per day 3,850 3,770 +2% 3,750
------------------------------------------------------------- -----------
Grades (percent) copper 1.0 1.0 - 1.0
zinc 2.2 3.1 -29% 1.9
sulphur 42 40 +5% 42
------------------------------------------------------------- -----------
Mill recoveries
(percent) copper 95 96 -1% 94
zinc 91 92 -1% 87
------------------------------------------------------------- -----------
Production
(tonnes) copper 13,300 13,600 -2% 13,000
zinc 27,800 38,900 -29% 22,600
pyrite 565,000 486,000 +16% 510,000
------------------------------------------------------------- -----------
Cost per tonne
of ore milled (C$) $42 $36 +17% $41
------------------------------------------------------------- -----------

Continues to improve efficiencies by increasing mill production

Pyhasalmi had record throughput in 2008, processing more than 1.4 million
tonnes of ore through the mill. The mill had a record 96 percent availability.
Copper production in 2008 was slightly higher than plan.
Zinc production was lower than we planned and lower than 2007 because
changes in stope sequencing resulted in lower grades.
Pyrite production increased to 565,000 tonnes for the year to take
advantage of high demand. Demand decreased in the fourth quarter and
accordingly we reduced our production of pyrite.
The higher cost of steel and mill processing reagents, combined with the
exchange rate between the euro and Canadian dollar, increased costs this year.

2009 outlook for production and costs

Pyhasalmi expects to mine 1.4 million tonnes of 1 percent copper and 1.9
percent zinc in 2009, and produce 13,000 tonnes of copper and 22,600 tonnes of
zinc. Zinc grades should be lower than in recent years because mining stopes
are further from the zinc-rich ore body contact.
Pyrite sales are beneficial to the financial performance of Pyhasalmi and
we will continue our efforts to enter the long-term pyrite markets in Europe
and Asia. We made important gains in the Chinese market in 2008.

Financial review

Higher pyrite sales help offset lower copper and zinc sales

---------------------------------------------------------------- --------
(millions of
Canadian dollars three months ended year ended
unless otherwise December 31 December 31 Objective
stated) 2008 2007 2008 2007 2009
---------------------------------------------------------------- --------
Sales analysis
Copper sales (tonnes) 3,800 3,300 13,700 14,000 13,000
Zinc sales (tonnes) 6,500 12,800 27,400 38,900 22,600
Pyrite sales (tonnes) 66,000 133,000 558,000 509,000 510,000
------------------------------------ --------
Gross copper sales $14 $21 $94 $105 $54
Gross zinc sales 9 30 51 125 31
Other metal sales 14 8 76 30 46
------------------------------------ --------
Gross sales 37 59 221 260 131
Smelter processing charges
and freight (9) (16) (57) (62) (38)
---------------------------------------------------------------- --------
Net sales $28 $43 $164 $198 $93
---------------------------------------------------------------- --------
Cost analysis
Tonnes of ore milled
(thousands) 356 358 1,406 1,377 1,370
Direct production costs
($ per tonne) $44 $38 $42 $36 $41
---------------------------------------------------------------- --------
Direct production costs $16 $13 $60 $50 $56
Change in inventory - - - (1) -
Depreciation and other
non-cash costs 4 2 11 11 11
---------------------------------------------------------------- --------
Operating costs $20 $15 $71 $60 $67
---------------------------------------------------------------- --------
Operating earnings $8 $28 $93 $138 $26
---------------------------------------------------------------- --------
Operating cash flow $21 $5 $100 $109 $33
---------------------------------------------------------------- --------

The objective for 2009 uses the assumptions laid out on page 13.

The table below shows what contributed to the change in operating earnings
and operating cash flow between 2008 and 2007.

-------------------------------------------------------------------------
three months year
ended ended
(millions) December 31 December 31
-------------------------------------------------------------------------
Lower metal prices, denominated in
Canadian dollars $(16) $(41)
Higher pyrite sales, net of costs to sell 7 28
Lower sales volumes (8) (29)
Lower smelter processing charges and freight 1 6
Higher operating costs (2) (5)
Impact of the Canadian dollar on translated
operating costs (2) (4)
-------------------------------------------------------------------------
Lower operating earnings, compared to 2007 (20) (45)
Lower tax expense because of lower earnings 5 11
Changes in working capital (mainly from lower
accounts receivable) 30 23
Other 1 2
---------------------------
Higher (lower) operating cash flow, compared
to 2007 $16 $(9)
-------------------------------------------------------------------------

Capital spending in 2008 was to improve mill efficiencies

-------------------------------------------------------------------------
three months ended December 31
(thousands) 2008 2007 change
-------------------------------------------------------------------------
Capital spending $3,900 $1,400 +179%
-------------------------------------------------------------------------

------------------------------------------------------------- -----------
year ended December 31 objective
(thousands) 2008 2007 change 2009
------------------------------------------------------------- -----------
Capital spending 9,800 $3,500 +180% $11,000
------------------------------------------------------------- -----------

We purchased a rock bolter, cable bolter and a production front end loader
in 2008. We also replaced the corroded copper rougher and scavenger cells with
new units.

2009 outlook for capital spending

We expect to spend $11 million in 2009, mainly for mine equipment,
improvements in the mill and renovation of process water pumps.

TROILUS

-------------------------------------------------------------------------
three months ended December 31
2008 2007 change
-------------------------------------------------------------------------
Tonnes of ore
milled (000's) 1,500 1,440 +4%
Tonnes of ore
milled per day 16,600 15,700 +4%
-------------------------------------------------------------------------
Strip ratio 1.3 1.5 -13%
-------------------------------------------------------------------------
Grades gold (grams
/tonne) 0.99 0.89 +11%
copper
(percent) 0.14 0.06 +133%
-------------------------------------------------------------------------
Mill recoveries
(percent) gold 83 82 +1%
copper 94 89 +6%
-------------------------------------------------------------------------
Production gold
(ounces) 40,500 33,700 +20%
copper
(tonnes) 2,000 600 +233%
-------------------------------------------------------------------------
Cost per tonne
of ore milled (C$) $15 $15 -
-------------------------------------------------------------------------


------------------------------------------------------------- -----------
year ended December 31 objective
2008 2007 change 2009
------------------------------------------------------------- -----------
Tonnes of ore
milled (000's) 5,800 6,000 -3% 6,200
Tonnes of ore
milled per day 15,900 16,500 -3% 16,900
------------------------------------------------------------- -----------
Strip ratio 1.4 1.1 +27% 0.3
------------------------------------------------------------- -----------
Grades gold (grams
/tonne) 0.96 0.87 10% 0.82
copper
(percent) 0.10 0.05 +100% 0.11
------------------------------------------------------------- -----------
Mill recoveries
(percent) gold 84 82 +2% 81
copper 93 88 +6% 92
------------------------------------------------------------- -----------
Production gold
(ounces) 151,300 138,400 +9% 132,200
copper
(tonnes) 5,700 2,800 +104% 6,000
------------------------------------------------------------- -----------
Cost per tonne
of ore milled (C$) $15 $13 +15% $10
------------------------------------------------------------- -----------

Higher gold production

Troilus milled 5.8 million tonnes in 2008, which was well below our
target of 6.6 million tonnes. This was the result of hard ore in the southwest
extension area of the pit, which limited grinding mill throughput for most of
the year, and lower production from the softer areas in the main ore body in
the second half of the year. A total of 151,300 ounces of gold were produced
during the year. Copper production reached 5,700 tonnes.
We completed mining in the J4 pit early in the year, and in the southwest
ore body extension of the 87 pit in the third quarter. By the fourth quarter,
production was confined to the main ore body in the 87 pit which helped
increase throughput in the fourth quarter. The 87 pit should be complete by
April 2009. Production access and sequencing became very difficult late in
2008 because of the constrained mining area and reduced working faces, but
delays in accessing the pit were mitigated by processing ore from the low
grade stockpile.
Gold production in the fourth quarter and for the year was higher than
for the same periods in 2007, mainly because grades from the 87 pit were
higher. Gold recoveries also continue to be higher than expected. Copper
grades peaked in the fourth quarter, more than tripling copper production in
the quarter compared to last year's fourth quarter, and increasing it over 100
percent year over year.
Higher fuel and steel grinding media costs resulted in a higher cost per
tonne compared to last year.

2009 outlook for production and costs

Troilus should complete mining in the 87 pit in the second quarter of
2009, and then begin stockpile recovery. We expect mill throughput of 6.2
million tonnes for the year at average grades of 0.8 grams per tonne gold and
0.11 percent copper, which should produce 132,200 ounces of gold and 6,000
tonnes of copper.
The workforce will be reduced during the year as pit mining is completed
and less equipment is required. We will assign some of the Troilus workforce
and available equipment to reclamation activities.
We also expect production costs to come down because of the completion of
mining in the pit in May and then reverting to lower cost production from
milling the stockpiles.

Financial review

Higher gold prices and higher sales volumes improved earnings

---------------------------------------------------------------- --------
(millions of
Canadian dollars three months ended year ended
unless otherwise December 31 December 31 objective
stated) 2008 2007 2008 2007 2009
---------------------------------------------------------------- --------
Sales analysis
Gold sales (ounces) 40,000 36,100 149,700 142,200 132,200
Copper sales (tonnes) 2,000 800 5,500 2,900 6,000
------------------------------------- --------
Gross gold sales $32 $22 $109 $85 $140
Gross copper sales 4 4 30 21 25
Other metal sales - 1 2 2 3
------------------------------------- --------
Gross sales 36 27 141 108 168
Smelter processing charges
and freight (4) (2) (11) (8) (13)
---------------------------------------------------------------- --------
Net sales $32 $25 $130 $100 $155
---------------------------------------------------------------- --------
Cost analysis
Tonnes of ore milled
(thousands) 1,530 1,440 5,800 6,000 6,200
Direct production costs
($ per tonne) $15 $15 $15 $13 $10
---------------------------------------------------------------- --------
Direct production costs $23 $21 $89 $78 $62
Change in inventory 1 1 - 1 1
Depreciation and other
non-cash costs 5 3 15 11 12
---------------------------------------------------------------- --------
Operating costs $29 $25 $104 $90 $75
---------------------------------------------------------------- --------
Operating earnings $4 $- $26 $10 $80
---------------------------------------------------------------- --------
Operating cash flow $20 $5 $41 $15 $90
---------------------------------------------------------------- --------

The objective for 2009 uses the assumptions laid out on page 13.

The table below shows what contributed to the change in operating earnings
and operating cash flow between 2008 and 2007.

-------------------------------------------------------------------------
three months year
ended ended
(millions) December 31 December 31
-------------------------------------------------------------------------
Higher gold price denominated in
Canadian dollars $7 $19
Lower copper price denominated in
Canadian dollars (8) (11)
Higher sales volumes 9 20
Lower smelter processing charges 1 3
Higher operating costs (3) (11)
Lay off costs accrued (2) (4)
-------------------------------------------------------------------------
Increase in operating earnings, compared to 2007 $4 $16
Changes in working capital 1 4
Add back - amortization of gold hedges cash
settled in August 7 -
Other 3 6
-------------------------------------------------------------------------
Increase in operating cash flow, compared to 2007 $15 $26
-------------------------------------------------------------------------


OK TEDI

-------------------------------------------------------------------------
three months ended December 31
(100 percent) 2008 2007 change
-------------------------------------------------------------------------
Tonnes of ore
milled (000's) 5,600 6,300 -11%
Tonnes of ore
milled per day 61,000 68,000 -11%
-------------------------------------------------------------------------
Strip ratio 2.1 1.5 +40%
-------------------------------------------------------------------------
Grades copper
(percent) 0.8 0.9 -11%
gold (grams
/tonne) 1.0 1.0 -
-------------------------------------------------------------------------
Mill recoveries
(percent) copper 89 87 +2%
gold 72 63 +14%
-------------------------------------------------------------------------
Production copper
(tonnes) 40,600 48,400 -16%
gold
(ounces) 134,100 130,400 +3%
-------------------------------------------------------------------------
Cost per tonne
of ore milled (C$) $27 $19 +42%
-------------------------------------------------------------------------

------------------------------------------------------------- -----------
year ended December 31 objective
(100 percent) 2008 2007 change 2009
------------------------------------------------------------- -----------
Tonnes of ore
milled (000's) 21,700 25,800 -16% 25,300
Tonnes of ore
milled per day 59,000 71,000 -16% 69,000
------------------------------------------------------------- -----------
Strip ratio 1.8 1.3 +38% 1.2
------------------------------------------------------------- -----------
Grades copper
(percent) 0.9 0.8 +13% 0.8
gold (grams
/tonne) 1.0 0.9 +11% 1.1
------------------------------------------------------------- -----------
Mill recoveries
(percent) copper 87 86 +1% 84
gold 73 71 +3% 68
------------------------------------------------------------- -----------
Production copper
(tonnes) 159,700 169,200 -6% 176,000
gold
(ounces) 515,400 471,800 +9% 608,000
------------------------------------------------------------- -----------
Cost per tonne
of ore milled (C$) $24 $18 +33% $26
------------------------------------------------------------- -----------

Lower throughput at Ok Tedi

Mill throughput in 2008 was 3.6 million tonnes below plan and 4.1 million
tonnes below 2007, averaging about 59,000 tonnes per day. The main cause of
the shortfall was a shortage of ore feed to the mill. Availability and
operational problems with the new in-pit crusher and a three day illegal
strike earlier in the year accounted for most of the lost tonnes.
Installing the new in-pit crusher has been a challenging project. To
counteract the reduced tonnage, Ok Tedi modified the mine plan to increase the
copper head grade. The higher grade and metal recovery regained about half of
the potential copper losses. By the end of the year, most of the issues that
affected the in-pit crusher's performance in 2008 had been resolved.
The mine waste tailing project is designed to remove sulphur from the
mill tailings. Commissioning began in September and is five months later than
plan because of late delivery of components and a delay in visa approvals for
key construction staff. Ok Tedi has managed sulphur control to date by
limiting the mining of the Taranaki ore. This reduced gold production this
year to 515,400 ounces, 24 percent below Ok Tedi's target.
The cost per tonne of ore milled is higher in 2008 because mill
throughput is lower and labour and fuel costs have increased.

