Inmet Mining Corporation
TSX : IMN

Inmet Mining Corporation

February 13, 2007 13:58 ET

Inmet's 2006 Fourth Quarter Results Are More Than Double Last Year



TORONTO, ONTARIO--(Marketwire - Feb. 13, 2007) -

All amounts in Canadian dollars unless indicated otherwise

Highlights

- Higher net income per share
Net income per share this quarter was $2.02 compared to $0.95 for the
same period in 2005.

- Higher operating cash flow per share
Operating cash flow before working capital increased to
$101.6 million or $2.11 per common share from $55.7 million or $1.16
per common share for the same period in 2005.

- Copper production meets target for 2006
We met our copper production target in 2006, producing over 80,000
tonnes of copper. Our zinc production fell short of target by 7,500
tonnes because we deferred mining zinc rich areas at Cayeli and
Pyhasalmi to 2007.

- Las Cruces on schedule
We moved a third of the overburden material, approximately
three million cubic metres, from the future pit. We have also made
significant progress preparing the site for plant construction in
addition to beginning the process of pouring lean concrete for the
crusher foundation and erecting buildings.

- Record throughput at Cayeli
Significant improvements at Cayeli resulted in record mill throughput
in 2006. During the fourth quarter, Cayeli was milling at an
annualized rate of over 980,000 tonnes. For 2007 and 2008 we expect
to process 1.1 million tonnes, increasing to 1.2 million tonnes by
2009.

- Completed cost update for the Petaquilla copper project in Panama
AMEC Engineering completed a cost update of the Petaquilla copper
project. The outcome of the cost update was encouraging and, together
with our fellow shareholders Teck Cominco Limited and Petaquilla
Minerals Ltd., we intend to advance work on the project in 2007.

- Dividend declared
We paid a dividend of $0.10 per common share to common shareholders
on December 15, 2006.

Key financial data

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
FINANCIAL
HIGHLIGHTS
(thousands,
except per
share
amounts)

Sales
Gross sales $258,911 $190,901 + 36% $1,087,869 $708,725 + 53%

Net income(4)
Net income $97,420 $45,646 + 113% $420,653 $142,035 + 196%
Net income
per share $2.02 $0.95 + 113% $8.73 $3.22 + 171%
Adjusted net
income(3) $97,420 $45,646 + 113% $396,748 $142,035 + 179%
Adjusted net
income per
share(3) $2.02 $0.95 + 113% $8.23 $3.22 + 156%

Cash
flow(3),(4)
Cash flow
provided by
operating
activities
(before
working
capital) $101,629 $55,675 + 83% $422,092 $192,918 + 119%
Cash flow
provided by
operating
activities
per share
(before
working
capital) $2.11 $1.16 + 82% $8.75 $4.37 + 100%
-------------------------------------------------------------------------

OPERATING
HIGHLIGHTS
Production(1)
Copper
(tonnes) 20,400 19,700 + 4% 81,300 80,600 + 1%
Zinc
(tonnes) 21,300 21,300 - 74,400 82,800 - 10%
Gold
(ounces) 64,100 60,100 + 7% 246,900 263,000 - 6%

Cash costs
Copper
(US $ per
pound)
(2),(3) $(0.25) $0.52 - 148% $0.20 $0.51 - 61%
Gold
(US $ per
ounce)
(3),(4) $406 $454 - 11% $365 $324 + 13%
-------------------------------------------------------------------------


as at as at
December 31 December 31
2006 2005
FINANCIAL
CONDITION
----------------------------
Current ratio 5.1 to 1 4.0 to 1
Long-term debt
to total
capitalization 10% 5%
Net working
capital
balance $666 million $301 million
Cash balance $640 million $252 million
Shareholders'
equity(4) $1,073 million $624 million
-------------------------------------------

(1) Inmet's share
(2) Cayeli and Pyhasalmi zinc production and Ok Tedi gold production are
included as metal credits.
(3) See reconciliation of non-GAAP measures on page 38 to see how these
costs are calculated.
(4) 2005 amounts are adjusted because we adopted CICA EIC 160 - Stripping
Costs Incurred in the Production Phase of an Operation (see
Accounting changes on page 34).


The business environment

We realized the following rates and prices in the fourth quarter and in
2006. These have a significant impact on our business.

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
2006 2005 2006 2005
-------------------------------------------------------------------------
Metal prices
Copper (per pound) US $2.77 US $2.15 US $3.21 US $1.76
Zinc (per pound) US $2.12 US $0.78 US $1.54 US $0.64
Gold (per ounce) US $525 US $429 US $514 US $407

Treatment charges(1)
Copper (per tonne) US $91 US $85 US $88 US $84
Zinc (per tonne) US $125 US $105 US $110 US $117

Freight charges(1)
Copper (per tonne) US $47 US $52 US $42 US $45
Zinc (per tonne) US $21 US $15 US $16 US $20

Statutory tax rates
Cayeli 20% 30% 20% 30%
Pyhasalmi 26% 26% 26% 26%
Ok Tedi 37% 37% 37% 37%

Exchange rates
1 US $ to C$ $1.14 $1.17 $1.13 $1.21
1 euro to C$ $1.47 $1.40 $1.42 $1.51
-------------------------------------------------------------------------
(1) per dry metric tonne of concentrate.

Metal prices
Higher copper and zinc prices increased our gross sales in the quarter by
$79 million and by $428 million for the year. Higher metal prices increased
our earnings and cash flow, but this also increased certain costs including
the price participation we pay to smelters, income taxes, royalties we pay at
Cayeli, and employee bonus compensation we pay at Ok Tedi.

Treatment charges
Treatment charges are one component of smelter processing charges. We
also pay smelters for content losses and price participation. Overall copper
and zinc smelter processing charges were higher than 2005 because of higher
metal prices. We expect lower smelter processing charges in 2007 as sellers of
concentrate are receiving more favourable terms in new contracts with respect
to price participation.

Freight charges
Zinc freight charges increased during the fourth quarter primarily due to
a combination of a seasonal increase in the grain trade, strong coal demand
and congestion at various coal ports around the world. For the first nine
months of the year, increased availability of cargo ships led to lower average
zinc freight rates in 2006 compared to 2005. We expect 2007 freight charges to
be similar to 2006.

Exchange rates
Canadian dollar revenue and earnings were affected by changes in the
Canadian dollar relative to the US dollar and the euro. In comparison to 2005,
in the fourth quarter, the Canadian dollar strengthened relative to the US
dollar and weakened relative to the euro. The net effect reduced gross sales
in the quarter by $4 million and did not impact net income. In comparing 2006
and 2005, the Canadian dollar was stronger relative to the US dollar and euro.
This reduced gross sales in the year by $44 million and net income by
$22 million.

Fourth quarter report

In this report, Inmet means Inmet Mining Corporation and we, us and our
mean Inmet and/or its subsidiaries and joint ventures.
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 such 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.

Where to find it
Our financial results..........................5
Key changes in 2006............................5
Understanding our performance..................6
Earnings from operations.....................7
Corporate costs.............................11
Results of our operations.....................13
Cayeli......................................15
Pyhasalmi...................................18
Troilus.....................................21
Ok Tedi.....................................24
Status of our development projects............28
Las Cruces..................................28
Cerattepe...................................29
Petaquilla..................................30
Managing our liquidity........................32
Managing risk.................................35
Non-GAAP measures.............................38
Quarterly review..............................39
Consolidated financial statements.............40


Our financial results

-------------------------------------------------------------------------
(thousands,
except three months ended year ended
per share December 31 December 31
amounts) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
EARNINGS FROM
OPERATIONS(1)
Cayeli $43,489 $20,222 + 115% $193,042 $64,400 + 200%
Pyhasalmi 46,172 20,585 + 124% 140,260 66,358 + 111%
Troilus 740 (4,993) - 115% 5,545 2,926 + 90%
Ok Tedi 28,431 34,274 - 17% 192,091 99,861 + 92%
Provisions
for mine
rehabil-
itation at
closed sites (576) (502) + 15% (1,944) (2,020) - 4%
-------------------------------------------------------------------------
118,256 69,586 + 70% 528,994 231,525 + 128%
-------------------------------------------------------------------------
DEVELOPMENT
AND
EXPLORATION
Corporate
development
and
exploration (4,136) (2,893) + 43% (9,754) (8,074) + 21%
-------------------------------------------------------------------------

CORPORATE COSTS
General and
administration (6,128) (2,119) (13,740) (7,251)
Investment and
other income
(expense) 16,697 985 23,334 (3,180)
Interest
expense (425) (392) (1,619) (1,952)
Income and
capital taxes (26,679) (19,521) (130,467) (69,033)
Non-
controlling
interest (165) - - -
-------------------------------------------------------------------------
(16,700) (21,047) - 21% (122,492) (81,416) + 50%
-------------------------------------------------------------------------
Net income
before other
items $97,420 $45,646 + 113% $396,748 $142,035 + 179%
Gain on sale
of Izok - - - 23,905 - -
-------------------------------------------------------------------------
Net income $97,420 $45,646 + 113% $420,653 $142,035 + 196%
-------------------------------------------------------------------------
Basic net
income per
share $2.02 $0.95 + 113% $8.73 $3.22 + 171%
-------------------------------------------------------------------------
Diluted net
income per
share $2.02 $0.95 + 113% $8.71 $3.21 + 171%
-------------------------------------------------------------------------
Weighted
average
shares
outstanding 48,278 48,086 48,212 44,100
-------------------------------------------------------------------------
(1) Sales less smelter processing charges and freight, cost of sales,
depreciation and provisions for mine rehabilitation.


Key changes in 2006

-------------------------------------------------------------------------
(millions) three months ended year ended
December 31 December 31 see page
-------------------------------------------------------------------------
EARNINGS FROM OPERATIONS
Sales
Higher metal prices denominated
in Canadian dollars $79 $428 7
Lower sales volumes (6) (28) 8

Costs
Higher smelter processing
charges and freight (22) (85) 9
Higher royalties and
compensation (because of
higher earnings) - (12) 9
Higher operating costs (3) (7) 9
Other 1 1
---------------------------------------------------------
Increase in earnings from
operations, compared to 2005 49 297

CORPORATE COSTS
Higher taxes from higher income (9) (77) 12
Lower taxes from reduced rates 2 16 12
Gain on sale of Izok - 24 11
Higher interest and
dividend income 9 10 11
Redemption costs of debentures - 7 11
Non-cash expense from settlement
of pension liability - 4 11
Other 1 (2)
---------------------------------------------------------
Increase in net income,
compared to 2005 $52 $279
---------------------------------------------------------

Understanding our performance

Metal prices and exchange rates

Our operations continued to benefit from high metal prices during the
fourth quarter and for the year. Copper and zinc prices reached record highs
this year before trending lower towards the end of 2006; although, the average
London Metal Exchange (LME) cash price in the fourth quarter was US $3.21 per
pound for copper, up significantly from US $1.95 in 2005, and US $1.91 per
pound for zinc, up significantly from US $0.74 per pound in 2005. The gold
price for the quarter continued to be strong, supported by a weaker US dollar;
however the gold price we ultimately realized did not get the full benefit
because we hedged some of our production at Troilus and Ok Tedi.
The following table shows the metal prices, in US dollars and Canadian
dollars, and exchange rates we realized in the fourth quarter and for the
year. Realized metal prices include the impact of finalization adjustments.

-------------------------------------------------------------------------
three months ended three months ended
December 31 December 31
2006 2005 2006 2005 C$ change
-------------------------------------------------------------------------
Copper (per pound) US $2.77 US $2.15 C $3.16 C $2.52 +25%
Zinc (per pound) US $2.12 US $0.78 C $2.42 C $0.92 +163%
Gold (per ounce) US $525 US $429 C $599 C $503 +19%
-------------------------------------------------------------------------
1 US$ to C$ $1.14 $1.17
1 euro to C$ $1.47 $1.40
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended year ended
December 31 December 31
2006 2005 2006 2005 C$ change
-------------------------------------------------------------------------
Copper (per pound) US $3.21 US $1.76 C $3.64 C $2.13 +71%
Zinc (per pound) US $1.54 US $0.64 C $1.75 C $0.78 +124%
Gold (per ounce) US $514 US $407 C $581 C $493 +18%
-------------------------------------------------------------------------
1 US$ to C$ $1.13 $1.21
1 euro to C$ $1.42 $1.51
-------------------------------------------------------------------------

Comparing our results
On August 22, 2005, we acquired a 70 percent indirect interest in the Las
Cruces copper project, and issued 5.6 million Inmet common shares valued at
$91 million to a wholly-owned subsidiary of Leucadia National Corporation as
consideration. We consolidate the Las Cruces balance sheet and income
statement as of that date.

EARNINGS FROM OPERATIONS

We calculate earnings from operations by taking the revenues generated
from the sale of metals, less the costs associated with those sales, and then
subtracting depreciation charges for capital and provisions for mine
rehabilitation.

1. Gross sales this quarter were 36% higher compared to the same period
last year

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
(thousands) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Gross sales
by operation
Cayeli $87,867 $53,081 +66% $370,561 $200,408 +85%
Pyhasalmi 88,170 47,860 +84% 273,848 174,174 +57%
Troilus 26,365 21,685 +22% 103,880 104,706 -1%
Ok Tedi(1) $56,509 68,275 -17% 339,580 229,437 +48%
-------------------------------------------------------------------------
$258,911 $190,901 +36% $1,087,869 $708,725 +53%
-------------------------------------------------------------------------
Gross sales
by metal
Copper $127,092 $105,932 +20% $638,209 $388,505 +64%
Zinc 83,677 43,409 +93% 266,114 143,772 +85%
Gold 35,577 31,174 +14% 141,385 137,428 +3%
Other 12,565 10,386 +21% 42,161 39,020 +8%
-------------------------------------------------------------------------
$258,911 $190,901 +36% $1,087,869 $708,725 +53%
-------------------------------------------------------------------------
(1) Our 18 percent share of Ok Tedi's sales


...mainly because of higher copper and zinc prices

-------------------------------------------------------------------------
three
months year
ended ended
December December
(millions) 31 31
-------------------------------------------------------------------------
Higher copper prices, denominated in C$ $23 $265
Higher zinc prices, denominated in C$ 49 144
Higher gold prices and other metal prices,
denominated in C$ 5 17
Lower sales volumes (9) (47)
-------------------------------------------------------------------------
Increase in gross sales, compared to 2005 $68 $379
-------------------------------------------------------------------------

We record sales using the metal price for sales settled during the
reporting period. For sales that have not been settled, we use an estimate
based on the month we expect the sale to settle and the commodity's forward
rate at the end of the reporting period. We recognize the difference between
our estimate and the final price by adjusting our gross sales in the period
when we settle the sale (finalization adjustment).We record sales using the
metal price for sales settled during the reporting period. For sales that have
not been settled, we use an estimate based on the month we expect the sale to
settle and the commodity's forward rate at the end of the reporting period. We
recognize the difference between our estimate and the final price by adjusting
our gross sales in the period when we settle the sale (finalization
adjustment).
The metal prices and exchange rates we used are shown on page 6. These
sales prices were affected by finalization adjustments from unsettled third
quarter sales. We recorded a negative US $7 million finalization adjustment
for copper and a US $5 million positive finalization adjustment for zinc in
the fourth quarter.
At December 31, 2006, unsettled sales included 28 million pounds of
copper provisionally priced (before finalization adjustments) at US $2.87 per
pound, and 15 million pounds of zinc provisionally priced at US $1.95 per
pound. The finalization adjustment we record in the first quarter of 2007 will
depend on the actual price we receive on final settlement.
For every US $0.10 decline in price per pound of copper and zinc at the
time of settlement, we would expect a negative finalization adjustment of
approximately:

- $3 million to gross sales and $2 million to net income with respect to
copper
- $2 million to gross sales and $1 million to net income with respect to
zinc.

...which more than offset lower zinc sales volumes

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Sales volumes
Copper
(tonnes) 18,500 18,400 +1% 79,300 82,300 -4%
Zinc
(tonnes) 16,100 21,100 -24% 70,000 82,700 -15%
Gold
(ounces) 59,600 59,600 -% 241,900 269,100 -10%
-------------------------------------------------------------------------


Zinc and gold sales volumes were impacted by lower production and
shipments that were behind schedule at year-end because:

- water levels on the Fly River were low in December, affecting Ok
Tedi's ability to ship out copper and gold production
- zinc shipments at Cayeli were delayed into January.

