Inmet Mining Corporation
TSX : IMN

Inmet Mining Corporation

July 28, 2009 08:50 ET

Inmet Announces Second Quarter Earnings of $1.37 Per Share Compared With $1.40 Per Share in the Second Quarter of 2008

TORONTO, ONTARIO--(Marketwire - July 28, 2009) - Inmet Mining Corporation
(TSX:IMN) -



Second quarter highlights

- Earnings from operations were down because of lower metal prices and
sales volumes

Lower copper and zinc prices reduced sales by $57 million this
quarter compared to the same quarter in 2008. This was offset
somewhat by higher gold and other metal prices, which increased sales
by $16 million. Copper prices this quarter averaged US $2.22 per
pound compared to US $3.83 per pound during the same quarter in 2008.

- Copper production in line with last year

Copper production this quarter was in line with last year's
production. Zinc production was lower because of lower grades mined
and gold production was lower because Troilus began to draw from its
low grade stockpile.

- Copper cash costs were down

Copper cash costs this quarter were US $0.52 per pound compared to
US $0.65 per pound in the second quarter of 2008. Lower direct
production costs and treatment charges helped lower cash costs, but
these were partly offset by lower zinc metal credits. Cash costs are
a non-GAAP measure (see pages 30 to 32).

- Revised production outlook for 2009

Production in the first half of the year was lower than we expected
because of lower grades mined at Cayeli and lower throughput at Ok
Tedi. As a result we have revised our 2009 production objectives to
reflect this. We now expect to produce 100,000 tonnes of copper,
78,000 tonnes of zinc, 230,000 ounces of gold and 411,000 tonnes of
pyrite in 2009.

- Las Cruces produces first copper cathode and receives final approval
for amended dewatering and reinjection system permit

On June 3, Las Cruces produced its first copper cathode and is
working towards achieving its designed annualized production rate
capacity of 72,000 tonnes by February 2010. On July 16, the Water
Authority of Andalucia approved an amended permit for the dewatering
and reinjection system.

- Petaquilla completes its drilling program

We completed the drilling program in June, but we have to finalize a
National Instrument 43-101 compliant technical report and the front-
end engineering and design study before we can establish a final
mineral reserve estimate for the Petaquilla project. Preliminary
results, however, indicate that we can expect to meet or exceed our
target for mineral reserves that would support a minimum mine life of
30 years at a throughput rate of 150,000 tonnes per day.

- We successfully issued 7.8 million shares for gross proceeds of
$348 million

On June 25, we closed a bought deal offering of 7.8 million common
shares at an offering price of $44.50 per share for gross proceeds of
$348 million. We plan to use about US $240 million of the proceeds to
fund the repayment of the Las Cruces credit facility, which is
scheduled for July 31, 2009.


Key financial data
-------------------------------------------------------------------------
three months ended June 30
2009 2008 change
-------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(thousands, except per share amounts)

Sales
Gross sales $213,042 $281,463 -24%

Net income
Net income $66,528 $67,705 -2%
Net income per share $1.37 $1.40 -2%

Cash flow
Cash flow provided by operating
activities $90,596 $114,797 -21%
Cash flow provided by operating
activities per share(1) $1.86 $2.38 -21%

Capital spending $86,263 $121,028 -29%
-------------------------------------------------------------------------

OPERATING HIGHLIGHTS

Production(2)
Copper (tonnes) 19,200 19,300 -1%
Zinc (tonnes) 17,500 20,900 -16%
Gold (ounces) 50,600 59,900 -16%

Cash costs(3)
Copper (US $ per pound) $0.52 $0.65 -20%
Gold (US $ per ounce) $259 $360 -28%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
six months ended June 30
2009 2008 change
-------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(thousands, except per share amounts)

Sales
Gross sales $452,194 $557,744 -19%

Net income
Net income $117,855 $174,379 -32%
Net income per share $2.43 $3.61 -32%

Cash flow
Cash flow provided by operating
activities $107,693 $195,708 -45%
Cash flow provided by operating
activities per share(1) $2.22 $4.05 -45%

Capital spending $181,122 $232,442 -22%
-------------------------------------------------------------------------

OPERATING HIGHLIGHTS

Production(2)
Copper (tonnes) 39,300 38,600 +2%
Zinc (tonnes) 32,800 41,200 -20%
Gold (ounces) 129,400 116,200 +11%

Cash costs(3)
Copper (US $ per pound) $0.55 $0.48 +15%
Gold (US $ per ounce) $164 $374 -56%
-------------------------------------------------------------------------

--------------------------
as at as at
June 30 December 31
FINANCIAL CONDITION 2009 2008
--------------------------
Current ratio 2.7 to 1 2.4 to 1
Gross debt to total equity(4) 12% 19%
Net working capital balance (millions) $689 $475
Cash balance (millions) $835 $573
Shareholders' equity (millions) $2,247 $1,868
-------------------------------------------------------------------------
(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
30 to 32.
(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

Although we saw improvement in base metal prices during the first half of
the year and despite signs of economic recovery, we continue to consider
market conditions to be unsettled. The strength of our financial position,
together with our relatively low operating costs, however, lead us to expect
that:

- market conditions will not have any impact on our ability to meet
expected production levels
- we will be able to sustain our capital expenditures and remain
consistent with our objectives
- we will continue to pursue our growth objectives by advancing the
Petaquilla project and considering other opportunities as they arise.

We will continue to 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.

Second quarter press release

Where to find it

Our financial results........................ 4
Key changes in 2009.......................... 4
Understanding our performance................ 5
Earnings from operations................... 7
Corporate costs............................ 11
Results of our operations.................... 13
Cayeli..................................... 14
Pyhasalmi.................................. 16
Las Cruces................................. 18
Troilus.................................... 20
Ok Tedi.................................... 22
Status of our development project............ 24
Petaquilla................................. 24
Managing our liquidity....................... 25
Financial condition.......................... 28
Accounting changes........................... 29
Supplementary financial information.......... 30
Consolidated financial statements............ 34

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 June 30, 2009.

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 June 30
(thousands, except per share amounts) 2009 2008 change
-------------------------------------------------------------------------
EARNINGS FROM OPERATIONS(1)

Cayeli $22,185 $45,262 -51%
Pyhasalmi 11,783 27,232 -57%
Troilus 16,032 7,510 +113%
Ok Tedi 35,530 49,656 -28%
Other (508) (494) +3%
-------------------------------------------------------------------------
85,022 129,166 -34%
-------------------------------------------------------------------------
DEVELOPMENT AND EXPLORATION

Corporate development and exploration (2,727) (2,483) +10%
-------------------------------------------------------------------------
CORPORATE COSTS

General and administration (4,785) (2,790) +72%
Investment and other income 16,466 (11,358) -245%
Asset impairment - - -
Interest expense (493) (471) +5%
Income and capital taxes (24,177) (44,457) -46%
Non-controlling interest (2,778) 98 -2,935%
-------------------------------------------------------------------------
(15,767) (58,978) -73%
-------------------------------------------------------------------------
Net income $66,528 $67,705 -2%
-------------------------------------------------------------------------
Basic net income per share $1.37 $1.40 -2%
-------------------------------------------------------------------------
Diluted net income per share $1.36 $1.40 -3%
-------------------------------------------------------------------------
Weighted average shares outstanding 48,712 48,282 +1%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
six months ended June 30
(thousands, except per share amounts) 2009 2008 change
-------------------------------------------------------------------------
EARNINGS FROM OPERATIONS(1)

Cayeli $37,086 $98,917 -63%
Pyhasalmi 18,326 55,226 -67%
Troilus 70,516 16,145 +337%
Ok Tedi 53,115 103,574 -49%
Other (992) (988) -
-------------------------------------------------------------------------
178,051 272,874 -35%
-------------------------------------------------------------------------
DEVELOPMENT AND EXPLORATION

Corporate development and exploration (5,959) (5,101) +17%
-------------------------------------------------------------------------
CORPORATE COSTS

General and administration (8,909) (6,438) +38%
Investment and other income 5,263 3,396 +55%
Asset impairment (6,419) - -100%
Interest expense (985) (918) +7%
Income and capital taxes (43,192) (89,327) -52%
Non-controlling interest 5 (107) -105%
-------------------------------------------------------------------------
(54,237) (93,394) -42%
-------------------------------------------------------------------------
Net income $117,855 $174,379 -32%
-------------------------------------------------------------------------
Basic net income per share $2.43 $3.61 -32%
-------------------------------------------------------------------------
Diluted net income per share $2.42 $3.61 -33%
-------------------------------------------------------------------------
Weighted average shares outstanding 48,498 48,282 -
-------------------------------------------------------------------------
(1) Gross sales less smelter processing charges and freight, cost of
sales, depreciation and provisions for mine reclamation.



Key changes in 2009
-------------------------------------------------------------------------
three months six months
ended ended
(millions) June 30 June 30 see page
-------------------------------------------------------------------------
EARNINGS FROM OPERATIONS

Sales
Lower copper and zinc prices
denominated in Canadian dollars $(57) $(139) 7
Higher gold prices and other prices 16 51 7
Lower sales volumes (13) (3) 8
Lower pyrite sales, net of costs to sell (2) (9)
Costs
Lower smelter processing charges and freight 5 7 9
Lower operating costs, including costs
that vary with income and cash flows 11 9 10
Higher depreciation (4) (11) 10
-------------------------------------------------------------------------
Lower earnings from operations,
compared to 2008 $(44) $(95)

CORPORATE COSTS

Lower income tax expense from lower
earnings 20 40 12
Lower interest income on cash balances (6) (13) 11
Foreign exchange changes on Las Cruces debt 15 4 11
Other foreign exchange changes 22 16 11
Other (8) (9)
-------------------------------------------------------------------------
Lower net income, compared to 2008 $(1) $(57)
-------------------------------------------------------------------------

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 June 30 six months ended June 30
2009 2008 change 2009 2008 change
-------------------------------------------------------------------------
US dollar
metal prices
Copper (per pound) $2.22 $3.83 -42% $2.14 $4.00 -47%
Zinc (per pound) $0.69 $0.94 -27% $0.60 $1.00 -40%
Gold (per ounce) $900 $725 +24% $932 $748 +25%
-------------------------------------------------------------------------
Canadian dollar
metal prices
Copper (per pound) $2.60 $3.87 -33% $2.58 $4.04 -36%
Zinc (per pound) $0.81 $0.95 -15% $0.72 $1.01 -29%
Gold (per ounce) $1,050 $732 +43% $1,124 $755 +49%
-------------------------------------------------------------------------

There has been an overall improvement in base metal prices in 2009 so
far, and a steady increase in the price of gold.

Copper
The price of copper increased by over 25 percent this quarter, following
a more than 30 percent increase in the first quarter, and reaching a high of
US $2.39 per pound in June. The average market copper price for the quarter
was US $2.11 per pound, and in June was US $2.27 per pound.
The increase was supported by a steady decline in metals exchange
inventories, a rise in demand from China, and an improvement in business
sentiment.
LME warehouse copper inventories fell in June to 266,000 tonnes - the
lowest level since November of 2008. Over the last four months, total global
exchange stocks have dropped by over 200,000 tonnes and, at the end of June,
were 14,000 tonnes lower than they were at the end of 2008.

Zinc
Zinc averaged US $0.67 per pound this quarter, a 25 percent increase over
last quarter, hitting a 9 month high in mid June of US $0.76 per pound.
Exchange stocks at LME warehouses increased by 10 percent in June, to 353,000
tonnes, reversing the downward movement of the prior three months.

Gold
Gold prices continued to increase this quarter, closing at US $935 per
ounce. This is a 2 percent increase over the first quarter, which ended at US
$917 per ounce. Gold averaged US $923 per ounce this quarter, up from US $908
per ounce in the first quarter. The price of gold was as high as US $982 at
the beginning of June because of the weakness of the US dollar and concerns
about inflation.

Pyrite
Toward the end of 2008, the economic downturn began to have a significant
effect on demand for sulphur and sulphuric acid. According to analysts, the
sulphuric acid market will continue to deteriorate and sulphur prices will
continue to be lower over the short to medium term. This will have a direct
impact on pyrite prices.

Exchange rates

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

-------------------------------------------------------------------------
three months ended June 30 six months ended June 30
2009 2008 change 2009 2008 change
-------------------------------------------------------------------------
Exchange rates
1 US$ to C$ $1.17 $1.01 +16% $1.21 $1.01 +20%
1 euro to C$ $1.59 $1.58 +1% $1.61 $1.54 +5%
1 euro to US$ $1.36 $1.56 -13% $1.33 $1.53 -13%
-------------------------------------------------------------------------

Sales are affected by the conversion of US dollar revenue to Canadian
dollars. Foreign exchange had a significant impact on our results this quarter
compared to the same period last year. The Canadian dollar dropped 16 percent
this quarter relative to the US dollar and 1 percent relative to the euro.
Net income was $34 million higher this quarter compared to the same
quarter last year because of fluctuations in the value of the US dollar and
euro relative to the Canadian dollar, as described in the table below.

-------------------------------------------------------------------------
three months ended
(millions) June 30
-------------------------------------------------------------------------
US dollar sales translated into Canadian dollars
(reflected in Canadian dollar sales price) $47
Cayeli and Ok Tedi US dollar costs translated
into Canadian dollars (25)
Pyhasalmi euro based costs translated into
Canadian dollars (2)
Foreign exchange gain on Las Cruces debt, net of
tax and non-controlling interest 7
Foreign exchange realized from distributions of
funds from subsidiaries 4
Other 3
-------------------------------------------------------------------------
$34
-------------------------------------------------------------------------

Treatment charges up for copper and down for zinc

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

The table below shows the average charges we realized this quarter and
year to date.


-------------------------------------------------------------------------
three months ended June 30
2009 2008 change
-------------------------------------------------------------------------
Treatment charges
Copper (per dry metric tonne
of concentrate) US $66 US $40 +65%
Zinc (per dry metric tonne
of concentrate) US $131 US $292 -55%
-------------------------------------------------------------------------
Price participation
Copper (per pound) US $0.03 US $0.05 -40%
Zinc (per pound) US $0.05 US $(0.01) +600%
-------------------------------------------------------------------------
Freight charges
Copper (per dry metric tonne
of concentrate) US $34 US $54 -37%
Zinc (per dry metric tonne
of concentrate) US $28 US $41 -32%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
six months ended June 30
2009 2008 change
-------------------------------------------------------------------------

Treatment charges
Copper (per dry metric tonne
of concentrate) US $67 US $46 +46%
Zinc (per dry metric tonne
of concentrate) US $192 US $291 -34%
-------------------------------------------------------------------------
Price participation
Copper (per pound) US $0.03 US $0.05 -40%
Zinc (per pound) US $0.01 US $(0.02) +150%
-------------------------------------------------------------------------
Freight charges
Copper (per dry metric tonne
of concentrate) US $30 US $50 -40%
Zinc (per dry metric tonne
of concentrate) US $26 US $41 -37%
-------------------------------------------------------------------------

Copper treatment charges were higher this quarter and year to date than
they were last year because contract terms with smelters were less favourable.
We finalized our contract terms for zinc smelters in the second quarter at
more favourable terms than last year. The second quarter includes adjustments
to first quarter charges that were priced at 2008 rates.