2009 outlook for production and costs

Ok Tedi expects to process 25.3 million tonnes of ore grading 0.8 percent
copper and containing 1.1 grams per tonne of gold. This should produce 176,000
tonnes of copper and 608,000 ounces of gold. Ok Tedi expects a 18 percent
increase in its gold production compared to 2008 because of the higher content
of skarn ores in the mill feed.
The delay in commissioning the mine waste and tailings management plant
will be mitigated by limiting mill feed to an average of 6 percent sulphur
grade for the first six months of 2009, after which it should rise to an
average of 8 percent. The sulphur constraint will limit the consumption of
higher grade gold ore from the Taranaki pit during the first half of the year.

Financial review

Higher operating cash flow

---------------------------------------------------------------- --------
(millions of
Canadian dollars three months ended year ended
unless otherwise December 31 December 31 objective
stated) 2008 2007 2008 2007 2009
---------------------------------------------------------------- --------
Sales analysis at 18%
Copper sales (tonnes) 7,500 7,600 29,900 32,500 31,600
Gold sales (ounces) 23,500 21,800 92,100 92,000 109,400
------------------------------------- --------
Gross copper sales $15 $40 $193 $248 $131
Gross gold sales 22 16 81 65 116
Other metal sales 1 1 3 3 4
------------------------------------- --------
Gross sales 38 57 277 316 251
Smelter processing charges
and freight (6) (7) (33) (41) (38)
---------------------------------------------------------------- --------
Net sales $32 $50 $244 $275 $213
---------------------------------------------------------------- --------
Cost analysis at 18%
Tonnes of ore milled
(thousands) 1,000 1,125 3,900 4,640 4,550
Direct production costs
($ per tonne) $27 $19 $24 $18 $26
---------------------------------------------------------------- --------
Direct production costs $27 $21 $93 $81 $118
Change in inventory 1 (1) (3) 2 -
Depreciation and other
non-cash costs 6 2 19 9 28
---------------------------------------------------------------- --------
Operating costs $34 $22 $109 $92 $146
---------------------------------------------------------------- --------
Operating earnings ($2) $28 $135 $183 $67
---------------------------------------------------------------- --------
Operating cash flow $11 $23 $117 $98 $63
---------------------------------------------------------------- --------

The objective for 2009 uses the assumptions laid out on page 13.

The table below shows what contributed to the change in operating earnings
and operating cash flow between 2008 and 2007.

-------------------------------------------------------------------------
three months year
ended ended
(millions) December 31 December 31
-------------------------------------------------------------------------
Lower copper prices, denominated in
Canadian dollars $(25) $(35)
Higher gold prices, denominated in
Canadian dollars 5 15
Lower sales volumes - (8)
Lower smelter processing charges - 4
Higher operating costs (6) (18)
Higher depreciation (4) (6)
-------------------------------------------------------------------------
Decrease in operating earnings,
compared to 2007 (30) (48)
Lower tax expense because of lower earnings 11 8
Changes in net working capital 6 41
Other 1 8
-------------------------------------------------------------------------
Increase (decrease) in operating cash flow,
compared to 2007 $(12) $19
-------------------------------------------------------------------------

The mine waste management program was commissioned in September

In 2008, Ok Tedi spent US $200 million (our 18 percent share was $36
million), of which US $114 million was for the mine waste management program
and US $43 million was for the pit drainage project. Ok Tedi's capital
spending this quarter was mainly for these same two projects.

-------------------------------------------------------------------------
three months ended December 31
(18 percent) 2008 2007 change
-------------------------------------------------------------------------
Capital spending $11,700 $10,100 +16%
-------------------------------------------------------------------------

------------------------------------------------------------- -----------
year ended December 31 objective
(18 percent) 2008 2007 change 2009
------------------------------------------------------------- -----------
Capital spending $38,400 $31,500 +22% $26,000
------------------------------------------------------------- -----------

2009 outlook for capital spending

Ok Tedi plans to spend US $115 million (our 18 percent share is $26
million) in 2009 for continuing work on the pit drainage project, further pit
development and other capital projects.

Status of our development projects

LAS CRUCES

Quarterly development update

Dewatering and re-injection system (DRS)

In May 2008, the authority responsible for the DRS permit notified Las
Cruces that it had suspended authorization of the dewatering and re-injection
system for the project. This has prevented Las Cruces from mining in the pit.
Las Cruces implemented short-term water purification and proposed
relocation of certain DRS wells and long-term water purification in response
to the water authority's concerns.
In a letter dated January 22, 2009, the water authority stated that the
measures set out in the Las Cruces action plan have now been validated and
successfully implemented and recommended that the provincial mining authority
allow Las Cruces to resume mining.
The recommendation stipulates that Las Cruces must reduce the level of
the contact water in the holding ponds, to make sure there is enough buffer
capacity to support a sudden influx of contact water from the pit. All water
from the holding ponds are treated by reverse osmosis or lime neutralization
before they are discharged.
Las Cruces has started emptying the holding ponds and expects to complete
this by the end of February. Mining at the bottom of the pit should begin
again during the first week of March, and we expect first ore delivery to the
crusher around March 21 and first production of cathode around the beginning
of the second quarter.
Because the original authorization did not contemplate long-term water
purification, the permit to operate the DRS has to be amended through a public
review process. The relevant authorities have agreed that Las Cruces can
resume mining and start up the hydrometallurgical plant during this process,
which will be initiated in the next month.
We expect the public review process to proceed without complication, that
Las Cruces will receive an amended DRS permit in due course, and that there
will not be any adverse impact on its copper production in the interim.

Preparation for first copper

Construction of the process plant is essentially completed and
commissioning well underway. The commissioning process will take several
months, and we expect first copper cathode production around the beginning of
the second quarter of 2009.

2009 outlook for development and production

Las Cruces construction is essentially complete with only minor finishing
work required during the first quarter of 2009. To date, (euro)448 million has
been spent on the project and (euro)31 million committed, and we expect to
spend the balance in the first quarter of 2009.
The following table shows total spending for the project to the end of
2008 and our 2009 capital objective:

-------------------------------------------------------------------------
(millions) Up to December Objective Total project
31, 2008 2009 estimate at
December 31, 2009
-------------------------------------------------------------------------
Construction capital (euro)448 (euro)56 (euro)504
Mine development 6 19 25
Sustaining capital - 22 22
Capitalized interest 18 5 23
Pre-operating costs
capitalized, net of sales - 8 8
Value added tax 25 (25) -
Other 5 4 9
-------------------------------------------------------------------------
Capital expenditures (euro)502 (euro)89 (euro)591
-------------------------------------------------------------------------


The following table shows expected production for 100 percent of Las
Cruces

-------------------------------------------------------------------------
2009 Life of
target mine
-------------------------------------------------------------------------
Tonnes of ore processed (thousands) 479 17,492
-------------------------------------------------------------------------
Strip ratio 23 12.5
-------------------------------------------------------------------------
Copper grades (percent) 8.8 6.2
-------------------------------------------------------------------------
Copper production (tonnes) 54,600 997,200
-------------------------------------------------------------------------
Cost per tonne of ore processed (C $) $167 $87
-------------------------------------------------------------------------

Copper production for 2009 includes 37,200 tonnes of copper cathode and
17,400 tonnes of copper in ore that, depending on market conditions, we plan
to ship directly to smelters. If market conditions change and smelters refuse
to accept the ore, we will stockpile the ore and process it in the
hydrometallurgical plant. In that situation, the Las Cruces production target
for 2009 would be reduced to 37,200 tonnes of copper.
Based on the 2009 production targets and the assumptions laid out on page
13, we are estimating operating earnings and cash flows for 2009 as follows.

100%
------------------------------------------------------------- -----------
(millions of
Canadian dollars unless objective
otherwise stated) 2009
------------------------------------------------------------- -----------
Copper sales (tonnes) 54,600
------------------------------------------------------------- -----------
Gross copper sales $188
------------------------------------------------------------- -----------
Smelter processing charges and freight (26)
------------------------------------------------------------- -----------
Net sales $162
------------------------------------------------------------- -----------
Tonnes of ore milled (thousands) 479
------------------------------------------------------------- -----------
Direct production costs ($ per tonne) $167
------------------------------------------------------------- -----------
Direct production costs $60
------------------------------------------------------------- -----------
Change in inventory 11
------------------------------------------------------------- -----------
Depreciation and other non-cash costs 24
------------------------------------------------------------- -----------
Operating costs $95
------------------------------------------------------------- -----------
Operating earnings $67
------------------------------------------------------------- -----------
Operating cash flow $76
------------------------------------------------------------- -----------

PETAQUILLA

Quarterly development update

Increased equity interest in Petaquilla to 100 percent

In March 2008, we entered into an arrangement with Teck Cominco Limited
to proceed with development of the Petaquilla project. Under that agreement we
agreed to fund our and Teck's share of project expenditures from April 1, 2008
until we contributed a total between us of US $50 million in development
costs, or until September 30, 2009, whichever was earlier. In late December,
we acquired Teck's 26 percent interest in the project after it gave notice of
its withdrawal from our arrangement. No payment was required other than the US
$30 million we had already paid to fund project expenditures.
Following our successful unsolicited take-over bid in September to
acquire all of the shares of Petaquilla Copper Ltd., the other partner in the
project, we acquired the remaining shares of Petaquilla Copper in November
under a plan of arrangement approved by its remaining shareholders. This
increased our interest in the project by 26 percent.
These two transactions increased our ownership in the Petaquilla project
to 100 percent. Our total investment in the Petaquilla project is now $522
million.
At a time when most mining companies have decided to suspend their copper
growth projects, not necessarily for strategic reasons but out of necessity,
we have decided to advance what we believe to be one of the most promising
copper porphyry projects in the world. Given the rapidly deteriorating supply
of new copper mines, we believe that having a "ready-to-build" project the
size of Petaquilla in Inmet's portfolio, will put us in a very strong position
when the general economy and with it the demand for metals turn around once
again. Our vision is to progress Petaquilla over the next two years before a
major decision on construction will have to be made. We will do this carefully
always ensuring that our balance sheet remains strong and our liquidity is not
impacted to endure the current economic environment.

We are pursuing three main objectives over the next two years:

(1) Complete sufficient drilling to establish a National Instrument
43-101 compliant resource large enough to support a daily mill
throughput of 150,000 tonnes per day for a minimum of 25 years
(2) Complete all front-end-engineering and design on the basis of a
150,000-tonne-per-day mill throughput and third-party power supply
scenario.
(3) Complete and submit for approval the Environmental and Social Impact
Assessment (EsIA), advance permitting and continue to build our
social license.

The following is an update on the status of the related field activities.

Drilling

We anticipate that approximately 60,000 metres of drilling will be needed
to reach our project mineral reserve targets, and that this work will take
until mid-2009 to complete. At the same time, we will carry out drilling for
geotechnical and hydrogeological purposes. Once the resource drilling and the
grinding variability test work is completed, we intend to develop a detailed
mine plan based on a throughput of 150,000 tonnes per day. As of early
February we have eight drills working on the property and have completed close
to 30,000 metres of the required drilling.

Social and environmental impact assessment and community development

Now that baseline studies are substantially complete, we are moving to
the impact assessment stage. We expect to submit our impact assessment to the
Panamanian environmental authorities towards the end of 2009. As a result of
findings from our commitment to build our social license, we are already
developing a number of community development initiatives. These include
helping local businesses to develop capacity to service future operational
needs in areas such as food supply, road maintenance and services. Other
initiatives, such as local scholarship programs and a hot lunch program for
school children, have been adopted.

Engineering

Engineering work is advancing, and our goal is to complete the FEED study
by the end of 2009. The base case is a 150,000 tonne per day conventional
flotation operation which will produce a copper concentrate with gold and
molybdenum by-products. The concentrate will be sent by pipeline to a new port
to be constructed on the coast approximately 30 kilometres from the mine. We
are in discussions with third party independent power producers to provide the
power required for the operation.

2009 outlook for development

By the end of 2009, once the FEED studies are complete and the EsIA is
submitted, we expect to begin detailed engineering. At the same time, we will
seek approval for the EsIA and begin the permitting for construction. We
expect construction to take approximately 44 months from the time the
construction permits are issued. We expect to spend approximately $94 million
in 2009 to fund this work. We have also begun to explore options for including
equity partners in the development of the Petaquilla project.

Managing our liquidity

We plan our financing strategy by assessing our long-term financial
requirements, reviewing our future capital needs and determining the optimal
mix of several alternatives, including our significant cash position, future
operating cash flow, credit facilities and project financing. In planning our
capital structure, we include a liquidity cushion that allows us to address
operational disruptions or general market downturns, such as the current
weakening of the global economy.

-------------------------------------------------------------------------
three months ended December 31 year ended December 31
(millions) 2008 2007 2008 2007
-------------------------------------------------------------------------
CASH FROM OPERATING
ACTIVITIES
Cayeli ($7) $51 $82 $215
Pyhasalmi 21 5 100 109
Troilus 20 5 41 15
Ok Tedi 11 23 117 98
Corporate development
and exploration not
included in operations'
cash flow (1) (2) (7) (6)
General and administration (3) (13) (13) (20)
Other (10) 7 5 16
-------------------------------------------------------------------------
31 76 325 427
-------------------------------------------------------------------------
CASH FROM INVESTING AND
FINANCING
Acquisition of Petaquilla
Copper (43) - (380) -
Capital spending (134) (94) (461) (346)
Investing in Petaquilla
prior to consolidation - - (25) -
Long-term - borrowing 22 24 128 98
- repayment - - (14) (9)
Funding from non-
controlling shareholder 25 16 62 56
Settlement of foreign
exchange forward contract - - 52 -
Financial assurance deposits 1 8 (14) (4)
Dividends paid on common
shares (5) (5) (10) (10)
Disposition of portfolio
investments - - 2 51
Foreign exchange on cash
held in foreign currency 37 6 60 (51)
Other 3 (5) 7 (11)
-------------------------------------------------------------------------
(94) (50) (593) (226)
-------------------------------------------------------------------------
Increase (decrease) in
cash (63) (26) (268) 201
Cash and short-term
investments
Beginning of period 636 815 841 640
-------------------------------------------------------------------------
End of period $573 $841 $573 $841
-------------------------------------------------------------------------


OPERATING ACTIVITIES

Key components of the change in operating cash flows
-------------------------------------------------------------------------
three months year
ended ended
(millions) December 31 December 31
-------------------------------------------------------------------------
Lower earnings from operations (see page 4) $(92) $(178)
Non-cash changes in operating earnings:
Add back higher non-cash charges included in
earnings from operations 13 10
Lower tax expense 19 34
Changes in working capital 15 32
-------------------------------------------------------------------------
Decrease in operating cash flow, compared to 2007 $(45) $(102)
-------------------------------------------------------------------------

Operating cash flows are lower than they were in 2007 mainly because of
lower operating earnings.