The impact of these delayed shipments was approximately $50 million to
gross sales and $15 million to net income.

2007 outlook for sales
We expect sales volumes in 2007 to be slightly higher than 2006 because
of our higher expectations for copper and zinc production (see page 13 for our
2007 production objectives).
The total amount we receive in Canadian dollars is affected by US dollar
denominated metal prices and the US dollar to Canadian dollar exchange rate.

2. Costs this quarter were higher than in 2005

Costs include our cost of sales (direct production costs, including non-
cash production related costs) and smelter processing charges.

Our cost of sales this quarter was consistent to 2005...

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
(thousands) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Cost of sales
by operation
Cayeli $15,547 $14,846 +5% $70,639 $67,083 +5%
Pyhasalmi 13,630 10,738 +27% 49,629 45,627 +9%
Troilus 19,889 21,521 -8% 76,311 80,185 -5%
Ok Tedi(1) 16,951 19,698 -14% 86,175 81,611 +6%
Other 576 502 +15% 1,944 2,020 -4%
-------------------------------------------------------------------------
$66,593 $67,305 -1% $284,698 $276,526 +3%
-------------------------------------------------------------------------
(1) Includes our 18 percent share of Ok Tedi's cost of sales.


...mainly because lower sales volumes offset higher labour and
energy costs

-------------------------------------------------------------------------
three
months year
ended ended
December December
(millions) 31 31
-------------------------------------------------------------------------
Lower sales volume $(4) $(6)
Stronger Canadian dollar (1) (12)
Energy costs 2 7
Labour costs 2 6
Royalties at Cayeli 1 8
Compensation at Ok Tedi (1) 4
Other - 1
-------------------------------------------------------------------------
Increase in cost of sales, compared to 2005 $(1) $8
-------------------------------------------------------------------------


...though higher metal prices increased smelter processing charges

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
(thousands) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Smelter
processing
charges and
freight by
operation
Cayeli $26,959 $16,536 +63% $99,462 $61,972 +60%
Pyhasalmi 26,035 14,254 +83% 75,342 52,230 +44%
Troilus 2,898 2,325 +25% 11,112 11,371 -2%
Ok Tedi(1) 9,113 13,016 -30% 54,689 43,094 +27%
-------------------------------------------------------------------------
$65,005 $46,131 +41% $240,605 $168,667 +43%
-------------------------------------------------------------------------
Smelter
processing
charges and
freight by
metal
Copper(1) $28,508 $24,916 +14% $126,347 $96,537 +31%
Zinc 33,807 18,963 +78% 104,111 61,894 +68%
Other 2,690 2,252 +19% 10,147 10,236 -1%
-------------------------------------------------------------------------
$65,005 $46,131 +41% $240,605 $168,667 +43%
-------------------------------------------------------------------------
(1) Includes our 18 percent share of Ok Tedi's smelter processing charges
and freight.

Smelter processing charges include treatment charges and price
participation and were 41 percent higher this quarter and 43 percent higher
for the year compared to the same period in 2005 mainly because of the impact
higher metal prices had on price participation.

2007 outlook for costs
We expect our direct production costs (cost of sales) to be higher in
2007 because of the following factors:

- higher production volumes
- higher labour costs at Cayeli as a new labour agreement has been
signed.

The following costs should also continue to be high:
- royalties at Cayeli, a result of high net income
- employee compensation costs at Ok Tedi, a result of high cash flows.

We expect smelter processing charges to be lower in 2007 because of lower
copper treatment charges and because mining companies have successfully
negotiated limits on the price participation that smelters can charge compared
to the last couple of years.
The total amount we spend in Canadian dollars is also affected by the US
dollar and euro to Canadian dollar exchange rates.

3. Depreciation is higher than last year

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
(thousands) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Depreciation by
operation
Cayeli $1,872 $1,477 +27% $7,418 $6,953 +7%
Pyhasalmi 2,333 2,283 +2% 8,617 9,959 -13%
Troilus 2,838 2,832 - 10,912 10,224 +7%
Ok Tedi 2,014 1,287 +56% 6,625 4,871 +36%
-------------------------------------------------------------------------
$9,057 $7,879 +15% $33,572 $32,007 +5%
-------------------------------------------------------------------------

In 2006, depreciation included the shaft development at Cayeli that we
commissioned in August, and higher capital investments at Ok Tedi. At
Pyhasalmi, lower copper production and sales reduced depreciation.

2007 outlook for depreciation
We expect depreciation to be higher in 2007 because of higher sales
volumes and because we will account for a full year of depreciation of the
shaft development at Cayeli.

CORPORATE COSTS

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

1. The gain on the sale of Izok and higher interest income increased
investment and other income in 2006

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
(thousands) 2006 2005 2006 2005
-------------------------------------------------------------------------
Gain on sale of Izok $- $- $23,905 $-
Interest and dividend income 11,179 2,313 19,899 9,475
Foreign exchange gain (loss) 5,862 (1,387) 3,252 (2,627)
Redemption costs of debentures - - - (6,631)
Non-cash expense from settlement
of pension liability - - - (4,100)
Other (344) 59 183 703
-------------------------------------------------------------------------
$16,697 $985 $47,239 $(3,180)
-------------------------------------------------------------------------


One time transactions
---------------------
- On March 31, 2006 we sold our interest in the Izok development
property to Wolfden Resources Inc., and recorded a gain of
$23.9 million. In exchange, we received 13.5 million common shares of
Wolfden, which represented approximately 18 percent of its issued and
outstanding common shares on that date.
- In 2005, we redeemed our convertible debentures for cash, and
expensed the difference between the carrying value of the debentures
and the redemption cost.
- In 2005, we purchased annuities for our retired pension plan members
under our Canadian defined benefit plan under our pension fund
assets. Settling the obligation generated a non-cash charge of
$4.1 million.

Higher cash balances
--------------------
Interest income was higher for the fourth quarter of 2006 and for the
year compared to the same periods in 2005 because we had higher cash balances.
We recorded dividend income of $5.7 million in the fourth quarter and for the
year in 2006. This compares to $0.8 million and $4.5 million for the same
periods in 2005.

Foreign exchange
----------------
We had foreign exchange gains in the fourth quarter and for the year
because of the revaluation of certain foreign intercompany loans. These were
reduced to some extent by foreign exchange losses from a return of our
investment from Cayeli and Ok Tedi during the fourth quarter and the year.
In 2005, the foreign exchange loss was mainly the result of a return of
our investment from Ok Tedi and Pyhasalmi.

2007 outlook for investment and other income
Investment and other income is affected by cash balances, interest rates
and exchange rates. Rising cash balances at our foreign operations may lead us
to continue to repatriate funds. This could result in foreign exchange losses
or gains depending on the relative strength or weakness in the Canadian dollar
compared to when we initially invested in the operations. The amount of the
gain or loss, if any, will depend on the amount repatriated and foreign
exchange rates.

2. Higher earnings increased income tax expense at our operations

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
(thousands) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Cayeli $4,036 $5,863 -31% $25,846 $18,166 +42%
Pyhasalmi 10,863 338 +3114% 32,078 11,734 +173%
Ok Tedi 9,580 12,976 -26% 69,893 36,722 +90%
Corporate 2,200 344 540% 2,650 2,411 -10%
-------------------------------------------------------------------------
$26,679 $19,521 +37% $130,467 $69,033 +89%
-------------------------------------------------------------------------

Earlier this year, the Turkish government enacted tax legislation that
reduced Cayeli's corporate tax rate to 20 percent, effective January 1, 2006.
Cayeli recorded an income tax recovery of $10 million for the year from a
reduction in its future income tax liability.

2007 outlook for income tax expense
Unless a new statutory tax rate is enacted, we expect statutory tax rates
at all our operations in 2007 to remain the same as they were in 2006. At
Cayeli, we will begin accruing for withholding tax on distributable earnings
at a tax rate of 8 percent. This change would result in an overall statutory
tax rate for Cayeli of 27 percent.


Results of our operations

Key performance indicator - production In 2006:
- Copper production was slightly higher in the fourth quarter and the
year compared to the same periods in 2005 mainly because of higher
throughput and grades at Cayeli.
- Zinc production was lower for the year compared to 2005 because we
deferred the mining of zinc rich areas at Cayeli and Pyhasalmi to
2007.
- Gold production was lower in 2006 compared to 2005 because of lower
gold grades and throughput at Troilus and lower gold grades at Ok
Tedi.
- Pyrite production in the fourth quarter of 2005 was reduced to
account for lower expected sales.

-------------------------------------------------------------------------
three months ended December 31
Inmet's share 2006 2005 change
-------------------------------------------------------------------------
Copper (tonnes)
Ok Tedi 8,800 8,900
Cayeli 7,700 6,600
Pyhasalmi 3,200 3,600
Troilus 700 600
-------------------------------------------------------------------------
20,400 19,700 +4%
-------------------------------------------------------------------------
Zinc (tonnes)
Cayeli 12,100 11,200
Pyhasalmi 9,200 10,100
-------------------------------------------------------------------------
21,300 21,300 -%
-------------------------------------------------------------------------
Gold (ounces)
Troilus 39,300 31,600
Ok Tedi 24,800 28,500
-------------------------------------------------------------------------
64,100 60,100 +7%
-------------------------------------------------------------------------
Pyrite (tonnes)
Pyhasalmi 177,300 4,000 +4333%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
Inmet's share 2006 2005 change 2007
-------------------------------------------------------------------------
Copper (tonnes)
Ok Tedi 35,000 34,700 33,800
Cayeli 30,400 26,500 33,200
Pyhasalmi 13,000 15,000 12,900
Troilus 2,900 4,400 3,300
-------------------------------------------------------------------------
81,300 80,600 +1% 83,200
-------------------------------------------------------------------------
Zinc (tonnes)
Cayeli 38,700 42,300 48,600
Pyhasalmi 35,700 40,500 38,400
-------------------------------------------------------------------------
74,400 82,800 -10% 87,000
-------------------------------------------------------------------------
Gold (ounces)
Troilus 147,900 159,500 157,900
Ok Tedi 99,000 103,500 91,200
-------------------------------------------------------------------------
246,900 263,000 -6% 249,100
-------------------------------------------------------------------------
Pyrite (tonnes)
Pyhasalmi 512,100 461,000 +11% 537,000
-------------------------------------------------------------------------

2007 outlook for production
We have set a slightly higher copper production target for 2007 based on
the operational improvements at Cayeli. Our zinc objective is 17 percent
higher than actual 2006 production levels because we expect to mine higher
zinc grades at Cayeli and Pyhasalmi during the first half of 2007. Our gold
target for 2007 is the same as our 2006 production.

Key performance indicator - cash costs

-------------------------------------------------------------------------
three months ended December 31
(US $) 2006 2005 change
-------------------------------------------------------------------------
Cash cost per pound of copper
Cayeli(1) $(0.39) $0.64
Pyhasalmi(1,2) (2.74) (0.08)
Ok Tedi(3) 0.75 0.68
-------------------------------------------------------------------------
$(0.25) $0.52 -148%
-------------------------------------------------------------------------
Cash cost per ounce of gold
Troilus (4,5) $406 $454 -11%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
(US $) 2006 2005 change 2007
-------------------------------------------------------------------------
Cash cost per pound of copper
Cayeli(1) $0.27 $0.68 $(0.02)
Pyhasalmi(1,2) (1.56) (0.10) (1.61)
Ok Tedi(3) 0.80 0.65 0.61
-------------------------------------------------------------------------
$0.20 $0.51 -61% $(0.01)
-------------------------------------------------------------------------
Cash cost per ounce of gold
Troilus (4,5) $365 $324 +13% $348
-------------------------------------------------------------------------

To estimate the metal credits in our 2007 objectives, we used:
(1) a zinc price of US $1.45 per pound
(2) a euro to US dollar exchange rate of US $1.25
(3) a gold price of US $630 per ounce
(4) a copper price of US $3.00 per pound
(5) a US dollar to Canadian dollar exchange rate of $1.10.

Our cash cost per pound of copper in the quarter was 148 percent lower
than the same period in 2005 and 61 percent lower for the year mainly because
of:

- higher zinc and gold metal credits from higher metal prices offset
by:
- higher price participation charges
- higher production costs from higher consumable costs
- higher royalties and higher variable employee compensation.

The change in our copper cash cost per pound is more clearly seen in the
following breakdown:

-------------------------------------------------------------------------
three months ended December 31
(US $) 2006 2005 change
-------------------------------------------------------------------------
Cash cost per pound of copper
Direct production costs $1.02 $0.92 +11%
Royalties and variable compensation 0.07 0.05 +40%
Smelter processing charges and
freight 1.48 0.90 +64%
Metal credits (2.82) (1.35) +109%
-------------------------------------------------------------------------
$(0.25) $0.52 -148%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
(US $) 2006 2005 change 2007
-------------------------------------------------------------------------
Cash cost per pound of copper
Direct production costs $0.93 $0.88 +6% $0.92
Royalties and variable compensation 0.10 0.03 +233% 0.11
Smelter processing charges and
freight 1.20 0.72 +67% 1.00
Metal credits (2.03) (1.12) +81% (2.04)
-------------------------------------------------------------------------
$0.20 $0.51 -61% $(0.01)
-------------------------------------------------------------------------

Our gold cash cost per ounce was lower in the fourth quarter of 2006
compared to the same period in 2005 mainly due to higher production.
For the year, our gold cash cost per ounce was higher compared to 2005
because of lower production and because the value of the Canadian dollar
increased relative to the US dollar. This was reduced slightly, however, by
higher metal credits.

2007 outlook for unit costs
In 2007, we expect unit cash costs per pound of copper to be lower than
2006 because of lower price participation charges, high metal credits and an
increase in copper production.
We expect the gold cash cost per ounce at Troilus to be lower because of
increased production.

CAYELI

-------------------------------------------------------------------------
three months ended December 31
2006 2005 change
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 246 218 +13%
Tonnes of ore milled per day 2,700 2,400 +13%
-------------------------------------------------------------------------
Grades (percent)
copper 3.8 3.7 +3%
zinc 6.6 6.7 -1%
-------------------------------------------------------------------------
Mill recoveries (percent)
copper 82 82 -
zinc 74 76 -3%
-------------------------------------------------------------------------
Production (tonnes)
copper 7,700 6,600 +17%
zinc 12,100 11,200 +8%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
2006 2005 change 2007
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 933 834 +12% 1,060
Tonnes of ore milled per day 2,600 2,300 +12% 2,900
-------------------------------------------------------------------------
Grades (percent)
copper 3.9 3.8 +3% 3.8
zinc 5.7 6.7 -15% 6.3
-------------------------------------------------------------------------
Mill recoveries (percent)
copper 84 83 +1% 82
zinc 73 75 -3% 73
-------------------------------------------------------------------------
Production (tonnes)
copper 30,400 26,500 +15% 33,200
zinc 38,700 42,300 -9% 48,600
-------------------------------------------------------------------------

Record mine production Cayeli demonstrated substantial operational
improvements throughout 2006 and by the fourth quarter of 2006, was producing
at an annualized rate of 980,000 tonnes - a record for the mine. The primary
improvement was the commissioning of a new ore handling system with new skip
feeds, feed conveyor and the first of three new ore passes that connect the
lower mine with the new loading station. Because of these improvements, Cayeli
was able to process 246,000 tonnes of ore in the fourth quarter of 2006 and
933,000 tonnes of ore for the year - an increase of 13 and 12 percent over the
same periods in 2005, respectively.
We successfully negotiated a new three-year collective agreement with the
unionized work force in December that allowed for uninterrupted production.
Basic terms of the new agreement include a four percent wage increase plus an
inflation adjustment of six percent. Workers will receive annual inflation
adjustments thereafter.
Higher throughput and grades increased copper production by 17 percent in
the quarter and 15 percent for the year compared to the same periods in 2005.
Zinc production in the fourth quarter was 8 percent higher than the same
period in 2005 mainly due to higher throughput. For the year, however, zinc
production was 9 percent lower than in 2005 because of lower grades, primarily
a result of Cayeli deferring the mining of a zinc rich stope into 2007.