Statutory tax rates remain consistent

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

-------------------------------------------------------------------------
2009 2008 change
-------------------------------------------------------------------------
Statutory tax rates
Cayeli 24% 24% -
Pyhasalmi 26% 26% -
Ok Tedi 37% 37% -
Las Cruces 30% 30% -
-------------------------------------------------------------------------

Earnings from operations

Earnings from operations include the following:

-------------------------------------------------------------------------
three months ended June 30
(thousands) 2009 2008 change
-------------------------------------------------------------------------
Gross sales $213,042 $281,463 -24%
Smelter processing
charges and freight (40,589) (53,209) -24%
Cost of sales:
Direct production costs (71,935) (82,076) -12%
Inventory changes 2,222 (1,744) -227%
Provisions for mine rehabilitation
and other non-cash charges (4,114) (6,073) -32%
Depreciation (13,604) (9,195) +48%
-------------------------------------------------------------------------
Earnings from operations $85,022 $129,166 -34%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
six months ended June 30
(thousands) 2009 2008 change
-------------------------------------------------------------------------
Gross sales $452,194 $557,744 -19%
Smelter processing
charges and freight (81,129) (97,366) -17%
Cost of sales:
Direct production costs (150,354) (159,610) -6%
Inventory changes (1,673) 1,196 -240%
Provisions for mine rehabilitation
and other non-cash charges (11,704) (10,725) +9%
Depreciation (29,283) (18,365) +59%
-------------------------------------------------------------------------
Earnings from operations $178,051 $272,874 -35%
-------------------------------------------------------------------------


Gross sales were down this year

-------------------------------------------------------------------------
three months ended June 30
(thousands) 2009 2008 change
-------------------------------------------------------------------------
Gross sales by operation
Cayeli $63,711 $98,313 -35%
Pyhasalmi 43,001 61,249 -30%
Troilus 37,407 35,171 +6%
Ok Tedi(1) 68,923 86,730 -21%
-------------------------------------------------------------------------
$213,042 $281,463 -24%
-------------------------------------------------------------------------
Gross sales by metal
Copper $105,260 $161,530 -35%
Zinc 33,028 52,185 -37%
Gold 55,711 45,046 +24%
Other 19,043 22,702 -16%
-------------------------------------------------------------------------
$213,042 $281,463 -24%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
six months ended June 30
(thousands) 2009 2008 change
-------------------------------------------------------------------------
Gross sales by operation
Cayeli $123,732 $198,929 -38%
Pyhasalmi 76,982 116,157 -34%
Troilus 124,397 69,422 +79%
Ok Tedi(1) 127,083 173,236 -27%
-------------------------------------------------------------------------
$452,194 $557,744 -19%
-------------------------------------------------------------------------
Gross sales by metal
Copper $209,999 $329,698 -36%
Zinc 60,052 100,991 -41%
Gold 148,725 88,333 +68%
Other 33,418 38,722 -14%
-------------------------------------------------------------------------
$452,194 $557,744 -19%
-------------------------------------------------------------------------
(1) Our 18 percent share of Ok Tedi's sales.

Key components of the change in sales: lower copper and zinc prices,
higher gold prices


-------------------------------------------------------------------------
three months ended six months ended
(millions) June 30 June 30
-------------------------------------------------------------------------
Lower copper prices,
denominated in Canadian dollars $(51) $(116)
Lower zinc prices,
denominated in Canadian dollars (6) (23)
Higher gold prices,
denominated in Canadian dollars 17 50
Changes in other metal prices (1) -
Lower sales volumes (27) (17)
-------------------------------------------------------------------------
Lower gross sales, compared to 2008 $(68) $(106)
-------------------------------------------------------------------------

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 calculated using 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).
In the second quarter, we recorded $8 million in positive finalization
adjustments from first quarter sales.

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

- 18 million pounds of copper provisionally priced at US $2.25 per pound
- 14 million pounds of zinc provisionally priced at US $0.70 per pound.

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

----------------------------------------------------
(millions of pounds) copper zinc
----------------------------------------------------
July 2009 7 14
August 2009 6 -
September 2009 3 -
October 2009 2 -
----------------------------------------------------
Unsettled sales at June 30, 2009 18 14
----------------------------------------------------

Lower sales volumes

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


-------------------------------------------------------------------------
three months ended June 30 six months ended June 30
2009 2008 change 2009 2008 change
-------------------------------------------------------------------------
Sales volumes
Copper (tonnes) 18,300 18,900 -3% 36,800 37,200 -1%
Zinc (tonnes) 18,600 25,000 -26% 37,300 45,500 -18%
Gold (ounces) 52,500 61,600 -15% 131,900 117,000 +13%
Pyrite (tonnes) 121,000 142,700 -15% 197,000 266,800 -26%
-------------------------------------------------------------------------


Production
-------------------------------------------------------------------------
three months ended six months ended revised
Inmet's June 30 June 30 objective
share(1) 2009 2008 change 2009 2008 change 2009
-------------------------------------------------------------------------
Copper (tonnes)
Ok Tedi 6,900 7,400 -7% 13,500 14,100 -4% 28,600
Cayeli 7,500 7,600 -1% 14,600 15,800 -8% 32,700
Pyhasalmi 3,700 3,100 +19% 7,300 6,600 +11% 13,000
Las Cruces - - - - - - 20,200
Troilus 1,100 1,200 -8% 3,900 2,100 +86% 6,000
-------------------------------------------------------------------------
19,200 19,300 -1% 39,300 38,600 +2% 100,500
-------------------------------------------------------------------------
Zinc (tonnes)
Cayeli 11,800 13,200 -11% 23,600 25,900 -9% 55,300
Pyhasalmi 5,700 7,700 -26% 9,200 15,300 -40% 22,600
-------------------------------------------------------------------------
17,500 20,900 -16% 32,800 41,200 -20% 77,900
-------------------------------------------------------------------------
Gold (ounces)
Troilus 26,700 37,800 -29% 84,800 72,800 +16% 128,000
Ok Tedi 23,900 22,100 +8% 44,600 43,400 +3% 102,000
-------------------------------------------------------------------------
50,600 59,900 -16% 129,400 116,200 +11% 230,000
-------------------------------------------------------------------------
Pyrite (tonnes)
Pyhasalmi 132,200 111,200 +19% 323,000 305,700 +6% 411,000
-------------------------------------------------------------------------
(1) Inmet's share represents 100 percent for Cayeli, Pyhasalmi and
Troilus, 18 percent for Ok Tedi and 70 percent for Las Cruces.

Copper production this quarter was consistent to the same quarter in
2008, because of higher grades at Pyhasalmi, and lower grades at Ok Tedi.
Zinc production was down mainly because zinc grades and recoveries at
Cayeli and Pyhasalmi were lower.
Gold production was down because grades were lower at Troilus as
production was drawn from its low grade stockpiles.

2009 outlook for sales

Our outlook for sales ties directly to our production outlook. We have
revised our original annual production objectives because production at
Cayeli, Ok Tedi and Troilus in the first half of the year was lower than we
expected. Turn to Results of our operations starting on page 13 for an
explanation for each operation. Overall, our copper production objective is
now 7,100 tonnes lower, zinc production is lower by 1,100 tonnes, gold by
11,600 ounces and pyrite production by 99,000 tonnes.
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. Market uncertainty makes it difficult to forecast
metal prices, but we remain focused on maximizing the efficiency of our
operations to ensure that we remain highly competitive in any economic
environment.

Lower smelter processing charges than last year


-------------------------------------------------------------------------
three months ended June 30
(thousands) 2009 2008 change
-------------------------------------------------------------------------
Smelter processing charges and
freight by operation
Cayeli $18,438 $25,565 -28%
Pyhasalmi 12,326 14,561 -15%
Troilus 2,458 2,421 +2%
Ok Tedi(1) 7,367 10,662 -31%
-------------------------------------------------------------------------
$40,589 $53,209 -24%
-------------------------------------------------------------------------
Smelter processing charges and
freight by metal
Copper $19,827 $21,516 -8%
Zinc 11,780 24,679 -52%
Other 8,982 7,014 +28%
-------------------------------------------------------------------------
$40,589 $53,209 -24%
-------------------------------------------------------------------------
Smelter processing charges
by type and freight
Copper treatment and
refining charges $8,882 $5,099 +74%
Zinc treatment charges 5,602 14,348 -61%
Copper price participation 1,275 2,281 -44%
Zinc price participation 2,407 (366) +758%
Content losses 10,660 16,104 -34%
Other 2,039 2,239 -9%
Freight 9,724 13,504 -28%
-------------------------------------------------------------------------
$40,589 $53,209 -24%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
six months ended June 30
(thousands) 2009 2008 change
-------------------------------------------------------------------------
Smelter processing charges and
freight by operation
Cayeli $37,514 $47,578 -21%
Pyhasalmi 21,317 25,381 -16%
Troilus 8,718 4,608 +89%
Ok Tedi (1) 13,580 19,799 -31%
-------------------------------------------------------------------------
$81,129 $97,366 -17%
-------------------------------------------------------------------------
Smelter processing charges and
freight by metal
Copper $38,343 $42,409 -10%
Zinc 26,968 44,451 -39%
Other 15,818 10,506 +51%
-------------------------------------------------------------------------
$81,129 $97,366 -17%
-------------------------------------------------------------------------
Smelter processing charges
by type and freight
Copper treatment and
refining charges $18,575 $11,074 +68%
Zinc treatment charges 17,281 26,140 -34%
Copper price participation 2,738 4,244 -35%
Zinc price participation 739 (2,261) +133%
Content losses 21,400 32,361 -34%
Other 4,010 4,512 -11%
Freight 16,386 21,296 -23%
-------------------------------------------------------------------------
$81,129 $97,366 -17%
-------------------------------------------------------------------------
(1) Our 18 percent share of Ok Tedi's smelter processing charges
and freight.

Copper treatment and refining charges were higher in 2009 than they were
last year because contract terms with smelters were less favourable. Zinc
treatment charges were lower in part because sales volumes were lower and also
because of more favourable contract terms.

2009 outlook for smelter processing charges and freight

We expect copper treatment and refining costs to increase in 2009, and
our agreements with our smelters reflect this. We sell approximately 90
percent of our copper concentrate under long-term contracts. We are estimating
annual treatment costs of US $75 per dry metric tonne in 2009. We also expect
that price participation will continue to be minimal.
We expect realized zinc processing charges to be less than US $200 per
tonne in 2009. Since the beginning of 2009, smelters have joined mines in
cutting zinc production to respond to the decline in demand for refined zinc
and to falling prices. We expect zinc mine production to be below smelting
requirements this year, which should result in a balanced or deficit zinc
concentrate market.
Las Cruces began producing copper in June. Its copper cathode production
is sold directly to copper fabricators, bypassing the smelters and eliminating
smelting and refining charges. Depending on certain conditions, it may also
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 the ore.
We expect our ocean freight costs to be about 20 percent lower than they
were in 2008 because of the general slowdown in global economic activity.

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

-------------------------------------------------------------------------
three months ended June 30
(thousands) 2009 2008 change
-------------------------------------------------------------------------
Direct production costs by operation
Cayeli $19,834 $22,638 -12%
Pyhasalmi 15,711 15,351 +2%
Troilus 13,816 22,345 -38%
Ok Tedi(1) 22,574 21,742 +4%
-------------------------------------------------------------------------
Total direct production costs 71,935 82,076 -12%
Inventory changes (2,222) 1,744 -227%
Reclamation, accretion and
other non-cash expenses 4,114 6,073 -32%
-------------------------------------------------------------------------
Total cost of sales $73,827 $89,893 -18%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
six months ended June 30
(thousands) 2009 2008 change
-------------------------------------------------------------------------
Direct production costs by operation
Cayeli $40,306 $45,978 -12%
Pyhasalmi 31,365 29,955 +5%
Troilus 32,422 42,292 -23%
Ok Tedi(1) 46,261 41,385 +11%
-------------------------------------------------------------------------
Total direct production costs 150,354 159,610 -6%
Inventory changes 1,673 (1,196) -240%
Reclamation, accretion and
other non-cash expenses 11,704 10,725 +9%
-------------------------------------------------------------------------
Total cost of sales $163,731 $169,139 -3%
-------------------------------------------------------------------------
(1) Our 18 percent share of Ok Tedi's direct production costs.

Direct production costs in 2009 were lower than they were last year
mainly because Troilus completed mining in April and began recovering ore from
its lower cost stockpiles. Cayeli has also seen the benefit of lower labour
costs from the drop in value of the Turkish lira.

2009 outlook for cost of sales

We expect cost of sales to increase in 2009 in line with the start of
production at Las Cruces. The cost of consumables and energy should go down.
The total amount we spend in Canadian dollars will also be affected by the
value of the US dollar and euro relative to the Canadian dollar.

Depreciation was higher than last year

-------------------------------------------------------------------------
three months ended June 30 six months ended June 30
(thousands) 2009 2008 change 2009 2008 change
-------------------------------------------------------------------------
Depreciation
by operation
Cayeli $3,373 $2,556 +32% $6,846 $4,929 +39%
Pyhasalmi 2,162 2,232 -3% 4,764 4,382 +9%
Troilus 3,301 1,718 +92% 6,720 4,136 +62%
Ok Tedi 4,768 2,689 +77% 10,953 4,918 +123%
-------------------------------------------------------------------------
$13,604 $9,195 +48% $29,283 $18,365 +59%
-------------------------------------------------------------------------

Depreciation is higher than last year mainly because we started
depreciating the mine tailings management plant at Ok Tedi, as well as assets
associated with an increase in our asset retirement obligations at Troilus.

2009 outlook for depreciation

We expect depreciation to be about $70 million for 2009. Depreciation for
Las Cruces should be about $10 million, assuming we capitalize pre-commercial
production costs until November.

Corporate costs

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


Investment and other income was higher because of foreign exchange gains

-------------------------------------------------------------------------
three months ended six months ended
June 30 June 30
(thousands) 2009 2008 2009 2008
-------------------------------------------------------------------------
Interest income $701 $6,963 $2,743 $15,686
Dividend income and royalty 385 1,504 685 1,504
Foreign exchange gain (loss) 18,195 (18,573) 8,098 (11,715)
Other (2,815) (1,252) (6,263) (2,079)
-------------------------------------------------------------------------
$16,466 $(11,358) $5,263 $3,396
-------------------------------------------------------------------------

Foreign exchange gain (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) are a result of the following:

-------------------------------------------------------------------------
three months ended six months ended
June 30 June 30
(millions) 2009 2008 2009 2008
-------------------------------------------------------------------------
Revaluation of US dollar
denominated debt at Las Cruces $15 $- $4 $-
Distribution of funds
from subsidiaries 4 (15) 4 (20)
Revaluation of short-term
foreign intergroup loans
and other monetary items (1) (4) - 8
-------------------------------------------------------------------------
$18 $(19) $8 $(12)
-------------------------------------------------------------------------

2009 outlook for investment and other income

Investment and other income is affected by cash balances, interest rates
and exchange rates. For the remainder of 2009, we expect to repatriate funds
only from Ok Tedi. Because Ok Tedi distributes its earnings more frequently,
the effect of repatriation is normally not that significant.
At June 30, 2009, we held (euro)19 million in Canada that could be
affected by foreign exchange gains or losses.
We expect to repay 100 percent of Las Cruces' US dollar denominated debt
on July 31 (see also 2009 outlook for investing and financing on page 27), and
replace it with intergroup debt using the proceeds from our equity offering.
As a result of this, Las Cruces terminated its interest rate swap contracts on
July 20 paying out $16 million for early termination. This will have the
following effects on investment and other income after July 31:

- At June 30, we held US $229 million corporately to be used to fund Las
Cruces. These funds were transferred to Las Cruces in July and because
of the strengthening in the Canadian dollar in July, we will recognize
a foreign exchange loss of about $17 million in the third quarter.
- We will no longer have to report foreign exchange on revaluation of
bank debt, because we are replacing it with intergroup debt and
therefore foreign exchange impacts will eliminate on consolidation.
Las Cruces will continue to be subject to foreign exchange
fluctuations on the intergroup debt on a stand-alone basis.
- When we converted the Las Cruces debt from euro to US dollars in 2008,
Las Cruces settled a foreign exchange forward contract and received
proceeds of $52 million. We deferred the proceeds in accumulated other
comprehensive income, and have been amortizing it to income over the
term of the debt. When we repay the debt, we will realize the
remaining deferred gain of $36 million in investment and other income.
- When we repay the debt, we will reflect the $16 million paid for early
termination of the interest rate swap as a loss in investment and
other income.