2009 outlook for cash from operating activities

In the current volatile markets it is even more difficult than usual to
develop reliable estimates for commodity prices and foreign exchange rates.
The table below shows our expected operating cash at our operations, based on
the market assumptions described on page 13, and the assumptions in Results of
our operations, which starts on page 13.

2009 estimated operating cash flow by operation
---------------------------------------------------------

(millions)
---------------------------------------------------------
Cayeli $51
Pyhasalmi 33
Troilus 90
Ok Tedi 63
Las Cruces 76
---------------------------------------------------------
$313
---------------------------------------------------------

Our estimates of the sensitivity of our earnings and cash flow to key
operating parameters are shown on page 30.

INVESTING AND FINANCING

Capital spending
---------------------------------------------------------------- --------
three months ended year ended
December 31 December 31 objective
(millions) 2008 2007 2008 2007 2009
---------------------------------------------------------------- --------
Cayeli $4 $2 $20 $18 $22
Pyhasalmi 4 1 10 3 11
Troilus - - 2 2 -
Ok Tedi 12 11 38 32 26
Las Cruces 94 76 356 283 133
Cerattepe 3 4 18 8 -
Petaquilla(1) 17 - 42 - 94
---------------------------------------------------------------- --------
$134 $94 $486 $346 $286
---------------------------------------------------------------- --------
(1) Includes our 48 percent share of funding provided to Petaquilla prior
to acquisition of PTC

Please see Results of our operations and Status of our development
projects for a discussion of actual results and our 2009 objective.

Long-term borrowings and settlement of hedge

By June 30, 2008 Las Cruces had fully drawn down its credit facility and
on June 30, this euro denominated debt was converted to a US dollar facility
and the related foreign exchange forward contract was settled. Las Cruces
received (euro)36 million in cash from the settlement of this contract. Since
June 30, Las Cruces has held a US $215 million debt at interest rates of US
Libor plus 2 percent. The funds received from the settlement of the forward
contract will be amortized as a reduction to interest expense over the term of
the loan.
In 2008, Las Cruces repaid (euro)9 million under Tranche B of its credit
facility which is equal to the amount of VAT refunds received. At December 31,
2008 this facility was fully drawn down.

Acquisition of Petaquilla

Details of the transactions that increased our ownership in the
Petaquilla project to 100 percent are described on page 24. We acquired
Petaquilla Copper (whose principal asset is a 26 percent interest in
Petaquilla) at a cost of $378 million. We acquired Teck's 26 percent interest
in Petaquilla at a cost of $32 million, which we had already paid through a
funding arrangement. Our total investment in the Petaquilla project is now
$522 million.

2009 outlook for investing and financing

We expect capital spending to be $286 million in 2009. The more
significant items include:

- $84 million to complete construction of the processing plant at Las
Cruces
- $94 million for work on the development plan at Petaquilla
- $10 million for pit development and $7 million for drainage tunnel
underground works at Ok Tedi.

Until we start receiving proceeds from sales at Las Cruces, we expect to
use sponsor contributions, value added tax refunds and government subsidies to
fund its costs. We are expecting (euro)45 million in subsidies, but we must
meet certain conditions before we receive the funds (mainly reaching specific
levels of employment and completing construction of the plant, which we
believe have been or will be met).

Market conditions
-----------------
These market conditions will have some impact on our overall financial
position. However, based on the strength of our financial position entering
into this downturn, together with our relatively low operating costs we expect
to:
- be able to meet expected production levels
- continue to make ongoing capital expenditures at our current
operations and to complete the development of Las Cruces
- continue to pursue our growth objectives through the advancement of
the Petaquilla project and consideration of other opportunities as
they arise.

We will continually monitor the metal and financial markets, our
financial performance and resources, and our capital spending to maintain the
financial strength required in the current volatile and uncertain markets.

Financial condition

CASH

Our cash and cash equivalents balance at December 31, 2008 was $573
million. This included cash and money market instruments that mature in 90
days or less from the date of acquisition, and short-term investments that
mature in 91 days to a year. Our policy is to invest excess cash in highly
liquid investments of the highest credit quality and to limit our exposure to
individual counterparties in order to minimize risks associated with these
investments. Decisions regarding the length of maturities are based on our
cash flow requirements, rates of returns and various other factors.

At December 31, 2008, cash and short-term investments were mainly held in:
- Canada and provincial T-Bills
- short-term debt instruments issued by Canadian Crown Corporations
- highest rated asset backed commercial paper programs sponsored by
leading Canadian financial institutions backed by global style
liquidity lines
- AAA rated treasury funds and money market funds managed by leading
international fund managers 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 benefiting directly and
indirectly from support programs by various governments and central
banks.

Since the end of the third quarter, general worldwide economic conditions
have weakened dramatically. In response, we adjusted our investment positions
and are now mainly invested in treasury funds to minimize liquidity risk until
normal market conditions return. Turn to note 6 on page 51 in the consolidated
financial statements for more details on where our cash is invested.

Our restricted cash balance of $61 million included:

- $17 million in trust for future reclamation at Ok Tedi
- $16 million of cash collateralized letters of credit for Inmet
- $26 million related to issuing letters of credit to suppliers at Las
Cruces and its labour bond
- $2 million for future reclamation at Pyhasalmi

COMMON SHARES

-------------------------------------------------------------------------
Common shares outstanding as of
December 31, 2008 and February 10, 2009 48,281,950
-------------------------------------------------------------------------
Deferred share units outstanding as of
December 31, 2008 (redeemable on a
one-for-one basis for common shares) 82,992
-------------------------------------------------------------------------


FINANCIAL INSTRUMENTS

The table below shows the gold and copper forward sales, and interest rate
hedges (and their marked-to-market valuations) recorded on our balance sheet
at the end of 2008.

-------------------------------------------------------------------------
C$ marked-to-
market loss
Type of at December 31,
contract Expiry Quantity Price 2008
-------------------------------------------------------------------------
Ok Tedi
copper forward
sales 2009 3.2 million lbs US $2.44 per lb $4.3 million(1)
Ok Tedi gold
forward sales 2010 3,600 ounces US $748 per oz.
2011 3,600 ounces US $775 per oz.
2012 3,600 ounces US $803 per oz.
2013 1,800 ounces US $825 per oz.
----------------------------------------
12,600 ounces US $783 per oz. ($1.7 million)(2)

Las Cruces
interest rate
swaps 2009
to 2014 US $179 million 5.2 percent ($23.4 million)
(reducing in
conjunction with
debt repayment
schedule)
-------------------------------------------------------------------------
(1) At a copper price of US $1.33 per pound.
(2) At a gold price of US $869 per ounce.

SENSITIVITY ANALYSIS

The table below shows you the effect of key variables on our net income
based on our 2009 objectives.

-------------------------------------------------------------------------
Would change
Would change our 2009 net
our 2009 net income per
A change of: income by: share by:
-------------------------------------------------------------------------
Metal prices
Copper (per pound) US $0.30 $74 million $1.54
Zinc (per pound) US $0.10 $11 million $0.24
Gold (per ounce)(1) US $100 $25 million $0.52
-------------------------------------------------------------------------
Exchange rates
Canadian dollar per US dollar C$0.10 $43 million $0.89
Canadian dollar per euro C$0.10 $14 million $0.29
-------------------------------------------------------------------------
Treatment and refining charges
Copper treatment charge per tonne US $10
and copper refining charge per
pound US $0.01 $5 million $0.11
Zinc treatment charge per tonne US $10 $1 million $0.03
-------------------------------------------------------------------------
Freight and energy costs
Concentrate freight per tonne 10% $3 million $0.06
Fuel price per litre $0.10 $3 million $0.05
Electricity per kilowatt hour $0.01 $4 million $0.09
-------------------------------------------------------------------------
(1) Calculations include hedging in place at December 31, 2008.


Accounting changes

We adopted a new section of the CICA Handbook:

Section 3031 - Inventories

Effective January 1, 2008, we adopted CICA Handbook section 3031 -
Inventories on a prospective basis.

This section requires inventory to be measured at the lower of cost or net
realizable value. It also clarifies how to allocate fixed production overhead,
and requires:

- consistent use of either first-in, first-out or weighted average to
measure inventories
- insurance and capital spares be accounted for as property, plant and
equipment
- any previous write-downs be reversed when the value of inventories
increases. The amount of the reversal is limited to the amount of the
original write-down.

We are now expensing certain administrative and other costs as we incur
them, rather than including them in the cost of inventory. We measure finished
goods inventory and materials and supplies at the lower of weighted average
cost or net realizable value.
This change in policy had the following impact on our 2008 consolidated
financial statements:

- decreased opening 2008 inventory by $3.5 million
- increased opening 2008 property, plant and equipment by $1.8 million
- decreased opening 2008 future income tax liability by $0.6 million
- decreased opening 2008 retained earnings by $1.1 million

Plans on transition to International Financial Reporting Standards
(IFRS):

The Accounting Standards Board confirmed in February 2008 that
International Financial Reporting Standards (IFRS) will replace current
Canadian GAAP for financial periods beginning on and after January 1, 2011.
IFRS is based on a conceptual framework similar to Canadian GAAP, but there
are significant differences in recognition, measurement and disclosure.
While the adoption of IFRS will not change the actual cash flows we
generate, it will result in changes to our reported financial position and
results of operations - which could have material effects.
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, as well as 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.
In 2008, we completed an initial analysis of the differences between IFRS
and our current accounting policies under Canadian GAAP. We expect the most
significant effects of adopting IFRS will be on the carrying values of
property, plant and equipment, our accounting for joint venture interests
which currently includes our investment in Ok Tedi, future income taxes and
our accounting for business combinations.
In 2009, we will develop our accounting policies under IFRS, calculate
all differences and document new internal controls. Our goal is to restate our
December 31, 2009 Canadian GAAP financial statements to IFRS in the first
quarter of 2010.

Recently issued accounting pronouncement:

Section 3064 - Goodwill and intangible assets

This section establishes standards for recognizing, measuring, presenting
and disclosing goodwill after it has been recognized, as well as intangible
assets. It replaces Section 3062, Goodwill and Other Intangible Assets and
Section 3450, Research and Development Costs. It provides guidance for
recognizing internally developed intangible assets, and ensuring consistent
treatment of all intangible assets. It does not change the standards that
apply to goodwill.
This section will apply beginning on January 1, 2009. The adoption of
this standard will not have an impact on our financial statements.

Section 1582 - Business combinations

This section establishes new standards for accounting for business
combinations and is the Canadian equivalent to IFRS 3 - Business combinations.
This section requires that:
- most identifiable assets, liabilities, non-controlling interests and
goodwill acquired in a business combination be recorded at full fair
value
- acquisition-related costs are recognized as expenses as incurred
- obligations for contingent consideration are measured and recognized
at fair value at the acquisition date
- liabilities associated with restructuring or exit activities are
recognized only if they meet the definition of a liability as of the
acquisition date
- an acquisition date gain is reflected for a bargain purchase
- for step acquisitions, where control is obtained the acquirer
re-measures its non-controlling equity investment in the acquiree at
fair value as of the date control is obtained and recognizes any gain
or loss in income.

Section 1602 - Non-controlling interests

This section provides guidance on accounting for non-controlling
interests (NCI) subsequent to a business combination and replicates the
provisions of International Accounting Standard (IAS) 27 - Consolidated and
separate financial statements. NCI in subsidiaries are presented in the
consolidated balance sheet with equity, separate from the parent shareholder's
equity. In the income statement, NCI is not deducted in arriving at
consolidated net income but is allocated to the controlling interest and the
NCI according to their percentage ownership. Losses are attributed to NCI even
if they exceed its carrying amount. Acquisitions or dispositions that do not
result in a change of control are accounted for as equity transactions.

Section 1601 - Consolidated financial statements

This section carries forward the consolidation guidance previously
included in its predecessor section 1600 except that it removes all guidance
on accounting for NCI that is replaced by that provided in section 1602, and
guidance already included in section 1582.
Sections 1582, 1601 and 1602, are to be implemented concurrently. Section
1582 is effective for business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after January 1, 2011. Sections 1601 and 1602 are effective for fiscal years
beginning on or after January 1, 2011 with earlier adoption permitted as of
the beginning of a fiscal year. Section 1602 is to be applied retrospectively,
with certain exceptions. We are currently assessing the impact these changes
in accounting policies will have on our consolidated financial statements.

Supplementary financial information

Pages 34 and 35 include supplementary financial information on cash
costs. These measures do not fall into the category of generally accepted
accounting principles.
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.
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.

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, Pyhasalmi, Troilus and Ok Tedi. We also have interests in
two development properties, Las Cruces and Petaquilla.
This press release is also available at www.inmetmining.com

Fourth quarter conference call

Will be held on
- Wednesday, February 11, 2009
- 8:30 a.m. Eastern Time
- webcast available at
www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2515700 or
www.inmetmining.com.

You can also dial in by calling
- Local or international: +1.416.644.3415
- Toll-free within North America: +1.800.731.6941

Starting 10:30 a.m. (ET) Wednesday February 11, 2009, conference call
replay will be available
- Local or international: +1.416.640.1917 passcode 21294126No.
- Toll-free within North America: +1.877.289.8525 passcode 21294126
followed by the number sign.