2007 outlook for production
We expect the shaft expansion project to be complete by the end of the
second quarter 2007 after final commissioning of the remaining two ore passes
and the completion of a permanent pumping station on the 570 level. Almost two
thirds of the total 2007 production will come from production stopes with the
balance from ore development. This reflects the improved availability of
production stopes.
Cayeli completed its long-term mine plan reviews and as a result expects
to process 1.1 million tonnes of ore in 2007 and 2008, and by 2009 expects to
achieve its objective of milling 1.2 million tonnes per year.

Cash cost per pound of copper lower in the fourth quarter

Copper unit cash costs for the quarter and the year were lower than the
same periods in 2005 mainly due to higher metal credits and higher copper
production. However, smelter processing charges were higher, a result of
higher price participation, and royalty payments were higher from rising net
income.

-------------------------------------------------------------------------
three months ended December 31
(US $) 2006 2005 change
-------------------------------------------------------------------------
Cash cost per pound
of copper
Direct production costs $0.89 $0.95 -6%
Royalty payments 0.14 0.06 +133%
-------------------------------------------------------------------------
Total direct production costs 1.03 1.01 +2%
Smelter processing charges
and freight 1.96 1.11 +77%
Metal credits(1) (3.38) (1.48) +128%
-------------------------------------------------------------------------
Cash costs (0.39) 0.64 -161%
Depreciation and other
non-cash costs 0.12 0.11 +9%
-------------------------------------------------------------------------
Total costs $(0.27) $0.75 -136%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
(US $) 2006 2005 change 2007
-------------------------------------------------------------------------
Cash cost per pound
of copper
Direct production costs $0.80 $0.87 -8% $0.80
Royalty payments 0.14 0.03 +367% 0.20
-------------------------------------------------------------------------
Total direct production costs 0.94 0.90 +4% 1.00
Smelter processing charges
and freight 1.48 0.86 +72% 1.25
Metal credits(1) (2.15) (1.08) +99% (2.27)
-------------------------------------------------------------------------
Cash costs 0.27 0.68 -60% (0.02)
Depreciation and other
non-cash costs 0.12 0.11 +9% 0.13
-------------------------------------------------------------------------
Total costs $0.39 $0.79 -51% $0.11
-------------------------------------------------------------------------
(1) We used a zinc price of US $1.45 per pound to estimate the metal
credit in the 2007 objective for cash costs per pound of copper. For
every US $0.05 per pound change in the price of zinc, cash costs
would change by US $0.04 per pound.


Direct production costs this quarter were 6% lower than 2005 (not
including the royalty)

-------------------------------------------------------------------------
three
months year
ended ended
December December
(US $ per pound) 31 31
-------------------------------------------------------------------------
Lower unit costs from higher copper production $(0.16) $(0.12)
Higher costs from higher production volumes 0.08 0.06
Higher labour costs 0.13 0.06
Higher consumable costs 0.03 0.02
Lower consultant costs (0.09) (0.06)
Lower costs from devaluation of the lira (0.05) (0.04)
Other - 0.01
-------------------------------------------------------------------------
Decrease in direct production costs,
compared to 2005 $(0.06) $(0.07)
-------------------------------------------------------------------------


2007 outlook for costs
We expect direct production costs to increase in 2007 because of higher
labour costs, but we expect unit cash costs to decrease in 2007 because of:
- higher copper and zinc production
- lower smelter processing charges.

Capital spending

-------------------------------------------------------------------------
three months ended December 31
(thousands of US$) 2006 2005 change
-------------------------------------------------------------------------
Capital spending $3,800 $6,500 -42%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
(thousands of US$) 2006 2005 change 2007
-------------------------------------------------------------------------
Capital spending $13,200 $16,800 -21% $15,200
-------------------------------------------------------------------------

Cayeli spent US $1.7 million on the infrastructure project in the
quarter, and US $7.7 million in 2006. The rest was mainly on other capital
development work and equipment.

2007 outlook for capital spending
In 2007, Cayeli expects to spend US $4.6 million to complete the shaft
project. It also plans to spend US $5.2 million on mine development and the
footwall ramp, US $1.3 million for a spare hoist motor and US $2.7 million in
sustaining capital.

Operating earnings and cash flows triple for the year

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Sales (tonnes)
copper 7,700 5,500 +40% 29,300 26,500 +11%
zinc 5,700 11,400 -50% 34,500 43,200 -20%
-------------------------------------------------------------------------
Operating
earnings
(millions) $43.5 $20.2 +115% $193.0 $64.4 +200%
-------------------------------------------------------------------------
Operating cash
flows
(millions) $23.4 $5.9 +297% $172.6 $49.9 +246%
-------------------------------------------------------------------------


...mainly because of higher metal prices

-------------------------------------------------------------------------
three
months year
ended ended
December December
(millions) 31 31
-------------------------------------------------------------------------
Higher metal prices, denominated in Canadian dollars $35 $172
Higher sales volumes 3 7
Higher smelter processing charges and freight (12) (41)
Higher royalty cost (2) (8)
Higher operating costs (1) (1)
-------------------------------------------------------------------------
Increase in operating earnings, compared to 2005 $23 $129
Increased tax expense because of higher earnings (5) (29)
Decreased tax expense because of lower rates 2 4
Changes in working capital (2) 19
-------------------------------------------------------------------------
Increase in operating cash flow, compared to 2005 $18 $123
-------------------------------------------------------------------------

Changes in working capital for the year are mainly from a collection of
accounts receivable and higher accounts payable balances because of higher
royalty payments.

PYHASALMI

-------------------------------------------------------------------------
three months ended December 31
2006 2005 change
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 346 358 -3%
Tonnes of ore milled per day 3,800 3,900 -3%
-------------------------------------------------------------------------
Grades (percent)
copper 1.0 1.1 -9%
zinc 2.9 3.0 -3%
sulphur 38 40 -5%
-------------------------------------------------------------------------
Mill recoveries (percent)
copper 95 96 -1%
zinc 92 94 -2%
-------------------------------------------------------------------------
Production (tonnes)
copper 3,200 3,600 -11%
zinc 9,200 10,100 -9%
pyrite 177,300 4,000 +4333%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
2006 2005 change 2007
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 1,372 1,393 -2% 1,370
Tonnes of ore milled per day 3,800 3,800 -2% 3,750
-------------------------------------------------------------------------
Grades (percent)
copper 1.0 1.1 -9% 1.0
zinc 2.8 3.1 -10% 3.1
sulphur 39 40 -3% 41
-------------------------------------------------------------------------
Mill recoveries (percent)
copper 95 95 - 94
zinc 93 94 -1% 92
-------------------------------------------------------------------------
Production (tonnes)
copper 13,000 15,000 -13% 12,900
zinc 35,700 40,500 -12% 38,400
pyrite 512,100 461,000 +11% 537,000
-------------------------------------------------------------------------

Throughput rates consistent to 2005

Mill throughout was slightly lower in the fourth quarter and for the year
compared to the same periods in 2005. The lower throughput combined with lower
grades decreased both copper and zinc production in the fourth quarter, by 11
and 9 percent, respectively, and for the year by 13 and 12 percent,
respectively, compared to the same periods in 2005. The lower copper and zinc
grades in 2006 were the result of timing in reaching certain targeted stopes
in the ore body.

2007 outlook for production
Pyhasalmi expects to mine 1.4 million tonnes in 2007 - essentially the
same as 2006. We expect copper production to be consistent to 2006. We also
expect higher zinc grades in 2007 due to the mining sequence of a high grade
zinc stope, to be mined in 2007 rather than in 2006, as originally planned.


High metal credits reduced our cash costs

Cash cost per pound of copper was significantly lower compared to the
fourth quarter of 2006 mainly because of higher zinc metal credits. This was
reduced somewhat by higher direct production costs and higher smelter
processing charges.

-------------------------------------------------------------------------
three months ended December 31
(US $) 2006 2005 change
-------------------------------------------------------------------------
Cash cost per pound
of copper
Direct production costs $1.62 $1.16 +40%
Smelter processing charges
and freight 2.72 1.35 +101%
Metal credits(1) (7.08) (2.59) +173%
-------------------------------------------------------------------------
Cash costs (2.74) (0.08) +3325%
Depreciation and other
non-cash costs 0.31 0.26 +19%
-------------------------------------------------------------------------
Total costs $(2.43) $0.18 -1450%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
(US $) 2006 2005 change 2007
-------------------------------------------------------------------------
Cash cost per pound
of copper
Direct production costs $1.48 $1.12 +32% $1.45
Smelter processing charges
and freight 2.07 1.09 +90% 1.79
Metal credits(1) (5.11) (2.31) +121% (4.85)
-------------------------------------------------------------------------
Cash costs (1.56) (0.10) 1460% (1.61)
Depreciation and other
non-cash costs 0.29 0.26 +12% 0.31
-------------------------------------------------------------------------
Total costs $(1.27) $0.16 -894% ($1.30)
-------------------------------------------------------------------------
(1) We used a zinc price of US $1.45 per pound to estimate the metal
credit in the 2007 objective for cash costs per pound of copper. For
every US $0.05 per pound change in the price of zinc, cash costs
would change by US $0.11 per pound.


Lower production increased direct production costs this quarter

-------------------------------------------------------------------------
three
months year
ended ended
December December
(US $ per pound) 31 31
-------------------------------------------------------------------------
Strengthened US dollar compared to the euro $0.14 $0.03
Higher costs due to lower copper production 0.17 0.20
Higher consumable costs 0.07 0.05
Higher labour costs 0.03 0.03
Higher utility costs 0.04 0.03
Other 0.01 0.02
-------------------------------------------------------------------------
Increase in direct production costs, compared to 2005 $0.46 $0.36
-------------------------------------------------------------------------

2007 outlook for costs
Direct production costs per unit should be slightly lower in 2007. Cash
costs should continue to be historically low, however, because metal credits
should be higher.

Capital spending to optimize mill production

-------------------------------------------------------------------------
three months ended December 31
(thousands) 2006 2005 change
-------------------------------------------------------------------------
(euro) (euro)
Capital spending 1,400 2,000 -30%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
(thousands) 2006 2005 change 2007
-------------------------------------------------------------------------
(euro) (euro) (euro)
Capital spending 3,900 3,300 18% 7,000
-------------------------------------------------------------------------

In 2006 and 2005, Pyhasalmi's capital spending was mainly on mill
improvements.

2007 outlook for capital spending
In 2007, Pyhasalmi expects to spend (euro) 7 million for capital to
develop an ore pass, replace mine mobile equipment, mill equipment and for
other sustaining capital.


Operating earnings and cash flows double

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Sales (tonnes)
copper 3,700 3,600 +3% 13,500 15,500 -13%
zinc 10,500 9,700 +8% 35,500 39,500 -10%
pyrite 131,200 119,700 +10% 494,700 489,400 +1%
-------------------------------------------------------------------------
Operating
earnings
(millions) $46.2 $20.6 +124% $140.3 $66.4 +111%
-------------------------------------------------------------------------
Operating
cash flows
(millions) $38.4 $18.6 +106% $109.2 $51.1 +114%
-------------------------------------------------------------------------


...mainly because of higher metal prices, but offset somewhat by lower
sales volumes and higher smelter processing charges

-------------------------------------------------------------------------
three
months year
ended ended
December December
(millions) 31 31
-------------------------------------------------------------------------
Higher metal prices, denominated in Canadian dollars $38 $115
Lower sales volumes (2) (13)
Higher smelter processing charges and freight (11) (28)
Higher operating costs (3) (3)
Other 4 3
-------------------------------------------------------------------------
Increase in operating earnings, compared to 2005 $26 $74
Increased tax expense because of higher earnings (11) (20)
Changes in working capital 7 8
Other (2) (4)
-------------------------------------------------------------------------
Increase in operating cash flow, compared to 2005 $20 $58
-------------------------------------------------------------------------

Sales volumes are directly affected by production volumes.

Changes in working capital this quarter and in the year were a result of
higher taxes payable because of higher net income. For the year, this was
offset to a certain extent by an increase in accounts receivable.


TROILUS

-------------------------------------------------------------------------
three months ended December 31
2006 2005 change
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 1,645 1,370 +20%
Tonnes of ore milled per day 17,900 14,900 +20%
-------------------------------------------------------------------------
Strip ratio 1.1 1.8 -39%
-------------------------------------------------------------------------
Grades
gold (grams/tonne) 0.90 0.89 +1%
copper (percent) 0.05 0.06 -17%
-------------------------------------------------------------------------
Mill recoveries
(percent)
gold 82 82 -
copper 87 87 -
-------------------------------------------------------------------------
Production
gold (ounces) 39,300 31,600 +24%
copper (tonnes) 700 600 +17%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
2006 2005 change 2007
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 6,525 6,500 +1% 6,700
Tonnes of ore milled per day 17,900 17,800 +1% 18,400
-------------------------------------------------------------------------
Strip ratio 1.5 1.6 -6% 1.2
-------------------------------------------------------------------------
Grades
gold (grams/tonne) 0.86 0.94 -9% 0.88
copper (percent) 0.05 0.08 -38% 0.06
-------------------------------------------------------------------------
Mill recoveries
(percent)
gold 82 82 - 83
copper 87 90 -3% 87
-------------------------------------------------------------------------
Production
gold (ounces) 147,900 159,500 -7% 157,900
copper (tonnes) 2,900 4,400 -34% 3,300
-------------------------------------------------------------------------

Mill throughput higher in quarter, flat for the year

Mill throughput in the fourth quarter of 2006 was 20 percent higher than
the same period in 2005, increasing gold production by 24 percent, as ore
production in 2005 was lower due to a damaged pinion in the SAG mill. Gold
production was lower in 2006 because of lower grades.
We recently completed a feasibility study on an underground mine and
based on that study we have determined not to proceed with the project. We
spent approximately $3 million in 2006 on this project and expect to spend an
additional $2 million in 2007 by the time the contractor is fully demobilized.

2007 outlook for production
Troilus should complete the J4 pit in November of 2007, and plans to mine
from only the 87 pit for the remainder of the mine's life. The average gold
grade estimated for 2007 is 0.88 grams per tonne, which is only marginally
higher than 2006.


Costs per ounce lower in the quarter

Cash costs per ounce, for the quarter, was lower compared to the same
period in 2005 because of higher production. For the year, cash unit costs
increased due to lower gold production, higher smelter processing charges and
a weaker US dollar, offset by higher copper metal credits.

-------------------------------------------------------------------------
three months ended December 31
(US $) 2006 2005 change
-------------------------------------------------------------------------
Cash cost per ounce
of gold
Direct production costs $442 $536 -18%
Smelter processing
charges and freight 66 58 +14%
Metal credits(1) (102) (140) -27%
-------------------------------------------------------------------------
Cash cost 406 454 -11%
Depreciation and other
non-cash costs 65 75 -13%
-------------------------------------------------------------------------
Total cost $471 $529 -11%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
(US $) 2006 2005 change 2007
-------------------------------------------------------------------------
Cash cost per ounce
of gold
Direct production costs $459 $383 +20% $443
Smelter processing
charges and freight 68 57 +19% 55
Metal credits(1) (162) (116) +40% (150)
-------------------------------------------------------------------------
Cash cost 365 324 +13% $348
Depreciation and other
non-cash costs 68 54 26% 66
-------------------------------------------------------------------------
Total cost $433 $378 +15% $414
-------------------------------------------------------------------------
(1) We used a copper price of US $3.00 per pound to estimate the metal
credit in the 2007 objective for cash costs per ounce of gold.