Asset impairment

We made a decision in 2008 not to proceed with the Cerattepe project. All
work ceased on the project and we took a $34 million charge to write down the
assets to net realizable value. We took an additional impairment charge of $6
million in the first quarter of 2009, as well as a $6 million tax recovery.

Income tax expense was lower because earnings were lower

-------------------------------------------------------------------------
three months ended June 30 six months ended June 30
(thousands) 2009 2008 change 2009 2008 change
-------------------------------------------------------------------------
Cayeli $2,212 $8,655 -74% $1,631 $27,779 -94%
Pyhasalmi 1,870 6,425 -71% 2,305 12,448 -81%
Ok Tedi 12,469 23,803 -48% 19,009 43,150 -56%
Las Cruces 4,302 (84) -5,221% 267 166 +61%
Corporate 3,324 5,658 -41% 19,980 5,784 +245%
-------------------------------------------------------------------------
$24,177 $44,457 -46% $43,192 $89,327 -52%
-------------------------------------------------------------------------

Our tax expense changes as our earnings change.
- At Cayeli, we recorded a $6 million tax recovery in the first six
months, related to the impairment on Cerattepe.
- At Las Cruces, we recorded a tax expense for foreign exchange gains
from the translation of US dollar denominated debt.
- The tax expense at Corporate relates to a provision for Quebec mining
duties and a reduction in our future income tax asset to reflect
Troilus' earnings. We reduced our future income tax asset by
$10 million for the six months of 2009 and $1 million for the quarter.
We also recorded Quebec mining duties of $10 million for the six
months and $2 million for the quarter.

2009 outlook for income tax expense

We are not expecting any further changes in statutory tax rates at our
operations this year. We do, however, expect to expense approximately $12
million in Quebec mining duties, depending on Troilus' 2009 net income.

Results of our operations

2009 estimates

Our financial review by operation includes estimates for our 2009
operating earnings and operating cash flows. We used our 2009 objectives for
production and cost per tonne of ore milled to build these estimates, along
with the following assumptions for the remaining six months of the year:

-------------------------------------------------------------------------
Copper price US $1.80 per pound
Zinc price US $0.60 per pound
Gold price US $920 per ounce
Copper treatment cost US $75 per tonne
Zinc treatment cost US $190 per tonne
US $ to C$ exchange rate $1.15
euro to C$ exchange rate $1.58
Working capital Assume no changes for the year
-------------------------------------------------------------------------


Cayeli

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

three months ended June 30
2009 2008 change
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 296 279 +6%
Tonnes of ore
milled per day 3,300 3,100 +6%
-------------------------------------------------------------------------
Grades (percent) copper 3.2 3.5 -9%
zinc 5.9 6.3 -6%
-------------------------------------------------------------------------
Mill recoveries
(percent) copper 80 78 +3%
zinc 68 75 -9%
-------------------------------------------------------------------------
Production (tonnes) copper 7,500 7,600 -1%
zinc 11,800 13,200 -11%
-------------------------------------------------------------------------
Cost per tonne of
ore milled (C$) $67 $81 -17%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
revised
six months ended June 30 objective
2009 2008 change 2009
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 561 557 +1% 1,200
Tonnes of ore
milled per day 3,100 3,100 - 3,300
-------------------------------------------------------------------------
Grades (percent) copper 3.3 3.6 -8% 3.5
zinc 6.0 6.4 -6% 6.4
-------------------------------------------------------------------------
Mill recoveries
(percent) copper 79 79 - 79
zinc 70 73 -4% 72
-------------------------------------------------------------------------
Production (tonnes) copper 14,600 15,800 -8% 32,700
zinc 23,600 25,900 -9% 55,300
-------------------------------------------------------------------------
Cost per tonne of
ore milled (C$) $72 $83 -13% $68
-------------------------------------------------------------------------

Production throughput on target for the year

Cayeli processed ore this quarter consistent with our annual objective
and higher than last year. Grades this quarter and year to June were lower
than last year and our 2009 plan because of interruptions in stope sequencing.
Copper and zinc production were therefore lower this quarter and year to date
compared to 2008.
Operating costs for the quarter and year to date were lower than last
year, mainly because of the drop in the value of the Turkish lira, which
reduced labour costs, and a reduction in the cost of key commodities, such as
copper sulphate and electricity. Royalty charges were $2 million less than the
second quarter of last year because earnings were lower.

2009 outlook for production and costs

We expect grades in 2009 to average 3.5 percent for copper and 6.4
percent for zinc, down from our initial objectives because grades in the first
half of the year have been lower than expected. Grades and recoveries should
improve during the second half of 2009. We have therefore lowered our annual
objectives from 36,800 tonnes of copper to 32,700 tonnes and 56,400 tonnes of
zinc to 55,300 tonnes.

We have reduced our objective for cost per tonne of ore milled for the
year from $81 per tonne to $68 per tonne for the following reasons:

- a stronger Canadian dollar
- cost savings programs
- lower commodity input prices
- lower labour costs.

Royalties also have a significant effect on costs and are variable
depending on earnings. Cost per tonne of ore milled included $3 per tonne in
royalties in the second quarter and $5 per tonne year to date. We estimate
that royalties will be $3 per tonne out of our total 2009 objective of $68 per
tonne of ore milled, depending on metal prices.
The current three-year labour agreement expired in May 2009 and
negotiations with the union are underway. Pay increases for the Cayeli workers
have typically been higher than Turkish inflation levels, which we believe is
not sustainable. We will make a strong effort to manage labour cost
escalations to maintain our competitiveness knowing that this position could
result in a short term labour disruption to achieve a long term improvement in
our labour costs.

Financial review

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

-------------------------------------------------------------------------
(millions of Canadian three months six months
dollars unless ended June 30 ended June 30 objective
otherwise stated) 2009 2008 2009 2008 2009
-------------------------------------------------------------------------
Sales analysis
Copper sales (tonnes) 6,800 6,800 13,300 13,500 32,700
Zinc sales (tonnes) 12,700 17,300 27,500 31,200 55,300
-------------------------------------------------------------------------
Gross copper sales $36 $57 $73 $121 $162
Gross zinc sales 23 37 44 70 86
Other metal sales 5 4 7 8 16
-------------------------------------------------------------------------
Gross sales 64 98 124 199 264
Smelter processing
charges and freight (19) (25) (38) (48) (88)
-------------------------------------------------------------------------
Net sales $45 $73 $86 $151 $176
-------------------------------------------------------------------------
Cost analysis
Tonnes of ore
milled (thousands) 296 279 561 557 1,200
Direct production
costs ($ per tonne) $67 $81 $72 $83 $68
-------------------------------------------------------------------------
Direct production costs $20 $23 $40 $46 $82
Change in inventory (1) 1 - - -
Depreciation and
other non-cash costs 4 4 9 6 18
-------------------------------------------------------------------------
Operating costs $23 $28 $49 $52 $100
-------------------------------------------------------------------------
Operating earnings $22 $45 $37 $99 $76
-------------------------------------------------------------------------
Operating cash flow $24 $35 $15 $50 $82
-------------------------------------------------------------------------

The objective for 2009 uses the assumptions listed on page 13.

The table below shows what contributed to the change in operating earnings
and operating cash flow between 2009 and 2008.


-------------------------------------------------------------------------
Three months ended six months ended
(millions) June 30 June 30
-------------------------------------------------------------------------
Lower metal prices,
denominated in Canadian dollars $(25) $(66)
Lower sales volumes (3) (6)
Lower smelter processing charges 2 6
Lower royalty 2 4
Lower operating costs 2 2
Higher depreciation (1) (2)
-------------------------------------------------------------------------
Lower operating earnings,
compared to 2008 $(23) $(62)
Lower tax expense because
earnings were lower 7 18
Changes in working capital 3 8
Other 2 1
-------------------------------------------------------------------------
Lower operating cash flow,
compared to 2008 $(11) $(35)
-------------------------------------------------------------------------

Spending in 2009 will be limited to sustaining capital

-------------------------------------------------------------------------
three months ended six months ended
June 30 June 30 objective
2009 2008 change 2009 2008 change 2009
-------------------------------------------------------------------------
Capital
spending $3,000 $6,300 -52% $6,600 $12,000 -45% $22,000
-------------------------------------------------------------------------

Capital spending in the quarter was for mine equipment replacements.

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 June 30
2009 2008 change
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 355 344 +3%
Tonnes of ore
milled per day 3,900 3,800 +3%
-------------------------------------------------------------------------
Grades (percent) copper 1.1 1.0 +10%
zinc 1.8 2.5 -28%
sulphur 42 40 +5%
-------------------------------------------------------------------------
Mill recoveries
(percent) copper 96 95 +1%
zinc 88 92 -4%
-------------------------------------------------------------------------
Production (tonnes) copper 3,700 3,100 +19%
zinc 5,700 7,700 -26%
pyrite 132,200 111,200 +19%
-------------------------------------------------------------------------
Cost per tonne of
ore milled (C$) $44 $45 -2%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
revised
six months ended June 30 objective
2009 2008 change 2009
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 704 691 +2% 1,370
Tonnes of ore
milled per day 3,900 3,800 +3% 3,750
-------------------------------------------------------------------------
Grades (percent) copper 1.1 1.0 +10% 1.0
zinc 1.5 2.4 -38% 1.9
sulphur 43 41 +5% 42
-------------------------------------------------------------------------
Mill recoveries
(percent) copper 95 96 -1% 94
zinc 87 92 -5% 87
-------------------------------------------------------------------------
Production (tonnes) copper 7,300 6,600 +11% 13,000
zinc 9,200 15,300 -40% 22,600
pyrite 323,000 305,700 +6% 411,000
-------------------------------------------------------------------------
Cost per tonne of
ore milled (C$) $45 $43 +5% $41
-------------------------------------------------------------------------

Lower zinc grades reduce zinc production

Pyhasalmi maintained its strong production record in the second quarter
of 2009, processing at an annualized rate of 1.4 million tonnes.
Copper production was higher than the second quarter of last year mainly
because of higher grades. Zinc production this quarter continued to be lower
than we planned and lower than the second quarter of 2008 because changes in
stope sequencing resulted in lower grades. Pyrite production was above the
same period last year, but persisting weakness in pyrite demand has reduced
sales prices and volumes. Pyhasalmi sold 121,000 tonnes of pyrite in the
second quarter of 2009 compared to 142,700 tonnes in the same quarter last
year.

2009 outlook for production and costs

We expect zinc grades to increase in the second half of the year and
anticipate copper and zinc production for the year to be consistent with our
earlier estimates. Pressure on mine operating costs caused by increased ground
support requirements in the first half of 2009 are expected to be reduced in
the second half of the year from lower mill operating materials.
We adjusted our pyrite production objective from 510,000 tonnes to
411,000 in response to lower demand.

Financial review

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

-------------------------------------------------------------------------
(millions of Canadian three months six months
dollars unless ended June 30 ended June 30 objective
otherwise stated) 2009 2008 2009 2008 2009
-------------------------------------------------------------------------
Sales analysis
Copper sales (tonnes) 3,500 3,300 7,100 6,800 13,000
Zinc sales (tonnes) 5,900 7,700 9,800 14,300 22,600
Pyrite sales (tonnes) 121,000 142,700 197,000 266,800 380,000
-------------------------------------------------
Gross copper sales $20 $29 $37 $57 $68
Gross zinc sales 11 16 17 31 38
Other metal sales 12 16 23 28 34
-------------------------------------------------
Gross sales 43 61 77 116 140
Smelter processing
charges and freight (12) (15) (21) (25) (40)
-------------------------------------------------------------------------
Net sales $31 $46 $56 $91 $100
-------------------------------------------------------------------------
Cost analysis
Tonnes of ore
milled (thousands) 355 344 704 691 1,370
Direct production costs
($ per tonne) $44 $45 $45 $43 $41
-------------------------------------------------------------------------
Direct production costs $16 $15 $31 $30 $56
Change in inventory - 1 - (1) -
Depreciation and
other non-cash costs 3 3 7 7 12
-------------------------------------------------------------------------
Operating costs $19 $19 $38 $36 $68
-------------------------------------------------------------------------
Operating earnings $12 $27 $18 $55 $32
-------------------------------------------------------------------------
Operating cash flow $23 $19 $21 $50 $34
-------------------------------------------------------------------------

The objective for 2009 uses the assumptions listed on page 13.

The table below shows what contributed to the change in operating earnings
and operating cash flow between 2009 and 2008.


-------------------------------------------------------------------------
Three months ended six months ended
(millions) June 30 June 30
-------------------------------------------------------------------------
Lower metal prices,
denominated in Canadian dollars $(12) $(26)
Lower pyrite sales,
net of costs to sell (2) (9)
Lower smelter processing charges 2 4
Lower sales volumes (1) (4)
Other (2) (2)
-------------------------------------------------------------------------
Lower operating earnings,
compared to 2008 $(15) $(37)
Lower tax expense
because of lower earnings 5 11
Changes in working capital 16 2
Other (2) (5)
-------------------------------------------------------------------------
Higher (lower) operating
cash flow, compared to 2008 $4 $(29)
-------------------------------------------------------------------------

The change in working capital this quarter is because Pyhasalmi received a
refund from 2008 tax over instalments.


Capital spending to sustain and improve

-------------------------------------------------------------------------
three months ended six months ended
June 30 June 30 objective
(thousands) 2009 2008 change 2009 2008 change 2009
-------------------------------------------------------------------------
Capital
spending $3,000 $1,600 +88% $3,800 $3,400 +12% $11,000
-------------------------------------------------------------------------

2009 outlook for capital spending

We expect to spend $11 million in 2009, mainly for mine equipment, making
improvements in the mill and renovating process water pumps. We expect to
replace the zinc circuit cells in September, and these should remain reliable
for the remaining mine life.

Las Cruces

First copper cathode produced on June 3

On April 7, 2009 Andalucian Regional Ministry of Innovation, Science and
Business (CICE) issued a resolution that authorized lifting the mining
suspension that had been imposed in May 2008.
On April 29, Las Cruces resumed mining, delivered the first truck load of
ore to the crusher on May 26, and produced the first copper cathode on June 3.
On July 16, the Water Authority of Andalucia authorized and approved operation
of the dewatering and reinjection system, based on the modifications proposed
in technical documentation Las Cruces provided in September 2008 (the "Global
Plan"). The authorization was granted for an operational period of 15 years
and a closure period of 5 years.
Operations in the pit are progressing well. In May and June, Las Cruces
mined 249,000 tonnes of gossan and 23,500 tonnes of copper ore, and produced
two tonnes of copper cathode. As expected, there have been normal challenges
in the plant during the start-up related to equipment operation, adjustment
and component reliability, including for example, performance of the belt
filters, adjustment of the pressure filter and corrosion failure of the
leaching thickener drive. We consider all of these problems typical in the
commissioning of a complex plant and are correcting them as they occur. We do
not expect them to have any long term effect on the performance of the
metallurgical plant.
Metallurgical recoveries to date are encouraging indicating that the
target rates are achievable. We delivered the first shipment of LME grade
cathode to Cunext Copper Industry in Cordoba, Spain on July 15, 2009.
We are focusing on ramping up production to reach the design capacity of
72,000 tonnes of copper cathode per year. Our goal continues to be to reach
full production by February 2010 and commercial production (about 60 percent
of design capacity) by November 2009.