INMET MINING CORPORATION
Supplementary financial information

Cash costs
2008 For the year ended December 31
per ounce
per pound of copper of gold
--------------------------------------- ---------
TOTAL
CAYELI PYHASALMI OK TEDI COPPER TROILUS
----------------------------------------------------- --------- ---------
(US dollars)

Direct production costs $1.07 $1.92 $1.32 $1.32 $550
Royalties and variable
compensation 0.10 - 0.07 0.07 -
Smelter processing
charges and freight 1.13 1.10 0.49 0.88 70
Metal credits (1.55) (3.33) (1.25) (1.75) (203)
--------------------------------------- ---------

Cash cost $0.75 ($0.31) $0.63 $0.52 $417
--------------------------------------- ---------
--------------------------------------- ---------


2007 For the year ended December 31
per ounce
per pound of copper of gold
--------------------------------------- ---------
TOTAL
CAYELI PYHASALMI OK TEDI COPPER TROILUS
----------------------------------------------------- --------- ---------
(US dollars)

Direct production costs $1.01 $1.58 $1.09 $1.14 $522
Royalties and variable
compensation 0.13 - 0.05 0.08 -
Smelter processing
charges and freight 1.18 1.64 0.53 1.00 52
Metal credits (1.97) (4.63) (0.90) (2.02) (153)
--------------------------------------- ---------

Cash cost $0.35 ($1.41) $0.77 $0.20 $421
--------------------------------------- ---------
--------------------------------------- ---------

-------------------------------------------------------------------------


Reconciliation of cash costs to statements of earnings
2008 For the year ended December 31
per ounce
per pound of copper of gold
--------------------------------------- ---------
(millions of Canadian
dollars, except where TOTAL
otherwise noted) CAYELI PYHASALMI OK TEDI COPPER TROILUS
----------------------------------------------------- --------- ---------
GAAP reference page 14 page 16 page 20 page 18

Direct production costs $90 $60 $93 $243 $89
Smelter processing
charges and freight 78 57 33 168 12
By product sales (111) (127) (84) (322) (33)
Adjust smelter processing
and freight, and sales
to production basis 1 - 1 2 (1)
--------------------------------------- ---------
Operating costs net
of metal credits $58 ($10) $43 $91 $67
US $ to C$ exchange rate $1.07 $1.07 $1.07 $1.07 $1.07
Inmet's share of
production (000's) 72,100 29,300 63,400 164,800 151,300
--------------------------------------- ---------
Cash cost $0.75 ($0.31) $0.63 $0.52 $417
--------------------------------------- ---------
--------------------------------------- ---------

2007 For the year ended December 31
per ounce
per pound of copper of gold
--------------------------------------- ---------
(millions of Canadian
dollars, except where TOTAL
otherwise noted) CAYELI PYHASALMI OK TEDI COPPER TROILUS
----------------------------------------------------- --------- ---------
GAAP reference page 14 page 16 page 20 page 18

Direct production costs $87 $50 $81 $218 $78
Smelter processing
charges and freight 95 62 41 198 8
By product sales (165) (155) (68) (388) (23)
Adjust smelter processing
and freight, and sales
to production basis 9 (2) 1 8 -
--------------------------------------- ---------
Operating costs net
of metal credits $26 ($45) $55 $36 $63
US $ to C$ exchange rate $1.07 $1.07 $1.07 $1.07 $1.07
Inmet's share of
production (000's) 72,000 30,000 67,000 169,000 138,400
--------------------------------------- ---------
Cash cost $0.35 ($1.41) $0.77 $0.20 $421
--------------------------------------- ---------
--------------------------------------- ---------



INMET MINING CORPORATION
Supplementary financial information

Cash costs
2008 For the three months ended December 31
per ounce
per pound of copper of gold
--------------------------------------- ---------
TOTAL
CAYELI PYHASALMI OK TEDI COPPER TROILUS
----------------------------------------------------- --------- ---------
(US dollars)

Direct production costs $0.98 $1.73 $1.41 $1.28 $466
Royalties and variable
compensation (0.07) - - (0.03) -
Smelter processing
charges and freight 0.88 0.82 0.33 0.66 80
Metal credits (1.18) (2.46) (1.18) (1.41) (86)
--------------------------------------- ---------

Cash cost $0.61 $0.09 $0.56 $0.50 $460
--------------------------------------- ---------
--------------------------------------- ---------


2007 For the three months ended December 31
per ounce
per pound of copper of gold
--------------------------------------- ---------
CAYELI PYHASALMI OK TEDI TOTAL TROILUS
----------------------------------------------------- --------- ---------
(US dollars per pound)

Direct production costs $1.10 $1.95 $1.10 $1.23 $640
Royalties and variable
compensation 0.07 - 0.03 0.04 -
Smelter processing
charges and freight 1.09 1.77 0.43 0.92 51
Metal credits (1.64) (5.05) (0.99) (1.90) (139)
--------------------------------------- ---------

Cash cost $0.62 ($1.33) $0.57 $0.29 $552
--------------------------------------- ---------
--------------------------------------- ---------

-------------------------------------------------------------------------



Reconciliation of cash costs to statements of earnings
2008 For the three months ended December 31
per ounce
per pound of copper of gold
--------------------------------------- ---------
(millions of Canadian
dollars, except where TOTAL
otherwise note) CAYELI PYHASALMI OK TEDI COPPER TROILUS
----------------------------------------------------- --------- ---------
GAAP reference page 14 page 16 page 20 page 18

Direct production costs $21 $16 $28 $65 $23
Smelter processing
charges and freight 13 10 6 29 4
By product sales (13) (24) (23) (60) (4)
Adjust smelter processing
and freight, and sales
to production basis (7) (1) - (8) -
--------------------------------------- ---------
Operating costs net
of metal credits $14 $1 $11 $26 $23
US $ to C$ exchange rate $1.21 $1.21 $1.21 $1.21 $1.21
Inmet's share of
production (000's) 18,400 7,400 16,100 41,900 40,500
--------------------------------------- ---------
Cash cost $0.61 $0.09 $0.56 $0.50 $460
--------------------------------------- ---------
--------------------------------------- ---------

2007 For the three months ended December 31
per ounce
per pound of copper of gold
--------------------------------------- ---------
(millions of Canadian
dollars, except where TOTAL
otherwise note) CAYELI PYHASALMI OK TEDI COPPER TROILUS
----------------------------------------------------- --------- ---------
GAAP reference page 14 page 16 page 20 page 18

Direct production costs $24 $13 $21 $58 $21
Smelter processing
charges and freight 20 16 7 43 2
By product sales (26) (38) (17) (81) (5)
Adjust smelter processing
and freight, and sales
to production basis (6) - - (6) -
--------------------------------------- ---------
Operating costs net
of metal credits $12 ($9) $11 $14 $18
US $ to C$ exchange rate $0.98 $0.98 $0.98 $0.98 $0.98
Inmet's share of
production (000's) 20,000 7,200 19,200 46,400 33,700
--------------------------------------- ---------
Cash cost $0.62 ($1.33) $0.57 $0.29 $552
--------------------------------------- ---------
--------------------------------------- ---------


Quarterly review

INMET MINING CORPORATION
Quarterly review
(unaudited)

Latest Four Quarters
-------------------------------------------------------------------------
2008 2008 2008 2008
(thousands of Canadian dollars, Fourth Third Second First
except per share amounts) quarter quarter quarter quarter
-------------------------------------------------------------------------
STATEMENTS OF EARNINGS
Gross sales $139,626 $247,495 $281,463 $276,281
Smelter processing charges
and freight (32,870) (49,502) (53,209) (44,157)
Cost of sales (91,715) (84,948) (89,893) (79,246)
Depreciation (14,844) (11,395) (9,195) (9,170)
-------------------------------------------
197 101,650 129,166 143,708
Corporate development and
exploration (1,971) (3,548) (2,483) (2,618)
General and administration (3,289) (3,411) (2,790) (3,648)
Investment and other income
(expense) 8,057 (5,467) (11,358) 14,754
Asset impairment (36,275) - - -
Interest expense (490) (476) (471) (447)
Capital tax expense (1,304) (125) (124) (126)
Income tax recovery (expense) 767 (17,379) (44,333) (44,744)
Non-controlling interest 1,794 3,813 98 (205)
-------------------------------------------
Net income (loss) ($32,514) $75,057 $67,705 $106,674
-------------------------------------------
Net income (loss) per
common share ($0.67) $1.55 $1.40 $2.21
-------------------------------------------
Diluted net income (loss)
per common share ($0.67) $1.55 $1.40 $2.21
-------------------------------------------


Previous Four Quarters
-------------------------------------------------------------------------
2007 2007 2007 2007
(thousands of Canadian dollars, Fourth Third Second First
except per share amounts) quarter quarter quarter quarter
-------------------------------------------------------------------------
STATEMENTS OF EARNINGS
Gross sales $224,773 $272,293 $320,018 $286,614
Smelter processing charges
and freight (43,902) (42,557) (55,413) (64,606)
Cost of sales (78,809) (72,057) (78,181) (79,377)
Depreciation (9,480) (8,739) (8,039) (9,415)
-------------------------------------------
92,582 148,940 178,385 133,216
Corporate development and
exploration (3,510) (2,475) (2,086) (1,012)
General and administration (12,622) (2,674) (2,162) (2,840)
Investment and other income 5,968 9,224 13,665 7,597
Interest expense (407) (424) (424) (438)
Capital tax (expense)
recovery 212 (273) (274) (274)
Income tax expense (18,551) (37,649) (48,509) (35,376)
Non-controlling interest (27) 167 (545) 205
-------------------------------------------
Net income $63,645 $114,836 $138,050 $101,078
-------------------------------------------
Net income per common share $1.32 $2.38 $2.86 $2.09
-------------------------------------------
Diluted net income per common
share $1.32 $2.37 $2.86 $2.09
-------------------------------------------



Consolidated Financial Statements
INMET MINING CORPORATION
Consolidated balance sheets

December 31 December 31
(thousands of Canadian dollars) 2008 2007
-------------------------------------------------------------------------
(unaudited)
Assets

Current assets:
Cash and short-term investments (note 6) $572,733 $840,823
Restricted cash (note 7) 8,311 1,569
Accounts receivable (note 8) 135,742 131,197
Inventories (note 2) 74,362 52,725
Future income tax asset 14,311 14,515
-------------------------
805,459 1,040,829

Restricted cash (note 7) 52,893 37,205
Property, plant and equipment 1,950,535 870,965
Investments (note 9) 17,514 32,266
Future income tax asset 5,499 7,884
Derivatives (note 10) 4,327 33,565
Other assets 5,031 25,751
-------------------------
$2,841,258 $2,048,465
-------------------------------------------------------------------------

Liabilities

Current liabilities:
Accounts payable and accrued liabilities
(note 11) $212,527 $172,800
Derivatives 8,693 -
Current portion of long-term debt 109,666 12,971
-------------------------
330,886 185,771

Long-term debt (note 12) 384,848 234,317
Asset retirement obligations (note 13) 126,782 84,017
Derivatives (note 10) 16,417 43,960
Other liabilities 27,122 19,249
Future income tax liabilities 15,971 37,084
Non-controlling interest 71,449 51,574
-------------------------
973,475 655,972
-------------------------
Commitments (note 14)

Shareholders' equity

Share capital 337,464 337,464
Contributed surplus 61,925 60,722
Stock based compensation 2,688 1,085
Retained earnings 1,283,074 1,076,958
Accumulated other comprehensive income
(loss) (note 15) 182,632 (83,736)
-------------------------
1,867,783 1,392,493
-------------------------
$2,841,258 $2,048,465
-------------------------------------------------------------------------
(see accompanying notes)



INMET MINING CORPORATION
Segmented balance sheets


2008 As at December 31
(unaudited) CORPORATE CAYELI PYHASALMI TROILUS
-------------------------------------------------------------------------
(thousands of Canadian (Turkey) (Finland) (Canada)
dollars)

Assets

Cash and short-term
investments $241,238 $192,881 $65,976 $ -
Other current assets 15,992 43,946 39,428 22,595
Restricted cash 16,343 - 2,104 -
Property, plant and
equipment 916 144,124 74,790 27,659
Investments 17,514 - - -
Derivatives - - - -
Other assets 3,183 454 - 1,825
-----------------------------------------------
$295,186 $381,405 $182,298 $52,079
-----------------------------------------------

Liabilities

Current liabilities $15,983 $52,112 $11,537 $11,029
Long-term debt 19,741 - - -
Asset retirement
obligations 23,501 9,654 16,307 12,626
Derivatives - - - -
Other liabilities 4,911 5,374 - 1,484
Future income tax
liabilities 1,026 5,509 9,215 -
Non-controlling interest - - - -
-----------------------------------------------
$65,162 $72,649 $37,059 $25,139
-----------------------------------------------


2008 As at December 31
(unaudited) OK TEDI LAS CRUCES PETAQUILLA TOTAL
------------------------------------------------------------- -----------
(thousands of Canadian (Papua New (Spain) (Panama)
dollars) Guinea)

Assets

Cash and short-term
investments $37,547 $33,981 $1,110 $572,733
Other current assets 43,148 66,774 843 232,726
Restricted cash 16,667 17,779 - 52,893
Property, plant and
equipment 105,145 1,065,435 532,466 1,950,535
Investments - - - 17,514
Derivatives 4,327 - - 4,327
Other assets 2,712 2,356 - 10,530
----------------------------------- -----------
$209,546 $1,186,325 $534,419 $2,841,258
----------------------------------- -----------

Liabilities

Current liabilities $45,711 $182,535 $11,979 $330,886
Long-term debt - 365,107 - 384,848
Asset retirement
obligations 25,016 39,678 - 126,782
Derivatives 1,670 14,747 - 16,417
Other liabilities 2,232 13,121 - 27,122
Future income tax
liabilities - 221 - 15,971
Non-controlling interest - 71,449 - 71,449
----------------------------------- -----------
$74,629 $686,858 $11,979 $973,475
----------------------------------- -----------