Higher gold production decreased unit direct production costs in the
quarter

-------------------------------------------------------------------------
three
months year
ended ended
December December
(US $ per ounce) 31 31
-------------------------------------------------------------------------
Stronger Canadian dollar $13 $44
Higher costs due to lower production - 27
Lower costs due to higher production (105) -
Higher (lower) fuel costs (8) 3
Higher labour costs (4) 2
Higher consumables 5 3
Higher electricity costs 2 1
Other 3 (4)
-------------------------------------------------------------------------
Increase (decrease) in direct production costs,
compared to 2005 $(99) $76
-------------------------------------------------------------------------

2007 outlook for costs
Troilus has been and we expect will continue to be affected by the high
costs of its major consumables. The mine, which has two years of remaining
life, continues to look for ways to reduce operating costs.
We expect cash unit costs to be lower in 2007 mainly because we expect
higher gold production and higher metal credits from higher copper production.


Minimal capital spending

-------------------------------------------------------------------------
three months ended December 31
(thousands) 2006 2005 change
-------------------------------------------------------------------------
Capital spending $300 $1,600 -81%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
(thousands) 2006 2005 change 2007
-------------------------------------------------------------------------
Capital spending $2,200 $9,200 -76% $3,000
-------------------------------------------------------------------------

Spending was higher in 2005 because of the purchase of equipment required
for the mine.

Improved operating earnings and cash flows

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Sales
gold
(ounces) 38,700 34,400 13% 144,100 167,100 -14%
copper
(tonnes) 700 700 - 2,900 4,600 -37%
-------------------------------------------------------------------------
Operating
earnings
(millions) $1.0 $(5.0) +120% $5.5 $2.9 +90%
-------------------------------------------------------------------------
Operating cash
flows
(millions) $5.5 $(2.4) +329% $17.5 $14.3 +22%
-------------------------------------------------------------------------

...mainly because of a higher gold price

Sales volumes were lower for the year because of lower production.

Approximately 37 percent of gold sales in the quarter were hedged
resulting in a realized gold price for the quarter of US $494 per ounce.

-------------------------------------------------------------------------
three
months year
ended ended
December December
(millions) 31 31
-------------------------------------------------------------------------
Higher metal prices $3 $18
Higher (lower) sales volumes 3 (11)
Higher smelter processing charges and freight - (2)
Higher operating costs - (2)
-------------------------------------------------------------------------
Increase in operating earnings, compared to 2005 $6 $3
Changes in working capital 4 (1)
Other (2) 1
-------------------------------------------------------------------------
Increase in operating cash flow, compared to 2005 $8 $3
-------------------------------------------------------------------------

OK TEDI

-------------------------------------------------------------------------
three months ended December 31
(100 percent) 2006 2005 change
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 6,700 6,000 +12%
Tonnes of ore milled per day 72,800 65,200 +12%
-------------------------------------------------------------------------
Strip ratio 1.4 1.8 -22%
-------------------------------------------------------------------------
Grades
copper (percent) 0.9 0.9 -
gold (grams per tonne) 0.9 1.1 -18%
-------------------------------------------------------------------------
Mill recoveries (percent)
copper 86 87 -1%
gold 69 71 -3%
-------------------------------------------------------------------------
Production
copper (tonnes) 49,100 49,500 -1%
gold (ounces) 138,000 158,200 -13%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
(100 percent) 2006 2005 change 2007
-------------------------------------------------------------------------
Tonnes of ore milled (000's) 27,600 25,400 +9% 27,500
Tonnes of ore milled per day 75,600 69,600 +9% 76,000
-------------------------------------------------------------------------
Strip ratio 1.6 2.1 -24% 1.1
-------------------------------------------------------------------------
Grades
copper (percent) 0.8 0.9 -11% 0.8
gold (grams per tonne) 0.9 1.0 -10% 0.8
-------------------------------------------------------------------------
Mill recoveries (percent)
copper 86 85 +1% 87
gold 71 73 -3% 70
-------------------------------------------------------------------------
Production
copper (tonnes) 194,400 193,000 +1% 188,000
gold (ounces) 550,100 574,700 -4% 507,000
-------------------------------------------------------------------------

Ore production for the quarter up compared to prior year

Ore production during the fourth quarter and for the year was higher than
the same period in 2005 because Ok Tedi's mill processed a higher proportion
of softer monzonite porphyry ores.
Copper production levels were consistent to those in 2005. Gold
production, on the other hand, was 13 percent lower in the fourth quarter and
four percent lower for the year compared to same periods in 2005 due to lower
grades and recoveries. Metal recoveries were affected, in the quarter and to a
lesser degree in the year, by a more difficult ore blend.

2007 outlook for production
Ok Tedi expects copper production in 2007 to be similar to 2006. Gold
production is expected to be lower because of lower gold grades.


Costs up because of higher smelter processing charges and compensation
costs

Cash costs were higher in the quarter compared to the fourth quarter of
2005 because of higher smelter processing charges, caused by price
participation charges, and higher variable compensation costs, caused by
higher cash flows.

-------------------------------------------------------------------------
three months ended December 31
(US $) 2006 2005 change
-------------------------------------------------------------------------
Cash cost per pound
of copper
Direct production
costs $0.92 $0.80 +15%
Variable compensation 0.02 0.06 -67%
Smelter processing
charges and freight 0.60 0.57 +5%
Metal credits(1) (0.79) (0.75) +5%
-------------------------------------------------------------------------
Cash cost 0.75 0.68 10%
Depreciation and other
non-cash costs 0.09 0.06 +50%
-------------------------------------------------------------------------
Total costs $0.84 $0.74 14%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
year ended December 31 objective
(US $) 2006 2005 change 2007
-------------------------------------------------------------------------
Cash cost per pound
of copper
Direct production
costs $0.86 $0.79 +9% $0.85
Variable compensation 0.09 0.04 +125% 0.06
Smelter processing
charges and freight 0.64 0.46 +39% 0.45
Metal credits(1) (0.79) (0.64) +23% (0.75)
-------------------------------------------------------------------------
Cash cost 0.80 0.65 +23% $0.61
Depreciation and other
non-cash costs 0.08 0.06 +33% 0.07
-------------------------------------------------------------------------
Total costs $0.88 $0.71 +24% $0.68
-------------------------------------------------------------------------
(1) We used a gold price of US $600 per ounce to estimate the metal
credit in the 2007 objective for cash costs per pound of copper.


Direct production costs this quarter were 15% higher than 2005 (not
including compensation costs)

-------------------------------------------------------------------------
three
months year
ended ended
December December
(US $ per pound) 31 31
-------------------------------------------------------------------------
Increase (decrease) in costs from lower
(higher) production $0.01 $(0.01)
Higher fuel costs 0.07 0.05
Higher labour costs 0.05 0.03
Other (0.01) -
-------------------------------------------------------------------------
Increase in direct production costs,
compared to 2005 $0.12 $0.07
-------------------------------------------------------------------------

High metal prices have increased the mine's cash flow. Some bonuses at Ok
Tedi are based on cash flows, so employee compensation costs have increased
during the year.

2007 outlook for costs
We expect direct production costs to be consistent with 2006, but we
expect unit costs to be lower in 2007, mainly because of more favourable terms
for copper smelter processing charges.


Capital spending during the quarter increased compared to 2005

Ok Tedi's capital spending in the quarter and for the year was mainly on
the upgrade of the in-pit crusher, work on the mine waste management program,
the pit drainage study, mobile equipment and other sustaining capital. This
was less than expected because some of the costs related to the in-pit crusher
upgrade have been deferred to 2007.

-------------------------------------------------------------------------
(100 percent) three months ended December 31
(thousands of US$) 2006 2005 change
-------------------------------------------------------------------------
Capital spending $22,000 $12,400 +77%
-------------------------------------------------------------------------


-------------------------------------------------------------------------
(100 percent) year ended December 31 objective
(thousands of US$) 2006 2005 change 2007
-------------------------------------------------------------------------
Capital spending $54,400 $20,100 +171% $209,000
-------------------------------------------------------------------------

2007 outlook for capital spending
Ok Tedi plans to spend US $140 million in 2007 on its mine waste
management program, US $10 million to complete the upgrade for the in-pit
crusher, US $20 million for capital required for pit drainage, and for mine
equipment and other sustaining capital.


Operating earnings and cash flows for the quarter lower than 2005

Copper and gold sales volumes were lower in the quarter than the same
period last year because of the timing of shipments. Shipments were behind
schedule at year-end because water levels on the Fly River were low in
December and this affected Ok Tedi's ability to ship out copper and gold
production. Concentrate inventory accumulated to 125,700 tonnes at
December 31, an increase of over 81,500 tonnes from September 30, 2006.

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
(18 percent) 2006 2005 Change 2006 2005 Change
-------------------------------------------------------------------------
Sales
copper
(tonnes) 6,400 8,600 -26% 33,600 35,700 -6%
gold
(ounces) 20,800 25,200 -17% 97,700 102,000 -4%
-------------------------------------------------------------------------
Operating
earnings
(millions) $28.4 $34.3 -17% $192.1 $99.9 +92%
-------------------------------------------------------------------------
Operating cash
flows
(millions) $11.9 $23.2 -49% $150.6 $62.7 +140%
-------------------------------------------------------------------------


...mainly because of lower sales volumes

-------------------------------------------------------------------------
three
months year
ended ended
December December
(millions) 31 31
-------------------------------------------------------------------------
Higher metal prices, denominated in Canadian dollars $4 $122
Lower sales volumes (10) (11)
Higher smelter processing charges and freight - (14)
Higher variable compensation costs - (4)
Higher operating costs - (1)
-------------------------------------------------------------------------
Increase (decrease) in operating earnings,
compared to 2005 $(6) $92
Increased (decreased) tax expense because
of change in earnings 7 (31)
Changes in net working capital (14) 24
Other 2 3
-------------------------------------------------------------------------
Increase (decrease) in operating cash flow,
compared to 2005 $(11) $88
-------------------------------------------------------------------------

Changes in working capital for the quarter were primarily due to taxes
paid during the quarter, offset to a certain extent by a reduction in accounts
receivable. For the year, the change in net working capital was due to a
collection of accounts receivable, offset somewhat by taxes paid.


Planning for the future

Ok Tedi has approved the implementation of a comprehensive mine waste
management program to substantially reduce the risk of future acid drainage
from mine waste, as part of its objective to improve its environmental
performance.
This new program, together with ongoing dredging and the addition of
limestone to the waste rock, should significantly mitigate the environmental
impact of Ok Tedi's operations by reducing the amount of sulphide in the mill
tailings that are currently discharged into the Ok Tedi River system.
In 2006, Ok Tedi placed orders for items with long lead-times, and
awarded contracts to various engineering firms for the flotation upgrade,
tailings pipeline and tailings storage project. Based on advanced engineering
work, the capital cost of the new waste management program is estimated to be
US $150 million (Inmet's share would be US $27 million), of which US
$10 million was spent in 2006. Incremental annual operating costs are
equivalent to US $0.05 per pound of copper. Construction is expected to begin
in 2007 with start up of a pyrite removal plant during the first half of 2008.
The required change notice to Ok Tedi's operating permit has been approved by
the relevant authorities.
Ok Tedi began its mid-term review of the Community Mine Continuation
Agreements (CMCAs) during the second quarter of 2006. The CMCAs set out the
level of compensation that is paid to local communities affected by the mining
operation. The review is part of the current CMCAs standard process, and is
designed to address any material changes that may have taken place since 2002,
when the initial agreements were signed. Negotiations are currently underway
and Ok Tedi expects to complete the negotiations in 2007. Current payments
under the CMCAs approximate US $4 million annually (Inmet's share -
US $1 million).


Status of our development projects

Las Cruces

Quarterly development update

We continue on schedule to meet our start-up date of early 2008 and at
the current mining rate, expect to reach ore in the fall of 2007. By the end
of 2006, we excavated nine million cubic metres of overburden material from
the area of the future pit of which three million was excavated in the fourth
quarter alone. The remaining 18 million cubic metres should be removed by the
end of 2007.
By the end of December, we spent (euro) 65 million of the total estimated
capital costs of (euro) 380 million. In 2007, we expect to spend a total
(euro) 180 million to complete detailed engineering, procurement and
construction. Spending to date has been less than anticipated due to the
timing of payments including a staggered payment schedule for the lump-sum
supply contracts for the process plant. However the construction schedule
remains unaffected.
The total number of employees on the project is 247, of which 194 are
contractors. The focus during 2007 will be on hiring and training operational
staff in preparation of a 2008 start up.

Other achievements include:

- diverting streams in the mine area - we completed the realignment of
several streams in the mine area, for space, safety and environmental
reasons.
- preparing the site for plant construction - this included leveling
and benching the construction site, mass excavation for foundations,
building access roads from the adjacent highway and constructing an
underpass to allow construction and mine traffic to pass freely from
one side of the highway to the other.
- Pouring concrete foundation - lean concrete has been poured for the
crusher foundation and several other areas of the plant.
- Erecting office buildings - framework for the future office building
and clinic has been completed and interior work is expected to be
completed by the middle of March.
- developing infrastructure - we surveyed power, water and
communications corridors, and obtained rights-of-way.

CERATTEPE

Quarterly development update

Artvin-based local non-governmental groups made two related applications
to cancel the operating licences for the Cerattepe property. In August 2006,
the local administrative court ruled in favour of the applicants and
determined that the relevant government authorities incorrectly exempted the
licences from environmental assessment regulations.
The Ministry of Energy and Natural Resources has appealed the Erzurum
Administrative Court decision to the Danistay (Administrative Supreme Court)
and we have joined as intervener. The Ministry is also seeking an interim
ruling from the Danistay that would negate the effect of the lower court
decision until the Danistay renders its decision on the appeal. A decision on
the appeal is expected by or shortly after the end of 2007 while a decision on
the application for the interim ruling should be received by the end of the
first quarter of 2007.
In the meantime, an active campaign of community dialogue and engagement
is underway to solidify support for the project. We continued to move the
project ahead during the fourth quarter by advancing engineering work and by
making progress on environmental impact assessments for the tramway. We also
received land use leases and permits to construct the aerial tramway (used as
an ore transfer station) and have began construction.
Subject to the outcome of the legal proceedings, we expect to spend
US $13 million on the development of Cerattepe in 2007. In addition, there are
option payments remaining to be paid in two installments totaling US
$9 million for the purchase of Cerattepe. These option payments have been
extended by mutual agreement with the vendor. The next option payment, of
US $4.5 million, was extended from September 30, 2006 to the earlier of
March 31, 2008, or 30 days after the receipt of the Danistay's decision on the
appeal.
We do not expect production start-up for Cerattepe to begin in 2008, as
we had originally projected. Assuming an interim ruling is obtained from the
Danistay, we could resume onsite activity shortly afterwards with the
objective of commencing production in 2009.

PETAQUILLA

Project update

In 1998, AMEC Americas Limited (AMEC) (then H.A. Simons) prepared a
comprehensive feasibility study(1) on Petaquilla. The study determined that
over its potential 23 year life, the Petaquilla mine could produce 4.5 million
tonnes of copper, 1.6 million ounces of gold and 59,500 tonnes of molybdenum.
In 2006, AMEC(2) was retained to update the cost estimates that were
completed for the 1998 feasibility study. AMEC estimated existing
preproduction and sustaining capital costs, and the operating costs, and
updated the financial model. Wherever possible they incorporated design
optimization opportunities into the cost update.
AMEC estimated the preproduction capital cost for the project to be
US $1.7 billion, as outlined in the table below.

Capital costs
-------------------------------------------------------------------------
(millions)
-------------------------------------------------------------------------
Mine US $301
Concentrator 349
Site and services 143
Port and power plant 214
General 227
Owners costs 126
Engineering, procurement and construction management 92
Contingency 140
Escalation 47
Working capital 69
-------------------------------------------------------------------------
Total US $1,708
-------------------------------------------------------------------------

Total sustaining capital is estimated at US $0.5 billion over the life of
the mine. Most of the sustaining capital cost is for replacement of, and
additions to, the mine and plant mobile equipment.

---------------------------
(1) The feasibility study was prepared before the adoption of National
Instrument 43-101. We believe the estimate continues to be relevant
and reliable. Accordingly, such estimate was used as the basis for
the revision and update undertaken by AMEC of the 1998 feasibility
study. The historical estimate is not being treated as a current
mineral resource or mineral reserve and should not be relied on as
such. In addition, mineral resources do not have demonstrated
economic viability.