Capital update

Las Cruces construction is complete and on budget, and, as at the end of
June, only (euro)7 million of the (euro)504 million construction budget
remained to be spent. The following table shows total spending for the project
to the end of June 2009 and our capital objective for the rest of the year:

-------------------------------------------------------------------------
(millions) up to December January to revised total project
31, 2008 June 2009 objective estimate at
July to December 31,
December 2009 2009
-------------------------------------------------------------------------
Construction
capital (euro)448 (euro)49 (euro)7 (euro)504
Mine development 6 5 17 28
Sustaining capital - 7 19 26
Capitalized interest 18 6 - 24
Pre-operating costs
capitalized,
net of sales - 8 (3) 5
Value added tax 25 9 (34) -
Other 5 (10) 10 5
-------------------------------------------------------------------------
Capital
expenditures (euro)502 (euro)74 (euro)16 (euro)592
-------------------------------------------------------------------------

2009 outlook

The table below shows expected production for 100 percent of Las Cruces
for 2009 and for the mine life.


-------------------------------------------------------------------------
2009 target life of mine
-------------------------------------------------------------------------
Tonnes of ore processed
(thousands) 305 17,492
-------------------------------------------------------------------------
Strip ratio 40 12.5
-------------------------------------------------------------------------
Copper grades (percent) 9.8 6.2
-------------------------------------------------------------------------
Copper production (tonnes) 28,800 997,200
-------------------------------------------------------------------------
Cost per tonne of ore processed (C $) $195 $87
-------------------------------------------------------------------------

Expected copper production for 2009 includes 23,400 tonnes of copper
cathode and 5,400 tonnes of copper in ore. We expect to ship ore directly to
smelters beginning in December of this year, subject to regulatory approval.
Depending on shipping dates and contract terms for title transfer, sales of
any production may not be recorded until after the start of 2010.
Our overall plan includes shipping a total of 18,200 tonnes of copper ore
to smelters, including 12,800 tonnes in 2010.
We estimate the following operating earnings and cash flow in 2009, based
on commencement of commercial production in November and the assumptions
listed on page 13:

100%
----------------------------------------------------- ------------------
(millions of Canadian dollars unless revised objective
otherwise stated) 2009
----------------------------------------------------- ------------------
Gross copper sales $69
Smelter processing charges and freight (14)
----------------------------------------------------- ------------------
Net sales $55
----------------------------------------------------- ------------------
Direct production costs $24
Depreciation and other non-cash costs 11
----------------------------------------------------- ------------------
Operating costs $35
----------------------------------------------------- ------------------
Operating earnings $20
----------------------------------------------------- ------------------
Operating cash flow -
----------------------------------------------------- ------------------


Troilus

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

three months ended June 30
2009 2008 change
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 1,542 1,454 +6%
Tonnes of ore milled per day 16,900 16,000 +6%
-------------------------------------------------------------------------
Strip ratio - 1.6 -100%
-------------------------------------------------------------------------
Grades gold (grams/tonne) 0.65 0.96 -32%
copper (percent) 0.08 0.09 -11%
-------------------------------------------------------------------------
Mill recoveries
(percent) Gold 83 84 -1%
Copper 88 92 -4%
-------------------------------------------------------------------------
Production gold (ounces) 26,700 37,800 -29%
copper (tonnes) 1,100 1,200 -8%
-------------------------------------------------------------------------
Cost per tonne of
ore milled (C$) $9 $15 -40%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
revised
six months ended June 30 objective
2009 2008 change 2009
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 3,019 2,851 +6% 6,100
Tonnes of ore milled per day 16,700 15,700 +6% 16,700
-------------------------------------------------------------------------
Strip ratio 0.1 1.4 -93% 0.1
-------------------------------------------------------------------------
Grades gold (grams/tonne) 1.03 0.94 +10% 0.82
copper (percent) 0.14 0.08 +75% 0.11
-------------------------------------------------------------------------
Mill recoveries
(percent) Gold 84 84 - 81
Copper 93 92 +1% 92
-------------------------------------------------------------------------
Production gold (ounces) 84,800 72,800 +16% 128,000
copper (tonnes) 3,900 2,100 +86% 6,000
-------------------------------------------------------------------------
Cost per tonne of
ore milled (C$) $11 $15 -27% $10
-------------------------------------------------------------------------

Completion of mining activity

Troilus completed mining the main 87 pit in April and began recovering
the lower-grade stockpile it had accumulated over the past several years.
This lowered gold and copper grades and production in the second quarter,
and lowered cost per tonne compared to the previous year.
Site restoration began this quarter, with Troilus placing moraine on
dumps and safety berms around the pits.

2009 outlook for production and costs

Troilus will continue to recover stockpiled ore for the rest of the
year,and should meet its targeted copper production.
We have reduced Troilus' gold production objective to 128,000 ounces from
132,200 ounces because deteriorating mining conditions prevented recovery of
ore from the pit bottom in April.
We will submit our revised closure plan to the provincial authorities in
the second half of the year and will continue with restoration of the site. We
will continue to lay off mining and maintenance personnel as primary
reclamation activities and pit clean up are completed.

Financial review

Higher gold prices improved earnings this quarter even though sales
volumes were down

-------------------------------------------------------------------------
(millions of Canadian three months six months revised
dollars unless ended June 30 ended June 30 objective
otherwise stated) 2009 2008 2009 2008 2009
-------------------------------------------------------------------------
Sales analysis
Gold sales (ounces) 28,200 36,300 88,300 71,500 128,000
Copper sales (tonnes) 1,100 1,200 4,000 2,000 6,000
-------------------------------------------------
Gross gold sales $29 $24 $99 $50 $139
Gross copper sales 8 10 24 18 31
Other metal sales - 1 1 1 2
-------------------------------------------------
Gross sales 37 35 124 69 172
Smelter processing
charges and freight (2) (2) (8) (4) (13)
-------------------------------------------------------------------------
Net sales $35 $33 $116 $65 $159
-------------------------------------------------------------------------
Cost analysis
Tonnes of ore
milled (thousands) 1,542 1,454 3,019 2,851 6,100
Direct production
costs ($ per tonne) $9 $15 $11 $15 $10
-------------------------------------------------------------------------
Direct production costs $14 $22 $33 $42 $61
Change in inventory - - 2 - 1
Depreciation and
other non-cash costs 5 3 10 7 11
-------------------------------------------------------------------------
Operating costs $19 $25 $45 $49 $73
-------------------------------------------------------------------------
Operating earnings $16 $8 $71 $16 $86
-------------------------------------------------------------------------
Operating cash flow $29 $8 $78 $15 $101
-------------------------------------------------------------------------

The objective for 2009 uses the assumptions listed on page 13.

The table below shows what contributed to the change in operating earnings
and operating cash flow between 2009 and 2008.


-------------------------------------------------------------------------
Three months ended six months ended
(millions) June 30 June 30
-------------------------------------------------------------------------
Higher gold price denominated
in Canadian dollars $10 $37
Lower copper price denominated
in Canadian dollars (2) (12)
Higher (lower) sales volumes (4) 28
Higher smelter processing charges (2) (5)
Lower operating costs 8 10
Higher amortization (2) (3)
-------------------------------------------------------------------------
Higher operating earnings,
compared to 2008 $8 $55
Changes in working capital 12 7
Other 1 1
-------------------------------------------------------------------------
Higher operating cash flow,
compared to 2008 $21 $63
-------------------------------------------------------------------------


Ok Tedi

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

three months ended June 30
(100 percent) 2009 2008 change
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 5,400 5,400 -
Tonnes of ore milled per day 59,300 59,300 -1%
-------------------------------------------------------------------------
Strip ratio 1.9 1.5 +27%
-------------------------------------------------------------------------
Grades copper (percent) 0.8 0.9 -11%
gold (grams/tonne) 1.1 1.0 +10%
-------------------------------------------------------------------------
Mill recoveries
(percent) copper 86 87 -1%
gold 71 74 -4%
-------------------------------------------------------------------------
Production copper (tonnes) 38,200 41,100 -7%
gold (ounces) 132,800 122,700 +8%
-------------------------------------------------------------------------
Cost per tonne
of ore milled (C$) $23 $22 +5%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
revised
six months ended June 30 objective
(100 percent) 2009 2008 change 2009
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 10,500 10,400 +1% 23,300
Tonnes of ore milled per day 58,300 57,100 +2% 64,000
-------------------------------------------------------------------------
Strip ratio 1.7 1.7 - 1.5
-------------------------------------------------------------------------
Grades copper (percent) 0.8 0.9 -11% 0.8
gold (grams/tonne) 1.1 1.0 +10% 1.1
-------------------------------------------------------------------------
Mill recoveries
(percent) copper 86 86 - 84
gold 68 74 -8% 68
-------------------------------------------------------------------------
Production copper (tonnes) 75,100 78,400 -4% 159,000
gold (ounces) 248,000 241,200 +3% 567,000
-------------------------------------------------------------------------
Cost per tonne
of ore milled (C$) $24 $22 +9% $26
-------------------------------------------------------------------------

Throughput will improve after mine tailings management plant has reached
designed performance

Ok Tedi has begun to modify the tailings management plant, and expects to
complete this work in the third quarter. It therefore mined only ores with low
sulphur content in the first and second quarters. Despite this change in mine
plan, however, gold and copper grades were consistent with expectations.
Mill throughput this quarter and year to date was consistent with last
year, but lower than expected because of low grinding rates on certain ores.
The cost per tonne of ore milled this quarter and year to date was higher
than in 2008 mainly because of the weaker value of the Canadian dollar.
On June 2, we entered into a non-binding draft term sheet with PNG
Sustainable Development Programme Limited (PNG SDPL), the 52 percent majority
shareholder of Ok Tedi Mining Limited (OTML), to exchange our 18 percent
equity interest in OTML for a 5 percent net smelter return (NSR) royalty from
OTML on product revenues from the Ok Tedi mine. We are waiting for the consent
of the Independent State of Papua New Guinea, which owns 30 percent of OTML
and the consent of BHP Billiton Ltd., which previously ceded its 52 percent
interest in OTML to PNG SDPL, among other things, before the transaction can
proceed.

2009 outlook for production and costs

We have adjusted our objectives for 2009 to compensate for the shortfall
in production in the first half of the year. We expect gold and copper
production to be lower than originally anticipated because of lower
throughput.
Until the mine tailings management plant is completed and working at
designed levels, Ok Tedi can put only a limited amount of sulphur in the ore
feed. Staying within these limits is a constraint on mining and, if the
project is delayed, could result in shortfalls in ore tonnes or grades.
Operating the plant to achieve designed results is critical not only to
achieve annual production objectives but also for the continued responsible
operation of the mine.
The pit drainage tunnel project is behind schedule because there have
been changes to the construction plan. The tunnel is critical because it
allows water to drain freely from the pit until the end of the mine life. Ok
Tedi has installed a temporary pumping system so mining can continue
uninterrupted while the tunnel is being built.

Financial review

Lower earnings and operating cash flow

-------------------------------------------------------------------------
(millions of Canadian three months six months revised
dollars unless ended June 30 ended June 30 objective
otherwise stated) 2009 2008 2009 2008 2009
-------------------------------------------------------------------------
Sales analysis at 18%
Copper sales (tonnes) 6,900 7,600 12,400 15,000 28,600
Gold sales (ounces) 24,400 25,300 43,700 45,500 102,000
-------------------------------------------------
Gross copper sales $41 $65 $76 $134 $134
Gross gold sales 27 21 49 38 109
Other metal sales 1 1 2 1 3
-------------------------------------------------
Gross sales 69 87 127 173 246
Smelter processing
charges and freight (7) (11) (14) (20) (38)
-------------------------------------------------------------------------
Net sales $62 $76 $113 $153 $208
-------------------------------------------------------------------------
Cost analysis at 18%
Tonnes of ore
milled (thousands) 967 978 1,898 1,877 4,200
Direct production costs
($ per tonne) $23 $22 $24 $22 $26
-------------------------------------------------------------------------
Direct production costs $23 $22 $46 $41 $109
Change in inventory (1) (1) - - -
Depreciation and
other non-cash costs 4 5 14 8 29
-------------------------------------------------------------------------
Operating costs $26 $26 $60 $49 $138
-------------------------------------------------------------------------
Operating earnings $36 $50 $53 $104 $70
-------------------------------------------------------------------------
Operating cash flow $29 $42 $15 $81 $71
-------------------------------------------------------------------------

The objective for 2009 uses the assumptions listed on page 13.

The table below shows what contributed to the change in operating earnings
and operating cash flow between 2009 and 2008.


-------------------------------------------------------------------------
three months ended six months ended
(millions) June 30 June 30
-------------------------------------------------------------------------
Lower copper prices,
denominated in Canadian dollars $(18) $(35)
Higher gold prices,
denominated in Canadian dollars 7 13
Lower sales volumes (5) (21)
Lower smelter processing
and freight charges 2 3
(Higher) lower operating costs 2 (5)
Higher depreciation (2) (6)
-------------------------------------------------------------------------
Lower operating earnings,
compared to 2008 $(14) $(51)
Lower tax expense because
of lower earnings 25 37
Changes in net working capital (from
higher accounts receivable balances) (21) (55)
Add back - non-cash higher depreciation 2 6
Other (5) (3)
-------------------------------------------------------------------------
Lower operating cash flow,
compared to 2008 $(13) $(66)
-------------------------------------------------------------------------

Capital spending on pit drainage

Ok Tedi's capital spending this quarter was mainly for the pit drainage
project.


-------------------------------------------------------------------------
three months ended six months ended
June 30 June 30 objective
(18 percent) 2009 2008 change 2009 2008 change 2009
-------------------------------------------------------------------------
Capital
spending $3,300 $10,900 -70% $6,600 $18,900 -65% $26,000
-------------------------------------------------------------------------

2009 outlook for capital spending

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

Status of our development project

Petaquilla

Quarterly development update

There are three main activities at Petaquilla: drilling, social and
environmental impact assessment and engineering.

Drilling

We completed the drilling program in June, but we have to finalize a
National Instrument 43-101 compliant technical report and the front-end
engineering and design (FEED) study before we can establish a final mineral
reserve estimate for the Petaquilla project. Preliminary results, however,
indicate that we can expect to meet or exceed our target for mineral reserves
that would support a minimum mine life of 30 years at a throughput rate of
150,000 tonnes per day.

Social and environmental impact assessment and community development

First drafts of the baseline studies are being completed and we are
progressing with impact assessment and identification of options. We expect to
submit an impact assessment (EsIA) to the Panamanian environmental authorities
by the end of 2009.

Engineering

We continued with engineering work and expect to complete the FEED study
by the end of 2009. The base case for the FEED study is a throughput rate of
150,000 tonnes per day, which equates to an average annual production of
275,000 tonnes of copper for the first 10 years. We have also begun a
metallurgical program to further review the throughput rate and explore
opportunities to optimize this rate.
We are working with a large international power company to pursue the
development of a coal-fired electric generating plant in parallel with the
development of Petaquilla. This plant would supply all the electricity
required for operation of the project.