2007 As at December 31
CORPORATE CAYELI PYHASALMI TROILUS
-------------------------------------------------------------------------
(thousands of Canadian (Turkey) (Finland) (Canada)
dollars)

Assets

Cash and short-term
investments $359,359 $333,671 $111,492 $ -
Other current assets 23,455 29,384 55,069 23,644
Restricted cash 14,444 - - -
Property, plant and
equipment 629 115,064 63,147 28,413
Investments 32,266 - - -
Derivatives - - - -
Other assets 5,618 441 - 6,289
-----------------------------------------------
$435,771 $478,560 $229,708 $58,346
-----------------------------------------------

Liabilities

Current liabilities $16,948 $39,161 $14,560 $11,972
Long-term debt 16,267 - - -
Asset retirement
obligations 24,393 3,169 13,104 7,662
Derivatives - - - 26,889
Other liabilities 5,057 4,787 - -
Future income tax
liabilities - 17,723 27,122 7,393
Non-controlling interest - - - -
-----------------------------------------------
$62,665 $64,840 $35,057 $46,523
-----------------------------------------------


2007 As at December 31
OK TEDI LAS CRUCES PETAQUILLA TOTAL
------------------------------------------------------------- -----------
(thousands of Canadian (Papua New (Spain) (Panama)
dollars) Guinea)

Assets

Cash and short-term
investments $13,473 $22,828 $ - $840,823
Other current assets 38,162 30,292 - 200,006
Restricted cash 11,836 10,925 - 37,205
Property, plant and
equipment 63,655 600,057 - 870,965
Investments - - - 32,266
Derivatives - 33,565 - 33,565
Other assets 2,101 2,461 16,725 33,635
----------------------------------- -----------
$129,227 $700,128 $16,725 $2,048,465
----------------------------------- -----------

Liabilities

Current liabilities $21,487 $81,643 $ - $185,771
Long-term debt - 218,050 - 234,317
Asset retirement
obligations 19,708 15,981 - 84,017
Derivatives 9,034 8,037 - 43,960
Other liabilities 1,412 7,993 - 19,249
Future income tax
liabilities - 11,968 - 37,084
Non-controlling interest - 51,574 - 51,574
----------------------------------- -----------
$51,641 $395,246 $ - $655,972
----------------------------------- -----------



INMET MINING CORPORATION
Consolidated statements of earnings
(unaudited)


(thousands of Canadian Three Months Ended Year Ended
dollars except per share December 31 December 31
amounts) 2008 2007 2008 2007
------------------------------------------------- -----------------------

Gross sales $139,626 $224,773 $944,865 $1,103,698

Smelter processing charges
and freight (32,870) (43,902) (179,738) (206,478)

Cost of sales (91,715) (78,809) (345,802) (308,424)

Depreciation (14,844) (9,480) (44,604) (35,673)

------------------------------------------------- -----------------------
197 92,582 374,721 553,123


Corporate development
and exploration (1,971) (3,510) (10,620) (9,083)

General and administration (3,289) (12,622) (13,138) (20,298)

Investment and other
income (note 16) 8,057 5,968 5,986 36,454

Asset impairment (note 19) (36,275) - (36,275) -

Interest expense (490) (407) (1,884) (1,693)

Capital tax expense (1,304) 212 (1,679) (609)

Income tax recovery
(expense) (note 17) 767 (18,551) (105,689) (140,085)

Non-controlling interest 1,794 (27) 5,500 (200)

------------------------------------------------- -----------------------

Net income (loss) ($32,514) $63,645 $216,922 $417,609
------------------------------------------------- -----------------------

Basic net income (loss) per
common share (note 18) ($0.67) $1.32 $4.49 $8.65
------------------------------------------------- -----------------------

Diluted net income (loss)
per common share (note 18) ($0.67) $1.32 $4.48 $8.64
------------------------------------------------- -----------------------

Weighted average shares
outstanding (000's) 48,282 48,282 48,282 48,279
------------------------------------------------- -----------------------
(see accompanying notes)



INMET MINING CORPORATION
Segmented statements of earnings
(unaudited)

2008 For the year ended
December 31 CORPORATE CAYELI PYHASALMI TROILUS
-------------------------------------------------------------------------
(thousands of Canadian (Turkey) (Finland) (Canada)
dollars)

Gross sales $ - $305,190 $221,124 $141,251
Smelter processing
charges and freight - (78,400) (56,954) (11,053)
Cost of sales (1,951) (92,859) (62,245) (94,631)
Depreciation - (11,448) (9,227) (9,239)
-----------------------------------------------
(1,951) 122,483 92,698 26,328

Corporate development and
exploration (7,325) (487) (2,808) -
General and administration (13,138) - - -
Investment and other
income (expense) 23,490 (3,009) 603 5,444
Asset impairment - (34,200) - (2,075)
Interest expense (1,884) - - -
Capital tax expense (1,679) - - -
Income tax (expense)
recovery (14,930) (32,216) (19,814) -
Non-controlling interest - - - -
-----------------------------------------------
Net income (loss) ($17,417) $52,571 $70,679 $29,697
-----------------------------------------------


2008 For the year ended
December 31 OK TEDI LAS CRUCES PETAQUILLA TOTAL
------------------------------------------------------------- -----------
(thousands of Canadian (Papua New (Spain) (Panama)
dollars) Guinea)

Gross sales $277,300 $ - $ - $944,865
Smelter processing
charges and freight (33,331) - - (179,738)
Cost of sales (94,116) - - (345,802)
Depreciation (14,690) - - (44,604)
----------------------------------- -----------
135,163 - - 374,721

Corporate development and
exploration - - - (10,620)
General and administration - - - (13,138)
Investment and other
income (expense) 6,780 (27,322) - 5,986
Asset impairment - - (36,275)
Interest expense - - - (1,884)
Capital tax expense - - - (1,679)
Income tax (expense)
recovery (49,779) 11,050 - (105,689)
Non-controlling interest - 5,500 - 5,500
----------------------------------- -----------
Net income (loss) $92,164 ($10,772) $ - $216,922
----------------------------------- -----------


2007 For the year ended
December 31 CORPORATE CAYELI PYHASALMI TROILUS
-------------------------------------------------------------------------
(thousands of Canadian (Turkey) (Finland) (Canada)
dollars)

Gross sales $ - $418,694 $260,246 $108,378
Smelter processing
charges and freight - (94,700) (62,081) (7,989)
Cost of sales (1,953) (91,245) (51,144) (80,441)
Depreciation - (8,857) (8,439) (10,120)
-----------------------------------------------
(1,953) 223,892 138,582 9,828

Corporate development
and exploration (5,590) (1,686) (2,077) 270
General and administration (20,298) - - -
Investment and other
income (expense) 34,807 (2,004) - 5,549
Interest expense (1,693) - - -
Capital tax expense (609) - - -
Income tax (expense)
recovery 3,302 (46,445) (30,911)
Non-controlling interest - - - -
-----------------------------------------------
Net income $7,966 $173,757 $105,594 $15,647
-----------------------------------------------


2007 For the year ended
December 31 OK TEDI LAS CRUCES PETAQUILLA TOTAL
------------------------------------------------------------- -----------
(thousands of Canadian (Papua New (Spain) (Panama)
dollars) Guinea)

Gross sales $316,380 $ - $ - $1,103,698
Smelter processing
charges and freight (41,708) - - (206,478)
Cost of sales (83,641) - - (308,424)
Depreciation (8,257) - - (35,673)
----------------------------------- -----------
182,774 - - 553,123

Corporate development
and exploration - - - (9,083)
General and administration - - - (20,298)
Investment and other
income (expense) (2,850) 952 - 36,454
Interest expense - - - (1,693)
Capital tax expense - - - (609)
Income tax (expense)
recovery (65,745) (286) - (140,085)
Non-controlling interest - (200) - (200)
----------------------------------- -----------
Net income $114,179 $466 $ - $417,609
----------------------------------- -----------



INMET MINING CORPORATION
Segmented statements of earnings
(unaudited)

2008 For the three months ended December 31

CORPORATE CAYELI PYHASALMI TROILUS
-------------------------------------------------------------------------

(thousands of
Canadian dollars) (Turkey) (Finland) (Canada)

Gross sales $ - $ 27,481 $ 37,273 $ 36,391
Smelter processing
charges and freight - (13,279) (9,615) (3,904)
Cost of sales (487) (19,490) (17,344) (25,838)
Depreciation - (3,150) (2,502) (2,954)
-----------------------------------------------
(487) (8,438) 7,812 3,695

Corporate development
and exploration (818) (209) (1,007) 63
General and administration (3,289) - - -
Investment and other
income (expense) 15,007 (5,149) 831 1,361
Asset impairment - (34,200) - (2,075)
Interest expense (490) - - -
Capital tax expense (1,304) - - -
Income tax (expense)
recovery (6,870) 1,991 (948) -
Non-controlling interest - - - -
-----------------------------------------------

Net income (loss) 1,749 ($46,005) $6,688 $3,044
-----------------------------------------------


2008 For the three months ended December 31

OK TEDI LAS CRUCES PETAQUILLA TOTAL
------------------------------------------------------------- -----------

(thousands of (Papua New
Canadian dollars) Guinea) (Spain) (Panama)

Gross sales $ 38,481 $ - $ - $ 139,626
Smelter processing
charges and freight (6,072) - - (32,870)
Cost of sales (28,556) - - (91,715)
Depreciation (6,238) - - (14,844)
----------------------------------- -----------
(2,385) - - 197

Corporate development
and exploration - - - (1,971)
General and administration - - - (3,289)
Investment and other
income (expense) 6,539 (10,532) - 8,057
Asset impairment - - - (36,275)
Interest expense - - - (490)
Capital tax expense - - - (1,304)
Income tax (expense)
recovery 545 6,049 - 767
Non-controlling interest - 1,794 - 1,794
----------------------------------- -----------

Net income (loss) $ 4,699 ($2,689) $ - ($32,514)
----------------------------------- -----------


2007 For the three months ended December 31

CORPORATE CAYELI PYHASALMI TROILUS
------------------------------------------------

(thousands of Canadian
dollars) (Turkey) (Finland) (Canada)

Gross sales $ - $ 81,088 $ 58,672 $ 27,317
Smelter processing
charges and freight - (19,756) (15,384) (1,798)
Cost of sales (491) (22,559) (13,258) (22,554)
Depreciation - (2,635) (1,881) (2,620)
------------------------------------------------
(491) 36,138 28,149 345

Corporate development
and exploration (2,438) (526) (506) (40)
General and
administration (12,622) - - -
Investment and other
income (expense) 6,447 (587) - 1,361
Interest expense (407) - - -
Capital tax expense 212 - - -
Income tax (expense)
recovery 4,459 (5,956) (6,200) -
Non-controlling interest - - - -
------------------------------------------------

Net income (loss) ($4,840) $ 29,069 $ 21,443 $ 1,666
------------------------------------------------


OK TEDI LAS CRUCES PETAQUILLA TOTAL
------------------------------------ -----------

(thousands of Canadian (Papua New
dollars) Guinea) (Spain) (Panama)

Gross sales $ 57,696 $ - $ - $ 224,773
Smelter processing
charges and freight (6,964) - - (43,902)
Cost of sales (19,947) - - (78,809)
Depreciation (2,344) - - (9,480)
------------------------------------ -----------
28,441 - - 92,582

Corporate development
and exploration - - - (3,510)
General and
administration - - - (12,622)
Investment and other
income (expense) (1,358) 105 - 5,968
Interest expense - - - (407)
Capital tax expense - - - 212
Income tax (expense)
recovery (10,822) (32) - (18,551)
Non-controlling interest - (27) - (27)
------------------------------------ -----------

$ 16,261 $ 46 $ - $ 63,645
------------------------------------ -----------




INMET MINING CORPORATION
Consolidated statements of cash flows
(unaudited)
Three Months Ended Year Ended
(thousands of Canadian December 31 December 31
dollars) 2008 2007 2008 2007
-------------------------------------------------------------------------

Cash provided by (used in)
operating activities (1)

Net income ($32,514) $63,645 $216,922 $417,609
Add (deduct) items not
affecting cash:
Gain on disposition of
investments - - (256) (11,730)
Depreciation 14,844 9,480 44,604 35,673
Future income tax (4,050) (4,217) (5,980) (5,724)
Accretion expense on
asset retirement
obligations 1,131 899 4,360 3,609
Non-controlling interest (1,794) 27 (5,500) 200
Asset impairment
(note 19) 34,428 - 34,428 -
Foreign exchange loss 5,541 4,657 35,688 10,491
Other (877) 2,796 4,292 1,982
Settlement of gold
forward contracts
(note 10) - - (12,399) -
Reclamation costs (1,330) (1,460) (2,792) (3,410)
Net change in non-cash
working capital (note 5) 15,613 498 11,138 (21,349)
------------------------------------------------
30,992 76,325 324,505 427,351
------------------------------------------------

Cash provided by (used in)
investing activities

Acquisition of Petaquilla
Copper, net of cash
acquired (note 4) (42,863) - (379,774) -
Capital spending (102,976) (149,097) (422,676) (376,569)
Working capital changes
associated with capital
spending (31,003) 55,208 (38,116) 30,677
Loans to other Petaquilla
shareholders - - (13,234) -
Investment in Petaquilla
prior to consolidation - - (12,167) -
Disposition of investments - - 1,521 50,170
Sale (purchase) of
short-term investments 78,405 (29,363) 282,644 (64,949)
Other - - - (43)
------------------------------------------------
(98,437) (123,252) (581,802) (360,714)
------------------------------------------------

Cash provided by (used in)
financing activities

Long-term debt:
Borrowings (note 12) 22,199 23,599 128,439 97,537
Repayment (note 12) - - (13,871) (8,604)
Funding by non-controlling
shareholder 25,450 16,277 61,638 55,805
Settlement of foreign
currency forward contract
(note 10) - - 52,256 -
Financial assurance deposits 1,101 8,487 (14,215) (4,164)
Dividends paid on common
shares (4,828) (4,828) (9,656) (9,656)
Other (746) (4,588) 2,349 (8,672)
------------------------------------------------
43,176 38,947 206,940 122,246
------------------------------------------------