(2) The metal price, oil price, treatment and refining charges and
freight pricing assumptions used in this estimate were provided by
Inmet, Petaquilla Minerals Ltd. and Teck Cominco Limited. AMEC was
not retained to provide these estimates, is not responsible for them,
and has not approved them. Inmet believes that the assumptions used
in the economic analysis set out here are reasonable in light of
expected market conditions.


Life of mine operating costs are estimated to be US $6.05 per tonne of ore
milled, assuming a copper price of US $1.30 per pound, as indicated in the
table below.

Life-of-mine average operating costs
-------------------------------------------------------------------------
(US dollars per tonne of ore milled)
-------------------------------------------------------------------------
Mine US $1.89
Mill 3.26
Plant 0.52
General and administration 0.38
-------------------------------------------------------------------------
Total US $6.05
-------------------------------------------------------------------------

The assumptions made for oil, steel and concentrate marketing terms were
based on the recent relationship between them and copper prices, as indicated
in the table below.

Parameters for determining operating costs
-------------------------------------------------------------------------
Units Price
-------------------------------------------------------------------------
Copper US$ per pound 1.30
Gold US$ per ounce 500
Molybdenum US$ per pound 6.50
Oil US$ per barrel 45
Treatment and refining charges(1) US$ per pound of
copper produced 0.26
Ocean freight(2) US$ per tonne 28
-------------------------------------------------------------------------
(1) Includes price participations above indicated threshold.
(2) Assumes 3/4 of production to Asia; 1/4 to Europe.

2007 outlook
Inmet, Petaquilla and Teck Cominco are in the process of formulating a
strategy for advancing the Petaquilla copper project. Additional engineering,
environmental and permitting, and financing work needs to be done before
development can begin. We will also be completing and filing a technical
report under National Instrument 43-101.

Managing our liquidity

-------------------------------------------------------------------------
three months ended year ended
December 31 December 31
(millions) 2006 2005 2006 2005
-------------------------------------------------------------------------
CASH FROM OPERATING ACTIVITIES
Cayeli $24 $6 $173 $50
Pyhasalmi 38 18 109 51
Troilus 5 (2) 17 14
Ok Tedi 12 23 151 63
Corporate development and
exploration not included in
operations' cash flow (1) (1) (3) (3)
General and administration (6) (2) (14) (7)
Other 9 2 5 -
-------------------------------------------------------------------------
81 44 438 168
-------------------------------------------------------------------------
CASH FROM INVESTING AND FINANCING
Acquisitions - - 2 (9)
Non-controlling cash on acquisition - - - 9
Capital spending (46) (23) (133) (62)
Long-term borrowings 36 - 73 -
Redemption of convertible debentures - - - (64)
Funding from non-controlling
shareholder 4 5 13 5
Financial assurance deposits (5) (14) (12) (16)
Subsidies received 3 - 8 -
Dividends paid on common shares (5) (5) (10) (5)
Debt issue costs - (7) (6) (8)
Foreign exchange on cash
held in foreign currency 17 (1) 15 (14)
Other (1) (1) - 2
-------------------------------------------------------------------------
3 (46) (50) (162)
-------------------------------------------------------------------------
Increase in cash and short-term
investments 84 (2) 388 6
Cash and short-term investments
Beginning of period 556 254 252 246
-------------------------------------------------------------------------
End of period $640 $252 $640 $252
-------------------------------------------------------------------------


CASH FROM OPERATING ACTIVITIES

-------------------------------------------------------------------------
three
months year
ended ended
December December
(millions) 31 31
-------------------------------------------------------------------------
Increased earnings from operations (see page 5) $49 $297
Non-cash changes in operating earnings:
Increased tax expense (9) (77)
Changes in working capital (8) 41
Other 5 9
-------------------------------------------------------------------------

Increase in operating cash flow, compared to 2005 $37 $270
-------------------------------------------------------------------------

Operating cash flows in the quarter were higher than the fourth quarter
of 2005 primarily due to higher operating earnings, offset to some extent by
an increase in net working capital and higher taxes. Net working capital in
the quarter was higher primarily due to higher tax payments by Ok Tedi
compared to the fourth quarter of 2005. This was offset to a certain extent by
a collection of accounts receivable at Ok Tedi.
For the year, operating cash flows were higher because of higher
operating earnings and a reduction in working capital, a result of lower
accounts receivable balances and increases in accounts and taxes payable.

2007 outlook for operating cash flow
Based on our outlook for metal prices and production, we expect our
operating cash flows to be in a similar range for 2007.

CASH FROM INVESTING AND FINANCING

Capital spending
-------------------------------------------------------------------------
three months ended year ended
December 31 December 31 objective
(millions) 2006 2005 2006 2005 2007
-------------------------------------------------------------------------
Cayeli $4 $7 $15 $20 $17
Pyhasalmi 2 3 6 5 10
Troilus - 2 2 9 3
Ok Tedi 5 2 11 4 41
Las Cruces 32 9 93 21 363
Cerattepe 1 - 3 2 15
Accruals and other 2 - 3 1 -
-------------------------------------------------------------------------
$46 $23 $133 $62 $449
-------------------------------------------------------------------------

Refer to Results of our operations and Status of our development projects
for a discussion of actual results and our 2007 objective.

Long-term borrowings and financial assurance deposits
During the fourth quarter, Las Cruces borrowed an additional (euro)
24 million, bringing the total borrowings for the year to (euro) 50 million,
under its credit facility for the continuing development of the mine. Also in
the fourth quarter, Las Cruces provided (euro) 3.1 million to secure future
payments for the use of an electrical substation.

Our restricted cash balance, of $36 million, at December 31, 2006
includes:

- $11 million in trust for future rehabilitation at Ok Tedi
- $14 million of cash collateralized letters of credit for Inmet
- $11 million related to issuing letters of credit to suppliers, the
local townships and for dewatering at Las Cruces.

Dividends paid on common shares
In December 2006, we paid a semi-annual dividend to common shareholders
of $0.05 per share or $4.8 million. For the year, we paid a total of
$9.6 million to common shareholders.

Redemption of convertible debentures
In 2005 we redeemed our convertible debentures for $64 million.

2007 outlook for investing and financing cash flow
We expect capital spending to be $449 million in 2007. Of that amount, we
expect to spend $363 million for the continuing development of the Las Cruces
mine and $28 million for the mine waste management program at Ok Tedi. The
remaining expenditures are mostly for various sustaining capital.

CASH BALANCE

Our consolidated cash balance at December 31, 2006 of $640 million
included $255 million of short term investments.

SHARE CAPITAL

-------------------------------------------------------------------------
Common shares outstanding as of December 31, 2006
and February 13, 2006 48,277,726
-------------------------------------------------------------------------
Deferred share units outstanding as of
December 31, 2006
(redeemable on a one-for-one basis for common shares) 75,466
-------------------------------------------------------------------------

OFF BALANCE SHEET TRANSACTIONS

The following table shows our Troilus and Ok Tedi gold hedging
transactions, the currency and interest rate hedges related to Las Cruces and
their respective marked-to-market valuations as at December 31, 2006.

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Type of Expiry Quantity Price C$ marked-to-
contract market gain
(loss) at
December 31
2006
-------------------------------------------------------------------------
Gold forward
sales
Troilus 2007 58,200 ounces US $352 per oz.
2008 58,200 ounces US $352 per oz.
------------------------------------------------------------
116,400 ounces US $352 per oz. $(42.3 million)(1)

Ok Tedi 2007 13,500 ounces US $371 per oz.
2008 6,750 ounces US $372 per oz.
------------------------------------------------------------
20,250 ounces US $371 per oz. $(7.5 million)(1)

Currency
forward sales (euro)
Las Cruces 2008 US $215 million 171.8 million $16.0 million
------------------------------------------------------------

Interest rate
swaps
Las Cruces 2008 US $179 million 5.2 percent $(1.7) million
to 2014 (reducing in
conjunction with
debt repayment
schedule)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) At a gold price of US $636 per ounce.

Accounting changes
We adopted CICA's abstract EIC 160 - Stripping Costs Incurred in the
Production Phase of an Operation retroactively, effective January 1, 2006.
The abstract allows companies to capitalize the costs of stripping, such
as the removal of overburden and mine waste materials, when the stripping
provides access to reserves that would not otherwise have been accessible and
that will be mined in the future. These stripping costs can be amortized over
the reserves directly affected by the stripping activity.
Previously, we capitalized mining costs associated with waste removal
rock in relation to the stripping ratio for the entire ore body. We then
amortized the capital over the life of the ore body using the same stripping
ratio.
We expensed some previously deferred stripping costs which resulted in
the following changes to our 2005 financial statements:

- increased the fourth quarter's cost of sales by $1.3 million
($2.2 million for the twelve months)
- decreased the fourth quarter's income tax expense by $0.5 million
($0.5 million for the twelve months)
- decreased the fourth quarter's earnings per common share and diluted
earnings per common share by $0.02 and $0.01 respectively ($0.04 for
the twelve months)
- lowered property, plant and equipment on the balance sheet by
$22.2 million at December 31
- increased future income tax asset on the balance sheet by
$5.0 million at December 31
- lowered opening 2005 retained earnings by $15.5 million.

If we had continued with our previous accounting policy for stripping
costs, we would have amortized $1 million this quarter and amortized a
negligible amount in 2006.


Managing risk

The following is an update to the discussion, only where required, of the
key risks associated with our business and the strategies we use to manage
them. You can find the full discussion in the annual Management's Discussion
and Analysis in Inmet's 2005 Annual Report.

Ground conditions at Cayeli
Ground conditions at Cayeli have improved, but they still continue to
pose a significant challenge. The mine's rock mechanical staff have been
actively managing ground conditions by designing and sequencing the working
areas to minimize the impact of difficult ground conditions. They have also
been monitoring and modeling ground events to use the information gathered as
a predictive tool.

Environmental and social impacts on Ok Tedi
Dredging the sediments in the Ok Tedi River at Bige has reduced the river
bed aggradation and overbank flooding, but riverine waste disposal at Ok Tedi
has had, and continues to have, two significant effects on the Ok Tedi and Fly
River systems: sedimentation of the river beds resulting in overbank flooding,
and acid rock drainage effects from oxidation of sulphur in the waste streams.
While studies to assess the impact are ongoing, Ok Tedi believes, based
on current findings, that these effects will likely be greater and last longer
than previously thought to be the case. As described on page 27, a
comprehensive mine waste management program has been initiated to reduce these
risks.

Meteorological factors at Ok Tedi
Ok Tedi's ability to generate electrical power, ship concentrates to its
customers and bring supplies to the operations depends on the amount of
rainfall in the area. Prolonged dry weather conditions could, therefore, have
a negative impact on its operating results. Ok Tedi has taken the necessary
steps to minimize the impact on the operation, by keeping concentrate
stockpiles at the lowest possible levels and increasing its inventory of
diesel fuel and other consumables. This should allow the mine to operate for
45 days without interruption during a complete drought, and for 90 days during
a drought where there is intermittent rainfall.

Development at Las Cruces
Las Cruces is a development project, and while we are confident that the
project will add value as planned, there is still significant uncertainty.
Risks associated with detailed engineering, mine and processing facilities
construction, inflationary cost increases, permitting, legal proceedings and
relations with local communities will continue to exist and could adversely
affect the project. A local non-governmental group has initiated several legal
proceedings claiming that various governmental approvals for the project were
not granted in accordance with regulatory requirements. We believe these
claims are without merit and are vigourously defending against them. Two of
these proceedings were dismissed in 2006. The other two proceedings remain
outstanding.
In addition, Las Cruces has not yet formally received a municipal
construction permit for water supply and discharge pipelines to which we
believe it is entitled. We believe the matter will be resolved without
impacting our construction schedule.

Foreign exchange exposure on returns of investment
Our operations (except for Troilus) operate in currencies different than
our Canadian dollar reporting currency. Since these operations are
self-sustaining, we defer changes in our net investment (which includes our
initial investment, earnings and long-term intergroup loans) that arise from
changes in foreign exchange rates in our foreign currency translation account.
The balance at the end of this quarter was a deferred loss of $1.8 million.
Repatriating funds through dividends, loan repayments or capital redemptions
could result in foreign exchange losses, because the Canadian dollar is much
stronger now than it was at the time of our original investment. The amount of
the loss, if any, will depend on the amount repatriated and foreign exchange
rates. We realized a foreign exchange gain of $0.2 million in the fourth
quarter of 2006 and a loss of $4.9 million for the year on the repatriation of
our foreign investment from Cayeli, Pyhasalmi and Ok Tedi.

Sensitivity analysis
The table below shows you the effect of key variables on our net income,
based on our revised objectives for 2007.

-------------------------------------------------------------------------
Would change
Would change our 2007
our 2007 net net income per
A change of: income by: share by:
-------------------------------------------------------------------------
Metal prices
Copper (per pound) US $0.10 $14 million $0.28
Zinc (per pound) US $0.05 $5 million $0.11
Gold (per ounce)(1) US $10 $2 million $0.03
-------------------------------------------------------------------------
Exchange rates
Canadian dollar per US dollar C$0.05 $19 million $0.40
Canadian dollar per euro C$0.05 $4 million $0.08
-------------------------------------------------------------------------
Treatment and refining charges
Copper treatment charge
per tonne and copper
refining charge per pound US $10
US $0.10 $4 million $0.08
Zinc treatment charge
per tonne US $10 $1 million $0.03
-------------------------------------------------------------------------
Freight and energy costs
Concentrate freight per tonne 10% $3 million $0.06
Fuel price per litre $0.10 $3 million $0.07
Electricity per kilowatt hour $0.01 $2 million $0.05
-------------------------------------------------------------------------
(1) Calculations include hedging in place at December 31, 2006.

About Inmet
Inmet is a Canadian-based global mining company that produces copper,
zinc and gold. We own and operate mining operations in locations around the
world, including Cayeli in Turkey, Pyhasalmi in Finland, Troilus in Canada,
and a major development property Las Cruces in Spain (70 percent). We also
have an interest in a mining operation Ok Tedi in Papua New Guinea
(18 percent), and a pre-development property Petaquilla in Panama
(48 percent). Inmet's common shares are listed and trade on the Toronto Stock
Exchange under the stock symbol IMN.