2009 outlook for development

In early 2010, once the final FEED study is complete and the EsIA is
submitted, we expect to begin detailed engineering. At the same time, we
intend to seek approval of the EsIA and begin the permitting process for
construction. If we receive the permits in time, we should be able to complete
construction in 2014.
We expect to spend approximately $94 million in 2009 to fund this work.
We are continuing to meet with potential partners for the development of
Petaquilla. We have approached certain potential partners and some of them
have expressed an interest in the project. Others have approached us to
express their interest.
We will evaluate the suitability of all potential partners. Proposals
could take a variety of forms or structures including, but not limited to,
direct investments in the project, financing related to concentrate purchases,
direct investments in Inmet or other forms of financing. We plan to pursue
these opportunities but there can be no assurance that any transaction will be
consummated.

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.
When planning our capital structure, we include a liquidity cushion that
allows us to address operational disruptions or general market downturns, such
as the current weakness of the global economy.

-------------------------------------------------------------------------
three months ended six months ended
June 30 June 30
(millions) 2009 2008 2009 2008
-------------------------------------------------------------------------
CASH FROM OPERATING ACTIVITIES

Cayeli $24 $35 $15 $50
Pyhasalmi 23 19 21 50
Troilus 29 8 78 15
Ok Tedi 29 42 15 81
Corporate development and
exploration not included
in operations' cash flow (2) (2) (3) (4)
General and administration (5) (3) (9) (6)
Other (7) 16 (9) 10
-------------------------------------------------------------------------
91 115 108 196
-------------------------------------------------------------------------
CASH FROM INVESTING AND FINANCING

Capital spending (86) (121) (181) (232)
Proceeds from issuance of common
shares, net of transaction costs 334 - 334 -
Long-term debt - borrowings - 56 - 106
- repayments (74) - (83) -
Funding by
non-controlling shareholder 28 20 44 35
Subsidies received 58 - 66 3
Settlement of foreign
currency forward contract - 52 - 52
Foreign exchange on cash
held in foreign currency (18) (9) (13) 24
Other (5) (20) (13) (26)
-------------------------------------------------------------------------
237 (22) 154 (38)
-------------------------------------------------------------------------
Increase in cash 328 93 262 158
Cash and short-term investments
Beginning of period 507 906 573 841
-------------------------------------------------------------------------
End of period $835 $999 $835 $999
-------------------------------------------------------------------------


OPERATING ACTIVITIES

Key components of the change in operating cash flows


-------------------------------------------------------------------------
Three months ended six months ended
(millions) June 30 June 30
-------------------------------------------------------------------------
Lower earnings from
operations (see page 4) $(44) $(95)
Non-cash changes in operating earnings:
Add back higher depreciation
in earnings from operations 4 11
Lower tax expense 41 62
Lower interest income (6) (13)
Reclamation spending at Troilus (2) (2)
Changes in working capital (11) (39)
Other (6) (12)
-------------------------------------------------------------------------
Lower operating cash flow,
compared to 2008 $(24) $(88)
-------------------------------------------------------------------------

Operating cash flows are lower than they were in 2008 because of lower
operating earnings and a large outflow of cash related to working capital. We
repaid smelters the excess provisional payments they made in 2008, before
copper prices dropped, which decreased cash flow by approximately $48 million
for the first six months.

2009 outlook for cash from operating activities

Volatile markets make it 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 listed 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 $82
Pyhasalmi 34
Troilus 101
Ok Tedi 71
Las Cruces -
---------------------------------------------------
$288
---------------------------------------------------


INVESTING AND FINANCING

Capital spending


-------------------------------------------------------------------------
three months six months revised
ended June 30 ended June 30 objective
(millions) 2009 2008 2009 2008 2009
-------------------------------------------------------------------------
Cayeli $3 $6 $6 $12 $22
Pyhasalmi 3 2 4 3 11
Troilus - - - - -
Ok Tedi 3 11 7 19 26
Las Cruces 54 97 119 190 141
Petaquilla 23 - 45 - 94
Cerattepe - 5 - 8 -
-------------------------------------------------------------------------
$86 $121 $181 $232 $294
-------------------------------------------------------------------------

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

Proceeds from public offering

On June 25 we completed a public offering of 7.825 million common shares
of Inmet Mining, on a bought deal basis, at a price of $44.50 per share, for
aggregate gross proceeds of $348 million ($334 million net of transaction
costs).
We will use about US $240 million of the net proceeds of the offering to
repay the debt under Las Cruces' project financing facility. We will use the
balance for general corporate purposes.

Long-term debt repayments

In the first half of 2009, Las Cruces made its first scheduled repayment
of US $12 million under Tranche A of its credit facility. It also repaid
(euro)42 million under Tranche B (an amount equal to the subsidies received).
We expect Las Cruces to receive the remaining (euro)3 million in subsidies in
the third quarter.
On July 31, we expect Las Cruces to repay the remaining US $203 million
under Tranche A, (euro)5 million under Tranche B and to cash collateralize
about US $30 million in letters of credit. This will eliminate the Las Cruces
project credit facility. In connection with the decision to repay the credit
facility, Las Cruces paid US $14 million in July to terminate its interest
rate swap contract.

Settlement of foreign currency forward contract

When we converted the Las Cruces debt from euro to US dollars on June 30,
2008, Las Cruces settled a foreign exchange forward contract and received
proceeds of $52 million on that date.

2009 outlook for investing and financing

We expect capital spending to be $294 million in 2009. The more
significant items include:

- $88 for the Las Cruces processing plant
- $94 million for work on the development plan at Petaquilla
- $10 million for pit development and $7 million for an underground
drainage tunnel at Ok Tedi.

Until we start receiving proceeds from sales at Las Cruces, we plan to
fund its costs using sponsor contributions and value added tax refunds. We
also plan to fund Las Cruces so it can repay its credit facility. We will be
funding 100 percent of the repayment of the credit facility at Las Cruces and
as a result the funding will be effected so that Leucadia's 30 percent
interest in Las Cruces is neither economically benefited nor disadvantaged as
compared to the terms currently in effect under the Las Cruces credit
facility.
After we repay the debt, long-term debt on our consolidated financial
statements will be significantly lower and restricted cash will increase by
about $36 million. The restricted cash will be used as cash collateral for the
letters of credit that had been secured under the credit facility.

Financial condition

CASH

Our cash and cash equivalents balance at June 30, 2009 was $835 million.
This included cash and money market instruments that mature in 90 days or
less, and short-term investments that mature in 91 days to a year.
Our policy is to invest excess cash in highly liquid investments of the
highest credit quality and to limit our exposure to individual counterparties
to minimize the risk associated with these investments. We base our decisions
about the length of maturities on our cash flow requirements, rates of return
and other factors.
General worldwide economic conditions have weakened dramatically since
the end of the third quarter of 2008. In response, we are now mainly invested
in treasury funds to minimize liquidity risk until normal market conditions
return. At June 30, 2009, we held cash and short-term investments in the
following:

- 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.

See note 4 on page 45 in the consolidated financial statements for more
details about where our cash is invested.

Our restricted cash balance of $69 million included:
- $17 million in trust for future reclamation at Ok Tedi
- $17 million of cash collateralized letters of credit for Inmet
- $33 million related to issuing letters of credit to suppliers at
Las Cruces and for its labour bond to the government
- $2 million for future reclamation at Pyhasalmi.

After we repay the Las Cruces credit facility, restricted cash will
increase by about $36 million mainly to secure the Las Cruces reclamation bond
that had been secured under the credit facility.

COMMON SHARES

---------------------------------------------------
Common shares outstanding as of
June 30, 2009 and July 28, 2009 56,106,660
---------------------------------------------------
Deferred share units outstanding
as of June 30, 2009
(redeemable on a one-for-one
basis for common shares) 85,563
---------------------------------------------------

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 this quarter.

-------------------------------------------------------------------------
C$ marked-to-market
Type of gain (loss) at
contract Expiry Quantity Price June 30, 2009
-------------------------------------------------------------------------
Copper
forward
sales
Ok Tedi
2009 1.6 million lbs US $2.41 per lb
---------------------------------------------------------------
2.4 million lbs US $2.41 per lb $0.3 million(1)

Gold
forward
sales

Ok Tedi 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. $(2.7 million)(2)

Interest
rate
swaps
Las
Cruces 2009 US $167 million 5.2 percent $(15.1) million(3)
to (reducing in
2014 conjunction
with debt
repayment
schedule)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) At a copper price of US $2.25 per pound.
(2) At a gold price of US $942 per ounce.
(3) Settled on July 20 at a cost of $16 million.

Accounting changes

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.
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.
To date, we have completed an initial draft of all our significant
accounting policies. Over the next several months we will quantify and prepare
the calculations to adjust our financial statements using these initial new
policies. This exercise will either validate our accounting policy choices or
tell us to rethink them. The work prepared to date has indicated that we are
not expecting significant changes to the carrying values of property, plant
and equipment, but based on current IFRS we expect significant effects on our
accounting for business combinations going forward. Current exposure drafts on
accounting for joint venture interests, which currently includes our
investment in Ok Tedi, and future income taxes could also have significant
effects on our financial statements. We will continue to monitor these
exposure drafts.
We will complete and finalize our accounting policies under IFRS during
the rest of the year, prepare the notes to our IFRS financial statements,
calculate all differences and document new internal controls. Our goal is to
restate our December 31, 2009 Canadian GAAP balance sheet to IFRS in the first
quarter of 2010.

Supplementary financial information

Pages 31 and 32 include supplementary financial information about 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 five mining operations in locations around
the world: Cayeli, Pyhasalmi, Las Cruces, Troilus and Ok Tedi. We also have a
100 percent interest in the Petaquilla development property in Panama.

This press release is also available at www.inmetmining.com

Second quarter conference call

Will be held on
- Wednesday, July 29, 2009
- 8:30 a.m. Eastern Time
- webcast available at
www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2720080
or www.inmetmining.com.

You can also dial in by calling
- Local or international: +1.416.644.3418
- Toll-free within North America: +1.800.731.6941

Starting 10:30 a.m. (ET) Wednesday July 29, 2009, conference call replay
will be available
- Local or international: +1.416.640.1917 passcode 21310329 followed by
the number sign.
- Toll-free within North America: +1.877.289.8525 passcode 21310329
followed by the number sign.



INMET MINING CORPORATION

Supplementary financial information

Cash costs

2009 For the six months ended June 30
per ounce
per pound of copper of gold
-------------------------------------- ---------
TOTAL
CAYELI PYHASALMI OK TEDI COPPER TROILUS
----------------------------------------------------- --------- ---------
(US dollars)

Direct production costs $0.98 $1.63 $1.27 $1.23 $317
Royalties and variable
compensation 0.07 - 0.01 0.03 -
Smelter processing
charges and freight 1.06 0.74 0.40 0.74 82
Metal credits (1.28) (1.79) (1.46) (1.45) (235)
---------------------------- --------- ---------
Cash cost $0.83 $0.58 $0.22 $0.55 $164
---------------------------- --------- ---------
---------------------------- --------- ---------

2008 For the six months ended June 30
per ounce
per pound of copper of gold
-------------------------------------- ---------
TOTAL
CAYELI PYHASALMI OK TEDI COPPER TROILUS
----------------------------------------------------- --------- ---------
(US dollars)

Direct production costs $1.15 $2.06 $1.25 $1.35 $576
Royalties and variable
compensation 0.19 - 0.11 0.12 -
Smelter processing
charges and freight 1.40 1.17 0.58 1.04 63
Metal credits (2.04) (3.73) (1.22) (2.03) (265)
-------------------------------------- ---------
Cash cost $0.70 ($0.50) $0.72 $0.48 $374
-------------------------------------- ---------
-------------------------------------- ---------
-------------------------------------------------------------------------


Reconciliation of cash costs to statements of earnings

2009 For the six months ended June 30
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 15 page 17 page 21 page 19

Direct production costs $40 $31 $46 $117 $32
Smelter processing
charges and freight 38 21 14 73 9
By product sales (50) (40) (51) (141) (25)
Adjust smelter processing
and freight, and sales
to production basis 4 (1) (1) 2 -
-------- --------- --------- --------- ---------
Operating costs net of
metal credits $32 $11 $8 $51 $16
US $ to C$ exchange rate $1.21 $1.21 $1.21 $1.21 $1.21
Inmet's share of
production (000's) 32,200 16,100 29,800 78,100 84,800
-------------------------------------- ---------
Cash cost $0.83 $0.58 $0.22 $0.55 $164
-------------------------------------- ---------
-------------------------------------- ---------

2008 For the six months ended June 30
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 15 page 17 page 21 page 19

Direct production costs $46 $30 $42 $118 $42
Smelter processing
charges and freight 48 26 20 94 5
By product sales (77) (59) (39) (175) (19)
Adjust smelter processing
and freight, and sales
to production basis 8 (4) - 4 -
-------------------------------------- ---------
Operating costs net of
metal credits $25 ($7) $23 $41 $28
US $ to C$ exchange rate $1.01 $1.01 $1.01 $1.01 $1.01
Inmet's share of
production (000's) 34,400 14,600 31,100 80,100 72,800
------------------------------------------------
Cash cost $0.70 ($0.50) $0.72 $0.48 $374
------------------------------------------------
------------------------------------------------


Cash costs

2009 For the three months ended June 30
per ounce
per pound of copper of gold
-------------------------------------- ---------
TOTAL
CAYELI PYHASALMI OK TEDI COPPER TROILUS
----------------------------------------------------- --------- ---------
(US dollars)

Direct production costs $0.98 $1.65 $1.23 $1.21 $443
Royalties and variable
compensation 0.04 - 0.07 0.04 -
Smelter processing
charges and freight 1.10 0.82 0.39 0.77 74
Metal credits (1.46) (1.54) (1.53) (1.50) (258)
-------------------------------------- ---------
Cash cost $0.66 $0.93 $0.16 $0.52 $259
-------------------------------------- ---------
-------------------------------------- ---------

2008 For the three months ended June 30
per ounce
per pound of copper of gold
-------------------------------------- ---------
TOTAL
CAYELI PYHASALMI OK TEDI COPPER TROILUS
----------------------------------------------------- --------- ---------
(US dollars per pound)

Direct production costs $1.24 $2.23 $1.21 $1.40 $584
Royalties and variable
compensation 0.14 - 0.12 0.11 -
Smelter processing
charges and freight 1.39 1.19 0.60 1.03 67
Metal credits (2.02) (3.51) (1.09) (1.89) (291)
-------------------------------------- ---------
Cash cost $0.75 ($0.09) $0.84 $0.65 $360
-------------------------------------- ---------
-------------------------------------- ---------
-------------------------------------------------------------------------


Reconciliation of cash costs to statements of earnings

2009 For the three months ended June 30
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 15 page 17 page 21 page 19

Direct production costs $20 $16 $23 $59 $14
Smelter processing
charges and freight 18 12 7 37 2
By product sales (27) (22) (28) (77) (8)
Adjust smelter processing
and freight, and sales
to production basis 2 3 1 6 -
-------------------------------------- ---------
Operating costs net of
metal credits $13 $9 $3 $25 $8
US $ to C$ exchange rate $1.17 $1.17 $1.17 $1.17 $1.17
Inmet's share of
production (000's) 16,700 8,200 15,200 40,100 26,700
-------------------------------------- ---------
Cash cost $0.66 $0.93 $0.16 $0.52 $259
-------------------------------------- ---------
-------------------------------------- ---------