Cash assumed on
consolidation of
Petaquilla - - 4,414 -
------------------------------------------------

Foreign exchange change
on cash held in foreign
currency 36,911 5,602 60,497 (50,988)
------------------------------------------------

Increase (decrease) in
cash 12,642 (2,378) 14,554 137,895

Cash:
Beginning of period 524,417 524,883 522,505 384,610
------------------------------------------------
End of period 537,059 522,505 537,059 522,505

Short-term investments 35,674 318,318 35,674 318,318
------------------------------------------------

Cash and short-term
investments $572,733 $840,823 $572,733 $840,823
-------------------------------------------------------------------------
(see accompanying notes)

(1) Supplementary cash
flow information:
Cash interest paid $8,782 $1,557 $18,562 $7,119
Cash taxes paid $19,945 $58,076 $143,357 $173,645
-------------------------------------------------------------------------



INMET MINING CORPORATION
Segmented statements of cash flows
(unaudited)

2008 For the year ended December 31

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 ($6,881) $ 94,440 $ 82,801 $ 41,456
Net change in
non-cash working
capital (8,398) (11,988) 16,856 (635)
-------------------------------------------------
($15,279) 82,452 99,657 40,821
-------------------------------------------------

Cash provided by
(used in) investing
activities
Acquisition of
Petaquilla Copper,
net of cash acquired (379,774) - - -
Capital spending (361) (37,632) (9,772) (1,510)
Working capital changes
associated with
capital spending - - - -
Disposition of
investments 1,521 - - -
Sale of short-term
investments 282,644 - - -
Loans to Petaquilla
shareholders (13,234) - - -
Investment in
Petaquilla prior to
consolidation (12,167) - - -
-------------------------------------------------
(121,371) (37,632) (9,772) (1,510)
-------------------------------------------------

Cash provided by
(used in) financing
activities (10,287) - (1,932) (700)
-------------------------------------------------

Cash assumed on
consolidation of
Petaquilla - - - -
-------------------------------------------------

Foreign exchange
change on cash
held in foreign
currency - 37,298 13,018 -
-------------------------------------------------

Intergroup funding
(distributions) 311,460 (222,908) (146,487) (38,611)
-------------------------------------------------

Increase (decrease)
in cash 164,523 (140,790) (45,516) -
-------------------------------------------------
Cash:
Beginning of period 41,041 333,671 111,492 -
-------------------------------------------------
End of period 205,564 192,881 65,976 -
Short-term investments 35,674 - - -
-------------------------------------------------

Cash and short-term
investments $ 241,238 $ 192,881 $ 65,976 $ -
-------------------------------------------------



2008 For the year ended December 31

LAS
OK TEDI CRUCES PETAQUILLA TOTAL
------------------------------------- -----------

(thousands of (Papua New
Canadian dollars) Guinea) (Spain) (Panama)


Cash provided by (used in)
operating activities
Before net change
in non-cash
working capital $ 101,551 - $ - $ 313,367
Net change in
non-cash working
capital 15,303 - - 11,138
------------------------------------- -----------
116,854 - - 324,505
------------------------------------- -----------

Cash provided by (used in)
investing activities
Acquisition of
Petaquilla Copper,
net of cash acquired - - - (379,774)
Capital spending (38,357) (318,019) (17,025) (422,676)
Working capital changes
associated with
capital spending - (38,116) - (38,116)
Disposition of
investments - - - 1,521
Sale of short-term
investments - - - 282,644
Loans to Petaquilla
shareholders - - - (13,234)
Investment in
Petaquilla prior to
consolidation - - - (12,167)
------------------------------------- -----------
(38,357) (356,135) (17,025) (581,802)
------------------------------------- -----------

Cash provided by
(used in) financing
activities (1,317) 221,176 - 206,940
------------------------------------- -----------

Cash assumed on
consolidation of
Petaquilla - - 4,414 4,414
------------------------------------- -----------

Foreign exchange
change on cash
held in foreign
currency 6,387 4,668 (874) 60,497
------------------------------------- -----------

Intergroup funding
(distributions) (59,493) 141,444 14,595 -
------------------------------------- -----------

Increase (decrease)
in cash 24,074 11,153 1,110 14,554
Cash:
Beginning of period 13,473 22,828 - 522,505
------------------------------------- -----------
End of period 37,547 33,981 1,110 537,059
Short-term investments - - - 35,674
------------------------------------- -----------

Cash and short-term
investments $ 37,547 $ 33,981 $ 1,110 $ 572,733
------------------------------------- -----------



2007 For the year ended December 31

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 ($1,583) $ 191,754 $ 114,982 $ 19,584
Net change in
non-cash working
capital (7,210) 22,773 (6,470) (4,935)
-------------------------------------------------
(8,793) 214,527 108,512 14,649
-------------------------------------------------
Cash provided by
(used in) investing
activities
Capital spending (191) (26,073) (3,451) (1,742)
Working capital
changes associated
with capital spending - - - -
Disposition of
investments 50,170 - - -
Sale (purchase) of
short-term
investments (90,940) 16,113 - -
Other - - - (43)
-------------------------------------------------
(40,961) (9,960) (3,451) (1,785)
-------------------------------------------------

Cash provided by
(used in) financing
activities (14,472) - - (4,000)
-------------------------------------------------

Foreign exchange
change on cash held
in foreign currency - (40,362) (4,405) -

Intergroup funding
(distributions) 65,368 10,271 (108,424) (8,864)
-------------------------------------------------

Increase (decrease)
in cash 1,142 174,476 (7,768) -
Cash:
Beginning of period 39,899 159,195 119,260 -
-------------------------------------------------
End of period 41,041 333,671 111,492 -
Short-term investments 318,318 - - -
-------------------------------------------------

Cash and short-term
investments $ 359,359 $ 333,671 $ 111,492 $ -
-------------------------------------------------


2007 For the year ended December 31

LAS
OK TEDI CRUCES PETAQUILLA TOTAL
-------------------------------------- ----------

(thousands of (Papua New
Canadian dollars) Guinea) (Spain) (Panama)


Cash provided by
(used in) operating
activities
Before net change in
non-cash working
capital $ 123,963 $ - $ - $ 448,700
Net change in
non-cash working
capital (25,507) - - (21,349)
------------------------------------- -----------
98,456 - - 427,351
------------------------------------- -----------
Cash provided by
(used in) investing
activities
Capital spending (31,527) (313,585) - (376,569)
Working capital
changes associated
with capital spending - 30,677 - 30,677
Disposition of
investments - - - 50,170
Sale (purchase) of
short-term
investments 9,878 - - (64,949)
Other - - - (43)
------------------------------------- -----------
(21,649) (282,908) - (360,714)
-------------------------------------------------

Cash provided by
(used in) financing
activities (1,609) 142,327 - 122,246
------------------------------------- -----------

Foreign exchange
change on cash held
in foreign currency (7,375) 1,154 - (50,988)
------------------------------------- -----------

Intergroup funding
(distributions) (88,322) 129,971 - -
------------------------------------- -----------

Increase (decrease)
in cash (20,499) (9,456) - 137,895
Cash:
Beginning of period 33,972 32,284 - 384,610
------------------------------------- -----------
End of period 13,473 22,828 - 522,505
Short-term investments - - - 318,318
------------------------------------- -----------

Cash and short-term
investments $ 13,473 $ 22,828 $ - $ 840,823
------------------------------------- -----------



INMET MINING CORPORATION
Segmented statements of cash flows
(unaudited)

2008 For the three months ended December 31

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 ($6,322) ($8,736) $ 10,269 $ 16,174
Net change in non-cash
working capital (6,977) 1,543 10,795 3,488
-----------------------------------------------
(13,299) (7,193) 21,064 19,662
-----------------------------------------------
Cash provided by (used in)
investing activities
Acquisition of
Petaquilla Copper, net
of cash acquired (42,863) - - -
Capital spending 7 (6,687) (3,924) (153)
Working capital changes
associated with capital
spending - - - -
Purchase of short-term
investments 78,405 - - -
Loans to Petaquilla
shareholders - - - -
Investment in Petaquilla
prior to consolidation - - - -
-----------------------------------------------
35,549 (6,687) (3,924) (153)
-----------------------------------------------

Cash provided by (used in)
financing activities (3,591) - (74) (700)
-----------------------------------------------

Foreign exchange change
on cash held in foreign
currency - 20,553 9,432 -
-----------------------------------------------

Intergroup funding
(distributions) 8,323 (1,366) (37,627) (18,809)
-----------------------------------------------

Increase (decrease) in
cash 26,982 5,307 (11,129) -
Cash:
Beginning of period 178,582 187,574 77,105 -
-----------------------------------------------
End of period 205,564 192,881 65,976 -
Short-term investments 35,674 - - -
-----------------------------------------------

Cash and short-term
investments $ 241,238 $ 192,881 $ 65,976 $ -
-----------------------------------------------


OK TEDI LAS CRUCES PETAQUILLA TOTAL
------------------------------------------------------------- -----------
(thousands of Canadian (Papua New
dollars) Guinea) (Spain) (Panama)

Cash provided by (used in)
operating activities
Before net change in
non-cash working
capital $ 3,994 - $ - $ 15,379
Net change in non-cash
working capital 6,764 - - 15,613
----------------------------------- -----------
10,758 - - 30,992
----------------------------------- -----------
Cash provided by (used in)
investing activities
Acquisition of
Petaquilla Copper, net
of cash acquired - - - (42,863)
----------------------------------- -----------

Capital spending (11,704) (63,490) (17,025) (102,976)
Working capital changes
associated with capital
spending - (31,003) - (31,003)
Purchase of short-term
investments - - - 78,405
Loans to Petaquilla
shareholders - - - -
Investment in Petaquilla
prior to consolidation - - - -
----------------------------------- -----------
(11,704) (94,493) (17,025) (98,437)
----------------------------------- -----------

Cash provided by (used in)
financing activities (59) 47,600 - 43,176
----------------------------------- -----------

Foreign exchange change
on cash held in foreign
currency 3,911 3,889 (874) 36,911
----------------------------------- -----------

Intergroup funding
(distributions) (18,863) 53,747 14,595 -
----------------------------------- -----------

Increase (decrease) in
cash (15,957) 10,743 (3,304) 12,642
Cash:
Beginning of period 53,504 23,238 4,414 524,417
----------------------------------- -----------
End of period 37,547 33,981 1,110 537,059
Short-term investments - - - 35,674
----------------------------------- -----------

Cash and short-term
investments $ 37,547 $ 33,981 $ 1,110 $ 572,733
----------------------------------- -----------



2007 For the three months ended December 31

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 ($7,167) $ 33,684 $ 23,976 $ 3,260
Net change in non-cash
working capital 234 16,910 (19,143) 1,866
-----------------------------------------------
(6,933) 50,594 4,833 5,126
-----------------------------------------------
Cash provided by (used in)
investing activities
Capital spending (46) (5,814) (1,380) (285)
Working capital changes
associated with capital
spending - - - -
Purchase of short-term
investments (28,617) (462) - -
Other - - - -
-----------------------------------------------
(28,663) (6,276) (1,380) (285)
-----------------------------------------------
Cash provided by (used in)
financing activities (8,000) - - (1,000)
-----------------------------------------------
Foreign exchange change
on cash held in foreign
currency - (448) 2,863 -
-----------------------------------------------
Intergroup funding
(distributions) 2,312 4,068 (3,775) (3,841)
-----------------------------------------------
Increase (decrease) in
cash (41,284) 47,938 2,541 -
Cash:
Beginning of period 82,325 285,733 108,951 -
-----------------------------------------------
End of period 41,041 333,671 111,492 -
Short-term investments 318,318 - - -
-----------------------------------------------
Cash and short-term
investments $ 359,359 $ 333,671 $ 111,492 $ -
-----------------------------------------------


2007 For the three months ended December 31

OK TEDI LAS CRUCES PETAQUILLA TOTAL
------------------------------------------------------------- -----------
(thousands of (Papua New
Canadian dollars) Guinea) (Spain) (Panama)

Cash provided by (used in)
operating activities
Before net change in
non-cash working
capital $ 22,074 $ - $ - $ 75,827
Net change in non-cash
working capital 631 - - 498
----------------------------------- -----------
22,705 - - 76,325
----------------------------------- -----------
Cash provided by (used in)
investing activities
Capital spending (10,113) (131,459) - (149,097)
Working capital changes
associated with capital
spending - 55,208 - 55,208
Purchase of short-term
investments (284) - - (29,363)
Other - - - -
----------------------------------- -----------
(10,397) (76,251) - (123,252)
----------------------------------- -----------
Cash provided by (used in)
financing activities 50 47,897 - 38,947
----------------------------------- -----------
Foreign exchange change
on cash held in foreign
currency 973 2,214 - 5,602
----------------------------------- -----------
Intergroup funding
(distributions) (36,041) 37,277 - -
----------------------------------- -----------
Increase (decrease) in
cash (22,710) 11,137 - (2,378)
Cash:
Beginning of period 36,183 11,691 - 524,883
----------------------------------- -----------
End of period 13,473 22,828 - 522,505
Short-term investments - - - 318,318
----------------------------------- -----------
Cash and short-term
investments $ 13,473 $ 22,828 $ - $ 840,823
----------------------------------- -----------



INMET MINING CORPORATION
Consolidated statements of retained earnings
(unaudited)

Three Months Ended Year Ended
(thousands of Canadian December 31 December 31
dollars) 2008 2007 2008 2007
------------------------------------------------- -----------------------

Retained earnings,
beginning of period, as
previously reported $1,320,416 $1,018,141 $1,076,958 $ 669,005

Adjustment for inventory
(note 2) - - (1,150) -
----------------------- -----------------------
Retained earnings,
as adjusted 1,320,416 1,018,141 1,075,808 669,005

Net income (loss) (32,514) 63,645 216,922 417,609

Dividends on common
shares (4,828) (4,828) (9,656) (9,656)
------------------------------------------------- -----------------------
Retained earnings, end
of period $1,283,074 $1,076,958 $1,283,074 $1,076,958
------------------------------------------------- -----------------------
(see accompanying notes)



Consolidated statements of comprehensive income (loss)
(unaudited)

Three Months Ended Year Ended
(thousands of Canadian December 31 December 31
dollars) 2008 2007 2008 2007
------------------------------------------------- -----------------------

Net income (loss) ($32,514) $ 63,645 $ 216,922 $ 417,609
----------------------- -----------------------

Other comprehensive
income (loss) for the
period(1) :
Changes in fair value
of gold forward sales
contracts (5,309) (6,017) (8,999) (8,576)

Changes in fair value
of interest rate swap
contracts (5,538) (2,392) (5,865) (3,929)

Changes in fair value
of foreign exchange
forward contracts 54 2,193 7,137 8,264

Changes in fair value
of investments (6,260) 2,820 (10,936) 23,202

Currency translation
adjustments 195,945 10,907 236,401 (88,296)

Reclassification to net
income of gains/losses
realized:
Gain on sale of
investments - - (256) (11,730)

Troilus gold hedges loss 7,440 4,872 31,812 15,689

Amortization of deferred
Troilus gold hedges (1,361) - (5,444) -

Amortization of gains on
foreign exchange
forward contracts 43 - (3,181) -

Ok Tedi gold hedges loss 5,723 3,595 6,736 3,595

Foreign exchange gain
(loss) on reduction of
net investment in
self-sustaining foreign
operations (note 16) (1,421) 2,083 18,963 5,394
----------------------- -----------------------
189,316 18,061 266,368 (56,387)
----------------------- -----------------------

Comprehensive income $ 156,802 $ 81,706 $ 483,290 $ 361,222
------------------------------------------------- -----------------------
(see accompanying notes)

(1) Net of applicable income tax and non-controlling interest.