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

Fourth quarter conference call
Will be held on
- Wednesday, February 14, 2007
- 11:00 a.m. (ET)
- webcast available at
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1714240
or www.inmetmining.com

You can also dial in by calling
- Local or international: +1.416.644.3414
Toll-free within North America: +1.800.796.7558



INMET MINING CORPORATION
Non-GAAP measures

Reconciliation of copper cash costs to statements of earnings

-------------------------------------------------------------------------
three months ended year ended
(millions of Canadian dollars, December 31 December 31
except where otherwise noted) 2006 2005 2006 2005
-------------------------------------------------------------------------

Cost of sales per financial
statements $46 $45 $206 $194
Smelter processing charges
and freight per financial
statements 62 44 229 157
Zinc, gold and other sales (110) (70) (370) (237)
Inventory and receivable
changes (10) 7 (19) (5)
Less - non-cash items (1) - (5) (5)
-------------------------------------------------------------------------
Operating costs net of
metal credits ($13) $26 $41 $104
-------------------------------------------------------------------------
US $ to C$ exchange rate $1.14 $1.17 $1.13 $1.21
Inmet's share of copper
production (000's pounds) 43,400 42,100 172,800 168,000
-------------------------------------------------------------------------
Copper cash cost (per pound) US $(0.25) US $0.52 US $0.20 US $0.51
-------------------------------------------------------------------------


Reconciliation of gold cash costs to statements of earnings

-------------------------------------------------------------------------
three months ended year ended
(millions of Canadian dollars, December 31 December 31
except where otherwise noted) 2006 2005 2006 2005
-------------------------------------------------------------------------
Cost of sales per financial
statements $20 $22 $76 $80
Smelter processing charges
and freight per financial
statements 3 2 11 11
Copper and other sales (5) (6) (26) (23)
Inventory and receivable
changes - (2) - (5)
-------------------------------------------------------------------------
Operating costs net of
metal credits $18 $16 $61 $63
-------------------------------------------------------------------------
US $ to C$ exchange rate $1.14 $1.17 $1.13 $1.22
Inmet's share of gold
production (ounces) 39,300 31,600 147,900 159,500
-------------------------------------------------------------------------
Gold cash cost (per ounce) $406 $454 $365 $324
-------------------------------------------------------------------------


Reconciliation of net income to adjusted net income
-------------------------------------------------------------------------
three months ended year ended
(thousands of Canadian dollars, December 31 December 31
except where otherwise noted) 2006 2005 2006 2005
-------------------------------------------------------------------------
Net income per financial
statements $97,420 $45,646 $420,653 $142,035
Deduct gain on sale of Izok - - 23,905 -
-------------------------------------------------------------------------
Adjusted net income $97,420 $45,646 $396,748 $142,035
-------------------------------------------------------------------------
Weighted average shares
outstanding 48,278 48,086 48,212 44,100
-------------------------------------------------------------------------
Adjusted net income
per share $2.02 $0.95 $8.23 $3.22
-------------------------------------------------------------------------


Reconciliation of operating cash flow to operating cash flow before
working capital
-------------------------------------------------------------------------
three months ended year ended
(thousands of Canadian dollars, December 31 December 31
except where otherwise noted) 2006 2005 2006 2005
-------------------------------------------------------------------------
Operating cash flow per
financial statements $81,360 $44,067 $438,129 $168,182
Deduct: Net change in
non-cash working capital
per financial statements (20,269) (11,608) 16,037 (24,736)
-------------------------------------------------------------------------
Operating cash flow before
working capital $101,629 $55,675 $422,092 $192,918
-------------------------------------------------------------------------
Weighted average shares
outstanding 48,278 48,086 48,212 44,100
-------------------------------------------------------------------------
Operating cash flow before
working capital per share $2.11 $1.16 $8.75 $4.37
-------------------------------------------------------------------------



INMET MINING CORPORATION
Quarterly review
(unaudited)

Latest Four Quarters
-------------------------------------------------------------------------
2006 2006 2006 2006
(thousands of Canadian dollars, Fourth Third Second First
except per share amounts) quarter quarter quarter quarter
-------------------------------------------------------------------------
STATEMENTS OF EARNINGS
Gross sales $258,911 $301,100 $317,624 $210,234
Smelter processing charges
and freight (65,005) (60,270) (63,668) (51,662)
Cost of sales (66,593) (73,892) (78,425) (65,788)
Depreciation (9,057) (9,025) (8,225) (7,265)
------------------------------------------
118,256 157,913 167,306 85,519
Corporate development and
exploration (4,136) (2,708) (1,456) (1,454)
General and administration (6,128) (2,618) (2,624) (2,370)
Investment and other income 16,697 2,257 2,587 25,698
Interest expense (425) (412) (391) (391)
Capital tax expense (recovery) - 41 (246) (245)
Income tax expense (26,679) (42,902) (33,240) (27,196)
Non-controlling interest (165) 11 154 -
------------------------------------------
Net income $97,420 $111,582 $132,090 $79,561
------------------------------------------
Net income per common share $2.02 $2.31 $2.74 $1.65
------------------------------------------
Diluted net income per
common share $2.02 $2.31 $2.74 $1.64
------------------------------------------


Previous Four Quarters
-------------------------------------------------------------------------
2005 2005 2005 2005
(thousands of Canadian dollars, Fourth Third Second First
except per share amounts) quarter(1) quarter(1) quarter(1) quarter(1)
-------------------------------------------------------------------------
STATEMENTS OF EARNINGS
Gross sales $190,901 $178,170 $157,720 $181,934
Smelter processing charges
and freight (46,131) (42,184) (36,654) (43,698)
Cost of sales (67,305) (64,569) (67,219) (77,433)
Depreciation (7,879) (7,849) (8,256) (8,023)
------------------------------------------
69,586 63,568 45,591 52,780
Corporate development and
exploration (2,893) (1,888) (1,883) (1,410)
General and administration (2,119) (1,351) (1,815) (1,966)
Investment and other income
(expense) 985 (3,401) 3,449 (4,213)
Interest expense (392) (409) (433) (718)
Capital tax expense (499) (198) (199) (198)
Income tax expense (19,022) (20,387) (13,151) (15,379)
------------------------------------------
Net income $45,646 $35,934 $31,559 $28,896
------------------------------------------
Net income per common share $0.95 $0.80 $0.75 $0.70
------------------------------------------
Diluted net income per
common share $0.95 $0.80 $0.75 $0.68
------------------------------------------

(1) Has been adjusted due to the adoption of Canadian Institute of
Chartered Accountants Emerging Issues Abstract - 160 - Stripping
Costs Incurred During the Production Phase of an Operation.



INMET MINING CORPORATION
Consolidated balance sheets

December December
(thousands of Canadian dollars) 31 2006 31 2005
-------------------------------------------------------------------------
(unaudited) (as
adjusted
- note 2)
Assets

Current assets:
Cash and short-term investments $640,186 $251,895
Accounts receivable 122,645 90,697
Inventories 58,323 52,215
Future income tax asset 7,567 4,938
-----------------------
828,721 399,745

Restricted cash (note 4) 35,759 22,642

Property, plant and equipment (note 9) 548,637 438,021

Investments (note 9) 53,002 3,620

Future income tax asset 21,750 20,627

Deferred charges 2,408 10,978

Other assets 42,663 32,239
-----------------------

$1,532,940 $927,872
-------------------------------------------------------------------------


Liabilities

Current liabilities:
Accounts payable and accrued liabilities $163,106 $99,196


Long-term debt (note 5) 109,080 31,934

Reclamation liabilities 65,812 61,132

Other liabilities 30,617 34,055

Future income tax liabilities 42,366 50,807

Non-controlling interest 49,125 27,124
-----------------------

460,106 304,248
-----------------------

Commitments (note 6)

Shareholders' equity

Share capital 337,338 336,434

Contributed surplus 66,999 66,999

Stock based compensation (note 7) 915 962

Retained earnings 669,385 258,386

Foreign currency translation account (note 8) (1,803) (39,157)
-----------------------

1,072,834 623,624
-----------------------

$1,532,940 $927,872
-------------------------------------------------------------------------
(see accompanying notes)



INMET MINING CORPORATION
Segmented balance sheets


2006 As at December 31

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

Assets
Cash and short-term
investments $267,277 $176,676 $119,260 $-
Other current assets 9,690 55,776 68,897 18,104
Restricted cash 14,300 - - -
Property, plant and equipment 570 117,464 74,873 33,277
Investments 53,002 - - -
Deferred charges - - - 2,408
Other assets 32,052 486 - 6,245
-------------------------------------------
$376,891 $350,402 $263,030 $60,034
-------------------------------------------
-------------------------------------------

Liabilities
Current liabilities $11,698 $37,879 $35,130 $19,780
Long-term debt 16,786 - - -
Reclamation liabilities 25,507 3,467 13,175 4,268
Other liabilities 8,035 3,891 - 8,657
Future income tax liabilities - 20,433 7,025 -
Non-controlling interest - - - -
-------------------------------------------
$62,026 $65,670 $55,330 $32,705
-------------------------------------------
-------------------------------------------


2006 As at December 31
LAS
(unaudited) OK TEDI CRUCES TOTAL
--------------------------------------------------- ----------
(thousands of Canadian (Papua New
dollars) Guinea) (Spain)

Assets
Cash and short-term
investments $44,689 $32,284 $640,186
Other current assets 26,157 9,911 188,535
Restricted cash 10,982 10,477 35,759
Property, plant and equipment 42,489 279,964 548,637
Investments - - 53,002
Deferred charges - - 2,408
Other assets 805 24,825 64,413
--------------------- ----------
$125,122 $357,461 $1,532,940
--------------------- ----------
--------------------- ----------

Liabilities
Current liabilities $37,391 $21,228 $163,106
Long-term debt - 92,294 109,080
Reclamation liabilities 17,568 1,827 65,812
Other liabilities 1,572 8,462 30,617
Future income tax liabilities 2,186 12,722 42,366
Non-controlling interest - 49,125 49,125
--------------------- ----------
$58,717 $185,658 $460,106
--------------------- ----------
--------------------- ----------



2005 As at December 31

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

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

Assets
Cash and short-term
investments $123,843 $36,578 $58,138 $-
Other current assets 3,674 39,922 40,624 18,996
Restricted cash 14,000 - - -
Property, plant and equipment 27,149 108,153 74,161 42,398
Investments 3,620 - - -
Deferred charges - - - 10,978
Other assets 28,130 488 - 5,865
-------------------------------------------
$200,416 $185,141 $172,923 $78,237
-------------------------------------------
-------------------------------------------

Liabilities
Current liabilities $10,260 $18,234 $19,068 $17,450
Long-term debt 14,624 - - -
Reclamation liabilities 25,650 3,248 11,155 4,058
Other liabilities 10,775 3,184 - 18,102
Future income tax liabilities - 32,075 5,311 -
Non-controlling interest - - - -
-------------------------------------------
$61,309 $56,741 $35,534 $39,610
-------------------------------------------
-------------------------------------------


2005 As at December 31
LAS
OK TEDI CRUCES TOTAL
--------------------------------------------------- ----------
(as
(thousands of Canadian (Papua New adjusted
dollars) Guinea) (Spain) - note 2)

Assets
Cash and short-term
investments $16,031 $17,305 $251,895
Other current assets 41,227 3,407 147,850
Restricted cash 8,642 - 22,642
Property, plant and equipment 37,445 148,715 438,021
Investments - - 3,620
Deferred charges - - 10,978
Other assets 899 17,484 52,866
--------------------- ----------
$104,244 $186,911 $927,872
--------------------- ----------
--------------------- ----------

Liabilities
Current liabilities $29,529 $4,655 $99,196
Long-term debt - 17,310 31,934
Reclamation liabilities 17,021 - 61,132
Other liabilities 1,994 - 34,055
Future income tax liabilities 2,027 11,394 50,807
Non-controlling interest - 27,124 27,124
--------------------- ----------
$50,571 $60,483 $304,248
--------------------- ----------
--------------------- ----------



INMET MINING CORPORATION
Consolidated statements of earnings


(thousands of Canadian Three Months Ended Year Ended
dollars except per December 31 December 31
share amounts) 2006(1) 2005 2006 2005
------------------------------------------------- -----------------------
(as (as
adjusted adjusted
(unaudited) - note 2) (unaudited) - note 2)

Gross sales $258,911 $190,901 $1,087,869 $708,725

Smelter processing
charges and freight (65,005) (46,131) (240,605) (168,667)

Cost of sales (66,593) (67,305) (284,698) (276,526)

Depreciation (9,057) (7,879) (33,572) (32,007)

------------------------------------------------- -----------------------
118,256 69,586 528,994 231,525

Corporate development
and exploration (4,136) (2,893) (9,754) (8,074)

General and administration (6,128) (2,119) (13,740) (7,251)

Investment and other
income (expense) (note 9) 16,697 985 47,239 (3,180)

Interest expense (425) (392) (1,619) (1,952)

Capital tax expense - (499) (450) (1,094)

Income tax expense
(note 10) (26,679) (19,022) (130,017) (67,939)

Non-controlling interest (165) - - -

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

Net income $97,420 $45,646 $420,653 $142,035
------------------------------------------------- -----------------------

Basic net income per
common share (note 11) $2.02 $0.95 $8.73 $3.22
------------------------------------------------- -----------------------

Diluted net income per
common share (note 11) $2.02 $0.95 $8.71 $3.21
------------------------------------------------- -----------------------

Weighted average shares
outstanding (000's) 48,278 48,086 48,212 44,100
------------------------------------------------- -----------------------
(see accompanying notes)
(1) Unaudited



INMET MINING CORPORATION
Segmented statements of earnings
(unaudited)

2006 For the year ended December 31

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

Gross sales $- $370,561 $273,848 $103,880
Smelter processing charges
and freight - (99,462) (75,342) (11,112)
Cost of sales (1,944) (70,639) (49,629) (76,311)
Depreciation - (7,418) (8,617) (10,912)
-------------------------------------------
(1,944) 193,042 140,260 5,545

Corporate development and
exploration (2,955) (1,454) (1,993) (3,352)
General and administration (13,740) - - -
Investment and other income 46,340 899 - -
Interest expense (1,619) - - -
Capital tax expense (450) - - -
Income tax expense (2,200) (25,846) (32,078) -
-------------------------------------------

Net income $23,432 $166,641 $106,189 $2,193
-------------------------------------------
-------------------------------------------


2006 For the year ended December 31
LAS
OK TEDI CRUCES TOTAL
--------------------------------------------------- ----------
(thousands of Canadian (Papua New
dollars) Guinea) (Spain)

Gross sales $339,580 $- $1,087,869
Smelter processing charges
and freight (54,689) - (240,605)
Cost of sales (86,175) - (284,698)
Depreciation (6,625) - (33,572)
--------------------- -----------
192,091 - 528,994

Corporate development and
exploration - - (9,754)
General and administration - - (13,740)
Investment and other income - - 47,239
Interest expense - - (1,619)
Capital tax expense - - (450)
Income tax expense (69,893) - (130,017)
--------------------- -----------

Net income $122,198 $- $420,653
--------------------- -----------
--------------------- -----------


2005 For the year ended December 31

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

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

Gross sales $- $200,408 $174,174 $104,706
Smelter processing charges
and freight - (61,972) (52,230) (11,371)
Cost of sales (2,020) (67,083) (45,627) (80,185)
Depreciation - (6,953) (9,959) (10,224)
-------------------------------------------
(2,020) 64,400 66,358 2,926

Corporate development and
exploration (2,723) (1,412) (1,615) (1,010)
General and administration (7,251) - - -
Investment and other income (3,180) - - -
Interest expense (1,952) - - -
Capital tax expense (1,094) - - -
Income tax expense (1,317) (18,166) (11,734) -
-------------------------------------------

Net income (loss) ($19,537) $44,822 $53,009 $1,916
-------------------------------------------
-------------------------------------------


2005 For the year ended December 31
LAS
OK TEDI CRUCES TOTAL
--------------------------------------------------- -----------
(as
(thousands of Canadian (Papua New adjusted
dollars) Guinea) (Spain) - note 2)

Gross sales $229,437 $- $708,725
Smelter processing charges
and freight (43,094) - (168,667)
Cost of sales (81,611) - (276,526)
Depreciation (4,871) - (32,007)
--------------------- ----------
99,861 - 231,525

Corporate development and
exploration (1,314) - (8,074)
General and administration - - (7,251)
Investment and other income - - (3,180)
Interest expense - - (1,952)
Capital tax expense - - (1,094)
Income tax expense (36,722) - (67,939)
--------------------- ----------

Net income (loss) $61,825 $- $142,035
--------------------- ----------
--------------------- ----------



INMET MINING CORPORATION
Segmented statements of earnings
(unaudited)

2006 For the three months ended December 31


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

Gross sales $- $87,867 $88,170 $26,365
Smelter processing charges
and freight - (26,959) (26,035) (2,898)
Cost of sales (576) (15,547) (13,630) (19,889)
Depreciation - (1,872) (2,333) (2,838)
-------------------------------------------
(576) 43,489 46,172 740

Corporate development and
exploration (1,268) (610) (400) (2,408)
General and administration (6,128) - - -
Investment and other income 17,960 (1,263) - -
Interest expense (425) - - -
Capital tax expense - - - -
Income tax expense (2,200) (4,036) (10,863) -
Non-controlling interest - - - -
-------------------------------------------

Net income (loss) $7,363 $37,580 $34,909 ($1,668)
-------------------------------------------
-------------------------------------------

2006 For the three months ended December 31

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

Gross sales $56,509 $- $258,911
Smelter processing charges (9,113) - (65,005)
and freight
Cost of sales (16,951) - (66,593)
Depreciation (2,014) - (9,057)
--------------------- ----------
28,431 - 118,256

Corporate development and
exploration - 550 (4,136)
General and administration - - (6,128)
Investment and other income - - 16,697
Interest expense - - (425)
Capital tax expense - - -
Income tax expense (9,580) - (26,679)
Non-controlling interest - (165) (165)
--------------------- ----------