2008 For the three months ended June 30
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 15 page 17 page 21 page 19

Direct production costs $23 $15 $22 $60 $22
Smelter processing
charges and freight 26 15 11 52 3
By product sales (41) (32) (21) (94) (11)
Adjust smelter processing
and freight, and sales
to production basis 5 1 2 8 -
-------------------------------------- ---------
Operating costs net of
metal credits $13 ($1) $14 $26 $14
US $ to C$ exchange rate $1.01 $1.01 $1.01 $1.01 $1.01
Inmet's share of
production (000's) 16,400 6,800 16,300 39,500 37,800
------------------------------------------------
Cash cost $0.75 ($0.09) $0.84 $0.65 $360
------------------------------------------------
------------------------------------------------



Quarterly review

INMET MINING CORPORATION
Quarterly review
(unaudited)

Latest Four Quarters
-------------------------------------------------------------------------
(thousands of Canadian 2009 2009 2008 2008
dollars, except per Second First Fourth Third
share amounts) quarter quarter quarter quarter
-------------------------------------------------------------------------
STATEMENTS OF EARNINGS
Gross sales $ 213,042 $ 239,152 $ 139,626 $ 247,495
Smelter processing charges
and freight (40,589) (40,540) (32,870) (49,502)
Cost of sales (73,827) (89,904) (91,715) (84,948)
Depreciation (13,604) (15,679) (14,844) (11,395)
-------------------------------------------
85,022 93,029 197 101,650
Corporate development and
exploration (2,727) (3,232) (1,971) (3,548)
General and administration (4,785) (4,124) (3,289) (3,411)
Investment and other income
(expense) 16,466 (11,203) 8,057 (5,467)
Asset impairment - (6,419) (36,275) -
Interest expense (493) (492) (490) (476)
Capital tax expense (125) (125) (1,304) (125)
Income tax (expense) recovery (24,052) (18,890) 767 (17,379)
Non-controlling interest (2,778) 2,783 1,794 3,813
-------------------------------------------
Net income (loss) $ 66,528 $ 51,327 ($32,514) $ 75,057
-------------------------------------------
Net income (loss) per common
share $ 1.37 $ 1.06 ($0.67) $ 1.55
-------------------------------------------
Diluted net income (loss) per
common share $ 1.36 $ 1.06 ($0.67) $ 1.55
-------------------------------------------


Previous Four Quarters
-------------------------------------------------------------------------
(thousands of Canadian 2008 2008 2007 2007
dollars, except per Second First Fourth Third
share amounts) quarter quarter quarter quarter
-------------------------------------------------------------------------
STATEMENTS OF EARNINGS
Gross sales $ 281,463 $ 276,281 $ 224,773 $ 272,293
Smelter processing charges
and freight (53,209) (44,157) (43,902) (42,557)
Cost of sales (89,893) (79,246) (78,809) (72,057)
Depreciation (9,195) (9,170) (9,480) (8,739)
-------------------------------------------
129,166 143,708 92,582 148,940
Corporate development and
exploration (2,483) (2,618) (3,510) (2,475)
General and administration (2,790) (3,648) (12,622) (2,674)
Investment and other income (11,358) 14,754 5,968 9,224
Interest expense (471) (447) (407) (424)
Capital tax (expense) recovery (124) (126) 212 (273)
Income tax expense (44,333) (44,744) (18,551) (37,649)
Non-controlling interest 98 (205) (27) 167
-------------------------------------------
Net income $ 67,705 $ 106,674 $ 63,645 $ 114,836
-------------------------------------------
Net income per common share $ 1.40 $ 2.21 $ 1.32 $ 2.38
-------------------------------------------
Diluted net income per common
share $ 1.40 $ 2.21 $ 1.32 $ 2.37
-------------------------------------------



Consolidated financial statements
INMET MINING CORPORATION
Consolidated balance sheets

June 30 December 31
(thousands of Canadian dollars) 2009 2008
-------------------------------------------------------------------------
(unaudited)
Assets

Current assets:
Cash and short-term investments (note 4) $834,678 $572,733
Restricted cash (note 5) 7,210 8,311
Accounts receivable 154,617 135,742
Inventories 80,360 74,362
Derivatives (note 7) 340 -
Future income tax asset 11,642 14,311
-------------------------
1,088,847 805,459

Restricted cash (note 5) 61,399 52,893
Property, plant and equipment 1,925,554 1,950,535
Investments (note 6) 26,915 17,514
Future income tax asset 7,137 5,499
Derivatives (note 7) - 4,327
Other assets 3,183 5,031
-------------------------
$3,113,035 $2,841,258
-------------------------------------------------------------------------

Liabilities

Current liabilities:
Accounts payable and accrued liabilities $130,887 $212,527
Derivatives (note 7) 15,141 8,693
Future income tax liabilities 11,492 -
Current portion of long-term debt (note 8) 242,624 109,666
-------------------------
400,144 330,886

Long-term debt (note 8) 208,175 384,848
Asset retirement obligations 127,414 126,782
Derivatives (note 7) 2,718 16,417
Other liabilities (note 10) 34,234 27,122
Future income tax liabilities 15,657 15,971
Non-controlling interest 77,984 71,449
-------------------------
866,326 973,475
-------------------------
Commitments (note 9)

Shareholders' equity

Share capital (note 12) 670,346 337,464
Contributed surplus 61,857 61,925
Stock based compensation 3,871 2,688
Retained earnings 1,396,101 1,283,074
Accumulated other comprehensive loss (note 13) 114,534 182,632
-------------------------
2,246,709 1,867,783
-------------------------
$3,113,035 $2,841,258
-------------------------------------------------------------------------
(see accompanying notes)



INMET MINING CORPORATION

Segmented balance sheets

2009 As at June 30

(unaudited) CORPORATE CAYELI PYHASALMI TROILUS
-------------------------------------------------------------------------
(thousands of Canadian
dollars) (Turkey) (Finland) (Canada)

Assets

Cash and short-term
investments $556,248 $100,665 $94,742 $ -
Other current assets 7,710 40,404 32,860 21,190
Restricted cash 16,444 - 1,958 -
Property, plant and
equipment 1,058 134,389 74,555 20,727
Investments 26,915 - - -
Other non-current assets 1,797 413 - -
---------------------------------------------
$610,172 $275,871 $204,115 $41,917
---------------------------------------------

Liabilities

Current liabilities $19,524 $24,875 $15,731 $10,088
Long-term debt 19,278 - - -
Asset retirement
obligations 23,879 9,467 16,125 11,043
Derivatives - - - -
Other liabilities 4,832 5,463 - -
Future income tax
liabilities 2,473 3,567 9,405 -
Non-controlling interest - - - -
---------------------------------------------
$69,986 $43,372 $41,261 $21,131
---------------------------------------------


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

Assets

Cash and short-term
investments $42,797 $35,304 $4,922 $834,678
Other current assets 58,247 93,040 718 254,169
Restricted cash 17,144 25,853 - 61,399
Property, plant and
equipment 94,992 1,051,994 547,839 1,925,554
Investments - - - 26,915
Other non-current assets 6,216 1,894 - 10,320
--------------------- ----------- -----------
$219,396 $1,208,085 $553,479 $3,113,035
--------------------- ----------- -----------

Liabilities

Current liabilities $30,620 $292,848 $6,458 $400,144
Long-term debt - 188,897 - 208,175
Asset retirement
obligations 24,281 42,619 - 127,414
Derivatives 2,718 - - 2,718
Other liabilities 2,126 21,813 - 34,234
Future income tax
liabilities - 212 - 15,657
Non-controlling interest - 77,984 - 77,984
--------------------- ----------- -----------
$59,745 $624,373 $6,458 $866,326
---------------------------------------------


2008 As at December 31

CORPORATE CAYELI PYHASALMI TROILUS
-------------------------------------------------------------------------
(thousands of Canadian
dollars) (Turkey) (Finland) (Canada)

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 - - -
Other non-current 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
---------------------------------------------


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

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
Other non-current assets 7,039 2,356 - 14,857
---------------------------------------------
$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
---------------------------------------------
---------------------------------------------

INMET MINING CORPORATION

Consolidated statements of earnings
(unaudited)

Three Months Ended Six Months Ended
(thousands of Canadian dollars June 30 June 30
except per share amounts) 2009 2008 2009 2008
--------------------------------------------------- ---------------------

Gross sales $213,042 $281,463 $452,194 $557,744

Smelter processing charges
and freight (40,589) (53,209) (81,129) (97,366)

Cost of sales (73,827) (89,893) (163,731) (169,139)

Depreciation (13,604) (9,195) (29,283) (18,365)

--------------------------------------------------- ---------------------
85,022 129,166 178,051 272,874

Corporate development and
exploration (2,727) (2,483) (5,959) (5,101)

General and administration (4,785) (2,790) (8,909) (6,438)

Investment and other income
(expense) (note 14) 16,466 (11,358) 5,263 3,396

Asset impairment (note 17) - - (6,419) -

Interest expense (493) (471) (985) (918)

Capital tax expense (125) (124) (250) (250)

Income tax expense (note 15) (24,052) (44,333) (42,942) (89,077)

Non-controlling interest (2,778) 98 5 (107)

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

Net income $66,528 $67,705 $117,855 $174,379
--------------------------------------------------- ---------------------

Basic net income per common
share (note 16) $1.37 $1.40 $2.43 $3.61
--------------------------------------------------- ---------------------
Diluted net income per common
share (note 16) $1.36 $1.40 $2.42 $3.61
--------------------------------------------------- ---------------------

Weighted average shares
outstanding (000's) 48,712 48,282 48,498 48,282
--------------------------------------------------- ---------------------
(see accompanying notes)



INMET MINING CORPORATION

Segmented statements of earnings
(unaudited)

2009 For the six months ended June 30

CORPORATE CAYELI PYHASALMI TROILUS
-------------------------------------------------------------------------
(thousands of Canadian
dollars) (Turkey) (Finland) (Canada)

Gross sales $ - $123,732 $ 76,982 $124,397
Smelter processing charges
and freight - (37,514) (21,317) (8,718)
Cost of sales (992) (42,286) (32,575) (38,443)
Depreciation - (6,846) (4,764) (6,720)
---------------------------------------------
(992) 37,086 18,326 70,516

Corporate development and
exploration (3,374) (901) (1,684) -
General and administration (8,909) - - -
Investment and other
income (expense) 6,420 1,070 (422) 361
Asset impairment charges - (6,419) - -
Interest expense (985) - - -
Capital tax expense (250) - - -
Income tax expense (19,730) (1,631) (2,305) -
Non-controlling interest - - - -
---------------------------------------------

Net income (27,820) $29,205 $13,915 $70,877
---------------------------------------------
---------------------------------------------


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

Gross sales $127,083 $ - $ - $452,194
Smelter processing charges
and freight (13,580) - - (81,129)
Cost of sales (49,435) - - (163,731)
Depreciation (10,953) - - (29,283)
---------------------------------------------
53,115 - - 178,051

Corporate development and
exploration - - - (5,959)
General and administration - - - (8,909)
Investment and other
income (expense) (2,486) 320 - 5,263
Asset impairment charges - - - (6,419)
Interest expense - - - (985)
Capital tax expense - - - (250)
Income tax expense (19,009) (267) - (42,942)
Non-controlling interest - 5 - 5
---------------------------------------------

Net income $31,620 $58 $ - $117,855
---------------------------------------------
---------------------------------------------


2008 For the six months ended June 30

CORPORATE CAYELI PYHASALMI TROILUS
-------------------------------------------------------------------------
(thousands of Canadian
dollars) (Turkey) (Finland) (Canada)

Gross sales $ - $198,929 $116,157 $69,422
Smelter processing charges
and freight - (47,578) (25,381) (4,608)
Cost of sales (988) (47,505) (31,168) (44,533)
Depreciation - (4,929) (4,382) (4,136)
---------------------------------------------

(988) 98,917 55,226 16,145

Corporate development and
exploration (3,812) (96) (1,181) (12)
General and administration (6,438) - - -
Investment and other income 199 3,938 - 2,722
Interest expense (918) - - -
Capital tax expense (250) - - -
Income tax expense (5,534) (27,779) (12,448) -
Non-controlling interest - - - -
---------------------------------------------

Net income ($17,741) $74,980 $41,597 $18,855
---------------------------------------------
---------------------------------------------


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

Gross sales $173,236 $ - $ - $557,744
Smelter processing charges
and freight (19,799) - - (97,366)
Cost of sales (44,945) - - (169,139)
Depreciation (4,918) - - (18,365)
--------------------- -----------------------

103,574 - - 272,874

Corporate development and
exploration - - - (5,101)
General and administration - - - (6,438)
Investment and other income (3,786) 323 - 3,396
Interest expense - - - (918)
Capital tax expense - - - (250)
Income tax expense (43,150) (166) - (89,077)
Non-controlling interest - (107) - (107)
--------------------- -----------------------

Net income $56,638 $50 $ - $174,379
---------------------------------------------
---------------------------------------------


2009 For the three months ended June 30

CORPORATE CAYELI PYHASALMI TROILUS
-------------------------------------------------------------------------
(thousands of Canadian
dollars) (Turkey) (Finland) (Canada)

Gross sales $ - $63,711 $43,001 $37,407
Smelter processing charges
and freight - (18,438) (12,326) (2,458)
Cost of sales (508) (19,715) (16,730) (15,616)
Depreciation - (3,373) (2,162) (3,301)
---------------------------------------------
(508) 22,185 11,783 16,032

Corporate development and
exploration (1,526) (407) (794) -
General and administration (4,785) - - -
Investment and other
income (expense) 5,969 (1,797) (422) 77
Asset impairment charges - - - -
Interest expense (493) - - -
Capital tax recovery (125) - - -
Income tax expense (3,199) (2,212) (1,870) -
Non-controlling interest - - - -
---------------------------------------------

Net income ($4,667) $17,769 $8,697 $16,109
---------------------------------------------


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

Gross sales $68,923 $ - $ - $213,042
Smelter processing charges
and freight (7,367) - - (40,589)
Cost of sales (21,258) - - (73,827)
Depreciation (4,768) - - (13,604)
---------------------------------------------
35,530 - - 85,022

Corporate development and
exploration - - - (2,727)
General and administration - - - (4,785)
Investment and other
income (expense) (1,114) 13,753 - 16,466
Asset impairment charges - - - -
Interest expense - - - (493)
Capital tax recovery - - - (125)
Income tax expense (12,469) (4,302) - (24,052)
Non-controlling interest - (2,778) - (2,778)
---------------------------------------------

Net income $21,947 $6,673 $ - $66,528
---------------------------------------------


2008 For the three months ended June 30

CORPORATE CAYELI PYHASALMI TROILUS
-------------------------------------------------------------------------
(thousands of Canadian
dollars) (Turkey) (Finland) (Canada)

Gross sales $ - $98,313 $61,249 $35,171
Smelter processing charges
and freight - (25,565) (14,561) (2,421)
Cost of sales (494) (24,930) (17,224) (23,522)
Depreciation - (2,556) (2,232) (1,718)
---------------------------------------------
(494) 45,262 27,232 7,510

Corporate development and
exploration (1,835) (26) (615) (7)
General and administration (2,790) - - -
Investment and other
income (expense) (10,362) (923) - 1,361
Interest expense (471) - - -
Capital tax expense (124) - - -
Income tax expense (5,534) (8,655) (6,425) -
Non-controlling interest - - - -
---------------------------------------------

Net income ($21,610) $35,658 $20,192 $8,864
---------------------------------------------


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

Gross sales $86,730 $ - $ - $281,463
Smelter processing charges
and freight (10,662) - - (53,209)
Cost of sales (23,723) - - (89,893)
Depreciation (2,689) - - (9,195)
---------------------------------------------
49,656 - - 129,166