INMET MINING CORPORATION

Notes to the consolidated financial statements

1. Significant accounting policies

Our interim consolidated financial statements do not include all of
the disclosure required for annual financial statements under
generally accepted accounting principles (GAAP), and they have not
been reviewed by our external auditors. These statements do, however,
follow the same accounting policies and methods of application used
in our most recent annual consolidated financial statements, except
for the differences explained in note 2. You should read our interim
statements in conjunction with our annual statements, which you can
find in our 2007 Annual Review.

2. Changes in accounting policies

Section 3031 - Inventories

Effective January 1, 2008, we adopted CICA Handbook section 3031 -
Inventories on a prospective basis.

This section requires inventory to be measured at the lower of cost
or net realizable value. It also clarifies how to allocate fixed
production overhead, and requires:

- consistent use of either first-in, first-out or weighted average
to measure inventories
- insurance and capital spares be accounted for as property, plant
and equipment
- any previous write-downs be reversed when the value of inventories
increases. The amount of the reversal is limited to the amount of
the original write-down.

We are now expensing certain administrative and other costs as we
incur them, rather than including them in the cost of inventory. We
measure finished goods inventory and materials and supplies at the
lower of weighted average cost or net realizable value.

This change in policy had the following impact on our 2008
consolidated financial statements:

- decreased opening 2008 inventory by $3.5 million
- increased opening 2008 property, plant and equipment by
$1.8 million
- decreased opening 2008 future income tax liability by $0.6 million
- decreased opening 2008 retained earnings by $1.1 million

3. Recently issued accounting pronouncement

Section 3064 - Goodwill and intangible assets

This section establishes standards for the recognition, measurement,
presentation and disclosure of goodwill subsequent to its initial
recognition and of intangible assets. This section replaces Section
3062, Goodwill and Other Intangible Assets and Section 3450, Research
and Development Costs. Various changes have been made to other
sections of the CICA Handbook for consistency purposes. It provides
guidance for the recognition of internally developed intangible
assets and ensuring consistent treatment of all intangible assets,
whether separately acquired or internally developed. Standards
concerning goodwill are unchanged from the standards included in the
previous section. This section becomes effective for us beginning on
January 1, 2009. The adoption of this standard will not have an
impact on our financial statements.

Section 1582 - Business combinations

This section establishes new standards for accounting for business
combinations and is the Canadian equivalent to IFRS 3 - Business
combinations. This section requires that:
- most identifiable assets, liabilities, non-controlling interests
and goodwill acquired in a business combination be recorded at
full fair value
- acquisition-related costs are recognized as expenses as incurred
- obligations for contingent consideration are measured and
recognized at fair value at the acquisition date
- liabilities associated with restructuring or exit activities are
recognized only if they meet the definition of a liability as of
the acquisition date
- an acquisition date gain is reflected for a bargain purchase
- for step acquisitions, where control is obtained the acquirer re-
measures its non-controlling equity investment in the acquiree at
fair value as of the date control is obtained and recognizes any
gain or loss in income.

Section 1602 - Non-controlling interests

This section provides guidance on accounting for non-controlling
interests (NCI) subsequent to a business combination and replicates
the provisions of International Accounting Standard (IAS) 27 -
Consolidated and separate financial statements. NCI in subsidiaries
are presented in the consolidated balance sheet with equity, separate
from the parent shareholder's equity. In the income statement, NCI is
not deducted in arriving at consolidated net income but is allocated
to the controlling interest and the NCI according to their percentage
ownership. Losses are attributed to NCI even if they exceed its
carrying amount. Acquisitions or dispositions that do not result in a
change of control are accounted for as equity transactions.

Section 1601 - Consolidated financial statements

This section carries forward the consolidation guidance previously
included in its predecessor section 1600 except that it removes all
guidance on accounting for NCI that is replaced by that provided in
section 1602, and guidance already included in section 1582.

Sections 1582, 1601 and 1602, are to be implemented concurrently.
Section 1582 is effective for business combinations for which the
acquisition date is on or after the beginning of the first annual
reporting period beginning on or after January 1, 2011. Sections 1601
and 1602 are effective for fiscal years beginning on or after January
1, 2011 with earlier adoption permitted as of the beginning of a
fiscal year. Section 1602 is to be applied retrospectively, with
certain exceptions. We are currently assessing the impact these
changes in accounting policies will have on our consolidated
financial statements.


4. Acquisition

(a) Petaquilla Copper Ltd.

In 2008 and through a wholly-owned subsidiary, we acquired all the
outstanding common shares of Petaquilla Copper Ltd. ("PTC"), a
Canadian junior mining company listed on the Toronto Stock Exchange.
PTC's principal asset is a 26 percent interest in Minera Panama S.A.
(MPSA), the Panamanian company that owns Petaquilla.

We acquired 95 percent of PTC on September 19, 2008, and the
remaining 5 percent on November 28, 2008 under a court approved plan
of arrangement, paying a total of $378 million in cash or $2.20 per
PTC common share for our interest.

The table below shows the fair value of the assets we acquired and
liabilities we assumed at the date of acquisition, based on the
consideration paid.

---------------------------------------------------------------------
(thousands of Canadian dollars)
---------------------------------------------------------------------
Consideration:
Cash paid $377,669
Transaction costs 24,411
---------------------------------------------------------------------
Cost of acquisition $402,080
---------------------------------------------------------------------

---------------------------------------------------------------------
Assets acquired:
Cash $21,909
Other current assets 918
Property, plant and equipment and other assets 395,380
---------------------------------------------------------------------
418,207
Liabilities assumed:
Current liabilities (16,127)
---------------------------------------------------------------------
Net assets acquired $402,080
---------------------------------------------------------------------
---------------------------------------------------------------------

Transaction costs include Panamanian advanced capital gains taxes of
$18.9 million on the transfer of share ownership.

We included 95 percent of PTC's earnings in our consolidated
statement of earnings from September 19, 2008 to November 28, 2008
and 100 percent after November 28, 2008.

Until September 19, 2008, we proportionally consolidated our 48
percent interest in Petaquilla. Our acquisition of PTC gave us a
76 percent interest in Petaquilla, and we have determined that we
control this entity, so we consolidated Petaquilla's balance sheet
effective September 19, 2008.

(b) Teck Cominco Limited's 26 percent interest in Petaquilla

On March 26, 2008, we entered into an agreement with Teck Cominco
Limited (Teck) to proceed with the development of Petaquilla. We
agreed to work closely with Teck in project development, acting as
operator of the project on their behalf. We also agreed to fund our
and Teck's share of project expenditures until we had contributed
US $50 million in development costs, or until September 30, 2009,
whichever was earlier.

On November 20, 2008, Teck chose not to continue to participate in
the Petaquilla copper project. We acquired their 26 percent interest
in the project at a purchase price of US $30 million. No payments
were required, as provided by our March 26, 2008 agreement. The
transaction closed in December 2008.

The table below shows the fair value of the assets we acquired and
liabilities we assumed at the date of acquisition, based on the
consideration paid.

---------------------------------------------------------------------
(thousands of Canadian dollars)
---------------------------------------------------------------------
Consideration:
Funding provided on behalf of Teck
and PTC plus accrued interest $32,065
Indemnity fee 3,654
---------------------------------------------------------------------
Cost of acquisition $35,719
---------------------------------------------------------------------

---------------------------------------------------------------------
Assets acquired:
Cash $289
Other current assets 219
Property, plant and equipment 38,879
---------------------------------------------------------------------
39,387
Liabilities assumed:
Current liabilities (3,668)
---------------------------------------------------------------------
Net assets acquired $35,719
---------------------------------------------------------------------
---------------------------------------------------------------------

5. Statement of cash flows

The following tables show the components of our net change in non-
cash working capital by segment.

For the twelve months ended December 31, 2008
-------------------------------------------------------------------------

(thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total
-------------------------------------------------------------------------
Accounts
receivable $8,506 $11,980 $30,408 $1,220 $17,136 $69,250
Inventories - (2,851) (682) 1,241 (8,348) (10,640)
Accounts
payable and
accrued
liabilities (10,594) (2,453) (5,114) (3,096) 17,374 (3,883)
Taxes (6,310) (18,742) (7,756) - (12,128) (44,936)
Other - 78 - - 1,269 1,347
-------------------------------------------------------------------------
$(8,398) $(11,988) $16,856 $(635) $15,303 $11,138
-------------------------------------------------------------------------


For the twelve months ended December 31, 2007
-------------------------------------------------------------------------

(thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total
-------------------------------------------------------------------------
Accounts
receivable $(4,814) $17,032 $14,383 $(7,685) $(14,877) $4,039
Inventories - 557 (853) 1,814 (1,362) 156
Accounts
payable and
accrued
liabilities 5,927 (2,707) 94 936 2,528 6,778
Taxes (3,905) 7,920 (20,094) - (8,450) (24,529)
Other (4,418) (29) - - (3,346) (7,793)
-------------------------------------------------------------------------
$(7,210) $22,773 $(6,470) $(4,935) $(25,507) $(21,349)
-------------------------------------------------------------------------


For the three months ended December 31, 2008
-------------------------------------------------------------------------

(thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total
-------------------------------------------------------------------------
Accounts
receivable $(2,247) $13,168 $18,421 $687 $(1,118) $28,911
Inventories - (1,859) (591) 2,435 239 224
Accounts
payable and
accrued
liabilities (64) (3,788) (6,005) 366 18,782 9,291
Taxes (4,557) (6,024) (1,030) - (12,503) (24,114)
Other (109) (46) - - 1,364 1,301
-------------------------------------------------------------------------
$(6,977) $1,543 $10,795 $3,488 $6,764 $15,613
-------------------------------------------------------------------------


For the three months ended December 31, 2007
-------------------------------------------------------------------------

(thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total
-------------------------------------------------------------------------
Accounts
receivable $(2,061) $16,777 $(3,436) $(2,613) $7,923 $16,590
Inventories - (690) (149) 3,619 (1,845) 935
Accounts
payable and
accrued
liabilities 7,052 3,617 280 860 5,317 17,126
Taxes (357) (2,783) (15,838) - (8,871) (27,849)
Other (4,400) (11) - - (1,893) (6,304)
-------------------------------------------------------------------------
$234 $16,910 $(19,143) $1,866 $631 $498
-------------------------------------------------------------------------

6. Cash and short-term investments

At December 31, our cash and short-term investments are held in:

---------------------------------------------------------------------
December December
(thousands) 31 2008 31 2007
---------------------------------------------------------------------
Cash:
Liquidity funds $276,301 $424,390
Term deposits 78,041 22,186
Overnight deposits 14,684 50,822
Bankers acceptances 64,293 -
Money market funds 38,683 18,531
Provincial short-term notes 12,628 -
Bank deposits 52,429 7,018
---------------------
537,059 522,947
Short-term investments:
Federal and crown corporation investments - 317,876
Provincial short-term notes 35,674 -
---------------------------------------------------------------------
35,674 317,876
---------------------------------------------------------------------
Total cash and short-term investments $572,733 $840,823
---------------------------------------------------------------------

7. Restricted cash

The table below shows our restricted cash balances.

---------------------------------------------------------------------
December December
(thousands) 31 2008 31 2007
---------------------------------------------------------------------
Collateralized cash for letter of
credit facility - Inmet Mining $16,343 $14,444
In trust for Ok Tedi reclamation 16,667 11,836
Collateralized cash for letters
of credit - Las Cruces 26,090 12,494
Collateralized cash for Pyhasalmi
reclamation 2,104 -
---------------------------------------------------------------------
61,204 38,774
Less current portion:
Collateralized cash for letters of
credit - Las Cruces (8,311) (1,569)
---------------------------------------------------------------------
$52,893 $37,205
---------------------------------------------------------------------

Cash collateralized letters of credit for Las Cruces are for the
following:

- (euro)3.1 million to secure payments that will ultimately be for
the use of an electrical substation
- (euro)2.5 million to secure payments to local townships that it
will owe once certain licences are granted
- (euro)5 million for a labour bond previously issued under
Tranche A of its credit facility. The labour bond is fixed at
(euro)5 million for the life of the mine.
- (euro)4.7 million for dewatering and other purposes.