Net income (loss) $18,851 $385 $97,420
--------------------- ----------
--------------------- ----------



2005 For the three months ended December 31

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

Gross sales $- $53,081 $47,860 $21,685
Smelter processing charges
and freight - (16,536) (14,254) (2,325)
Cost of sales (502) (14,846) (10,738) (21,521)
Depreciation - (1,477) (2,283) (2,832)
-------------------------------------------
(502) 20,222 20,585 (4,993)

Corporate development and
exploration (1,056) (862) (241) (292)
General and administration (2,119) - - -
Investment and other income 985 - - -
Interest expense (392) - - -
Capital tax expense (499) - - -
Income tax expense 155 (5,863) (338) -
-------------------------------------------

Net income (loss) ($3,428) $13,497 $20,006 ($5,285)
-------------------------------------------
-------------------------------------------


2005 For the three months ended December 31

LAS
OK TEDI CRUCES TOTAL
--------------------------------------------------- ----------
(thousands of Canadian (Papua New (as adjusted -
dollars) Guinea) (Spain) note 2)

Gross sales $68,275 $- $190,901
Smelter processing charges
and freight (13,016) - (46,131)
Cost of sales (19,698) - (67,305)
Depreciation (1,287) - (7,879)
--------------------------------
34,274 - 69,586

Corporate development and
exploration (442) - (2,893)
General and administration - - (2,119)
Investment and other income - - 985
Interest expense - - (392)
Capital tax expense - - (499)
Income tax expense (12,976) - (19,022)
--------------------------------

Net income (loss) $20,856 $ - $45,646
--------------------------------
--------------------------------



INMET MINING CORPORATION
Consolidated statements of cash flows


Three Months Ended Year Ended
(thousands of Canadian December 31 December 31
dollars) 2006(1) 2005 2006 2005
------------------------------------------------- -----------------------
(as (as
adjusted adjusted
(unaudited) - note 2) (unaudited) - note 2)

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

Net income $97,420 $45,646 $420,653 $142,035
Add (deduct) items not
affecting cash:
Gain on disposition of
investments (note 9) - - (24,291) -
Depreciation 9,057 7,879 33,572 32,007
Future income tax (2,380) (1,211) (11,823) 2,919
Redemption cost of
convertible debentures
(note 9) - - - 6,631
Settlement of pension
liability (note 9) - - - 4,100
Accretion expense on
reclamation liabilities 925 896 3,500 3,663
Deferred revenue 1,053 1,140 3,126 1,270
Non-controlling interest 165 - - -
Other (3,562) 2,191 (126) 3,296
Reclamation costs (1,049) (866) (2,519) (3,003)
Net change in non-cash
working capital (note 3) (20,269) (11,608) 16,037 (24,736)
----------------------- -----------------------
81,360 44,067 438,129 168,182
----------------------- -----------------------

Cash provided by (used in)
investing activities

Capital spending (45,759) (23,233) (132,799) (61,735)
Acquisitions and
dispositions - - 2,105 (8,570)
Non-controlling cash as
at acquisition date - - - 8,834
Sale (purchase) of
short-term investments (21,199) 16,992 (254,826) 94,927
Other (118) (268) 1,249 (1,163)
----------------------- -----------------------
(67,076) (6,509) (384,271) 32,293
----------------------- -----------------------

Cash provided by (used in)
financing activities

Long-term debt borrowings 35,870 - 72,921 -
Redemption of convertible
debentures (note 9) - - - (63,987)
Funding by non-controlling
shareholder 4,071 4,667 13,317 4,667
Financial assurance
deposits (note 4) (4,814) (14,000) (11,718) (15,915)
Dividends paid on
common shares (4,827) (4,809) (9,654) (4,809)
Subsidies received
(note 5) 3,330 - 8,180 -
Debt issue costs (356) (6,524) (6,088) (8,021)
Additional contribution
to pension plans (3,469) - (3,469) -
Issue of share capital - 60 542 3,056
----------------------- -----------------------
29,805 (20,606) 64,031 (85,009)
----------------------- -----------------------


Foreign exchange change
on cash held in foreign
currency 16,884 (1,699) 14,826 (14,451)
----------------------- -----------------------

Increase in cash 60,973 15,253 132,715 101,015

Cash:
Beginning of period 323,637 236,642 251,895 150,880
----------------------- -----------------------
End of period 384,610 251,895 384,610 251,895

Short-term investments 255,576 - 255,576 -
----------------------- -----------------------

Cash and short-term
investments $640,186 $251,895 $640,186 $251,895
------------------------------------------------- -----------------------
(see accompanying notes)

(1) Cash used in operations
includes the following
payments:
Interest $- $- $1,196 $2,278
Taxes $41,261 $16,595 $119,600 $49,565
------------------------------------------------- -----------------------
(2) Unaudited



INMET MINING CORPORATION
Segmented statements of cash flows

2006 For the year ended December 31

(unaudited) 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 ($3,530) $163,616 $115,832 $17,394
Net change in non-cash
working capital (8,244) 8,952 (6,600) 96
-------------------------------------------
(11,774) 172,568 109,232 17,490
-------------------------------------------
Cash provided by (used in)
investing activities
Capital spending (94) (19,987) (5,760) (2,665)
Acquisitions and
dispositions - - 2,105 -
Short-term investments (227,378) (17,016) - -
Other 1,629 - - (380)
-------------------------------------------
(225,843) (37,003) (3,655) (3,045)
-------------------------------------------

-------------------------------------------
Cash provided by (used in)
financing activities (12,881) - - -
-------------------------------------------
Foreign exchange change on
cash held in foreign
currency - 3,149 11,545 -
-------------------------------------------
Intergroup funding
(distributions) 166,554 (16,097) (56,000) (14,445)
-------------------------------------------

Increase (decrease) in cash (83,944) 122,617 61,122 -
Cash:
Beginning of period 123,843 36,578 58,138 -
-------------------------------------------
End of period 39,899 159,195 119,260 -
Short-term investments 227,378 17,481 - -
-------------------------------------------
Cash and short-term
investments $267,277 $176,676 $119,260 $-
-------------------------------------------
-------------------------------------------


2006 For the year ended December 31
LAS
(unaudited) OK TEDI CRUCES TOTAL
--------------------------------------------------- ----------
(thousands of Canadian (Papua New
dollars) Guinea) (Spain)

Cash provided by (used in)
operating activities
Before net change in non-
cash working capital $128,780 $- $422,092
Net change in non-cash
working capital 21,833 - 16,037
---------------------- ----------
150,613 - 438,129
---------------------- ----------
Cash provided by (used in)
investing activities
Capital spending (11,110) (93,183) (132,799)
Acquisitions and
dispositions - - 2,105
Short-term investments (10,432) - (254,826)
Other - - 1,249
---------------------- ----------
(21,542) (93,183) (384,271)
---------------------- ----------

---------------------- ----------
Cash provided by (used in)
financing activities (1,712) 78,624 64,031
---------------------- ----------
Foreign exchange change on
cash held in foreign
currency (1,045) 1,177 14,826
---------------------- ----------
Intergroup funding
(distributions) (108,373) 28,361 -
---------------------- ----------

Increase (decrease) in cash 17,941 14,979 132,715
Cash:
Beginning of period 16,031 17,305 251,895
---------------------- ----------
End of period 33,972 32,284 384,610
Short-term investments 10,717 - 255,576
---------------------- ----------
Cash and short-term
investments $44,689 $32,284 $640,186
---------------------- ----------
---------------------- ----------



2005 For the year ended December 31

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


Cash provided by (used in)
operating activities
Before net change in non-
cash working capital ($10,587) $59,935 $65,463 $13,248
Net change in non-cash
working capital 795 (10,078) (14,356) 1,059
-------------------------------------------
(9,792) 49,857 51,107 14,307
-------------------------------------------
Cash provided by (used in)
investing activities
Capital spending (172) (19,277) (7,222) (9,435)
Acquisitions and
dispositions (29,181) - - -
Short-term investments 94,927 - - -
Other - - - (1,163)
-------------------------------------------
65,574 (19,277) (7,222) (10,598)
-------------------------------------------

-------------------------------------------
Cash used in financing
activities (79,740) - - -
-------------------------------------------
Foreign exchange change
on cash held in foreign
currency - 67 (11,201) -
-------------------------------------------
Intergroup funding
(distributions) 101,803 (27,921) (26,801) (3,709)
-------------------------------------------

Increase (decrease) in cash 77,845 2,726 5,883 -
Cash:
Beginning of period 45,998 33,852 52,255 -
-------------------------------------------
End of period 123,843 36,578 58,138 -
Short-term investments - - - -
-------------------------------------------
Cash and short-term
investments $123,843 $36,578 $58,138 $-
-------------------------------------------
-------------------------------------------


2005 For the year ended December 31
LAS
OK TEDI CRUCES TOTAL
--------------------------------------------------- ----------
(as
(thousands of Canadian (Papua New adjusted
dollars) Guinea) (Spain) - note 2)

Cash provided by (used in)
operating activities
Before net change in non-
cash working capital $64,859 $- $192,918
Net change in non-cash
working capital (2,156) - (24,736)
--------------------- ----------
62,703 - 168,182
--------------------- ----------
Cash provided by (used in)
investing activities
Capital spending (4,299) (21,330) (61,735)
Acquisitions and
dispositions - 29,445 264
Short-term investments - - 94,927
Other - - (1,163)
--------------------- ----------
(4,299) 8,115 32,293
--------------------- ----------

--------------------- ----------
Cash used in financing
activities (1,915) (3,354) (85,009)
--------------------- ----------
Foreign exchange change
on cash held in foreign
currency (1,293) (2,024) (14,451)
--------------------- ----------
Intergroup funding
(distributions) (57,940) 14,568 -
--------------------- ----------
Increase (decrease) in cash (2,744) 17,305 101,015
Cash:
Beginning of period 18,775 - 150,880
--------------------- ----------
End of period 16,031 17,305 251,895
Short-term investments - - -
--------------------- ----------
Cash and short-term
investments $16,031 $17,305 $251,895
--------------------- ----------
--------------------- ----------



INMET MINING CORPORATION
Segmented statements of cash flows
(unaudited)

2006 For the three months ended December 31

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

Cash provided by (used in)
operating activities
Before net change in non-
cash working capital $4,822 $34,113 $36,796 $2,638
Net change in non-cash
working capital (2,633) (10,732) 1,619 2,859
--------------------------------------------
2,189 23,381 38,415 5,497
--------------------------------------------
Cash provided by (used in)
investing activities
Capital spending (9) (5,882) (3,191) (240)
Short-term investments (101,924) 91,157 - -
Other - - - (118)
--------------------------------------------
(101,933) 85,275 (3,191) (358)
--------------------------------------------

--------------------------------------------
Cash provided by (used in)
financing activities (8,387) - - -
--------------------------------------------
Foreign exchange change
on cash held in foreign
currency - 5,040 9,429 -
--------------------------------------------
Intergroup funding
(distributions) 54,838 (1,516) (42,857) (5,139)
--------------------------------------------

Increase (decrease) in cash (53,293) 112,180 1,796 -
Cash:
Beginning of period 93,192 47,015 117,464 -
--------------------------------------------
End of period 39,899 159,195 119,260 -
Short-term investments 227,378 17,481 - -
--------------------------------------------
Cash and short-term
investments $267,277 $176,676 $119,260 $-
--------------------------------------------
--------------------------------------------


2006 For the three months ended December 31
LAS
OK TEDI CRUCES TOTAL
--------------------------------------------------- ----------
(thousands of Canadian (Papua New
dollars) Guinea) (Spain)

Cash provided by (used in)
operating activities
Before net change in non-
cash working capital $22,710 $550 $101,629
Net change in non-cash
working capital (10,832) (550) (20,269)
--------------------- ----------
11,878 - 81,360
Cash provided by (used in)
investing activities
Capital spending (4,505) (31,932) (45,759)
Short-term investments (10,432) - (21,199)
Other - - (118)
--------------------- ----------
(14,937) (31,932) (67,076)
--------------------- ----------

--------------------- ----------
Cash provided by (used in)
financing activities - 38,192 29,805
--------------------- ----------
Foreign exchange change
on cash held in foreign
currency 1,478 937 16,884
--------------------- ----------
Intergroup funding
(distributions) (8,813) 3,487 -
--------------------- ----------

Increase (decrease) in cash (10,394) 10,684 60,973
Cash:
Beginning of period 44,366 21,600 323,637
--------------------- ----------
End of period 33,972 32,284 384,610
Short-term investments 10,717 - 255,576
--------------------- ----------

Cash and short-term
investments $44,689 $32,284 $640,186
--------------------- ----------
--------------------- ----------



2005 For the three months ended December 31

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

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

Cash provided by (used in)
operating activities
Before net change in non-
cash working capital ($2,434) $14,996 $23,867 ($1,287)
Net change in non-cash
working capital 1,136 (9,053) (5,313) (1,085)
--------------------------------------------
(1,298) 5,943 18,554 (2,372)
--------------------------------------------
Cash provided by (used in)
investing activities
Capital spending (62) (7,631) (2,934) (1,084)
Short-term investments 16,992 - - -
Other - - - (268)
--------------------------------------------
16,930 (7,631) (2,934) (1,352)
--------------------------------------------

--------------------------------------------
Cash used in financing
activities (17,252) - - -
--------------------------------------------
Foreign exchange change
on cash held in foreign
currency - 1,380 (1,617) -
--------------------------------------------
Intergroup funding
(distributions) 20,958 366 (20,950) 3,724
--------------------------------------------
Increase (decrease) in cash 19,338 58 (6,947) -
Cash:
Beginning of period 104,505 36,520 65,085 -
--------------------------------------------
End of period 123,843 36,578 58,138 -
Short-term investments - - - -
--------------------------------------------
Cash and short-term
investments $123,843 $36,578 $58,138 $-
--------------------------------------------
--------------------------------------------


2005 For the three months ended December 31

LAS
OK TEDI CRUCES TOTAL
--------------------------------------------------- ----------
(as
(thousands of Canadian (Papua New adjusted
dollars) Guinea) (Spain) - note 2)

Cash provided by (used in)
operating activities
Before net change in non-
cash working capital $20,533 $- $55,675
Net change in non-cash
working capital 2,707 - (11,608)
--------------------- ----------
23,240 - 44,067
--------------------- ----------
Cash provided by (used in)
investing activities
Capital spending (2,690) (8,832) (23,233)
Short-term investments - - 16,992
Other - - (268)
--------------------- ----------
(2,690) (8,832) (6,509)
--------------------- ----------

--------------------- ----------
Cash used in financing
activities - (3,354) (20,606)
--------------------- ----------
Foreign exchange change
on cash held in foreign
currency (846) (616) (1,699)
--------------------- ----------
Intergroup funding
(distributions) (18,666) 14,568 -
--------------------- ----------

Increase (decrease) in cash 1,038 1,766 15,253
Cash:
Beginning of period 14,993 15,539 236,642
--------------------- ----------
End of period 16,031 17,305 251,895
Short-term investments - - -
--------------------- ----------
Cash and short-term
investments $16,031 $17,305 $251,895
--------------------- ----------
--------------------- ----------



INMET MINING CORPORATION
Consolidated statements of retained earnings


Three Months Ended Year Ended
(thousands of Canadian December 31 December 31
dollars) 2006 2005 2006 2005
------------------------------------------------- -----------------------
(unaudited) (unaudited) (unaudited)

Retained earnings,
beginning of period,
as previously reported $576,792 $233,904 $275,541 $136,648

Adjustment for capitalized
stripping (note 2) - (16,355) (17,155) (15,488)
----------------------- -----------------------

Retained earnings, restated 576,792 217,549 258,386 121,160

Net income 97,420 45,646 420,653 142,035

Dividends on common shares (4,827) (4,809) (9,654) (4,809)
------------------------------------------------- -----------------------

Retained earnings,
end of period $669,385 $258,386 $669,385 $258,386
------------------------------------------------- -----------------------
(see accompanying notes)



INMET MINING CORPORATION
Notes to the consolidated financial statements

1. Significant accounting policies

Our consolidated financial statements do not include all the
disclosures as required under generally accepted accounting
principles for annual financial statements, however, the consolidated
financial statements follow the same accounting policies and methods
of application as our most recent annual financial statements, except
for the changes as described in note 2. The consolidated financial
statements should be read in conjunction with our annual consolidated
financial statements included in our 2005 Annual Report. These
financial statements have not been reviewed by our external auditors.