Corporate development and
exploration - - - (2,483)
General and administration - - - (2,790)
Investment and other
income (expense) (924) (510) - (11,358)
Interest expense - - - (471)
Capital tax expense - - - (124)
Income tax expense (23,803) 84 - (44,333)
Non-controlling interest - 98 - 98
---------------------------------------------

Net income $24,929 ($328) $ - $67,705
---------------------------------------------



INMET MINING CORPORATION

Consolidated statements of cash flows
(unaudited)

Three Months Ended Six Months Ended
June 30 June 30
(thousands of Canadian dollars) 2009 2008 2009 2008
--------------------------------------------------- ---------------------

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

Net income $66,528 $67,705 $117,855 $174,379
Add (deduct) items not
affecting cash:
Depreciation 13,604 9,195 29,283 18,365
Future income tax 13,552 (6,973) 11,319 (4,056)
Accretion expense 1,208 1,123 2,475 2,144
Non-controlling interest 2,778 (98) (5) 107
Asset impairment - - 6,419 -
Foreign exchange loss (gain) (19,788) 22,476 (8,848) 18,890
Other 5,114 1,156 7,610 3,209
Settlement of asset retirement
obligations (2,309) (303) (2,756) (824)
Net change in non-cash working
capital (note 3) 9,909 20,516 (55,659) (16,506)
------------------------------------------
90,596 114,797 107,693 195,708
------------------------------------------

Cash provided by (used in)
investing activities

Capital spending (86,263) (121,028) (181,122) (232,442)
Investment in Petaquilla prior
to consolidation - (3,755) - (3,755)
Loans to other Petaquilla
shareholders - (4,091) - (4,091)
Disposition of investments - - - 1,521
Sale (purchase) of short-term
investments (47,682) (125,439) (45,251) 174,985
------------------------------------------
(133,945) (254,313) (226,373) (63,782)
------------------------------------------

Cash provided by (used in)
financing activities

Long-term debt
prepayments (note 8)
Borrowings - 55,894 - 106,240
Repayments (74,174) - (82,502) -
Issuance of common shares 334,284 - 334,284 -
Funding by non-controlling
shareholder 28,269 19,627 43,941 34,756
Settlement of foreign
currency forward contract - 52,256 - 52,256
Financial assurance deposits 700 (6,478) (8,740) (13,972)
Dividends paid on common shares (4,828) (4,828) (4,828) (4,828)
Subsidies received (note 11) 57,600 - 66,209 3,233
Other (45) (46) (90) (92)
------------------------------------------
341,806 116,425 348,274 177,593
------------------------------------------

Foreign exchange change on
cash held in foreign currency (18,400) (9,467) (12,900) 23,568

------------------------------------------
Increase (decrease) in cash 280,057 (32,558) 216,694 333,087

Cash:
Beginning of period 473,696 888,150 537,059 522,505
------------------------------------------
End of period 753,753 855,592 753,753 855,592

Short-term investments 80,925 143,333 80,925 143,333
------------------------------------------

Cash and short-term
investments $834,678 $998,925 $834,678 $998,925
(see accompanying notes)

(1) Supplementary cash flow
information:

Cash interest paid $5,170 $4,724 $9,895 $8,122
Cash taxes paid $4,792 $65,036 $10,640 $80,249



INMET MINING CORPORATION

Segmented statements of cash flows
(unaudited)

2009 For the six months ended June 30

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 ($21,139) $34,967 $15,368 $78,859
Net change in non-cash
working capital 79 (19,786) 5,873 (1,173)
---------------------------------------------
(21,060) 15,181 21,241 77,686
---------------------------------------------

Cash provided by (used in)
investing activities
Capital spending (261) (6,555) (3,778) -
Disposition of investments
Purchase of short-term
investments (45,251) - - -

Other
---------------------------------------------
(45,512) (6,555) (3,778) -
---------------------------------------------

---------------------------------------------
Cash provided by (used in)
financing activities 329,264 - - -
---------------------------------------------

Foreign exchange change
on cash held in foreign
currency - (10,675) (1,652) -
---------------------------------------------

Intergroup funding
(distributions) 7,067 (90,167) 12,955 (77,686)
---------------------------------------------

Increase (decrease) in cash 269,759 (92,216) 28,766 -
Cash:
Beginning of period 205,564 192,881 65,976 -
---------------------------------------------
End of period 475,323 100,665 94,742 -
Short-term investments 80,925 - - -
---------------------------------------------

Cash and short-term
investments $556,248 $100,665 $94,742 -
---------------------------------------------


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 $55,297 $ - $ - $163,352
Net change in non-cash
working capital (40,652) - - (55,659)
---------------------------------------------
14,645 - - 107,693
---------------------------------------------

Cash provided by (used in)
investing activities
Capital spending (6,590) (118,550) (45,388) (181,122)
Disposition of investments
Purchase of short-term
investments - - - (45,251)

Other
---------------------------------------------
(6,590) (118,550) (45,388) (226,373)
---------------------------------------------

---------------------------------------------
Cash provided by (used in)
financing activities (749) 19,759 - 348,274
---------------------------------------------

Foreign exchange change
on cash held in foreign
currency (1,951) 1,371 7 (12,900)
---------------------------------------------

Intergroup funding
(distributions) (105) 98,743 49,193 -
---------------------------------------------

Increase (decrease) in cash 5,250 1,323 3,812 216,694
Cash:
Beginning of period 37,547 33,981 1,110 537,059
---------------------------------------------
End of period 42,797 35,304 4,922 753,753
Short-term investments - - - 80,925
---------------------------------------------

Cash and short-term
investments $42,797 $35,304 $4,922 $834,678
---------------------------------------------


2008 For the six months ended June 30

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 ($1,973) $78,116 $46,306 $22,893
Net change in non-cash
working capital 1,752 (28,164) 4,298 (8,321)
---------------------------------------------
(221) 49,952 50,604 14,572
---------------------------------------------
Cash provided by (used in)
investing activities
Capital spending (50) (20,255) (3,358) (279)
Disposition of investments 1,521 - - -
Sale of short-term
investments 174,985 - - -
Spending on Petaquilla (7,846) - - -
---------------------------------------------
168,610 (20,255) (3,358) (279)
---------------------------------------------

---------------------------------------------
Cash provided by (used in)
financing activities 45,739 - (1,850) -
---------------------------------------------

Foreign exchange change
on cash held in foreign
currency - 9,517 8,531 -
---------------------------------------------

Intergroup funding
(distributions) 251,200 (225,032) (103,365) (14,293)
---------------------------------------------

Increase (decrease)
in cash $465,328 (185,818) (49,438) -
Cash:
Beginning of period 41,041 333,671 111,492 -
---------------------------------------------
End of period 506,369 147,853 62,054 -
Short-term investments 143,333 - - -
---------------------------------------------

Cash and short-term
investments $649,702 $147,853 $62,054 $ -
---------------------------------------------


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 $66,872 $ - $ - $212,214
Net change in non-cash
working capital 13,929 - - (16,506)
---------------------------------------------
80,801 - - 195,708
---------------------------------------------
Cash provided by (used in)
investing activities
Capital spending (18,851) (189,649) - (232,442)
Disposition of investments - - - 1,521
Sale of short-term
investments - - - 174,985
Spending on Petaquilla - - - (7,846)
---------------------------------------------
(18,851) (189,649) - (63,782)
---------------------------------------------

---------------------------------------------
Cash provided by (used in)
financing activities (616) 134,320 - 177,593
---------------------------------------------

Foreign exchange change
on cash held in foreign
currency 978 4,542 - 23,568
---------------------------------------------

Intergroup funding
(distributions) (40,979) 132,469 - -
---------------------------------------------

Increase (decrease)
in cash 21,333 81,682 - 333,087
Cash:
Beginning of period 13,473 22,828 - 522,505
---------------------------------------------
End of period 34,806 104,510 - 855,592
Short-term investments - - - 143,333
---------------------------------------------

Cash and short-term
investments $34,806 $104,510 $ - $998,925
---------------------------------------------


2009 For the three months ended June 30

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 ($7,607) $23,370 $9,708 $19,143
Net change in non-cash
working capital (6,900) 757 13,319 9,817
---------------------------------------------
(14,507) 24,127 23,027 28,960
---------------------------------------------
Cash provided by (used in)
investing activities
Capital spending (445) (2,988) (3,006) -
Purchase of short-term
investments (47,682) - - -
---------------------------------------------
(48,127) (2,988) (3,006) -
---------------------------------------------

---------------------------------------------
Cash provided by (used in)
financing activities 329,374 - - -
---------------------------------------------

Foreign exchange change
on cash held in foreign
currency - (17,356) (509) -
---------------------------------------------

Intergroup funding
(distributions) 14,696 (90,562) 17,107 (28,960)
---------------------------------------------

Increase (decrease)
in cash 281,436 (86,779) 36,619 -
Cash:
Beginning of period 193,887 187,444 58,123 -
---------------------------------------------
End of period 475,323 100,665 94,742 -
Short-term investments 80,925 - - -
---------------------------------------------

Cash and short-term
investments $556,248 $100,665 $94,742 $ -
---------------------------------------------
---------------------------------------------


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 $36,073 $ - $ - $80,687
Net change in non-cash
working capital (7,084) - - 9,909
--------------------------------- -----------
28,989 - - 90,596
--------------------------------- -----------
Cash provided by (used in)
investing activities
Capital spending (3,269) (53,999) (22,556) (86,263)
Purchase of short-term
investments - - - (47,682)
--------------------------------- -----------
(3,269) (53,999) (22,556) (133,945)
--------------------------------- -----------

--------------------------------- -----------
Cash provided by (used in)
financing activities 24 12,408 - 341,806
--------------------------------- -----------

Foreign exchange change
on cash held in foreign
currency (3,037) 3,039 (537) (18,400)
--------------------------------- -----------

Intergroup funding
(distributions) (299) 64,149 23,869 -
--------------------------------- -----------

Increase (decrease)
in cash 22,408 25,597 776 280,057
Cash:
Beginning of period 20,389 9,707 4,146 473,696
--------------------------------- -----------
End of period 42,797 35,304 4,922 753,753
Short-term investments - - - 80,925
--------------------------------- -----------

Cash and short-term
investments $42,797 $35,304 $4,922 $834,678
--------------------------------- -----------
--------------------------------- -----------


2008 For the three months ended June 30

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 $(3,462) $37,202 $22,192 $10,218
Net change in non-cash
working capital 13,829 (2,250) (2,826) (2,124)
---------------------------------------------
10,367 34,952 19,366 8,094
---------------------------------------------
Cash provided by (used in)
investing activities
Capital spending (18) (11,372) (1,599) (32)
Sale (purchase) of
short-term investments (125,439) - - -
Other (7,846) - - -
---------------------------------------------
(133,303) (11,372) (1,599) (32)
---------------------------------------------

---------------------------------------------
Cash provided by (used in)
financing activities 45,784 - (1,850) -
---------------------------------------------

Foreign exchange change
on cash held in foreign
currency - (2,255) (6,844) -
---------------------------------------------

Intergroup funding
(distributions) 230,128 (186,420) (91,545) (8,062)
---------------------------------------------

Increase (decrease) in cash 152,976 (165,095) (82,472) -
Cash:
Beginning of period 346,198 312,948 151,721 -
---------------------------------------------
End of period 499,174 147,853 69,249 -
Short-term investments 143,333 - - -
---------------------------------------------

Cash and short-term
investments $642,507 $147,853 $69,249 $ -
---------------------------------------------


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 $28,131 $ - $ - $94,281
Net change in non-cash
working capital 13,887 - - 20,516
--------------------- ----------- -----------
42,018 - - 114,797
--------------------- ----------- -----------
Cash provided by (used in)
investing activities
Capital spending (10,892) (97,115) - (121,028)
Sale (purchase) of
short-term investments - - - (125,439)
Other - - - (7,846)
--------------------- ----------- -----------
(10,892) (97,115) - (254,313)
--------------------- ----------- -----------

--------------------- ----------- -----------
Cash provided by (used in)
financing activities (1) 72,492 - 116,425
--------------------- ----------- -----------

Foreign exchange change
on cash held in foreign
currency (165) (203) - (9,467)
--------------------- ----------- -----------

Intergroup funding
(distributions) (41,097) 96,996 - -
--------------------- ----------- -----------

Increase (decrease) in cash (10,137) 72,170 - (32,558)
Cash:
Beginning of period 44,943 32,340 - 888,150
--------------------- ----------- -----------
End of period 34,806 104,510 - 855,592
Short-term investments - - - 143,333
--------------------- ----------- -----------

Cash and short-term
investments $34,806 $104,510 $ - $998,925
--------------------- ----------- -----------



INMET MINING CORPORATION

Consolidated statements of retained earnings
(unaudited)

Three Months Ended Six Months Ended
(thousands of Canadian June 30 June 30
dollars) 2009 2008 2009 2008
------------------------------------------------- -----------------------

Retained earnings,
beginning of period $1,334,401 $1,181,436 $1,283,074 $1,074,762
Net income 66,528 67,705 117,855 174,379
Dividends on common shares (4,828) (4,828) (4,828) (4,828)

----------------------- -----------------------
Retained earnings,
end of period $1,396,101 $1,244,313 $1,396,101 $1,244,313
------------------------------------------------- -----------------------
(see accompanying notes)



Consolidated statements of comprehensive income
(unaudited)

Three Months Ended Six Months Ended
(thousands of Canadian June 30 June 30
dollars) 2009 2008 2009 2008
------------------------------------------------- -----------------------

Net income $66,528 $67,705 $117,855 $174,379
----------------------- -----------------------

Other comprehensive income
(loss) for the period :
Changes in fair value of
gold forward sales
contracts (344) 2,926 (1,105) (6,999)
Changes in fair value of
interest rate swap
contracts 3,244 4,912 4,984 190
Changes in fair value of
foreign exchange forward
contracts - (899) - 11,373
Changes in fair value of
investments 5,781 5,238 9,401 (2,181)
Currency translation
adjustments (98,622) (10,883) (71,577) 64,486
Reclassification to net
income of gains/losses
realized:
Gain on sale of investment - - - (256)
Troilus gold hedge loss - - - 13,718
Ok Tedi gold hedge loss - 6,721 - 1,013
Amortization of gain on
foreign exchange forward
contracts (1,523) - (3,031) -
Foreign exchange loss
(gain) on reduction of
net investment in
self-sustaining foreign
operations (note 14) (3,912) 14,870 (3,912) 20,384
Income tax expense related
to other comprehensive
income (note 18) (2,098) (2,977) (3,137) (4,240)
----------------------- -----------------------
(97,474) 19,908 (68,377) 97,488
----------------------- -----------------------

Comprehensive income (loss) ($30,946) $87,613 $49,478 $271,867
------------------------------------------------- -----------------------
(see accompanying notes)



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 2008 Annual Review.

2. Changes in accounting policies

Effective January 1, 2009, we adopted CICA Handbook Section 3064,
Goodwill and Intangible Assets, which replaces Section 3062 -
Goodwill and Other Intangible Assets and Section 3450 - Research and
Development Costs. This new standard establishes standards for the
recognition, measurement, presentation and disclosure of goodwill
subsequent to its initial recognition and of intangible assets. It
provides guidance for recognizing 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. The adoption of this standard did not have an
impact on our consolidated financial statements.

Emerging Issues Committee 173 - Credit Risk and the fair value of
financial assets and financial liabilities

Effective January 1, 2009, we adopted EIC-173, Credit Risk and the
Fair Value of Financial Assets and Financial Liabilities
retroactively, without restatement. This EIC provides guidance on how
to take into account credit risk of an entity and counterparty when
determining the fair value of financial assets and financial
liabilities, including derivative instruments. The adoption of EIC
173 did not have a significant impact on our consolidated financial
statements.