8. Accounts receivable

---------------------------------------------------------------------
2008 2007
---------------------------------------------------------------------
Accounts receivable from sale of metal $39,232 $70,407
Value-added and other taxes receivable 66,817 30,368
Advances and prepaid expenses 23,373 15,772
Other amounts receivable 6,320 14,649
---------------------------------------------------------------------
$135,742 $131,197
---------------------------------------------------------------------

9. Investments

The table below shows our investments.

---------------------------------------------------------------------
December December
(thousands) 31 2008 31 2007
---------------------------------------------------------------------
Available-for-sale equity securities:
Premier Gold Mines Ltd. $15,309 $22,680
Other 2,205 9,586
---------------------------------------------------------------------
$17,514 $32,266
---------------------------------------------------------------------

10. Derivatives

The table below shows the fair value of our derivatives.

---------------------------------------------------------------------
December December
(thousands) 31 2008 31 2007
(fair (fair
value) value)
---------------------------------------------------------------------
Derivative asset:
Ok Tedi copper forward sales contracts $4,327
Las Cruces currency forward sales contracts - 33,565
---------------------------------------------------------------------
$4,327 $33,565
---------------------------------------------------------------------
Derivative liabilities:
Troilus gold forward sales contracts $- $26,889
Ok Tedi gold forward sales contracts 1,670 6,603
Ok Tedi copper forward sales contracts - 2,431
Las Cruces interest rate swaps 23,440 8,037
---------------------------------------------------------------------
$25,110 $43,960
---------------------------------------------------------------------

During the second quarter, Las Cruces' currency forward sale settled
and Las Cruces received (euro)32.6 million. As this hedge was highly
effective from inception to the date of settlement, we continue to
apply hedge accounting for this contract. The gain on settlement
continues to be deferred in Accumulated other comprehensive income
(note 15) and will be recognized in income as a reduction of interest
expense over the life of Las Cruces' credit facility - Tranche A. Las
Cruces is currently capitalizing interest on long-term debt as a cost
of deferred development, therefore the amortized gain is being
recognized as a reduction of this interest. During 2008, this
amounted to a reduction of $6.5 million.

During the third quarter, we settled Troilus' remaining gold forward
sales contracts for 24,250 ounces relating to gold shipments taking
place during the remainder of 2008. These contracts were settled at a
market price of US $819 per ounce, resulting in a cash payment of
$12.4 million. We applied hedge accounting up to the point of
settlement of these contracts therefore the settlement loss will be
recognized against gross sales at the same time as the originally
hedged gold shipments.

11. Accounts payable and accrued liabilities

The table below shows the significant components of our accounts
payable and accrued liabilities balance at December 31.

---------------------------------------------------------------------
2008 2007
---------------------------------------------------------------------
Accounts payables and accrued liabilities $143,715 $140,168
Amounts payable related to metal sales 47,639 5,029
Income taxes payable 17,173 23,603
Current portion of asset retirement obligations 4,000 4,000
---------------------------------------------------------------------
$212,527 $172,800
---------------------------------------------------------------------

12. Long-term debt

---------------------------------------------------------------------
December December
(thousands) 31 2008 31 2007
---------------------------------------------------------------------
Credit facility - Tranche A $262,504 $125,776
- Tranche B 80,364 34,656
Promissory note 19,741 16,267
Loans from non-controlling shareholder 131,905 70,589
---------------------------------------------------------------------
494,514 247,288

Less current portion:
Credit facility - Tranche A (29,302)
- Tranche B (80,364) (12,971)
---------------------------------------------------------------------
$384,848 $234,317
---------------------------------------------------------------------

Credit facility

In the first half of 2008, Las Cruces borrowed an additional
(euro)52 million under Tranche A, the US $215 million senior secured
facility. On June 30, 2008, Tranche A was fully drawn and was
converted from a euro-denominated loan to a US $215 million loan.
Beginning July 1, we revalued the loan to euros (the functional
currency of Las Cruces). Foreign exchange gains and losses on
revaluations are reflected in Investment and other income (note 16).

In this quarter, there was additional borrowings of (euro)14 million
(2008 year to date - (euro)33 million) under Tranche B, the
(euro)69 million senior secured bridge financing facility. During the
third quarter, Las Cruces repaid (euro)9 million under Tranche B
equal to value-added tax refunds received.

The credit facility loans approximate fair value because the loans
accrue interest at prevailing market rates.

Loans from non-controlling shareholder

This quarter, Las Cruces received (euro)23 million (2008 year to date
- (euro)101 million) of intercompany loan advances. These loans bear
interest at EURIBOR plus 6.1 percent and are due to be repaid on
February 25, 2020. The non-controlling portion of these loans,
(euro)78 million, is reflected in long-term debt at December 31,
2008. Loans from non-controlling shareholders approximate fair value
because the loans accrue interest at prevailing market rates.

13. Asset retirement obligations

During 2008, we have recognized additional liabilities of
$17.6 million at Las Cruces as a result of development activities
that have taken place.

During the second quarter, we recognized additional liabilities of
$4.3 million at Cayeli primarily as a result of cost escalation. At
December 31, 2008, we recognized additional liabilities of
$5.3 million at Troilus because of additional owner's costs.

14. Commitments

Our operations have the following capital commitments as at
December 31, 2008:

- Ok Tedi committed approximately $86.5 million (our proportionate
share is $15.6 million) for expenditures related to pit drainage,
dredging and other mining equipment.
- Las Cruces committed $39.8 million for engineering, procurement
and construction management related to the plant.
- Petaquilla committed $177.7 million for the design and supply of
certain SAG mill and ball mill equipment.

15. Accumulated other comprehensive income (loss) (AOCI)

The table below shows the components of the beginning and ending
balances of AOCI.

---------------------------------------------------------------------
(thousands)
---------------------------------------------------------------------
Unrealized losses on gold forward sales contracts
(net of tax of $2,169) $(31,951)
Deferred Troilus gold hedges 5,444
Unrealized gains on foreign exchange forward contract(1) 17,067
Unrealized losses on interest rate swap contracts(2) (4,097)
Unrealized losses on investments (net of tax of $2,951) 14,506
Currency translation adjustment (84,705)
---------------------------------------------------------------------
AOCI, December 31, 2007 $(83,736)
Other comprehensive income for the year ending
December 31, 2008 266,368
---------------------------------------------------------------------
AOCI, December 31, 2008 $182,632
---------------------------------------------------------------------

AOCI December 31, 2008 comprises:
Unrealized losses on gold forward sales contracts
(net of tax of $1,030) $(2,402)
Unrealized gains on foreign exchange forward contract(3) 21,023
Unrealized losses on interest rate swap contract(4) (9,962)
Unrealized gains on investments (net of tax of $667) 3,314
Currency translation adjustment 170,659
---------------------------------------------------------------------
AOCI, December 31, 2008 $182,632
---------------------------------------------------------------------
(1) Net of tax of $10,448 and non-controlling interest of $7,315.
(2) Net of tax of $2,510 and non-controlling interest of $1,756.
(3) Net of tax of $14,818 and non-controlling interest of $10,373.
(4) Net of tax of $6,102 and non-controlling interest of $4,270.

The table below shows the breakdown of the currency translation
adjustment included in AOCI.

---------------------------------------------------------------------
December December
(thousands) 31 2008 31 2007
---------------------------------------------------------------------
Pyhasalmi (euro functional currency) $17,480 $(1,466)
Las Cruces (euro functional currency) 57,947 (1,919)
Cayeli (US dollar functional currency) 24,751 (65,822)
Ok Tedi (US dollar functional currency) 6,224 (15,498)
Petaquilla (US dollar functional currency) 64,257 -
---------------------------------------------------------------------
$170,659 $(84,705)
---------------------------------------------------------------------

The US dollar to Canadian dollar exchange rate was $1.22 at
December 31, 2008 and $0.99 at December 31, 2007. The euro to
Canadian dollar exchange rate was $1.70 at December 31, 2008 and
$1.45 at December 31, 2007.

16. Investment and other income

Investment and other income are summarized as follows:

---------------------------------------------------------------------
Three months ended Twelve months ended
December 31 December 31
(thousands) 2008 2007 2008 2007
---------------------------------------------------------------------
Interest income $6,188 $9,703 $28,182 $32,647
Foreign exchange loss (5,607) (2,969) (33,875) (14,519)
Dividend and royalty income 1,825 1,677 4,979 5,748
Gain on sale of Wolfden - - - 11,730
Mark to market on Ok Tedi
copper forward contracts 3,791 (1,615) 3,791 (3,109)
Other 1,860 (828) 2,909 3,957
---------------------------------------------------------------------
$8,057 $5,968 $5,986 $36,454
---------------------------------------------------------------------

Foreign exchange

For transactions with foreign currencies we use:
- the exchange rates in effect at year-end for monetary assets and
liabilities
- the exchange rates in effect on the date of the transaction for
non-monetary assets and liabilities
- the exchange rates in effect on the date of the transaction for
income and expenses

Foreign exchange loss is a result of:

---------------------------------------------------------------------
Three months ended Twelve months ended
December 31 December 31
2008 2007 2008 2007
---------------------------------------------------------------------
Translation of foreign-
denominated cash $4,292 ($(722) $5,102 $(5,511)
Translation of Las Cruces'
US dollar-denominated debt
(note 12) (12,001) - (24,896) -
Translation of other-
monetary assets and
liabilities 681 (138) 4,882 (3,614)
Reduction in our net
investments 1,421 (2,109) (18,963) (5,394)
---------------------------------------------------------------------
$(5,607) $(2,969) $(33,875) $(14,519)
---------------------------------------------------------------------

Gain on sale of Wolfden

In 2007, we sold our shares in Wolfden for cash proceeds of
$51.4 million and recorded a gain of $11.7 million.

17. Income tax expense (recovery)

The tables below show our current and future income tax expense.

For the twelve months ended December 31, 2008
-------------------------------------------------------------------------
Las
(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total
-------------------------------------------------------------------------
Current
income taxes $9,930 $32,965 $18,995 $49,779 $ - $111,669
Future
income taxes 5,000 (749) 819 - (11,050) (5,980)
-------------------------------------------------------------------------
$14,930 $32,216 $19,814 $49,779 $(11,050) $105,689
-------------------------------------------------------------------------


For the twelve months ended December 31, 2007
-------------------------------------------------------------------------
Las
(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total
-------------------------------------------------------------------------
Current
income taxes $1,698 $45,866 $30,117 $68,128 $ - $145,809
Future
income taxes (5,000) 579 794 (2,383) 286 (5,724)
-------------------------------------------------------------------------
$(3,302) $46,445 $30,911 $65,745 $286 $140,085
-------------------------------------------------------------------------


For the three months ended December 31, 2008
-------------------------------------------------------------------------
Las
(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total
-------------------------------------------------------------------------
Current
income taxes $1,870 $(3,600) $398 $332 $4,283 $3,283
Future
income taxes 5,000 1,609 550 (877) (10,332) (4,050)
-------------------------------------------------------------------------
$6,870 $(1,991) $948 $(545) $(6,049) $(767)
-------------------------------------------------------------------------


For the three months ended December 31, 2007
-------------------------------------------------------------------------
Las
(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total
-------------------------------------------------------------------------
Current
income taxes $541 $5,735 $5,569 $10,923 $ - $22,768
Future
income taxes (5,000) 221 631 (101) 32 (4,217)
-------------------------------------------------------------------------
$(4,459) $5,956 $6,200 $10,822 $32 $18,551
-------------------------------------------------------------------------

18. Net income (loss) per share

The following tables show our calculation of basic and diluted net
income (loss) per share.

---------------------------------------------------------------------
Three months ended Twelve months ended
December 31 December 31
(thousands) 2008 2007 2008 2007
---------------------------------------------------------------------
Net income (loss)
available to common
shareholders $(32,514) $63,645 $216,922 $417,609
---------------------------------------------------------------------

(thousands)
---------------------------------------------------------------------
Weighted average common
shares outstanding 48,282 48,282 48,282 48,279

Plus incremental shares
from assumed conversions:
Deferred share units 83 75 83 75
Long-term incentive plan
units 43 - 43 -
---------------------------------------------------------------------
Diluted weighted average
common shares outstanding 48,408 48,357 48,408 48,354
---------------------------------------------------------------------

(Canadian dollars per share)
---------------------------------------------------------------------
Basic net income (loss) per
common share $(0.67) $1.32 $4.49 $8.65
Dilutive effect from
assumed conversions of
deferred share units per
common share - - (0.01) (0.01)
---------------------------------------------------------------------
Diluted net income (loss)
per common share $(0.67) $1.32 $4.48 $8.64
---------------------------------------------------------------------

19. Asset impairment

At December 31, 2008, we have recorded impairment charges as follows:

---------------------------------------------------------------------
2008 2007
---------------------------------------------------------------------

Long-lived assets - Cerattepe $34,200 $ -
Materials and supplies inventory - Troilus 2,075 -
---------------------------------------------------------------------
$36,275 $ -
---------------------------------------------------------------------

(a) Cerattepe

On March 26, 2008 we received notice from the Rize Administrative
Court of its decision to grant an injunction against the Cerattepe
property. The injunction prevented us from doing any further
development work on the project. We appealed the injunction and on
October 24, 2008 the Court ruled to cancel our operating licences. We
made a further appeal to the Supreme Administrative Court. We
continue to believe that the applications to cancel the operating
licences are without merit. Nonetheless, we have decided that we will
not proceed with the project, regardless of the decision on the
appeal. All work has ceased and we took a $34 million charge to write
down the assets to its fair value of $5.5 million. We calculated the
impairment charges using expected discounted cash flows.

(b) Troilus

During the quarter, we recognized an impairment charge of $2 million
to write down materials and supplies that Troilus will not use over
the remainder of its operations to its net realizable value.


Contact Information

  • Inmet Mining Corporation
    Richard Ross
    Chairman and Chief Executive Officer
    (416) 860-3974
    or
    Inmet Mining Corporation
    Jochen Tilk
    President and Chief Operating Officer
    (416) 860-3972