2. Change in accounting policy

We adopted CICA's abstract EIC 160 - Stripping Costs Incurred in the
Production Phase of an Operation retroactively, effective January 1,
2006.

The abstract allows companies to capitalize the costs of stripping,
such as the removal of overburden and mine waste materials, when the
stripping provides access to reserves that would not otherwise have
been accessible and that will be mined in the future. These stripping
costs can be amortized over the reserves directly affected by the
stripping activity.

Previously, we capitalized mining costs associated with waste removal
rock in relation to the stripping ratio for the entire ore body. We
then amortized the capital over the life of the ore body using the
same stripping ratio.

We expensed some previously deferred stripping costs, which resulted
in the following changes to our 2005 financial statements:

- increased the fourth quarter's cost of sales by $1.3 million
($2.2 million for the year)
- decreased the fourth quarter's income tax expense by $0.5 million
($0.5 million for the year)
- decreased the fourth quarter's earnings per common share by
$0.02 ($0.04 for the year) and diluted earnings per common share
by $0.01 ($0.04 for the year)
- lowered property, plant and equipment on the balance sheet by
$22.2 million at December 31
- increased future income tax asset on the balance sheet by
$5.0 million at December 31
- lowered opening 2005 retained earnings by $15.5 million.

If we had continued with our previous accounting policy for stripping
costs, we would have amortized $1 million this quarter and amortized
a negligible amount in 2006.

3. Statement of cash flows

The following tables show the components of our net change in
non-cash working capital by segment for the three months and year
ending December 31.



For the year ended December 31, 2006
-------------------------------------------------------------------------

(thousands) Corporate Cayeli Pyhasalmi Troilus
-------------------------------------------------------------------------

Accounts receivable $(6,017) $(9,038) $(20,271) $2,667
Inventories - (4,497) 591 (1,389)
Accounts payable and
accrued liabilities 276 16,980 440 (1,182)
Taxes payable 446 5,504 12,640 -
Other (2,949) 3 - -
-------------------------------------------------------------------------
$(8,244) $8,952 $(6,600) $96
-------------------------------------------------------------------------

For the year ended December 31, 2006
--------------------------------------------------------------
Las
(thousands) OK Tedi Cruces Total
--------------------------------------------------------------

Accounts receivable $15,199 $- $(17,460)
Inventories (60) - (5,355)
Accounts payable and
accrued liabilities 5,085 - 21,599
Taxes payable 1,758 - 20,348
Other (149) - (3,095)
--------------------------------------------------------------
$21,833 $- $16,037
--------------------------------------------------------------



For the year ended December 31, 2005
-------------------------------------------------------------------------

(thousands) Corporate Cayeli Pyhasalmi Troilus
-------------------------------------------------------------------------

Accounts receivable $207 $(15,396) $(14,276) $464
Inventories - 491 (821) 1,283
Accounts payable and
accrued liabilities (800) (1,086) 3,176 (688)
Taxes payable 997 5,948 (2,435) -
Other 391 (35) - -
-------------------------------------------------------------------------
$795 $(10,078) $(14,356) $1,059
-------------------------------------------------------------------------


For the year ended December 31, 2005
--------------------------------------------------------------
Las
(thousands) Ok Tedi Cruces Total
--------------------------------------------------------------

Accounts receivable $(13,773) $- $(42,774)
Inventories 1,989 - 2,942
Accounts payable and
accrued liabilities (2,071) - (1,469)
Taxes payable 11,523 - 16,033
Other 176 - 532
--------------------------------------------------------------
$(2,156) $- $(24,736)
--------------------------------------------------------------



For the three months ended December 31, 2006
-------------------------------------------------------------------------

(thousands) Corporate Cayeli Pyhasalmi Troilus
-------------------------------------------------------------------------

Accounts receivable $(6,120) $(15,832) $(2,952) $1,755
Inventories - (4,574) 684 1,050
Accounts payable and
accrued liabilities 2,979 9,118 (1,881) 54
Taxes payable 2,694 560 5,768 -
Other (2,186) (4) - -
-------------------------------------------------------------------------
$(2,633) $(10,732) $1,619 $2,859
-------------------------------------------------------------------------


For the three months ended December 31, 2006
--------------------------------------------------------------
Las
(thousands) Ok Tedi Cruces Total
--------------------------------------------------------------

Accounts receivable $10,804 $- $(12,345)
Inventories (3,666) - (6,506)
Accounts payable and
accrued liabilities 2,945 (550) 12,665
Taxes payable (21,220) - (12,198)
Other 305 - (1,885)
--------------------------------------------------------------
$(10,832) $(550) $(20,269)
--------------------------------------------------------------



For the three months ended December 31, 2005
-------------------------------------------------------------------------

(thousands) Corporate Cayeli Pyhasalmi Troilus
-------------------------------------------------------------------------

Accounts receivable $(299) $(8,054) $(5,606) $(2,561)
Inventories - (2,680) (90) 1,183
Accounts payable and
accrued liabilities 779 (156) 3,384 293
Taxes payable 216 1,666 (3,001) -
Other 440 171 - -
-------------------------------------------------------------------------
$1,136 $(9,053) $(5,313) $(1,085)
-------------------------------------------------------------------------


For the three months ended December 31, 2005
--------------------------------------------------------------
Las
(thousands) Ok Tedi Cruces Total
--------------------------------------------------------------

Accounts receivable $(5,300) $- $(21,820)
Inventories (3) - (1,590)
Accounts payable and
accrued liabilities 2,403 - 6,703
Taxes payable 5,304 - 4,185
Other 303 - 914
--------------------------------------------------------------
$2,707 $- $(11,608)
--------------------------------------------------------------



4. Restricted cash

The table below shows our restricted cash balances.

---------------------------------------------------------------------
December 31 December 31
(thousands) 2006 2005
---------------------------------------------------------------------
Collateralized cash for letter of
credit facility $14,300 $14,000
In trust for Ok Tedi rehabilitation 10,982 8,642
Cash collateralized for letters of
credit - Las Cruces 10,477 -
---------------------------------------------------------------------
Total restricted cash $35,759 $22,642
---------------------------------------------------------------------

The letters of credit that Las Cruces issued are for:
- (euro) 3.1 million to secure payments that will ultimately be
paid for the use of an electrical substation
- (euro) 2.5 million to secure payments to local townships that it
will owe once certain licenses are granted
- (euro) 1.2 million for dewatering and other purposes.

5. Long-term debt

---------------------------------------------------------------------
December 31 December 31
(thousands) 2006 2005
---------------------------------------------------------------------
Credit facility - Tranche A $53,792 $-
- Tranche B 23,054 -
Promissory note 16,786 14,624
Loans from non-controlling shareholder 15,448 17,310
---------------------------------------------------------------------
$109,080 $31,934
---------------------------------------------------------------------

Credit facility

During the fourth quarter, Las Cruces borrowed an additional
(euro) 18 million ((euro) 35 million for the year) under Tranche A,
the US $240 million senior secured facility, and an additional
(euro) 6 million ((euro) 15 million for the year) under Tranche B,
the (euro) 69 million senior secured bridge financing facility.

In the second quarter of 2006, Las Cruces fully utilized its
US $25 million letter of credit facility under Tranche A to provide
financial assurance with respect to a restoration bond and labour
bond, which were required before mining activity could begin. The
labour bond is fixed at (euro) 5 million. The closure bond is based
upon the cost it would take at any particular time in the mine life
to restore the site to its post-mining land-use as determined by
regulatory authorities. The initial amount of the restoration bond
was set at (euro) 14.8 million.

In the fourth quarter of 2006, Las Cruces received a subsidy of
(euro) 2.1 million ((euro) 5.5 million for the year) related to the
development of the mine. As a result, Las Cruces utilized
(euro) 5.5 million from Tranche B of its credit agreement to provide
security for the receipt of these subsidies that will be released
when certain conditions are met.

Loans from non-controlling shareholder

The intercompany loans advanced by Inmet and Leucadia to Las Cruces
that were in place at December 31, 2005, were converted to equity in
February 2006.

In the fourth quarter of 2006, Las Cruces received
(euro) 9.1 million ((euro) 31.1 million for the year) of intercompany
loan advances. These loans bear interest at EURIBOR plus 8.55 percent
and are due to be repaid on February 25, 2020. The non-controlling
portion of these loans, (euro) 10.1 million, is reflected in
long-term debt at December 31, 2006.

6. Commitments

Our operations have the following capital commitments as at
December 31, 2006:

- Cayeli has committed approximately US $4.6 million for work on
its shaft deepening project, which it will spend in 2007.

- Ok Tedi has committed US $9.9 million (our proportionate share is
US $1.8 million) for the mine waste tailings project.

- Las Cruces has committed (euro) 124 million related to
engineering, procurement and construction management and
additional construction work related to the pit and plant.

7. Stock based compensation

The final 174,250 stock options were exercised during the second
quarter of 2006 for which we received proceeds of $0.5 million on the
issuance of 174,250 common shares from treasury. There are no stock
options outstanding at December 31, 2006.

During the fourth quarter we issued 1,314 deferred share units
(7,840 for the year) and recognized an expense of $0.1 million
($0.3 million for the year). At December 31, 2006, there are 75,467
deferred share units outstanding that are recorded in equity at an
average price of $12.12 per unit.

8. Foreign currency translation account

The table below shows the breakdown of the foreign currency
translation account:

---------------------------------------------------------------------
December 31 December 31
(thousands) 2006 2005
---------------------------------------------------------------------
Pyhasalmi (euro functional currency) $5,637 $(7,479)
Las Cruces (euro functional currency) 8,095 (8,188)
Cayeli (US dollar functional currency) (9,278) (15,836)
Ok Tedi (US dollar functional currency) (6,257) (7,654)
---------------------------------------------------------------------
$(1,803) $(39,157)
---------------------------------------------------------------------

The United States dollar to Canadian dollar exchange rate was $1.17
at December 31, 2006 and $1.16 at December 31, 2005. The euro to
Canadian dollar exchange rate was $1.54 at December 31, 2006 and
$1.38 at December 31, 2005. The euro to Canadian dollar exchange rate
on the date we acquired Las Cruces, August 22, 2005, was $1.47.

9. Investment and other income

Investment and other income is summarized as follows:

---------------------------------------------------------------------
three months ended year ended
December 31 December 31
(thousands) 2006 2005 2006 2005
---------------------------------------------------------------------
Gain on sale of Izok $- $- $23,905 $-
Interest and dividend income 11,179 2,313 19,899 9,475
Foreign exchange gain (loss) 5,862 (1,387) 3,252 (2,627)
Redemption costs of
debentures - - - (6,631)
Non-cash expense from
settlement of pension
liability - - - (4,100)
Pension expense (310) (108) (404) (226)
Other (34) 167 587 929
---------------------------------------------------------------------
$16,697 $985 $47,239 $(3,180)
---------------------------------------------------------------------

Sale of Izok development property and acquisition of Wolfden common
shares

On March 31, 2006, we sold our interest in the Izok development
property to Wolfden Resources Inc. In exchange, we received
13.5 million common shares of Wolfden valued at $50.6 million, which
represented approximately 18 percent of the issued and outstanding
common shares of Wolfden on that date. We recorded a gain of
$23.9 million as a result of the transaction. The value of the Izok
property was formerly carried at $26.6 million and was recorded in
property, plant and equipment.

During the third quarter of 2006, Wolfden completed an arrangement
under the Business Corporation Act of Ontario involving a new
company, Premier Gold Mines Ltd. Under this arrangement, we received
one new Wolfden common share and 0.7 common shares for every Wolfden
common share we owned. At December 31, 2006 we held 13.5 million
common shares of Wolfden and 9.45 million common shares of Premier,
carried at $39.7 and $10.9 million, respectively, on our balance
sheet.

Interest and dividend income

Interest and dividend income was higher in the fourth quarter and for
the year because of higher cash balances. We recorded dividend income
of $5.7 million in the fourth quarter and year ended 2006. This
compares to $0.8 million and $4.5 million for the same periods in
2005.

Foreign exchange

The foreign exchange gains in the fourth quarter are primarily the
result of the revaluation of certain euro denominated balances. For
the year, these foreign exchange gains were reduced by foreign
exchange losses of $4.9 million from a return of our investment from
Cayeli, Pyhasalmi and Ok Tedi.

Redemption costs of debentures

In 2005, we redeemed our convertible debentures for cash, and
expensed the difference between the carrying value of the debentures
and the redemption cost.

Settlement of pension liability

In 2005, we reduced our Canadian defined benefit pension liability
substantially by buying annuities for retirees in the plan. Because
the plan was adequately funded, we were able to buy the annuities
using pension plan assets. This transaction reduced our $20 million
accrued benefit obligation by $14.5 million. We also recorded a
non-cash charge of $4.1 million to recognize remaining unamortized
net actuarial losses.

10. Income tax expense

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

For the year ended December 31, 2006
---------------------------------------------------------------------

(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Total
---------------------------------------------------------------------

Current income taxes $2,200 $37,858 $31,063 $70,719 $141,840
Future income taxes - (12,012) 1,015 (826) (11,823)
---------------------------------------------------------------------
$2,200 $25,846 $32,078 $69,893 $130,017
---------------------------------------------------------------------

For the year ended December 31, 2005
---------------------------------------------------------------------

(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Total
---------------------------------------------------------------------

Current income taxes $1,817 $12,556 $11,307 $39,340 $65,020
Future income taxes (500) 5,610 427 (2,618) 2,919
---------------------------------------------------------------------
$1,317 $18,166 $11,734 $36,722 $67,939
---------------------------------------------------------------------


For the three months ended December 31, 2006
---------------------------------------------------------------------

(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Total
---------------------------------------------------------------------

Current income taxes $2,200 $9,000 $9,920 $7,939 $29,059
Future income taxes - (4,964) 943 1,641 (2,380)
---------------------------------------------------------------------
$2,200 $4,036 $10,863 $9,580 $26,679
---------------------------------------------------------------------

For the three months ended December 31, 2005
---------------------------------------------------------------------

(thousands) Corporate Cayeli Pyhasalmi Ok Tedi Total
---------------------------------------------------------------------

Current income taxes $345 $5,322 $(682) $15,248 $20,233
Future income taxes (500) 541 1,020 (2,272) (1,211)
---------------------------------------------------------------------
$(155) $5,863 $338 $12,976 $19,022
---------------------------------------------------------------------

In June 2006, the Turkish government enacted tax legislation that
reduced Cayeli's corporate tax rate to 20 percent, effective
January 1, 2006. Cayeli recorded an income tax recovery of
$10 million in the year from a reduction in its future income tax
liability.

11. Net income per share

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

---------------------------------------------------------------------
three months ended year ended
December 31 December 31
(thousands) 2006 2005 2006 2005
---------------------------------------------------------------------
Net income available to
common shareholders $97,420 $45,646 $420,653 $142,035
---------------------------------------------------------------------


---------------------------------------------------------------------
three months ended year ended
December 31 December 31
(thousands) 2006 2005 2006 2005
---------------------------------------------------------------------
Weighted average common
shares outstanding 48,278 48,086 48,212 44,100
Plus incremental shares from
assumed conversions:
Stock options - 116 - 111
Deferred share units 75 74 75 74
---------------------------------------------------------------------
Diluted weighted average
common shares outstanding 48,353 48,276 48,287 44,285
---------------------------------------------------------------------


---------------------------------------------------------------------
three months ended year ended
December 31 December 31
(Canadian dollars per share) 2006 2005 2006 2005
---------------------------------------------------------------------

Basic net income per
common share $2.02 $0.95 $8.73 $3.22
Dilutive effect from assumed
conversions of stock options
per common share and deferred
share units per common share - - (0.02) (0.01)
---------------------------------------------------------------------
Diluted net income per
common share $2.02 $0.95 $8.71 $3.21
---------------------------------------------------------------------

Contact Information

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