3. Statement of cash flows

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


For the six months ended June 30, 2009
-------------------------------------------------------------------------
(thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total
-------------------------------------------------------------------------

Accounts
receivable(1) 66 ($15,678) ($6,203) ($495) ($48,400) ($70,710)
Inventories - 219 390 3,938 (12) 4,535
Accounts payable
and accrued
liabilities (2,871) (5,522) 1,257 (4,616) 382 (11,370)
Taxes 5,342 1,172 10,429 - 7,671 24,614
Other (2,458) 23 - - (293) (2,728)
-------------------------------------------------------------------------
$79 ($19,786) $5,873 ($1,173) ($40,652) ($55,659)
-------------------------------------------------------------------------


For the six months ended June 30, 2008
-------------------------------------------------------------------------
(thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total
-------------------------------------------------------------------------

Accounts
receivable $8,832 ($13,805) $9,362 ($5,113) $1,476 $752
Inventories - (3,180) (714) (2,320) (1,502) (7,716)
Accounts payable
and accrued
liabilities (10,271) 1,966 (80) (467) (4,232) (13,084)
Taxes 3,138 (13,255) (4,270) - 18,386 3,999
Other 48 110 - (421) (194) (457)
-------------------------------------------------------------------------
$1,747 ($28,164) $4,298 ($8,321) $13,934 ($16,506)
-------------------------------------------------------------------------
(1) Includes changes in accounts payable related to metal sales.


For the three months ended June 30, 2009
-------------------------------------------------------------------------
(thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total
-------------------------------------------------------------------------

Accounts
receivable $214 $8,839 ($7,323) $13,290 ($8,967) $6,053
Inventories - (999) 797 998 (1,400) (604)
Accounts payable
and accrued
liabilities (2,137) (3,671) 1,478 (6,162) 1,801 (8,691)
Taxes (2,530) (3,381) 18,367 - 2,467 14,923
Other (2,447) (31) - 1,691 (985) (1,772)
-------------------------------------------------------------------------
($6,900) $757 $13,319 $9,817 ($7,084) $9,909
-------------------------------------------------------------------------


For the three months ended June 30, 2008
-------------------------------------------------------------------------
(thousands) Corporate Cayeli Pyhasalmi Troilus Ok Tedi Total
-------------------------------------------------------------------------

Accounts
receivable $8,817 $19,569 ($2,937) ($2,022) $10,537 $33,964
Inventories - (433) 750 367 (1,602) (918)
Accounts payable
and accrued
liabilities 1,533 3,555 1,395 (48) 1,305 7,740
Taxes 3,422 (24,931) (2,034) - 2,705 (20,838)
Other 57 (10) - (421) 942 568
-------------------------------------------------------------------------
$13,829 ($2,250) ($2,826) ($2,124) $13,887 $20,516
-------------------------------------------------------------------------

4. Cash and short-term investments

At period end, our cash and short-term investments are held in:

---------------------------------------------------------------------
June 30 December 31
(thousands) 2009 2008
---------------------------------------------------------------------
Cash:
Liquidity funds $193,645 $276,301
Bankers' acceptances 56,408 64,293
Money market funds 41,700 38,683
Corporate 65,495 -
Term deposits 344,422 78,041
Overnight deposits 11,316 14,684
Bank deposits 40,767 52,429
Provincial short-term notes - 12,628
-------------------------
753,753 537,059
Short-term investments:
Provincial short-term notes 11,420 35,674
Bankers' acceptances 26,709 -
Bank deposits 19,985 -
Other 22,811 -
---------------------------------------------------------------------
80,925 35,674
---------------------------------------------------------------------
Total cash and short-term investments $834,678 $572,733
---------------------------------------------------------------------

5. Restricted cash

---------------------------------------------------------------------
June 30 December 31
(thousands) 2009 2008
---------------------------------------------------------------------
Collateralized cash for letter of credit
facility $16,444 $16,343
In trust for Ok Tedi rehabilitation 17,144 16,667
Collateralized cash for letters of credit
- Las Cruces 33,063 26,090
Collateralized cash for Pyhasalmi reclamation 1,958 2,104
---------------------------------------------------------------------
68,609 61,204
Less current portion:
Collateralized cash for letters of credit
- Las Cruces (7,210) (8,311)
---------------------------------------------------------------------
$61,399 $52,893
---------------------------------------------------------------------

Las Cruces' restricted cash which secures a restoration bond
increased by (euro) 5.4 million (note 9) year to date.

6. Investments

---------------------------------------------------------------------
June 30 December 31
(thousands) 2009 2008
---------------------------------------------------------------------
Available-for-sale equity securities:
Premier Gold Mines Ltd. $24,476 $15,309
Other 2,439 2,205
---------------------------------------------------------------------
$26,915 $17,514
---------------------------------------------------------------------

7. Derivatives

---------------------------------------------------------------------
June 30 December 31
(thousands) 2009 2008
---------------------------------------------------------------------
Derivative asset:
Ok Tedi copper forward sales contracts $340 $4,327
---------------------------------------------------------------------
Derivative liabilities:
Ok Tedi gold forward sales contracts $2,718 $1,670
Las Cruces interest rate swap contracts 15,141 23,440
---------------------------------------------------------------------
$17,859 $25,110
---------------------------------------------------------------------

On July 20, 2009, Las Cruces settled its interest rate swap
contracts, requiring a cash payment of US $14 million ($16 million).

8. Long-term debt

---------------------------------------------------------------------
June 30 December 31
(thousands) 2009 2008
---------------------------------------------------------------------
Credit facility - Tranche A $234,339 $262,504
- Tranche B 8,285 80,364
Promissory note 19,278 19,741
Loans from non-controlling shareholder 188,897 131,905
---------------------------------------------------------------------
450,799 494,514
Less current portion:
Credit facility - Tranche A (234,339) (29,302)
- Tranche B (8,285) (80,364)
---------------------------------------------------------------------
$208,175 $384,848
---------------------------------------------------------------------

Credit facility

This quarter, Las Cruces repaid (euro) 37.0 million under Tranche B
equal to subsidies received. Additionally Las Cruces made a scheduled
repayment of US $12 million under Tranche A. The credit facility
loans approximate fair value because the loans accrue interest at
prevailing market rates.

On July 17, 2009, Las Cruces issued a notice to repay amounts
outstanding under its credit facility on July 31, 2009 and these
amounts have been classified as current liabilities.

Loans from non-controlling shareholder

This quarter, Las Cruces received intercompany loan advances of
(euro) 40 million. 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) 116 million, is reflected
in long-term debt at June 30, 2009. Loans from non-controlling
shareholders approximate fair value because the loans accrue interest
at prevailing market rates.

9. Commitments

Our operations have the following capital commitments as at June 30,
2009:

- Ok Tedi has committed approximately $116.3 million (our
proportionate share is $20.9 million) to capital expenditures
related to the mine waste management project.

- Las Cruces has committed $6.6 million for engineering, procurement
and construction management related to the process plant.

- Petaquilla has committed $166 million for the design and supply of
certain mill equipment.

- Cayeli has capital commitments related to drilling equipment
amounting to $2.4 million.

Las Cruces' restoration bond increased by (euro) 5.4 million year to
date, to (euro) 20.2 million, because of development activities in
2008.

10. Leases

Las Cruces has a contract for the supply of oxygen, effective during
the first quarter, from a plant owned and operated by a third party
and located at the mine site. This arrangement contains a capital
lease with minimum lease payments of:

2009 $2,001
2010 2,668
2011 2,668
2012 2,668
2013 2,668
Thereafter 27,348
----------------------------------------------------
Total $40,021
----------------------------------------------------

We have recognized the oxygen plant in property, plant and equipment
at $25 million. This amount is based on the total minimum future
lease payments, discounted at Las Cruces' incremental borrowing rate
of 8.2 percent. We have also recognized capital lease obligations of
$25 million in other liabilities. The oxygen plant will be
depreciated over its estimated useful life of 15 years once Las
Cruces is substantially complete.

11. Las Cruces subsidies

During the second quarter, Las Cruces received (euro) 37 million in
subsidy grants. This operation must meet certain minimum employment
and share capital requirements for a five year period, otherwise
subsidies received must be repaid. Las Cruces expects to meet these
conditions and has recognized total subsidies of (euro) 53 million as
a reduction of the cost of the related property, plant and equipment.

12. Share capital

On June 25, 2009, we completed a public offering of 7.825 million
common shares, on a bought deal basis, at a price of $44.50 per share
for aggregate gross proceeds of $348 million ($333 million net of
estimated transaction costs).

13. Accumulated other comprehensive 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 $1,030) ($2,402)
Unrealized gains on foreign exchange forward contract(1) 21,023
Unrealized losses on interest rate swap contracts(2) (9,962)
Unrealized gains on investments (net of tax of $667) 3,314
Currency translation adjustment 170,659
---------------------------------------------------------------------
AOCI, December 31, 2008 $182,632
Impact on adoption of EIC 173 - January 1, 2009 (note 2) 279
Other comprehensive income for the six months ending
June 30, 2009 (68,377)
---------------------------------------------------------------------
AOCI, June 30, 2009 $114,534
---------------------------------------------------------------------

AOCI June 30, 2009 comprises:
Unrealized losses on gold forward sales contracts
(net of tax of $1,361) ($3,176)
Unrealized gains on foreign exchange forward contract(3) 17,992
Unrealized losses on interest rate swap contract(4) (6,592)
Unrealized gains on investments (net of tax of $2,242) 11,140
Currency translation adjustment 95,170
---------------------------------------------------------------------
AOCI, June 30, 2009 $114,534
---------------------------------------------------------------------
(1) Net of tax of $12,792 and non-controlling interest of $8,956.
(2) Net of tax of $6,102 and non-controlling interest of $4,270.
(3) Net of tax of $10,946 and non-controlling interest of $7,664.
(4) Net of tax of $4,038 and non-controlling interest of $2,825.

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

---------------------------------------------------------------------
June 30 December 31
(thousands) 2009 2008
---------------------------------------------------------------------
Pyhasalmi (euro functional currency) $9,245 $17,480
Las Cruces (euro functional currency) 42,424 57,947
Cayeli (US dollar functional currency) 4,677 24,751
Ok Tedi (US dollar functional currency) (976) 6,224
Petaquilla (US dollar functional currency) 39,800 64,257
---------------------------------------------------------------------
$95,170 $170,659
---------------------------------------------------------------------

The US dollar to Canadian dollar exchange rate was $1.16 at June 30,
2009 and $1.22 at December 31, 2008. The euro to Canadian dollar
exchange rate was $1.63 at June 30, 2009 and $1.70 at December 31,
2008.

14. Investment and other income

---------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
(thousands) 2009 2008 2009 2008
---------------------------------------------------------------------
Interest income $701 $6,963 $2,743 $15,686
Dividend and royalty
income 385 1,504 685 1,504
Foreign exchange gain
(loss) 18,196 (18,573) 8,098 (11,715)
Mark to market on Ok Tedi
Copper forward contracts (1,007) (1,436) (2,426) (4,416)
Other (1,809) 184 (3,837) 2,337
---------------------------------------------------------------------
$16,466 ($11,358) $5,263 $3,396
---------------------------------------------------------------------

Foreign exchange

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

Foreign exchange gain (loss) is a result of:

---------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
(thousands) 2009 2008 2009 2008
---------------------------------------------------------------------
Translation of Las Cruces'
US dollar-denominated
debt (note 13) 15,273 - 3,808 -
Translation of other-
monetary assets and
liabilities (989) (3,703) 378 8,669
Reduction in our net
investments 3,912 (14,870) 3,912 (20,384)
---------------------------------------------------------------------
$18,196 $18,573 $8,098 $(11,715)
---------------------------------------------------------------------

15. Income tax expense

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

For the six months ended June 30, 2009
-------------------------------------------------------------------------
Las
(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total
-------------------------------------------------------------------------

Current income
taxes $10,164 $10,606 $1,758 $9,095 $ - $31,623
Future income
taxes 9,566 (8,975) 547 9,914 267 11,319
-------------------------------------------------------------------------
$19,730 $1,631 $2,305 $19,009 $267 $42,942
-------------------------------------------------------------------------


For the six months ended June 30, 2008
-------------------------------------------------------------------------
Las
(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total
-------------------------------------------------------------------------

Current income
taxes $5,534 $28,472 $12,536 $46,591 $ - $93,133
Future income
taxes - (693) (88) (3,441) 166 (4,056)
-------------------------------------------------------------------------
$5,534 $27,779 $12,448 $43,150 $166 $89,077
-------------------------------------------------------------------------


For the three months ended June 30, 2009
-------------------------------------------------------------------------
Las
(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total
-------------------------------------------------------------------------

Current income
taxes $2,509 $2,800 $1,330 $3,861 $ - $10,500
Future income
taxes 690 (588) 540 8,608 4,302 13,552
-------------------------------------------------------------------------
$3,199 $2,212 $1,870 $12,469 $4,302 $24,052
-------------------------------------------------------------------------


For the three months ended June 30, 2008
-------------------------------------------------------------------------
Las
(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Cruces Total
-------------------------------------------------------------------------

Current income
taxes $5,534 $9,922 $6,564 $29,286 $ - $51,306
Future income
taxes - (1,267) (139) (5,483) (84) (6,973)
-------------------------------------------------------------------------
$5,534 $8,655 $6,425 $23,803 ($84) $44,333
-------------------------------------------------------------------------

16. Net income per share

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

---------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
(thousands) 2009 2008 2009 2008
---------------------------------------------------------------------
Net income available to
common shareholders $66,528 $67,705 $117,855 $174,379
---------------------------------------------------------------------


(thousands)
---------------------------------------------------------------------
Weighted average common
shares outstanding 48,712 48,282 48,498 48,282
Plus incremental shares
from assumed conversions:

Deferred share units 83 78 83 78
Long term incentive plan
units 43 - 43 -
---------------------------------------------------------------------
Diluted weighted
average common shares
outstanding 48,838 48,360 48,624 48,360
---------------------------------------------------------------------


(Canadian dollars per share)
---------------------------------------------------------------------
Basic net income per
common share $1.37 $1.40 $2.43 $3.61
Dilutive effect from
assumed conversions of
deferred share units and
long term incentive plan
units per common share ($0.01) - ($0.01) -
---------------------------------------------------------------------
Diluted net income per
common share $1.36 $1.40 $2.42 $3.61
---------------------------------------------------------------------

17. Asset impairment

We made a decision in 2008 not to proceed with the Cerattepe project
and all work has ceased on the project. During the first quarter, we
recognized an asset impairment charge of $6 million and an associated
tax recovery of $6 million.

18. Income taxes recovery (expense) included in other comprehensive
income

---------------------------------------------------------------------
Three months ended Six months ended
June 30 June 30
(thousands) 2009 2008 2009 2008
---------------------------------------------------------------------
Changes in fair value
of gold forward sales
contracts $104 ($575) $331 ($284)
Changes in fair value
of interest rate swap
contracts (1,233) (1,865) (1,893) (72)
Changes in fair value
of foreign exchange
forward contracts - 341 - (4,319)
Changes in fair value
of investments (969) (878) (1,575) 435
---------------------------------------------------------------------
($2,098) ($2,977) ($3,137) ($4,240)
---------------------------------------------------------------------

Contact Information

  • Inmet Mining Corporation
    Richard Ross
    Chairman and Chief Executive Officer
    (416) 860-3974

    Inmet Mining Corporation
    Jochen Tilk
    President and Chief Operating Officer
    (416) 860-3972